Matt Durniak, welcome to Acquiring Minds. Thanks for having me, Will. Matt, you bought a B2B e-commerce business. So, a bit of a different business than one might think if you say e-commerce. And we're going to learn all about uh this business in this category today and your story uh of how you got here. Start us off, please, Matt, with with a little of that. Give us some background on you, please. Uh sure. Um so, I grew up in Florida. Uh my dad owned a uh solar contracting small business. Um and uh yeah, I went to Florida State for a year, uh dropped out and bought a HomeVestors uh franchise. They're the We Buy Ugly Houses Mhm. uh billboards, which you may have seen in the last 20 years or so. Um The caveman one? Exactly. Yeah, they added a caveman. Yeah. They did. that that was a franchise, actually. That it was a big corporate concern. Interesting. Yeah, yeah. Um I didn't either, but then when I found out it was a franchise, I left college to to buy one. Um and yeah, did that from like 02 to to the Great Recession, uh Great Financial Crisis, and um uh yeah, thought I was a great real estate investor, realized I was not. Um and then Because you'd done well during the run-up. Exactly. Right, as did a lot of people. Right, right. Everyone was a genius. yeah. Yeah, I mean, I started when I was 19 and you know, by the time I was 21, 22, I you know, on paper was a uh uh millionaire, I suppose. Very much on paper, though, and uh thought that I'd keep everything in that asset class as leveraged as possible for forever cuz real estate never goes down. Um, and then, yeah. Had a nice implosion at the bleeding edge of You had a real estate portfolio and you were a franchisee. So, what were the in the We Buy Houses or or Sorry, what is it called? Home Yeah, We Buy Ugly Houses is kind of what everyone knows it as. It's HomeVestors is the name of the company, but everyone knows it as We Buy Ugly Houses. But, yeah, a lot of people used the franchise as a vehicle to build a portfolio of houses. I see. Yeah. So, So, you weren't you weren't building much of your intention wasn't necessarily to build out this thriving franchisee. Instead, it was to use that as a vehicle to build your own real estate portfolio. Primarily. It was It was both. I mean, what did me under was I had a ton of hard money loans, you know, high interest rate short-term loans for my short-term inventory, and then the music stopped. So, yeah. And what happened when the music stopped? Um, I did my best to liquidate things as soon as possible. I I wish I knew how to architect I wish I had known how to architect some sort of short trade. I feel like I I knew what was coming ahead of people, but had no idea how to properly react to or trade on that other than try to get out of things. Um, and uh, yeah, it looked like a a financial situation that if if a personal bankruptcy could have made it better, I would have filed personal bankruptcy. Wow. Wow. So, down to zero or negative. Negative, yes. Yeah. Yeah. And this is So, this is I assume 2009-ish? I mean that was actually uh it got real bad for me even the third quarter of 2006 just because I was in Florida and like it again it was the very uh you know, I mean that scene from The Big Short where they're in Florida, I don't know if that's where I was and um yeah. realize that so things started unraveling before 2008 which we all consider it all starting in 2008 but I guess things had started already unraveling in certain real estate markets a year more before 2008. Yes. Yeah. Okay. Okay. Well, um and so your it's 2006-ish and you're how old? Uh 24. Okay. 24 or 20 Yeah, 24. Okay. Well, not to take away from the trauma of that but if you're going to find yourself broke, I guess best to do it when you're young. Oh, for sure. Yeah, yeah. It was a great uh uh college you know, and even more expensive than typical college education but uh it was worth it for sure. Yeah. Right. Okay. All right. So so carry on what comes next cuz I know you have a number of kind of small business experiences leading up to DHS your now business. We're not going to have time for them all but take us through the kind of quickly what happens next. Uh yeah, I bought a I said okay, well, you know, I'll try to buy a simpler service franchise bought a a Servpro franchise which is the disaster restoration deal in Austin, Texas. Um had a wanted to buy several of them, quickly realized after buying the first one that that wasn't going to be a possibility based on the first one that uh we bought. So, um kind of abandoned that before even a full year, probably. Um and then then a guy I knew from HomeVestors, a fellow franchisee from the We Buy Ugly Houses deal, uh an old older older than more experienced guy than me was like, "Hey, we can just buy any business. Uh it doesn't need to be, you know, in a franchise network." Um and started looking on BizBuySell, and this was 2008 at that point. Um and bought a uh a business in Miami that sold parts for uh sprayers, chemical sprayers for like lawn pest control and small farms. Um bought that. Bought a a business in the same industry that made the sprayers in 2009, um and kind of consolidated those ultimately in Orlando a few years later. And so, we had this company that um we sold that we assembled the sprayers, we sold the parts and components for them as well. And we were able to ride kind of the early AdWords days. Mhm. Um and yeah, grew that owned it and operated it for about 9 years. My my partner got sick and um I didn't know how to put together the money at that point to to buy him out. I was a minority shareholder. Um so, we sold it in 2017. Um I then we'd implemented EOS at Sprayer Depot and had a lot of great success with it, and I thought, "Well, maybe I'll try being an EOS implementer which is kind of the consultants that implement the system in other businesses. Um I did that for a couple years. I didn't I love the system. I didn't love I don't think I'm a great consultant. Um so then I that kind of brought me to 2020 early 2020-ish when I started my search for the business that I now own. Perfect. Let me ask you a couple follow-up here follow-ups here, Matt. The this gentleman Joe was the was your partner? Mhm. Um when he says we you know we can just buy businesses as I recall from your pre-call from our pre-call that that was an epiphany. An exciting and a epiphany for you not unlike what I hear so many of my guests have. Although they usually have it cuz they've read Buy Then Build which wasn't published for another eight or nine years after you had your epiphany thanks to Joe. So just talk talk me through a little bit of that like you know I always love this moment this lightbulb moment that my guest have. So share your lightbulb moment with us, please. Yeah, I was why I mean I was like oh um cuz it and I I do think franchises are great as well. But you know being in one for a while you do start to feel a little bit constrained sometimes. Um and not being a zero to one tech entrepreneur type. Um yeah, it was just this whole world opened up and um yeah, I think you've had plenty of guests who have talked to it just being that you know you're searching in your hometown or just you know places you'd like to live or or certain keywords for types of businesses that are interesting and and um we just went on like a road trip and just we're driving all around the Southeast US and looking at a business a day cuz Oh. Uh I don't know. I think there was less competition then maybe or something, but we'd call a broker, there'd be a listing, we'd look at the business the next day. It