Jules Brenner, thank you for joining me today on Acquiring Minds. Hey there. Well, thanks for having me. Jules, you acquired a manufacturing business after a 2 and 1/2 year search. So, it was a long search and in retrospect, there was a lot you'd do differently. So, we're going to hear all about what you learned during your search as well as the business that you ultimately acquired, which is pretty unlike the businesses of many of my guests. But, let's start with a little context, Jules. Where are you from? What's your background? Kick us off. Sure. Um so, originally from Brooklyn, New York. I grew up there, went to college out there in NYU. Um kind of early on liked industrials. Um there was a book that I got as a gift as a kid of Ayn Rand book uh Atlas Shrugged. Um fell in love with that whole space, studied mechanical engineering, studied business as well. Um ended up doing an aerospace minor and um and when I got out of college, I knew I wanted to do industrials. So, I looked a lot into like, you know, new age industrials, old age industrials, old age being like, you know, businesses that have been around for 5 plus years. Um usually old and boring, machining metals, things like that. New age being like electric vehicles and renewables and things like that. And um you know, fell in love with both worlds this worlds, decided to pursue the new age industrials, spent a bunch of time in earlier stage tech companies, um working in all different roles from project management, operations, business development, sales, etc. Um and kind of fell in love with everything to do with running a business and fell in love with bringing like a more modern technological approach um to an old age industry like industrials. And um you know, after, you know, some amount of time in the industries, I decided that I wanted to look at um business acquisition. Um and jumped into this whole world from there. And Jules, you how did you get you I I know that your experience in startups is in the Bay Area and California. Correct? So, how did you get from from New York to California? Yeah, a good question. Um so, I don't know kind of why I wanted to do that. I think I got sick of the humidity in the New York. And um you know, just decided to move out here um out of college and you know, knew that there was like a lot of manufacturing industrial operations out here in the state. It's actually a pretty heavily industrial state. Um but, I moved out here and um you know, lived in a lot of the different cities everywhere from San Diego to LA to the Bay Area, different cultures and different ways of of doing industrials, if you will. Mhm. And so, and and so, your your last stint here in the Bay Area working for whom? I worked at a company called AmpUp. So, um you know, I kind of when I moved to California, I got into electric vehicles initially on the OEM vehicle manufacturing side, manufacturing electric trucks. And you know, after kind of seeing the growth in the industry of electric vehicles in California, um I started to realize that there were going to be other ways aside from the physical vehicles themselves um and that were going to grow. So, I moved up to the Bay Area, worked at a software company that just got a Y Combinator. Um you know, they were doing like software for electric vehicle charging stations, trying to basically use software to optimize what hardware couldn't. And um you know, fell in love with early stage companies, but um you know, I loved how um the culture is so different uh when it comes to industrial technology. Everyone wants to see rapid progression in an industry that's historically slow-moving. And so, if you're kind of immersed in the Bay Area, you're working for a Y Combinator company, uh the the obvious path would be more be to start and have an idea, start a business. Um and yet, you became interested in acquiring an existing business. So, what was the what was the evolution there? Yeah, good question. Um so, you know, I kind of almost um you know, went down that path. So, you know, during the years I worked everywhere from like later stage businesses that were, you know, like series B all the way to like series A, you know, seed round. And um kind of seeing that like a lot of like particularly industrial companies, especially hardware, they don't really get to a point where they're, you know, at really operating state until maybe 3 years in at best. I've seen a lot of the ones I know usually five, some maybe even like they're still pivoting 10 years later. So, um I really liked having the ability to modernize the industry, but I did not like how long it would take to go from zero. Uh finding those customers, convincing them of some new age thing, uh it's all really really slow. And I wanted to jump into the driver's seat of operations faster than that. So, I looked at uh business acquisition from there because it's something that I knew um could be done. I grew up in New York. I have uh some friends that like they took over their parents' companies and you know, a lot of finance and private equity out there. So, um was aware it could be done, just you know, had to kind of figure out how. And so, tell us about figuring it out figuring out how. You you had private equity friends, you knew friends who had acquired their parents' businesses, but were you at all familiar with the, you know, loan self-funded or traditional search fund model, buy then build model? Had you read the books? What was your What did your education there look like? Yeah, I kind of read all the books there were to read um everything and then um found searchfunder.com, started there. Um just ingested as much material as I could. Um you know, looking online, just trying to learn about how it's done, what industry people are choosing, how they're choosing it. Where does all the equity capital flow to? Um you know, what are all the competitors? Um how do we stand out? Things like that. So, I I studied everything and really tried to be systematic about where we went. Um having been from the startup community, you know, you're kind of ingrained to, you know, go the opposite direction of the pack and look for value there. Um so, I took a lot of that into um the future search. But, given your experience and interest in industrials, it doesn't sound like you considered the industries that you might buy into uh a blank canvas. Talk about what you where you focused your your your preferences. Yeah, so, you know, when we started the search, I started to try to think about what you know, high-level parameters are important to getting funded. Right? Cuz you know, you can want to do whatever industry you want to do, but if the deal doesn't get funded, you've kind of wasted your time. So, really thought about what were the criteria that were really important and really try to understand why and build from there. And I think at the core, you know, I really started to see that high, you know, gross margins were really really important. Um typically these are found in service-based businesses. Um you know, knew that it was important purely from also my Silicon Valley days because I've always looked at it as like when you start a startup, your investors are expecting you to focus predominantly on gross margin. You know, how do you find a product or service that is so widely good or different the customers will pay a large margin for and there aren't a lot of competitors and then over time, you can figure out how to get revenue by hiring sales people and how to get, you know, even a profit by um you know, hiring the right finance and operational people. So, really thought about that as like the core base from where to build out. Um thought about like which business models have a, you know, strong moat, you know, where you're going to come in and there's going to be a way for you to grow and way for you to dominate a market and not have all these competitors that are driving margins down over time. Um and ideally something that's in a growing industry. Um something that's, you know, growing, something that, you know, has to be um in, you know, the US, right? A lot of different businesses have been starting to be outsourced out of the country. So, really wanted to find something that was like that. Um and ultimately a really bankable company with lots of history. So, you know, when you think about that, lots of history, you're not going to find it in like an industry that was started 2 years ago. You know, you're going to have to look into old and boring. You're going to have to think about like, you know, if you're going to find high margins, um you know, you're usually going to find it um in a company that has high operating leverage. Um so, you know, it had to be of a certain size because of that and then you start kind of narrowing it down. Um and I think then the final thing I don't filter I applied really was I looked at like who the other searchers were out there, who was my competition both from the funding perspective, but also who's also going to be reaching out to sellers. Um