was just like 2 or 3 week uh Oh, that's cool. Yeah. Um Shopping. Just shopping around. Yeah, yeah. We're getting LOIs used in the car cuz we've got them all printed from the hotel. It was kind of a mess, but um Yeah, loved every uh every minute. Even even in that point, too, I was looking at like, "Oh, I should have just bought existing franchises." Even if I wanted to stay in the franchise and I would I don't know why that didn't even occur to me. Um cuz those are show up on BizBuySell as well even. And so just that whole idea of like putting debt or owner financing on an existing concern and just taking it to the next level, I think is the big unlock for me. Yeah. Well, you know, it took me 100 episodes uh to to realize the exciting opportunity that's that. And and that's of course a niche within ETA is applying ETA to franchising where you buy an exist franchisee that's existing. So it has all the benefits of ETA, existing business don't have to start from scratch, and the benefits but the the pros and the cons of franchising. But just a little bit about the business that you did buy. We're not going to have time for the story, but Sprayer Parts Depot I recall that in retrospect, you know, you just said you didn't know how to buy it from Joe, who is ill. Um but you would have in retrospect because why? That business What you wouldn't have wanted to sell? Why? Yeah, we had just kind of reached that point where um you know, when we had bought the first bit business of the two that became Sprayer Depot, you know, it was making a couple hundred grand a year, you know, the very bottom end of anything you'd want to uh buy profitability and and revenue and size-wise, but yeah, we had gotten to the point where we were a legit company, you know, approaching 2 million in discretionary earnings and um we had a a management layer in place and knew what we were doing, you know, it was a nice niche. Um and yeah, I didn't have to be there every day, you know, it was a it was a good a good thing we had uh going. And yeah, I would have it would have been stretching it would have been beyond like the SBA limits and I probably would have had to bring on um even some outside money, but I would have tried rather given it a shot now and uh knowing what I know now about how easy that you well, not easy, but uh doable That is. Doable. Yeah. Yeah. Yeah, that that is. Um and the but that exit even though in retrospect you maybe wouldn't have done it was material for you? The money you made on that exit? yeah, it was a for me, you know, it was a low seven-figure exit. So it was it was, you know, not uh not retire and never work again money, but um it was enough to um you know, be comfortable and ultimately I guess not need an investors for this later purchase. Mhm. Then one question on the EOS and then we're going to get into your search for your now business. You'd said, you know, you got into EOS consulting and didn't love being a consultant but still are committed to EOS. Tell give people 30 or 60 seconds on EOS and having seen it and imp I guess implemented it yourself into a number of different businesses and kind of remaining a believer or maybe even that solidified your belief even more. Just kind of pitch EOS to people for a minute for for those who are don't know it very well. Yeah, sure. Um I mean, it's just kind of all the business fundamentals you've ever read in any business book put into one kind of cohesive language, which I'd never seen done. You know, typically it was me as the business owner bringing new ideas to employees and saying this is how we're going to do this now and um well, that might have conflicted with a different way of running meetings previously or you know, a different way to have a strategic vision and um yeah, this is just kind of put There's nothing um I don't I don't There aren't any concepts you haven't seen anywhere else. Uh it's just in one nice cohesive system and everyone can use the same language and um you know, have the full plan on two pages and you can show it to a banker. You can also show it to the guy who works in the warehouse and everyone kind of gets like where we're going and how we're going to get there. And you saw it have real impact on the businesses that implemented it? Yeah, absolutely. I mean, the longest example I had was at Sprayer Depot where we implemented it about halfway through and saw the iterations of our like leadership team and several years of making plans and seeing if they came true and and all of that. Um and yeah, it absolutely worked with um you know, I just had a handful of uh clients. One of my clients was uh Delivery Dudes who was uh uh you had Peter teased on your on your show recently. Yeah, yeah. Um but yeah, he was one of my very few clients uh that I had. Um and yeah, I mean, it was great for them. Okay, Matt. So, you you decide that you're not going to be an EOS consultant forever and you turn your attention back to this thing that had worked well for you buying an existing business. What does your search look like? Yeah, um I think it was Peter who early on, you know, I was like I think I'm not going to keep doing these implementations. Um, you know, I was trying to help them either find someone else or how to do it themselves and I'm going to go and you know, find a business to buy and Peter was even like, oh, that's um, that's a search fund and uh, you know, he kind of opened my eyes to um, I think search funder and probably soon after that I found like buy then build and HBR guide and all that and then I used that in combination with I went back and found during our 08 search there was this there's one course on BizBuySell called DEO which is by this guy Richard Parker who I think I've seen around search funder a little bit now but um, it was a he advertised heavily on BizBuySell in 08 and it was a great just fundamentals of um, I would say similar to the buy then build uh, uh, architecture of like how to put a search together. Um, so yeah, I just kind of went back and read all that, you know, I said it's been a decade since I've done this like I should, you know, remind myself how it works um, and yeah, just put together kind of my criteria and got on BizBuySell and and started a uh, you know, a I guess a self what you'd call now kind of a self-funded brokered search. Um, And looking locally, you're Florida-based. Um, yeah, so I was looking at first in um, so I'm I live in Southern California and but I've been back and forth to to Florida a lot over the the years and um, so I started looking in Southern California specifically um but then pretty soon started looking in South Florida as well just because I had a certain comfort level there with I guess the businesses and the people and how to um transact there and there just seemed to be more like a lot of things in Florida more liquid uh market maybe. I mean this is at the beginning of COVID as well so you know things in general seem to be um moving more there. Anyway, I was looking in both Southern California and South Florida. Okay. And it was going to be BizBuySell pretty much that was going to be your deal flow as opposed to some proprietary Yeah, I mean I would love for that have not to been the case but um yeah I mean I did I just kind of your standard where like okay I'd see one listing that was interesting. I'd contact the broker and then just do whatever I could with the broker to get further up the funnel with the broker if I thought they were uh legitimate and had other listings that um you know would be becoming and that ultimately did actually work out because I the things I got closest on and what I the one I ultimately bought one way or another weren't on BizBuySell. They were from brokers but for you know whether it was an email they send out first or a phone call or um or what have you. Well I I should come up with a name for this. The uh using BizBuySell not to find businesses but to find the good brokers strategy. Yes, for sure. Yeah, yeah. you're not I don't know if you did that intentionally but it's kind of the way it worked for you. It's the way it's worked for a number a number of my guests and then I actually just had a recent guest who explicitly was like I used BizBuySell to find the good local brokers and and just establish relationships with those brokers. Um Yeah. So so intentionally or not, it seems to be a strategy of many. Yeah. Yeah, looking back, I probably should have Yeah, now I would probably go and specifically look for brokers on BizBuySell rather than maybe the one-off, you know, based on the the the listing. But yeah, I think that's a great strategy. Great. So eventually, after how long you find DHS? It was about a year into my search, I would say. Yeah, early 2021. So I got close on a few things, but ultimately um yeah, I think I got DHS under contract um or under LOI, rather, um like the end of February of '21. Okay. Wow. So if you had been doing a year ish, you this this this search really overlapped with COVID. Like when COVID I mean, COVID started almost exactly a year earlier. Yeah, yeah, yeah. Yeah, I was looking at my uh criteria before the call and the first line was uh COVID resistant, which I don't even remember what that means anymore at this point. But um yeah, that was that was part of it, for sure. Uh okay, great. So tell us about this business, DHS, that you found were connected with. Uh yeah, so it um it was kind of smaller than You know, I was looking in that 500 to 1 and 1/2 million uh discretionary earnings range is kind of your typical self-funded searcher SBA land. Um and this was right at the the bottom end of that size-wise, um earnings-wise. But um but it was kind of right in my wheelhouse with um they sell parts for construction equipment. And um mostly through e-commerce, Um either the customers are checking out online or at least finding us online and and calling us and we're packing and shipping them parts. And yeah, that just lined up well with my uh experience um at the the previous company and um even though it was smaller than I had hoped for um I just felt like I could um I could grow it a little more quickly than than something else that maybe I didn't have as much direct experience with and um kind of went into it with a an investment budget in mind to um kind of put put some things in place that I I thought could jump-start the the sales a bit. So, when you say an investment budget, you meant you were going to bring whatever you needed to to acquire the business and then you already were thinking about either using the earnings to reinvest or your own infusing it with more of your own capital to to really grow things, reinvest in the business. I guess that's not so dissimilar than most searchers they imagine reinvesting, but it sounds like you were already budgeting things in your mind as you as you negotiated the transaction. Yeah. Exactly. I you know, I um I knew how much it would cost to implement a real ERP system in an inventory heavy business. I knew what it would cost to do some real marketing as most people do. Um uh just add inventory. Um a lot of blocking and tackling. It wasn't like anything super speculative. Um and it was easy enough to budget for. When you say sell construction parts, give us give us an example. What's a construction part? Like what's one of the most popular parts that sells if such a thing is one? stand out? Sure, sure. I mean most of our the parts that we sell equipment for is um a lot of like infrastructure construction. So a lot of um uh road builders, bridge builders, excavation companies. And um within those it's a lot of uh like uh soil compaction equipment, um concrete and asphalt uh cutting um and yeah, and any part that goes on any of those um machines, you know, it's a lot of vibration and a lot of uh uh shaky machines that have parts that wear. And um we sell mostly for the lighter to medium-duty equipment. So not generally not the huge rollers um that you'll see rolling a road, but a lot of the support equipment that might be closer to the size of a a big lawn mower. Mhm. Um and yeah, most of our parts fit in a FedEx two-day pack. Um and we've got a lot of them. And and so the a a given part will be maybe something like a proprietary piece that has to fit a particular manufacturer's particular model uh sort of thing? Yeah, it might be a carburetor for an engine. It might be a uh a gasket for an exciter assembly. Um it might be a it can be a handle, you know, an awkwardly shaped uh handle. So think of a lawn mower handle uh um that we just need to figure out how to ship uh without getting damaged. Um and yeah, a lot of kits we put together uh kits that are a combination of proprietary parts um from the original equipment manufacturer combined with aftermarket sort of commoditized parts that we get from overseas from Asia. Um and just over time the previous owner who was a mechanic uh knew how to find the right mix of of those. Um and yeah, I think um that's kind of our unique offering in a lot of ways is just uh technical expertise that um we're able to offer the the customer and they just kind of know that they can count on the the parts that they're getting from us. Well, maybe you've just answered the the next question which is whenever I encounter an e-commerce business, it's like why why is this protected from Amazon? What Why I don't know if Amazon has a B2B construction section, but Amazon has everything, so if it doesn't, let's pretend that it could. Why did you feel that this was protected from Amazon selling carburetors uh out from under you? Yeah. So, I mean a lot of a lot of these things you can buy on Amazon. Um it's just a different experience. And um there is the technical component. I think Amazon is getting a lot better in B2B when it comes to supply as well as some other like Home Depot, you know, some other big players that are getting more into e-commerce are good on construction supplies, which are your consumables as a contractor. But, when it comes to parts on the actual machine, it's a you can't um if you get a a supply, you know, I don't you know, say you get a nail that's slightly the wrong size that you're using, I mean, it's not a big deal, but if you get a gasket that's slightly the wrong gasket, your machine is just not going to work and your project is still halted. Um and so there's the combination of um finding the right part uh that the customer needs and actually getting that to them um as soon as possible. And um yeah, I it the the Amazon effect was certainly something we were always worried about at the sprayer business as well. I mean, going back, you know, 14 years now and we always kind of thought, "Well, Amazon will squash us at some point." But yeah, they've never quite gotten there with I think the niche B2B parts uh stuff yet. And not that they couldn't, but they haven't. Well, and so it sounds like many of your sales are high-touch sales. I mean, are you on the phone with people? Uh are you on the phone with your customer? We are. Yeah, um you know, the majority of them were not and we've you know, we've built enough on the front end to help customers self-service. You know, our our typical product