and a lot of them had like more like, you know, left um a consulting gig or they were in private equity or they had an MBA and they were more like finance and generalist operators versus like they focused predominantly on one industry their whole career and they bought a company in it. So, wanted to really, you know, figure out how to stand out from the pack and increase the chances of success and that was um a big part of it. So, kind of doing like, you know, a self-audit from there, you look at, you know, what's your background, how do you fit in, um where are you going to stand out? Um you know, if 10 of the same like generalist operators wanted to get a landscaping company, uh it's going to be really hard to stand out aside from in the numbers. So, it's a lot less chance you find value. So, um applying all these filters, um I kind of knew that the highest chance of success and the thing that would operate the best would be something in the industrial space, ideally in manufacturing. And you know, for that reason, we actually started initially calling ourselves Manufacturing Succession Partners, MSP for short. Um you know, I would actually still keep the same website, but um over time, we kind of opened up the um the deals we looked at and we can get into that later. Um but, I looked at manufacturing and then um I knew it well, I spent time in it. And then from there, I started to ask myself like who in manufacturing is actually making high gross margins? And a lot of it goes to China. A lot of them are like tier one suppliers to OEMs and they usually have, you know, lower margins. So, um kind of putting all that together, I knew that a really nice target would be a, you know, like an aerospace or medical manufacturing facility that has some some highly specialized work where they can charge high gross margins, but they were also like a tier two or tier three or maybe even tier four where they were so low down the chain that, um, you know, it's not likely that they're ever going to really get disrupted, but also so low down the chain where their margins could be the highest. And if you have, um, significant amount of dollar value of physical assets and machines, there's a lot less of a, um, chance that a deal's not going to get funded. You know, it's a much more bankable kind of deal. When you say tier one, two, three, four, what are the what are those tiers represent? So, if I can give you an example, like let's say an an automotive, right? So, like a tier, you know, one, um, there's the OEM, original equipment manufacturer. So, let's say that's Ford, right? And there's the tier one, maybe a tier one supplies the whole engine for Ford in one shot. Now, that tier one subcontracts basically out to a bunch of other smaller tiers. So, maybe someone who, you know, builds the top of the engine block and then that gets, you know, to another party that builds the bottom of the engine block and that's your engine. Now, those guys, you know, they'd be basically like your tier twos. They would split off and oh, this guy provides a gasket, this guy provides a bolt, this guy provides a hose, so on and so on. And as you go up the chain, your margins tend to decrease. So, you want to find yourself as low as possible and frankly, like you're going to do that anyway because most searches aren't buying these like, you know, to be a OEM or tier one, you're going to be a pretty big company. So, you're going to be buying something small anyway. Um, but, you know, for that reason I avoided companies that were like original equipment manufacturers that made some small widget all themselves and um, often their margins were not that great. Um, so stayed in like, you know, someone who made a part that went into something big and, um, if you could even find a, um, someone that's making a part that's like cheap relative to the whole end product, the margins tend to be really nice. Alex Mears, uh, of the Brighton Group talks about one of the best businesses he'd ever seen was a manufacturer of some piece where the piece was very, very, very custom for a particular whatever I don't even know what the what the the machine or the the vehicle that it was ultimately being manufactured for, the final product, but it was very, very custom. Um, and uh, so it was it was kind of that was the moat. It was hard to kind of find a replacement for that. Um, and it was also such a small line item on the overall cost of the final product that it was not one that was ever going to be really scrutinized. And so, they could just have a lot of margin there and and feel safe that they were kind of hidden way, way, way, way down the list and and who they were selling to, their vendor was never really going to spend the time to try to optimize them or push them on price. And it was just a very safe, fat, and happy kind of place to occupy in the value chain. Um, this this kind of reminds me of, uh, you remind me of what of that kind of whole dynamic there. So, I get I guess this is well known in in in manufacturing that that's where you want to want to play at least as a small small player. Yeah, yeah, exactly. Yeah, you want to have as many like complexities to the part as possible. The more complexities means the less people that can make it, right? The more features. Like I've seen some shops where they only will bid something with like maybe 50 features, right? It's, you know, one block of metal with 50 unique features cut into it. Um, and something like that will tend to eliminate a lot of the competitors because you can you can cut one feature wrong and the whole part's scrap. So, you know, if you think more along the lines of that, you will tend to find some pretty good margin products. And then if if you're playing in that space, how do you grow? Because it it seems like you're just so integrated with your vendor that you're you're basically your sales are determined by what the vendor needs from year to year. And this isn't like, you know, a home services business where you can grow your territory or whatever. So, so, yeah, just for for those, um, uninitiated to the world of manufacturing, how do you grow business like that? It's tough. It's very, very tough. So, um, yeah, yeah, like we've definitely seen those where like those companies are making a product where there's maybe like 50 customers out there in the whole US that might buy this and they're already working with like most of them. Yeah. So, yeah, that is really, really tough and you know, if you get really, really specialized, frankly, you're better off just becoming like an acquirer or a bolt-on to a larger like private equity or competitor. You know, it's not where and and frankly, those guys will offer more money than we ever will anyway. So, you probably won't end up with that deal regardless. But, um, you know, in those cases like there are some where they like who will make something somewhat generic-ish, like for example, a gasket manufacturer, right? So, you might be doing, you know, gaskets for automotive or something, but gaskets are used in a a bunch of other industries. So, you can apply it there. Um, sheet metal is another good example. Sometimes somebody will make like a sheet metal part that is very particular for certain industries, you know, they do something really, really well in-house. Um, but then, um, you know, you might find yourself in a position where you can apply, you know, you've been doing, let's say, automotive sheet metal and now you can also apply it to aerospace and things like that cuz those machines will work on different parts. So, um, yeah, I mean, you have to be careful basically is is the really really thing there. You might get your great margins, it might look really good, but then you might have a ceiling on how far you can grow the thing for sure. Mhm. Okay. And so, just overall, again, for those of us who don't know industrials or manufacturing very well, um, you know, what I would understand is what I understand about manufacturing, of course, is that outsourcing has been been a big trend for a generation or two of the excuse me, off specifically offshoring like out of the U outside the US. And so, it sounds like the opportunities that remain here are just super niche, super specialized, kind of premium, high-value manufacturing. First of all, is that correct? And second of all, are there any other big trends that, you know, that we should be aware of? Just kind of help us understand it at a 30,000-ft level like the state of manufacturing and the opportunities therein. Yeah, and that's a good question. I think, um, it's it's definitely tough in the US. Um, you know, like all the time like now I get emails from like a a Chinese, you know, precision laser or something shop that actually like, you know, wants to work with us and have us outsource our laser work to them. Just as a small part of what they do. I mean, it's pretty crazy in that, you know, we definitely become a much more global economy, especially out here in California. Um, but, you know, with COVID, there