page is quite a bit more detailed and technical and boring than any uh t-shirt that that you're going to buy online. Um but it's pretty explicit. Like, these are the models that this fits. Um if you're not sure, download this break this parts breakdown and here's how to look at it and see you know, confirm that this is the right fitment for your machine that's 25 years old and this machine has had 12 models since then and let's make sure it's the right uh gasket um cuz the shape has changed ever so slightly um over the years. Um and then yeah, we we say all over our website if you're not sure don't order it and just call us and we'll walk you through it or chat with us or email, you know, however you you like. And that's a combination of making people feel good that they are in fact buying the right part. Maybe pointing out like hey you might want these handful of other parts. If you're if you're replacing that you're probably going to want to replace these handful of other items as well. Um And then also just the the sourcing of the parts. So sometimes people will will have something in stock but they'll need a couple other items on that same machine and those we ship directly from the manufacturer. We have to special order them or whatever but we can say like look this this is going to get to you in four days. This will get to you in 12. And yeah, that's a lot to communicate uh just on a website without the personal touch, yeah. Yeah. And and do you consider it a some of these definitions can be arbitrary but do you see yourself as an e-commerce business or almost more of a distributor? But I guess not just typically a distributor you kind of have regular distribution whereas you're taking every every order is different every order is you know, and you're serving the end customer as well and that's not really distri that's not distribution either. But it feels it starts to feel like you know, you're the one middleman. I don't mean that in any negative way. You're the one middleman sometimes between a manufacturer and the end customer and that sure sounds like a wholesaler or a distributor. So just indulge my me putting arbitrary labels on the business. Where does this business slot in? Yeah, I mean it's all those. Like I I think we're not a distributor in the classic sense of like we're just moving pallets of of you know large we get a truckload in and we move one of one pallet to each of our customers. It's much more we get a pallet in of a soup of of parts and then we put it into FedEx you know tiny FedEx packages and and get it to you're right the end it's always the end user. I mean almost always we it's the end user. And um we yeah I think of our we're a parts dealer. You know we're a parts business and um I do think we're value add. You know it's not just about getting the part there is a a real service component uh to it as well. And um yeah so I don't I mean I you know I'm sure on our on my SBA loan it was called you know we're a parts distributor but it's very much a um it's a it's a B2B in that we're selling to businesses but it's very B2C. We try to get the experience as much towards a B2C website experience as possible recognizing that there are other components to the buying experience that everyone's aware of. And we just try to get as close to the easy breezy no you know no hassle no effort experience that you would have buying paper towels on Amazon recognizing that that's not that ideal will never completely get to. Yeah. Yeah. Well one of the things the other things about this business that might have made me nervous is um in a lot you know in a of businesses that my guest buy, like a services business, like a lawn care business, let's say, landscaping business or plumbing business, the business isn't necessarily so differentiated from hundreds of other plumbing businesses out there, but it's a local business, so that that's kind of the their competitive play is that they are they they only need to be competitive with four or five other big players in the market and they can differentiate within that pool. But when you're selling on the internet, even putting his Amazon aside, how do you differentiate from other parts sellers, parts distributors, parts e-commerce businesses, where how does this not just become pure race to the bottom pricing uh pricing uh bloodbath kind of dynamic? Right. Um So, I would say it's almost a similar dynamic to I mean, if you had a uh you know, an HVAC business in a in a you know, certain metro area and now there are other players who are getting good at the internet uh and the sales process. Um you know, I'm in a decently big enough um market to to grow, but it's also not like wildly huge. Um so, there aren't that many players specifically doing what we're doing. And um so, it is you know, I'm competing against a half a dozen other uh companies who have even even our direct competitors don't have the exact product mix that we do. Mhm. Um we might have some overlap um with like companies who sell like lawn care equipment. We might have some overlap with people who smell sell uh parts for small engines. Um but for like our end user, there aren't a ton of I people who are companies who sell specifically for like um I would say sort of infrastructure builder contractors, right? So I'm sure we get a ton of one I know we get a ton of one-off customers who um or people who stop by and don't buy from us because we're not maybe the absolute lowest price on that one specific thing they're looking at at that moment. Um you know, when you've got a list of parts that you're trying to buy and you want to buy 20 parts for one machine because you've got a $100,000 piece of road you're trying to build you're not like shopping around to save $2 here and there. You want to make sure that you're confident you're buying the right stuff that that machine is going to get back up and running and your job's going to keep moving. So um I think it still just comes down to like on that service. That become that becomes really you know, getting them the parts, getting them exactly what they need, knowing that they're getting the correct parts, helping them figure out maybe you know, other parts they didn't realize they needed and so on. That's really where the value is and they'll pay for that. Yes, correct. Yeah. You know, this reminds me a little bit a little bit of um Danny Fields and Steve Reese's business where they bought uh basically a distributor of the you know, meters on the side of your house for gas for energy for gas and they and a big part of their value prop is that is is is the technical sales service that they provide helping home builders or whomever figure out exactly what they need. Right. And it's it makes perfect sense once you kind of talk it out, but I we're as consumers we're so used to there not being a human in the mix, you know, everything we just do our own research and we just buy our own stuff and that's just just It's the the steady march of consumer behavior forever. Right. Um it's interesting it's interesting to just think, "Well, no, actually I'd like some help on this sale, please." And that probably happens more in B2B land than we realize. Yeah, for sure. And we're trying to make it as self-service as possible, but the way to do that is to see what people are calling us about, what are they chatting with us about, where are they needing still the the technical expertise or the guidance. And how do we then turn that into more self-service options very specifically to our type of uh customer. But the only way to know that is to hear from them anecdotally. Yeah. Yeah. Yeah. Yeah. But so yeah, so it does serve a sort of data gathering purpose as well to have these conversations. Correct. Now, I've I've really jumped in onto the kind of strategic thoughts here I want the stuff here I want to hear more bullet points about the business, but one more question. So I I imagine one of the big marketing strategies here would be to just have this incredible long tail of pages devoted to all these variations of um machines and their attendant parts. Just hundreds and thousands of of pages product pages about random parts that you sell. Is that Is that the play sort of? You got it. Yes. We uh yeah, every um you know, every time I go to add a tool to our our website, it's a conversation around how do you manage huge catalogs um and how much is this going to cost me because of our massive uh product catalog. And um yeah, so it's a combination of having them there so people can you know, we're one sometimes we're one of a few people who even have a product that's on Google period and they bump into us and then realize, "Oh, they got a ton of other stuff as well." But also it's it's a matter of like when they land on that one random product showing them a few others for that same machine that they might need and didn't realize they need didn't realize someone's you know making it available to them on the internet in a self-service way if if they want or or call us but yeah that's it's managing a lot of SKUs. Rewinding back a little bit now to so just kind of bullet points about the business you told us that it was at the lower end of your range of STE which was half a million to a million and a half so let's call it half a million STE about? Yeah I don't think I really knew exactly I mean that's what they were representing maybe even a little slightly more than that but it was one of those where the inventory number over the years on the had been the same number and the inventory was never tied to the um accounting system which is fine it was easy enough to sort of back into and and estimate but yeah that was roughly where it was. And how about and and revenue and number of employees? Revenue was like about three and a half ish million and I think seven employees. Okay. At the time yeah. Okay. So that what is that seven 1/7 so call that what? 14 15% margins so for a business like this that strikes me as probably pretty good margins in this category I would guess cuz it's not a lot of Yeah. Yes um part of that was you know a very involved owner as is common at that size range obviously um I think going for you know, and I ate up all of that immediately uh for the first couple years. Um but uh going forward, you know, for projections, I use generally like a 12 and 1/2% to allow for a steady, you know, 20 to 30% growth rate. Um but yeah, anything over 12 and 1/2% I've always thought was pretty healthy for this type of business. I don't know what I I guess I'm just basing that roughly on like what we did at the at the sprayer business, but not on anything else in particular. And but when you say 12 and 1/2% and anything above that to allow for growth, you said. Does that mean that sort of like you you allow yourself once you're be into the 12 and a half above 12 and a half, you can feel comfortable reinvesting that if your margins can get above that, you can feel comfortable reinvesting and putting fuel in the fire, putting the money back in. for a if I wanted to for a year at any point, um as I know some people do. Uh Yeah, could make it 15 to you know, high teens, um and just know that the following year revenue will be exactly the same, but um yeah, so some some mix within there. But like I said, yeah, the first couple years it was a zeroish, uh and but we've been been growing. So. Mhm. And what did the purchase price look like and how did you buy it? Uh yeah, it was your it ended up being a what I learned was a pretty vanilla kind of SBA uh deal. Um it was right around 2 million. It ended up being a little less than that uh purchase price just based on um a a little bit of renegotiation. But um yeah, call it 2 millionish with a 80% SBA loan, 10% seller note, 10% uh my equity check. And that 4x was with inventory. Correct. Yeah, so it was kind of your you know, in e-com businesses sometimes it's the the uh you'll see the um multiple plus inventory um for whatever reason, but yeah, so it would uh it was either like a 3x plus inventory or a 4x including inventory. Well, let's hear about inventory and how two things I want to cover. The inventory and how you kind of diligenced it and how you think about it now cuz this is often one of the tricky parts with e-com, probably the trickiest part with e-com. And you've also got this interesting dynamic where you actually drop ship a lot of your parts directly from the manufacturer. But and then what and then I also want to talk about the technical knowledge needed to run this business. Your owner was pretty technical, a mechanic you said. So, first things first, inventory. So, how did you diligence this inventory? This you know, this business is selling inventory. How how what does it look like to get in there and decide if it's really half a million bucks worth of inventory? Yeah, um I mean, looking at enough of this type of business cuz even at the sprayer business, we had all along the way, even though we didn't make any acquisitions, we were looking at a lot of these types of businesses and there's just always a certain percentage of in parts businesses, you know, whether it's e-commerce or not, of um stale, rusty parts that you just know is is kind of part of the deal. And you know, whether the seller is and my seller at DHS couldn't have been better, was super up front about everything. Um and But in other words, unsellable, useless inventory. Right. So, you have a or you know, some gray area there within that of like, you know, this this these are parts for a machine that is a 20-year-old machine that they all had been in use until a few years ago. Yeah, it might sell because there's 300 of this machine still in use out there, but you're probably not going to. It's not worth the shelf space. It's tough. You kind of got to ballpark a decent amount of it, but if you can look at in parts businesses specifically, cuz that's all I know, so I won't speak to I guess other e-commerce, but if generally, if you have a any SKU that you've sold at least one of in say the last 12 to 18 months, I would treat that as active. And if you haven't sold it in at least one of it in 12 to 18 months, then that is uh stale and worthless and costs you more than but just by taking up shelf space typically. Um And yeah, just looking for um uh I smile because uh we have um you don't want to have obviously also if you say sold one of that item and you have a thousand of them, well, we don't need a thousand years worth of of that particular item either. So, um just recognizing those discrepancies as well. So, there's the sort of on-off of like completely worthless or possibly worth something, but then also like the um how many years Yeah, exactly. Yeah. And do you feel that that an inventory diligence is a key part of the diligence of a business like this? Um or is there did you feel pretty comfortable doing kind of following whatever standard procedure to diligence inventory was fine? I guess I guess the reason I'm harping on it is because the whole business is like you say is the inventory. Um so it feels like that's where there would be a lot more diligence necessary than elsewhere. Yeah, so I think it depends on the the