was there's a lot of onshoring going on where some of the people that would send their parts out to the China or somewhere else might bring them into the US. So. But, you can't compete with a lot of their prices. I mean, at scale, they do a really, really good job. Um, you know, so what actually works here in the US is like, for example, if you're doing aerospace, you tend to have to work with a US company. Um, if you're doing like certain like infrastructure work, like what we do and I can tell you about that later, um, you have to use US metals and, you know, they tend to want to work with somebody hyper-localized for a quick turnaround. So, it's like you you kind of have to play more of the service game. Mhm. And yeah, maybe get really good at certain parts where, you know, they have to go with you. Um, but, yeah, it is it is tough. A lot of, um, you know, a lot of manufacturers, they shut down, especially, um, you know, as their margins shrink, it's already such a low-margin uh, game for a lot of people that, you know, just enough of a margin shrink that it puts them out of business pretty fast. Well, getting back to the beginning of your search, the launch of your search. So, you know, it was a 2 and 1/2-year search. You acquired this year. So, you know, my math suggests that you started right around COVID. COVID had already started or was about to start. So, so take us, uh, take us to the launch of your search. And, um, where are you at the time and how old are you at the time? Yeah, I, um, so I started the search, as you said, right into COVID. Um, quite interesting cuz, you know, when we got going, it was literally a, um, you know, we weren't sure, just like the rest of the world, what was going to happen. Um, you know, I started it in March 2020. And you know, that was right about when, you know, literally all the news started coming out. Even better, so we started in aerospace machining. Um, we actually had like a few deals, like basically guys that I knew from the aerospace industry, um, that I called up and said, "Hey, I'd like to buy a company now. Are you guys selling?" You know, a few said yes. Then very quickly, they started losing contracts left and right. You know, they had, you know, some of the big aerospace, um, they were supplying some of the bigger aerospace contractors that were, you know, supplying parts for like Boeing. And, um, as, you know, the planes got grounded, their, you know, replacement and maintenance schedules got pushed. So, you know, a small change in revenue eliminates a good chunk of your EBITDA for someone of that size. Yeah. We were seeing people basically tell us like, "You know, I would love to try to sell now, but not only are my numbers going to look good, but I'm trying to make sure my business doesn't fail." Yeah. So, you know, attentions got shifted. It it pushed a lot of what was going on. Um, you know, at the time I kind of knew we were going to take some bit of a like a hit. Like it was going to, you know, be a situation of like, you know, it's never a good time to really start anything and, you know, COVID is hard to predict and it was hard to predict how long it would last for, but you know, I thought it was going to end by August. And then it kept kind of getting pushed and pushed and pushed. Um, we then ran into the election, you know, and that also slowed down a lot of the deals and then ramped them right back up after the election and so on. So, very kind of volatile year, but you know, when I started, I I kind of knew that like, you know, the average search was a year and a half. So, I prepared for that and then also knowing that like, you know, you're going to probably lose some time due to COVID. Um, you know, I was searching in California at the time, the state was like shut down. I knew it was going to be a little longer than a year and a half. So, um, you know, when things added up, it it definitely was a slow start. Yeah, your search was based in the Bay Area and you were at this point four-ish, five-ish years out of school out of college? Yeah, the search was in the Bay Area. I was yeah, probably about that out of school and you know, I was pretty much at the point where I thought it was going to it was going to be a quick one, a quick search and turned out not to be after it got worse. But the Bay Area was interesting cuz it was probably the first place in the country to you know, shut down, right? We so we had like the big tech companies there. Everyone is leaving, everyone is leaving remotely. So I eventually also left as well. I actually ended up going to Phoenix, Arizona for a bit during like about a year part of the search. Um but definitely wanted to find something in the West Coast. I think there's some statistics on search funder where you know, the average searcher they find their deal within like 2 and 1/2 hour flight or drive or something like that from where they're based. So you know, I knew that statistically likely I was going to land something on the West Coast between either Arizona or California. And so give us more of these parameters of your search. So you were you were willing to move but you but you thought likely it would be on the somewhere on the West Coast. That's probably just where the opportunities were. So you were willing to move. You were living off savings and kind of what what size company were you looking to take down? Give us some of these parameters. Yeah, sure. So when we started, we were a you know, I kind of like looked at the market. I thought about doing like a traditional search where you know, you raise the capital ahead of time but then you get worse economics later and then you also have to buy a bigger deal. And then and then look at that versus like the self-funded search where you know, you fund it yourself and then when you go to acquire the business, you take investor equity still but you end up buying a little bit of a smaller deal but owning more economics of that deal. I weighed both options. I actually talked a lot to the traditional search fund investors, pretty much anyone that would talk to me like the big funds that everyone knows. I pretty much got laughed at by most of them. They kind of told me that manufacturing doesn't work for search. You know, and I tried to explain to them I'm like you know, if you look where everyone else is looking, you're going to you know, find yourself in high valuations and tough to get good economics out of those setups but just wasn't for a lot of the funds. So just kind of out of necessity, we shifted towards a self-funded search. With that said, like you know, I I use we a lot and when I talk about this stuff, I wanted to you know, kind of call it like you know, mimic you know, some of the aspects that work well in a traditional search in our search. So like in the traditional search, you're raising money from investors in the beginning but then they serve as advisors throughout the process. They help you get the deal funded and in diligence, etc. So I built a small team internally, recruited a former Deloitte accountant that you know, was partner there for like three decades, left and then you know, serves in a the board of a bunch of publicly traded companies and go by the name Ron. So he came on board and then you know, part doing that, I started to like build more formality to stuff and get a little bit more focus. So you know, applying those filters initially at aerospace was proved to be pretty ineffective because of COVID. So you know, because of that, we said all right, well, what's the next industry? So then we started to having to look to other things in manufacturing. So I looked at you know, like manufacturing level like architectural components. We looked at the lighting industry for a little bit, you know, LEDs and things like that. And we looked at um you know, PCBs, so you know, circuit boards, things like that. Um and then you know, eventually stumbled into the infrastructure industry. Which I can talk about later. But you know, the whole way through is all self-funded, me putting in my own funds and investing, you know, just typical self-funded search fashion. Um and you know, I think it's important someone starting in that just prepare for the journey to maybe take a little bit of time and make sure you're funded appropriately. And in this and yeah, and the funding in your case came from savings or kind of other money that you had access to. But you were Yeah. Yeah. And when you so when you say we, the the acquisition vehicle is essentially Jules but you had assembled kind of a deal team that was helping you along the way. Yeah, and the deal team grew over time. I think you get into that as well. But it started with basically myself and then our CFO Ron and then you know, we have some like indirect advisors that we worked with that are like industry experts that we could I use on a case-by-case basis you know, operational diligence and things like that. And then eventually we had an intern that started with us that finished an MBA program and then eventually