the business. So like if if for instance um so say say uh he had half a million dollars in inventory, you know, that's a few turns a year um based on our the revenue size when I bought it. If it had been three or four times as much as a lot of parts businesses are, you'll see parts businesses with three to five million dollars in revenue and they also have two million dollars in inventory. Well, you just know intuitively like there's an issue here and then it's a matter of like um how much value is the seller putting on that inventory and how much does it seem like this is when they're cashing out uh and how much cash has the seller accumulated over the last several years and if it hasn't been very much cash, but it's been a lot of inventory. I know these are more um sort of quality more of a qualitative answer to your question, but to me those were the kind of key things looking at a lot of these um and just the fact that this particular business, I trusted the seller. When I asked about when I would walk in a through an aisle and say, you know, what is this? What's it What's it used on? When was the last time you sold one of these? How dusty are the bins? Yeah. Literally. Yeah. How rusty are some some parts? Cuz a lot of time, you know, things can accumulate rust pretty quickly and it's not a big deal, but if the whole bin is rusty and it's covered in cobwebs. Um I'm saying all this these qualitative things because I guess you can only do so much with the the data that um you're provided with and it's also not super easy to do like um real comprehensive inventory counts in a lead-up to a purchase, right? So, I can't like uh I can ask a seller to do an inventory a full inventory count before I buy it, but I can't necessarily be there asking a bunch of questions of the employees while they're doing that, you know, if this I mean you've had plenty of people I'm sure where they you know, it's always a question of like what employees are you able to talk to before the transaction goes through if any, right? So, um yeah, a lot of times you're relying then on reports that you're asking a a seller to provide to you, but like there's no I'm not going to take that to a what expert do I take that to to say tell me if this is accurate? I'm I'm the expert I mean I'm not even an expert I don't know, but like I'm closer to it than anyone else would be. Obviously, the real expert though is the seller. So, if you don't trust uh the seller and it's a lot of asking the same question a hundred different ways um about inventory and trends and um why you have this in stock and not that. Follow on to that the technical nature of this business and him being a mechanic this plays into the inventory cuz again, this business basically carrying inventory and redistributing it is the business. So, tell us how you thought about buying a basically technical sales business not knowing that that then the first thing about about this product category. How did you approach that? Yeah. It was actually looking back at my criteria, it was one of the things that was on my criteria as like a preference was a technical sale. And I'm the least technical person myself. You know, my wife puts the furniture together. I can't do anything with my hands. Um but the experience then of having the parts business, the sprayer parts business was telling because like I was immediately selling parts for sprayers as a guy who didn't know what an O-ring was or the purpose and and um But to your point, um it's just a matter of like how how how technical how much technical intuition does that person on the phone with a customer need to have immediately versus how um how good can we be as a company with having that information at the customer service person's fingertips. So, if a customer can't find something on our website, um and and they're calling us, how quickly can we have those hard-to-find parts breakdowns pulled up on our computer screen? Um how quickly can we help a customer find a um serial number on their very specific type of equipment because that serial number has been muddy for 5 years and dirt's like caked into it. We got to tell them where to find it, how to unearth it so that we we're we're finding the exact right parts breakdown for them. Um A lot of our customers aren't technically savvy at all. They can find our phone number, but they can't otherwise do much. So, how do we get them a how do we get their nephew on the phone to print them a parts breakdown You know, if it's something where we can't just hear exactly what it is, how do we get them there? So, do you You're right. The seller was a a mechanic and you know, was able to build a lot of this technical information onto our website and we still use him regularly for a lot of information. But, he one thing that he wasn't on the phone with customers at all. You know, he was able to hire people that he trained and you know, had the right information in front of them. Um and yeah, I think that's the key uh thing is just make it We're hiring customer service people who have no experience in any of this, but they're good with people and they're capable of uh using tools that we're putting in in front of them. Then it sounds like the key kind of link in the chain was his ability to hire and train customer service people. Again, something that was going to rely on his technical knowledge as a mechanic, his intuitions. How are you planning or how have you downloaded that capability into the organization without it there? Yeah, so I mean, he luckily we did have a couple employees that were had been there for a long time um and one in particular who's still there who really knows the products inside and out and can answer a question from a customer without needing to look anything up. Um but it's um it's really more about I mean, even Dave who who's the the seller, he's a mechanic. When it comes down to like uh if a customer calls and says, "Oh, my exciter is is rattling and uh in this very specific sound is happening." Like, yeah, sure. He's going to get to the bottom of that faster. But, a lot of our customers are mechanics themselves and it's not so much a this is how you do the repair, it's how do we find this part that they already know they they at least know they need that initial part because they can see that it's worn. And then at that point it's not so much like, "Oh, well, here's how you then install that part. Um it's a matter of let's make sure that it's the exact right O-ring that even the seller couldn't eyeball when you have, you know, if you have a million different size O-rings, you can't look at it and know intuitively. But um there really is just it's unrealistic to think that anyone would help a customer as fast as someone who's worked on this equipment. Um but it is realistic to have like uh uh our customer service reps look up the the part for our customer in a a reasonable amount of time. You know, our customers realize if they call with an obscure part they're looking for, it's not we're not going to magically have the part number on the top of our head, but if we say, "All right, we're just looking for it. Does it look like this?" You know, maybe shoot him a quick picture and and that is as good as you get. But having Dave and being able to use his initial uh technical knowledge and put a lot of that on our website, um he made a lot of YouTube videos that people, you know, reference still. Um and I'm I'm still plan to have him hopefully make a lot more of those for us, but um yeah, it's about having the the the technical knowledge available to us more than know