became a kind of full-time associate with us who works with us on site at the current deal. And then you know, we're looking to scale that as well. You know, and have like a kind of a small management team for which we can use to support many companies you know, kind of a micro private equity fashion. Okay, well we'll get into that. But Jules, when you were getting all of these rejections from the the traditional search fund folks, did that give you pause or did you remain confident in your thesis? No, I mean I don't know. I mean I came from the startup world. So that's pretty normal, right? You know, you're going to like not get funded from 90% of the investors you talked to. So it was just about talking to enough people that you know, believed in it, you know, maybe did industrials themselves. You know, I found that kind of like industrial community, you know, eventually. Amongst search, it took some time because it's small and it's not a lot of us. Um but I think it proved to be kind of interesting because we went to go fund our current deal. I actually took it back to some of those and all of a sudden they had a very different you know, tone when we were able to offer a deal at a lower valuation than a lot of like the software companies they were being brought at. You know, during the time when we were funding it, the multiples were pretty wild all across the board except in um the niche we're in. Um And and just what didn't they like about industrials? Like what about the model doesn't work? Is it is it just that customer concentration and non-recurring revenue generally? Although I guess there probably is recurring revenue because you you're you're on a continual basis providing a a part to to your to your vendor, right? Well, you know, when we started, we were called manufacturing succession, right? So it was just manufacturing, not industrials broadly. So you know, I'm I'm sure they like industrials. Like if you brought them an industrial service or an industrial software company, they'd be all over that. I'm talking like initially with manufacturing and with manufacturing, you know, I can see their point. It is really tough. I mean a few things is I noticed is like A, they're like a little harder to operate fundamentally because you know, a little lower margins. There's a capex requirement that's often a lot higher than that of like a HVAC business where you just buy another truck and hire a few people and they take it home with them. You have to get machines, you got to get real estate, you know, there's a lot of consumables involved. Sometimes the cash flow conversion cycles are really slow. So all those things can make it tough for growth rate because you know, you can pay like you know, I don't want to say anything but you can over you can overpay for a business as long as there's a really big growth rate behind it. So you know, a lot of these like you know, searchers will like software and stuff and pay like seven times EBITDA and get funded but then they grow at 30% a year and quickly it's okay. So if you have a lot of things that slow you down amongst the growth journey, it can get a you know, can make a lot of equity investor a little queasy. A bank will love it but an equity investor might not. So I think that was the big one. And then the other one was like you know, they sometimes wanted people with like more you know, kind of generally like an easier business to run fundamentally. Like even for us like you know, we wouldn't buy this like you know, high-tech laser frequency manufacturing type of business. Right? And some of the manufacturers that still remain in the US are frankly those, right? The high margin, low profile. So it's kind of hard to find a balance. There's just less available options too and I think that's why they think there's a less of a chance you're going to succeed in the search itself. Yeah. Yeah. Those are good arguments. So one other question about the nature of your search when you decided to go self-funded after talking to all these traditional folks traditional search fund folks I recall from our pre-call that you had an interesting you talked to people who had also done self-funded searches and who are now CEOs of self-funded acquisitions and traditional search fund acquisitions. And there was another point that you uncovered in talking to these folks. Do you do you recall that? Particularly the self-funded your your self-funded guy and why he actually if he could go back and do it again, he would have done traditional. Yeah. Yeah, I definitely talked to a lot of different searchers. You know, some that were about to acquire, some that have already acquired, some a few years in. It's kind of interesting cuz like what I realized over time is um there's kind of two distinct routes you go. Like the self-funded, you buy a smaller deal. Smaller deal means people are wearing many hats means you're not going to walk in day one and have like a you know, an assistant that all they do is an assistant, a purchasing person. That's all of this. People are running around doing a lot of different things and you probably are going to become the general manager and you probably are going to have to do a lot of things and probably work in the business and maybe spend a year trying to work your way out of working in the business full-time. Now, if you buy a larger deal, which you have to pretty much from a traditional search that's when you like you know, we'll walk in and you have those like almost luxuries. People focused in all those different job roles and you know, what I have interestingly found is like some searchers, they came from like you know, they were a VP at like you know, a bank or something like that or like you know, high up in a startup and you know, they find themselves where they walk into the deals and start to have to do a lot of different roles and interesting, right? And I've heard people like even complain about the quality of people they work with, right? All sorts of things. I think um, you know, if you think those are going to be concerning, I think maybe you just might want to do traditional because it takes probably a year or two extra in a self-funded search minimum to grow to a point where you look, you know, big enough and have the scale to hire um, those sorts of like, you know, basic creature comfort type roles and focused um, people. Uh, maybe even better quality people. Um, so it's a little bit like that and I think in hindsight like um, you know, it's it's interesting too cuz we since we did a self-funded search, we ran into that as well. And um, found ourselves like we're, you know, I had to be involved in a lot of different roles and it's a little bit more chaos than maybe some people like when everyone's doing different things. Mhm. Mhm. Okay. Great. Okay. Well, take us So now you Take us through the first deal, the that that near miss that you had um, or I guess near success that you had. Get Give us uh, quickly on that story. Yeah, so but so there were a few. Um, you know, initially it was in the aerospace industry. COVID killed those. Um, that pushed us basically in 2021 and then in 2021 there was like, you know, we just had the election end. Um, a lot of people were concerned about capital gains taxes. So we found a flood of sellers in the market. Um, and then they were able to kind of close their books from that bad COVID year, at least put something, you know, file a tax return. Usually a lot of deals are done after the first tax return's filed. Um, so um, you know, I kind of broadened the search cuz I wasn't sure if we're going to find candidates in California when the state is closed most of the time. So ended up finding a company on the East Coast that manufactures architectural lighting. Um, little bit of a bigger deal. Not like I intended to go that large, but they kind of came up where they were doing like almost 3 million of EBITDA. And um, you know, I felt like there could be a lot to grow. They fit a lot of the stuff that I talked about, the high margins, all that. So at that point like the deal kind of fell um, in at a point where, you know, frankly I don't think you know, I or the team was prepared to close it in the sense that like we did more networking with investors prior. A lot of the investors didn't want to talk to you unless you had a deal to show them first and it's kind of hard to build a relationship and get funding all at the same time. And then um, it was also larger than expected, right? When you raise When you try to do a deal that size, usually it's in a traditional search and you've raised money before. So the investors have a time to see how you operate and trust you. But if you come out of the gate asking for what the time was $15 million. Uh, it's a little tough. I mean, in Silicon Valley, I've seen it all the time. You know, we have like 17-year-olds raising, you know, tens of millions of dollars, no problem. Right? But when you when you do it out of the gate in the search world, it's, you know, it's it's it's not okay. So um, I took ended up taking that deal. Like we put it on their LOI. Ended up taking that deal and like shopped it around to probably like 100, 200 investors, something crazy. I mean, everyone that was on SearchFunder, everyone that was on every site, anyone and anyone that I could find. Um, I showed the deal to. You know, ended up you know, basically getting to a point where I found a group that was interested in funding it. Um, this took a bit of time and unfortunately by the time that group said, "Yes, we'll fund it." the sellers of the company decided to change their minds and said, "Hey, you know, we actually don't want to sell now. We'd like to continue making money from this company for another 2 3 years and then let's talk. And then we'll we'll we'll we'll be, you know, better in the market to sell at that point." So uh, really sucked. I mean, you know, we were at a point where it was like probably 30 to 45 days to close the thing um, after months of investment trying to fund it. And um, it died out. Um, but I know you called it like um, you know, like the it was it was definitely a near miss, but what was interesting from it is that a lot of those investors that I kind of showed that deal to, um, they had really good things to say about the way we were thinking about the business, the way we structured it, the way we presented it in the SIM. And then um, when it came to fund the next deal, not only did I already have those relationships and some bit of trust, right? And kind of, you know, I I knew who to go to quickly, but at the same time, you know, I knew what to say to get the deal across the finish line. Um, so kind of, you know, It was not wasted time. Not Yeah, not wasted time, but it sucked. It sucked. It certainly felt like wasted time in the um, you know, in in the middle of it. And that's the hard thing I think about search cuz it's a super binary outcome versus starting a, you know, startup. You kind of get revenue every month and slowly increases, but usually not very binary. Yeah. So at when that deal fell apart, did you question continuing with your search? Oh, yeah, I did. I mean, that was um, I don't know, a little bit over a year and a half in. So at that point I was like, "All right, now, you know, I'm over the average." Um, but COVID, you know, did slow things down. Um, so I kind of said, "All right, like, you know, I need to do something different." Right? So that I think that was a a pretty, you know, direct moment in saying something I was doing was not working. I have to try something else. Okay. And so what was that? What what what was your next step forward? Um, so it's interesting. So um, you know, when that deal died, I ended up um, kind of talking to one of the investors that I showed the deal to that, you know, the deal wasn't for them, a gentleman named Sam who um, you know, owns a few industrial businesses in Tampa, Florida. Um, you know, he was Rosati who will be a familiar name to to the audience, uh, Pursuit Capital and and one of the three people behind SM Bash, the conference. Yep. Yeah, exactly. Yeah, and you know, I Sam and I got to know each other a little bit then um, with that initial deal. And then um, you know, when this deal died, I I kind of told him about it and he said, you know, that basically happened to him too when he was starting out. Like he had a deal about the similar size just die in a similar fashion. Um, so he, you know, wanted to help out. So, you know, he basically became kind of like an advisor to the search from that point. Mhm. And um, one of the interesting things I kind of started realizing at that point was kind of like, you know, thinking about private um, small businesses acquisitions as like buying um, real estate, right? And what I mean by that is like every piece of real estate can be sold, right? You can take a small plot of land in the most rural area and um, it has a value. Some There's some dollar value to it. It's usually not zero. And um, you know, what was interesting there is like it's not necessarily about the dollar value you pay, it's about the structure you do to get there. And that kind of made me think about like, you know, there were deals out there that I kept coming across that were like small or imperfect for one reason or the other and I kept rejecting. Um, you know, over time the criteria started widening as I started to realize a lot of the deals in the market have imperfections. Um, but it made me kind of think about like what um, imperfections were okay with me and then start to shift my attention to how do I structure the deal to accommodate for those imperfections. Okay. And that was um, a pretty big change. Um, but then Sam also urged me to focus predominantly on the um, broker deals. He kind of said, "At this point forward, no more, you know, off-market deals. Um, you only work with a broker. Um, find someone, you know, locally and that's it." And um, that's exactly what I did. Um, and then that's what I did. Jules Jules, let let me let me jump in here too cuz I want to drill down on both of these points. So the thing about the the the perfect business or the imperfect the imperfections that you were now willing to tolerate. Like I'm sure that you had already encountered the the old phrase like there is there's no such thing as a perfect business. So you you probably already knew that you couldn't find perfect. Uh, and yet it sounds like Sam actually did kind of break break open whatever standard you had for perfection or imperfection. What were some of the things that you were requiring in in when you in previously in your search that Sam was like, you need to relax those a little bit? Yeah, I think um, the big one is customer concentration and then um, you know, with that one like often you can structure a way for it. One thing that I started doing and then I eventually started getting better at was like before I used to say um, if it was like a customer concentration over 20%. I would structure basically that percentage of valuation almost for a forgivable seller note. And um, you know, sellers would say, "Well, that's um, I see how that's reasonable, um, but um, that is a big risk, you know, for them where they lose the whole percentage of that customer's revenue if they leave, right? So Yeah. Over time what I did was like, "All right, well, if this is a 15% customer, then I would be okay." So I'd do 15% from the total percentage of that customer. Let's say they're they're 25 and then that 10% becomes more of what forgivable consideration is. Um, but then also like what I started to think about was like um, simplicity in deals. I think a lot of the sellers in the lower micro market that we operate in, um, they want simple deals. So I'm trying to minimize the amount of moving pieces, not having three, moving pieces like, you know, you might have in the large private equity deals where there's a a seller rollover, a seller note, an earn out, an upfront cash, you know, you know, all consulting agreement and you know, the salary associated to it. Like, you know, really baking it down super super simple. Um, because I found that a lot of like, you know, the sellers in the you know, SBA um, deal land, they they don't get that. You know, they just this not for them. So um, you know, those I think those are two of the how I'd bigger things. For sure. That's interesting. I I thought you were going to say just the opposite. I thought I was going to hear you get more creative about terms because Sam was kind of kind of telling you that like focus less on the imperfections and more on the terms. So I thought he was going to kind of be showing you all these different terms tricks that you could use to get comfortable with a particular deal. But no, in fact, he was saying you were already overcomplicating things. Yeah, I think the big thing is the valuation, right? So it's like one, you know, kind of weird concept is like, you know, if you paid nothing for the company, would you still buy it, right? You know, so it's like, you know, there is a dollar value in which it's cheap enough where you're willing to absorb the risk with just upfront cash, right? Like buying a piece of furniture, you know, if I'll buy a I don't know a table, right? And you know, I'll just be if it had a little imperfection, then I would just pay less cash with the thought that I'm going to fix it later, right? So, taking that sort of mentality. So, basically the the goal is not to like, you know, go wild on valuation, it's to like, you know, let's be systematic about it. So, be systematic about meeting the seller's needs, telling them what you need to get there, but then reducing the total moving pieces and then I can kind of talk about what ended up happening with our deal maybe as a indicator for you know, this sort of procedure. But I think, you know, it's important like to to, you know, do that and then understand like, you know, really early on like what are the seller's like positions because if they have a certain dollar value in mind, they're just not going to