it intuitively cuz it's impossible. Is there anything to learn about e-commerce generally? I guess since you're kind of B2B e-commerce, kind of depending how we choose to label you, um do you have se- a sense of what buying a business like yours is versus, say, buying some consumer D2C e-commerce business? Does that feel like adjacent to your business or does that actually feel like a completely different business model? Um and and what might you tell people listening about whether or not to buy a business like yours or to buy kind of a consumery D2C business? Yeah, it does feel different. Like when I you know, I've heard people on podcasts or when I you know, try to listen to e-commerce podcasts, they're all they're almost always D2C and um it does feel quite a bit different. I identify a lot more with um a parts businesses. Like even even ones that don't sell anything online, but say they're like a local parts supplier. Um so yeah, it's a little tough. I think the the markets are um quite a bit different. But that like that example you gave earlier of the uh the meters, um was that what the Yeah. Um and you know, I did look at There were a lot of businesses I looked at that were selling parts and components to equipment that I had the thought of like, oh, I'll turn that into more of an e-commerce pack and ship situation. Um and I think there are a lot of opportunities um from what I saw in in those types of businesses. Um where it's a little bit It can be a little bit uh touchy in some of them where they're um if you're a parts dealer for certain manufacturers, they might have geographical restrictions on where or how you can sell and if you start selling online out of state, other dealers may or may not have an issue, but um yeah, I do think there are opportunities there. Um For sure, especially going forward as as more and more people are different types of consumers are being, you know, everyone seems to be pretty comfortable buying stuff online now. Online. Great, Matt. Well, I'd like to start wrapping, but with let's hear how it's gone. So, I have the sense, correct me if I'm wrong, that your thesis or your sense of the business from the outside looking in has has has played out pretty pretty pretty well. How's it How's it gone? Yeah, yeah. Um Yeah, I think it's gone pretty much to to plan. I mean, I've you know, I've implemented a legit ERP system. We've made some upgrades to the website, implemented just a lot of your standard um SaaS tools that that are used by a lot of D2C e-commerce businesses, but we're using it in, you know, obviously this more B2B experience. So, trying to kind of marry um those those two because a lot of those tools are very simple, you know, for very simple transactions, and we're trying to use them in transactions that are a little bit more complex and often require a little bit more back and forth. So, you know, it's not your standard customer service ticket a lot of times. Um Mhm. But, yeah, we're approaching uh 3 years in and we'll be about double in um revenue, um the Did discretionary earnings should uh recover to not quite double from where I bought it, but should be um uh you know, somewhere close to that uh this year as well. But again, that was after a pretty big J-curve trough for after some expensive uh projects the first the first couple years. Well, that's it. That's I would say that's pretty good progress and pretty exciting after 3 or so years to have doubled your SDE, doubled your revenue, and doubled your SDE, and and um you know, to have your initiatives kind of bear out, you know, to spend a lot of money, but to have it go the way it should. Yeah. Um W- And And so, what is the the plan thereafter? Or is Is the plan basically to kind of more of the same, or is there some grand strategy, or you know, how do you think about the next 5 years? Yeah. Um So, we did just I hired an EOS implementer over the last 6 months, you know, and I've I've got a little bit of a leadership team now, and um you know, started to look at some of these types of questions over the next 5 to 10 years, and um yeah, I think we're at the point now where we finally have all the right platforms in place, and um uh I'm hoping we're at the point where we can legitimately start to scale uh uh you know, for our type of business anyway. And um yeah, I think we've got a lot of With so many SKUs, uh there are a lot of opportunities to get better at selling each one of those individual uh SKUs on our website. So, that's either with very manual uh uh content that we're adding around the that those types of parts that customers are interacting with. Um but obviously there's all kinds of AI tools now that can help us. Um and I think marrying those two, like our actual product knowledge, our actual uh customer feedback data of all these customers that are shopping for these parts, we see what they're not clear on that they're asking us about. Um and then using the AI tools that are available to everyone, but not everyone has the same proprietary uh data input that we have. Um and you know, and that's been a big part of the investment the last couple years is investing in a really RP that could start to collect this data that wasn't there um before. Um and yeah, I think those are the real opportunities. And a little bit of it is just staying uh that much ahead of any other competitors that might have um similar ideas. Mhm. And um yeah, ideally I'd love to grow uh organically at a at an aggressive, you know, kind of that uh 25% plus a year. Um and I think that's doable organically. I mean, certainly if there are um acquisitions that make sense along the way, I'll I'll do it. It's a little bit different than obviously just buying another HVAC business within your uh metro area in that um you know, I might just be buying a either a website or a different dealer in a different area that might have different agreements with the same manufacturers. You know, there are just a few different um considerations. But yeah, the main plan is to grow it organically, aggressively organically. And if we happen to bump into any decent acquisition candidates, we'll we'll certainly take a look. But to stay in this in this main, you know, parts for uh construction equipment and um just to our our kind of uh our why that we sort of identified in the EOS process was to keep builders building. Mhm. And I think certainly our our first like 10x is within this parts pack and ship world in North America. And um yeah, maybe after that, if that becomes I think our next, you know, this is 8 or 10 years from now, but would be like local um service centers at that point. So, we're not just providing the parts, but we're actually um fixing the machines for you. There There for our specific equipment, I do think there are a lot of opportunities to um provide better service than a lot of people are. And obviously at that point, that would be much more of a maybe not obviously, but in my mind, much more of a uh acquisitive sort of growth strategy at that point. But you said your first 10x that would come post your first 10x, which I guess implies that you feel like you could you could there's room here to 10x revenue. Play your cards right, long enough time frame. So, this what was a $3.5 million your business when you bought it, you could be selling 30 You think there's room to sell $35 million in parts a year? I do. I mean, that would include um probably adding a couple of um manufacturers uh lines that we're selling parts for, both, you know, the the OEM part and um growing our uh aftermarket part like replacement