really sell until they get it. So, you're better off not even spending your time trying to chase valuations, but saying the guy is the right seller, right company, wrong time, or it's just not for me, or someone else got to take, you know, more risk than I'm comfortable to take. Yeah. Okay. And let's double click on the the other thing that he told you about just broker transactions going forward. And so, that that is a kind of a further departure from traditional search fund land where it's a lot of it's going to be a lot of those deals are going to be proprietary sourced. And so, why is why did Sam convince you that that was not the way? Yeah, so kind of like I overdid it with my mindset of like I want to find something that no one else has found, right? Like industry-wise, and I apply that mindset to the deals, right? I want to be the only guy on the deal, and the only way to do that is be proprietary. And um what I kind of realized with the proprietary is like the broker is there to talk the seller off the ledge. And there's a lot more times than like, you know, we as the buyer see where the seller's on the ledge of like changing their mind, and the broker just pulls them back in. So, that's really important. And like now I wouldn't even attempt to do a deal where a broker wasn't involved. I have not had very good success with it at all, frankly. I mean, we're definitely, I don't know, over five at least or something on it. Because every time like something comes up in the purchase agreement, you know, cuz the other thing too is like if you think about team on the seller side, most of the team in a proprietary deal is not your friend. Um So, for example, like you know, you try to do a deal with let's say the lighting company I talked about. You know, their accountant, you know, it's a they're it's their trusted advisor, right? Cuz if they don't have a broker, then they're going to call their accountant and say, "Hey, what do you think about this deal? Should I do this deal?" And that accountant is not your friend. They want them to stay a client as long as possible. Right? So, they don't want the deal sold. So, they're going to say whatever they need to say basically to keep that client the client and the deal to not get sold, right? Cuz likely you're going to change accountants. Same thing with their lawyers, right? So, there's no one on on their side that's kind of has your interest in mind, too. It's not aligned well. So, because of that, you know, the sellers tend to freak out and then not sell the company. And I'm sure it works for some, but there's a lot less odds of it happening. And then there's also a lot less odds of the seller being reasonable about valuation and structure because there's no one to really teach them about the market. Right? When brokers come in, they like a good broker will spend a lot of time explaining to the seller, "This is what you can going to likely sell for. And um you know, adjust your expectations or let's wait a year." So, I think it's you know, it's really important that um searchers remember they're not a private equity fund. They don't have unlimited amounts of time to do deals and they're collecting management fees the whole time, especially if they're self-funded, they're probably not making any money, they're losing money. So, you need certainty of close. It's super super important, at least for the first one. And certainty of close is hard to find in proprietary deals. Great. I think there was also an item about gross margin that that shifted in your perspective on your search. Talk to me about that. Yeah, so gross margin, you know, as I was kind of saying in the Silicon Valley example, it's the most important thing, right? If you have a high gross margin, you can solve for a lot of issues, right? Throttling revenue with sales people, throttling profits with operational finance people. But you know, I started noting is like noticing is the more advanced business buyers, what they do is they find situations where the gross margin is bad, and they figure out how to, you know, like look past that to see if there's something that sellers are missing. So, you know, for example, you know, during the time we've owned the current company, we actually had another company reach out to us that makes the same revenue, is in a similar industry, but makes a third of the EBITDA, if even that. And, you know, their margins are, you know, like literally just a little bit lower, 10 15%, well, that's a lot, but you know, it's it's substantial was what it does to the EBITDA. So, you know, in that deal like we could have, you know, or the older version of myself would have said, "Okay, no, not going to waste time." But instead, we spent some time on it and said, "Hey, what goes into your margin?" And we realized that like they were having double the amount of employees than they needed for the revenue of their size. They were, you know, something was happening with their consumables. They were just disappearing as if somebody was stealing for them or something. And, you know, there were clear things based on our business where we knew that day one we could come in, make those changes, and find ourselves in the gross margin that was appropriate, but we would pay today off a lower gross margin. So, that's what I started seeing with like the more sophisticated buyers in a more competitive acquisition environment, especially for really nice companies, they get creative on that. They figure out like, you know, I'm going to pay a little bit more, you know, on face value, but you know, they have some very immediate ideas on how they're going to, you know, day two already be, you know, looking like they paid a really good price for the company. Mhm. Great. Okay. So, after that disappointing loss, and you connect with Sam, and you kind of rejigger your search a little bit, or at least like your your perspective shifts on a on a number of on a number of variables, what what happens then? Yeah. So, you know, I don't know whether it was serendipity or or what, but you know, pretty much a month and a half or something after that happened, you know, we found the current company that we bought today. So, that business, interestingly enough at this point, I've seen so many manufacturing operations, as soon as the broker sent it, I was like, "Oh, this is the one." How did I know it? I couldn't tell you, but it just, you know, I knew it was the one. It looked or it smelled the part. Lo and behold, like when we started understanding like the seller's background, he actually had a pretty similar background to me. Also New Yorker, also moved to California, also an engineer. A lot of things matched up in a interesting way. Um and then you know, the company, you know, actually the seller bought it himself. He bought like a, you know, a smaller sheet metal company out in Anaheim, California. That's Orange County. And over time applied his industry expertise of construction to the business. He spent a lot of time. He's like a key executive in some of the transit companies out here. And brought a lot of infrastructure work to the business. So, think like supplying metals to highways, roads, bridges, train stations, stuff sometimes people wouldn't see like drainage systems, stuff that goes into the concrete that provides structural rigidity to the components, train station furnishing like trash cans and, you know, map cases and benches and things like that. And we really loved how he had, you know, kind of like the maximum size of EBITDA you can do for an SBA size deal, but he was also in an industry that was receiving a lot of growth. So, California invest been investing a lot in infrastructure with the Olympics coming into town, the train system being built to support some of the traffic, and then the Biden bill coming down in the next few years here, of which, you know, the largest pouring of the cash appropriated for would find its way to Southern California. So, loved the trends, knew that like, you know, we can get creative with this deal because there was a lot of overlap, and we could, you know, eventually find ourselves to to a lot of growth. And about the company, and it was an interesting negotiation. I can get into it. It took pretty much what two and a half months to get under LOI, and another six months after that, or seven months after that to close with the seller. But, you know, I've been really happy with what we bought so far. And so, he had acquired the business himself after a stint or a career in working in as an executive in the various various transit agencies in Southern California. It was and then grew the company and introduced a lot of those those contacts and contracts into the business. And so, now primarily the business is serving kind of infrastructure, public transportation in Southern California? Exactly. Yeah, the the lion's share of the revenue supports infrastructure supply. So, just making parts, and then the contractors, the general contractors that we are subbing contracting to will provide