parts um for those as well, but um yeah, I mean, construction equipment in general is a multi-billion dollar Right. industry. Um there are opportunities, too. If I if we want to start selling bigger parts for those bigger, you know, legit heavy-duty machines and having um more warehouse space and shipping stuff on pallets instead of uh FedEx packs, um then there's room to grow within that as well. It's the same model. It's just uh a heavier shipment, basically. Right. Right. Yeah. Great, Matt. And then last question, so the business is in Florida and you're in Southern California? Correct. And just any thoughts on virtual businesses? You uh I guess how often are you at the business and do you like the nature of the business being one that you can can run virtually? Yeah, I mean, I uh just recently I'm there less. I mean, I've uh had an apartment there and um was there a whole lot for the first couple years. So, it it was certainly not a a virtual uh business for for a while. Um and yeah, I certainly think I'm obviously a a business like this uh where it's, you know, leaning towards e-commerce, pack and ship is for sure more of a virtual possibility, but we're very, you know, we've got inventory. We've got um people moving inventory. It's not just an FBA uh shipping stuff to Amazon scenario. Um, but yeah, I would say I'm this has been more closer to, you know, being close to 3 years in now where I've got an operations manager who is on site and probably isn't wildly unlike if I had bought a local service business and you have operations managers who run the very physical uh day-to-day operation. You know, at this point we've hired contractors who are um, and employees who are um, remote and overseas and, you know, we're probably half remote, half on site as far as employees go. Um, so now it it's not as uh crazy for me to rarely be on site, but um, yeah, right now I'm probably there every uh 6 weeks or so. Oh, okay. And and what is employee count at now? Probably 11 or 12. Um, yeah. 11 I'd I'd say about 12. Anything about your story or this or this business DHS method you we didn't touch on that you feel like the audience should hear? I think a common theme that a lot of your guests have, the ones that have done well, um, and and even the ones that have struggled, I think the key thing to me is like you need to be someone who is able to walk into a room with any type of individual or group of people and just be able to communicate and and listen uh to them and um I think as long as you're able to do that, though, this, you know, specifically this SBA loan program uh is pretty wildly appealing. And um yeah, I it doesn't it doesn't seem like there's any uh anti-SBA uh coalition out there that uh is jeopardizing this going forward. So, yeah, I'm excited about it. And um for just the sort of this this part of the world in general going forward. Well, Matt, and just about kind of um net out how you feel about your business model, let's say, a parts business or, you know, a web-enabled parts business. It's it's not a business that I've interviewed many gu- or any guests really, well, I guess Stephen and Danny a little bit, but um it's not, you know, a home services business. It's it's different different than most of my typical guests. Is this a an appealing business model? Is there Is it something that that uh guest searchers listening should maybe uh try to find? I think so, yeah. I think you probably the the the highest likelihood that, you know, th- this one happened to be doing a decent amount of um e-commerce sales. But more what I came across during my search was um parts businesses who did a little bit of e-commerce or a little bit of pack and ship where I thought I would turn it into more of a e-commerce operation. And that I think is where the opportunity probably is. You know, you you'd come across that more in in a typical search now. I don't know, you know, there's just a limited amount of this very specific uh type of business where they're selling parts for um equipment online. Uh so, I'm I mean, I'm sure you could come across, I'm sure people could run proprietary searches that might be um, close to that as well. Um, but yeah, I think you more along the lines of like uh, they're selling parts for, I mean, I like equipment specifically, but really any type of replacement parts it it would work and you have access to the parts to buy them at a competitive price and and have some margin there. Um, but maybe where they've at least proven a little bit that uh, they can pack and ship those parts and not have their vendors uh, cut it off, then that would probably be enough of a proof of concept to that you'd be able to to grow it for sure. And and so a parts business like that today would be serving its local market sort of and be taking orders at the other end of a phone call of a phone number? Yeah, yeah, I think a lot of times a lot of businesses like that I mean, there's a lot of kind of parts businesses and all over kind of local businesses all over the place sort of thing serving their local geography. It's it's funny I just you see a parts business um, and I'm like, yeah, that sounds like a business type, but I I actually I actually as I said, I haven't really interviewed anyone who's kind of done a parts business and I don't know what they look like or how off how common they are or what, so Yeah, I mean, any obviously people think of automotive parts whenever, you know, whenever you think of parts and that's not what I'm talking about, but um, I mean, you see any piece of equipment anywhere whether it's uh, mobile or or not, um, and you've had plenty of guests I'm sure that um, that service different types of equipment and that's the business model. Um, I looked at a bunch of those as well that do have a parts component that I thought I could could grow. Um, but yeah, a lot of those are um, uh, Uh, the uh, it's a mechanic type owner where they want to be able to service that customer afterwards if there's any issue with a part or component. And that's much easier for a mechanic type person if they can see it, uh, see the the issue physically and put their hands on it. Um, and yeah, it's just a matter of being comfortable with how with um, solving those customers issues when there are issues without having the part right in front of you. You might have to ship it back to you to to your warehouse. Um, but yeah, there are absolutely a ton of those businesses out there for any type of, um, you know, they it might not be quite as technical as what um, we're selling. Um, but it's can be technical enough to where it's not Amazon can't get it right. You can't tell by looking at a picture of a wheel on an obscure machine whether it's exactly the right size. I mean, you can if they've taken the picture properly with some scales on it, but um, generally you're going to need something more than Amazon at least right now is, um, providing. If people want to learn more about parts businesses, Matt, or they got one that they're looking at, how can they contact you? How do you prefer they do that? Uh, LinkedIn is is great. All right, Matt Durndeck, thank you for walking us through WebEnabled technical parts business. Congratulations on what seems like a a really good business with a lot of growth still ahead of it. For sure. Thanks so much for having me. I hope you enjoyed that interview. Make sure you subscribe to the Acquiring Minds channel below. We are now publishing twice a week, so tons of new interviews and stories to come. Stories that will help you along your own path to acquiring a business.