installation. And the other portion of the business supports like a lot of quick turnaround work. Think like, you know, architectural metals for various buildings and industrial machinery that might break down and they need like a stainless steel component quickly. Well, we'll make it. We have our own trucks, and we drive it over to a lot of the machinery operators here in SoCal. You had mentioned that the it kind of maxed out the SBA loan. Give us a sense of uh, size of the business. Um, ballpark whatever you can on numbers and and number of employees and how old was the business? Both how old it how long had he held it that your seller and then when was it actually founded? Sure. Um, the business was um, was a a little bit over two decades old. He bought it like I think four or five years into its existence. Um, and then you know, in terms of structure, we always structure the deals with like seller note. I think that's really important, you know, just to have some buy-in from the seller. Um, and then also, you know, look good from our perspective of funding. Um, but we had to you know, it was sizable enough to max out the whole SBA loan and then a seller note on top of it coming into the company. There was about like I think 15 employees, something like that. And then um, in the first like five months, um, we started seeing a lot of growth. So we increased head count to about 27 or 30, something like that right now. Well. Um, one of the other thing going back to, you know, the perfect business, uh, one of the things that of course we all we all hear all the time is quality of revenue, recurring revenue, um, is ideal. Uh, this sounds very project-based, like project-based revenue. Um, and that's one that lenders and and everyone tell you to be especially wary of. How did you think about that? Yeah, I think um, a few things. So the first one is making sure, you know, if you're going to buy something with project revenue, you're going to pay as little as possible. I think that's A, really important. You know, you can solve a lot of problems if your loans are low, right? Um, and then B, you know, while you while even general, even getting recurring revenue in the current deal market is really really hard, you know, any most sellers like if they have recurring revenue, they some broker has educated them on um, how much their company is worth. Yeah. And you know, if you pay 10 times EBITDA for recurring revenue, I mean, that sounds great cuz you don't have to work as hard cuz the revenue revenue is recurring. Um, but those loans are going to be insane and the equity return is probably going to be low. So um, you know, you got to find a balance but what I started seeing is like there's this other there's two other things that you can kind of think about. There's recurring revenue. So um, you know, consistent patterns of the same customer ordering and over you can you know, if you want to track there. Order volume over time. Um, and the other bigger one in particular for our industry is backlog. So um, you know, if I let's say got contracts right now that more dollar value backlogged for a whole year's worth of revenue. Well, what does that mean? I mean, that's better than recurring revenue, right? You know exactly what's going to happen for the next year and you can move forward. I think recurring revenue is important, you know, even I realized more so even because you just be in the operator seat, uh, because you can make business decisions. Um, it's hard to decide on how many people you should hire, what machines you should get or whatever when you don't know if there's going to be work to support that coming up. Yeah. Um, and it's a really powerful feeling. So for our industry, we just work on backlog and if you're in a construction type um, space, often times there's good lead time on the work. So you can you know, get into it today and then um, you know, know that it's later next year you'll have it and then build from there. And so you look for, you know, the the more the backlog obviously the better. And so you're the business that you acquired American Sheet American Sheet Metal is the name? Yeah, the the company's called American Sheet Metal. It's ASM in the acronym sheetmetal.com. Um, we kind of rebranded it to ASM cuz you know, we no longer just do sheet metal but um, yeah, ASM. And so ASM had a a nice big healthy backlog. Yeah, they had good backlog and more importantly a lot of growth trends as well going forward. So you know, we kind of like we knew that with this amount of cash it's like $5 billion a year going into SoCal for you know, the next four or five years for this kind of work, there'll be plenty for us to do. So you know, when we got in the deal, we actually spent more of our time like building up internal digital and physical infrastructure so we can process as much of that revenue as possible as it comes in. So you know, all those factors were important and then I think um, you know, when you do something like that too, you have to be thoughtful of things like growth capital and make sure you're raising accordingly to to support that. You had said that um, just after your failed deal and and kind of connecting with Sam, this deal popped up about a month and a half later. Um, do you think that you would have pursued this deal before your kind of shift in perspective of your search? We would have definitely pursued it cuz it was in our backyard and fit a lot of traits. Would we have structured it appropriately to get it done quickly? You know, with that with you know, when I say quickly, I mean getting it under LOI quickly. Um, maybe not. Uh, because I think you know, I almost even kind of made like call it a little bit of a mistake on it earlier on in the process like when we structured it and made the first offer, you know, I asked the broker what were the seller's expectations in terms of dollar value. So I knew that but then I threw like a little bit of a wild structure still still less wild than um, what I would do before meeting Sam but still with multiple pieces. And um, I think the seller kind of had enough of a like enough and thought there was a good you know, buyer seller fit where um, you know, he himself kind of simplified the offer um, and got it to where it's less valuation which is more of what we wanted. Um, but you know, different you know, structure as well too for him. So um, I think that worked out but I'll tell you I mean we had a deals before that that I sent stuff like that too and they didn't even bother to do that. They said too complicated, too many moving pieces, too risky, whatever and they just dismissed it. Um, so I don't think I don't think we would have made it from that perspective of mindset. Um, and then funding, you know, we kind of knew what to do from the lighting deal failure. So it is it's like you know, you had to have those two lessons prior to to be successful here. Yeah. Yeah. You know, it's interesting to hearing you about the simplicity of of offers and terms because one of I feel like I hear kind of two contradictory things. The first is that like is what you what you what you've learned which is that the the sellers don't want some overly complicated deal like basically keep your terms simple. And then on the flip side you often hear like, well, you know, you find your price my terms or you know, part of the part of the part of the excitement in the fun of deal making is that you can be really creative and structure all this stuff to you know, cover all your risks and incentivize all parties correctly and so on. But it it just seems like when that that theory makes contact with reality, sellers don't don't don't love that. I think um, that theory um, applies in two places. Um, the first one being like larger deals where you have more sophisticated bankers and sellers and those sellers tend to want to actually keep economics and take a second bite of the apple. Mhm. So um, it works there. Um, and then maybe the other place where um, you know, you have really small deals like deals where basically there's no other buyer, no one wants it. There's all seller finance kind of situations. So um, you know, that's I think that's the mix of it. But even then, I think um, you know, a lot of the sellers we've dealt with like they um, like we give them options, right? So we we throw out like a we figure out what their valuation is. Like what are in their minds is that dollar value to retire. And what I kind of learned over time of doing this is that they're going to get their dollar value. Whatever they whatever they actually want, they're going to get it. Um, with our seller, you know, he I think he had a higher number he did have a higher number than what we ended up actually closing on but then he also just dragged out the process for an extra six months and then ended up regenerating that EBITDA anyway for himself. So you know, it's it's it's like you think you want you think you're smart but then you end up paying the same outcome. You just wasted six months that you could have been in the driver's seat, right? Right. So um, I think it's really important because they're they're you know, they're seeing this as their last like financial hit from anything in general. So then they do have to like um, you know, think think about getting exactly what they need to retire. Yeah. So um, you know, because of that like you have to be mindful of like you're probably not going to beat them on the valuation. Frankly, if the number's so wild, I mean we have like one seller I like when was it? It's been a year and a half already. Made a made one offer wasn't sufficient. You know, he's kept the business since and he's growing it growing and I'm sitting here and saying, well, that sucks cuz the whole time we could have owned it and been part of that growth. Um, if we just gave him a little bit more on the upfront. So Yeah. You know, it's it's kind of like a a pick your poison. Um, but basically, you know, figure out their valuations and tell them say, hey, for me to pay this what you're asking for right now, right? There will there will have to be a forgivable seller note {slash} earn out. There's just no way, right? Cuz you just won't get funded. I mean, I could I can write an offer up for you and there's a lot of searches that do that. They just throw whatever offer out there and it cost a fingers and hope it gets funded. Um, but then the bank says no. And then um, you know, if the bank doesn't say no, then when it gets to legal stage for of writing up what happens when this and that, whatever, the lawyers will kill the deal. So you know, instead I try to push them towards like a second option which is like if um, you know, we paid you maybe a little bit more upfront cash than we wanted taking a little bit more risk ourselves and taking it off their plate, um, then the structuring of it becomes a little simpler. So that's kind of really where it ended up and with this deal it was no different. Um, and then you know, thinking about like, you know, what else can you do? What other part of the pie can you split? Can you let them keep economics? Can you you know, think about like by the time you buy the deal, how much backlog are they going to have bled through, right? Cuz just cuz they had backlog on day one when they presented the deal to you doesn't mean by the time you close you're going to even see that, you know, and your best foot they're going to invoice as much of the backlog as they can before the deal closes. Yeah. Right? So. Um hopefully that makes sense, but it's um you know, I think I'm being flexible and knowledgeable the fact of like they have a number in mind. Uh you know, you either going to get there now with structure sometimes or you just you have to wait. You got to sit on the sidelines for that thing to bounce back. Someone else makes the offer or maybe deal with them in a year. Mhm. Mhm. Jules, to to round us out here, um two more topics. So you're you're kind of hinting at the fact that you're now talking to other sellers. So which suggests you're kind of in a in a mode of acquisition. So you've done your first and then I want to hear if you've if you've done another or what your plans are there. But first, um just talk talk to us a little bit about what you have done other than any other acquisition activity. Um in the business, how does it look? What have What have your first few months there or the months since you since you acquired looks like and how's the health of the business and is it what you expected? Yeah, absolutely. Um you know, when we walked into the company, we started to see a lot of like um you know, backlog and growth that wasn't um consumer with what um you know, we initially thought in a good way. Um but you know, when you have that amount of like growth, I mean, the seller grew like 30% prior year before we bought it and you know, they're likely going to hit another 30% this year. Uh if not more. So um that's a lot of growth, you know, to manage through especially when trying to figure out the transition and sometimes you don't know what to do first, you know, do I figure out how to keep finding more sales because there is a project nature of the revenue. Do I open up operational capacity and then B, how do I not piss off all these customers that have been with us for years and are ordering all this stuff and want it now regardless of whether or not we have capacity internally to support it. So I'm doing all that, you know, has been interesting while at the same time like adding modernization to the business. You know, we did a office renovation that was you know, pretty old school. It's like 10 years that hasn't been changed. And then um we also modernized all the digital features like you know, got away from paper, went to the cloud on all the systems and new ERPs and things like that. So it's been it's been kind of wild, you know, juggling a lot and it's reminded me more of my like startup days um than what I expected this to be. Um but so far it's been fun and like you know, we we're trying to be systematic while still thinking about like we got to be in the best possible position um from internal interest structure to support a lot of the work coming down from the Biden bill here shortly. So Jules, it it it doesn't sound like you you were uh hesitant about making changes quickly. Sounds like you got in there and started making changes. Yeah, yeah, not hesitant at all. I mean, it it was like day two. Um but like that's cuz I cuz I knew like when we had a plan prior um and we implemented quickly. Um but the big thing like I talk about the you know, infrastructure, right? Internally to to support more growth, you know. Um that's part of why we're also looking at acquisition. You know, once we kind of tap out what's going on here, we need other facilities. We would like rather other facilities to be under ownership as well so we can send work there while using the ASM brand name and resume um to win that stuff. Mhm. So you know, we knew had to kind of act quickly cuz if we're going to buy another deal pretty shortly, I mean, we have to have you know, the time to do it. We can't be transitioning two companies at the same time. So um it's been balancing those two that have been really interesting. But has there been any chafing by the new employees to all this acceleration and change? Yeah, also some have definitely been overwhelmed especially on the production side. So we hired like we actually had to hire more people on the S&A side to support um kind of making that investment. We found that like you know, at certain revenue sizes in sheet metal like you're optimized for EBITDA margin, but then if you want to get to the next level of total EBITDA, you have to then like reinvest a little bit in S&A. People can't be generalists anymore. They have to be focused in certain roles. Um so we did that. Um but for the most part people appreciated that actually. I mean, initially they were all like what the hell's going on and why is it happening so quickly, you know, but eventually I think they saw that like it was for the betterment of their jobs. You know, work environment, their jobs, and things easier. Um and people have been excited, you know, kind of reinvigorated cuz it was so like you know, kind of stagnant over the years. I mean, seller did a good job of like optimizing the maximum EBITDA for the effort. Um but he kind of kept it there. You know, he didn't want to push it hard higher and harder than a certain point. You know, Jules, your your confidence is striking to me. You seem very um comfortable and in the seat as captain there um making big changes in this business. Um and I I feel like many of my guest don't don't seem quite as confident when they're so they're so newly in the seat. Um that's your personality or what what's going on there? Yeah, I mean, you know, I came from startups. So hyper growth is not anything weird to me. I mean, usually like some of the companies I was at, I mean, we'd go from like 50 employees pre-series A and then all of a sudden you raise a series A and then within a few months you're at 200. You know, and things are happening real fast, you know, new hires, new this, new that. So it's like you know, and then you kind of like you know, at series A you also kind of put on your grown-up pants, you know, you start to get away from like you know, 10 guys manufacturing in the shack somewhere to like a big manufacturing facility with proper infrastructure. Yeah. So it wasn't it wasn't that like how foreign to me. Um but I kind of know that like if we don't do these things and we don't do them quickly, we're going to find ourselves in operational headaches pretty fast and you know, we've been trying to keep away from that. We even still see it still right now, but you know, we uh I don't know. And then I think um just yeah, I know that um this is not at all the potential of the business. There's a lot more for us to run and go. And I think kind of knowing kind of what we're underwriting to from having seen much bigger operations, I know that it can be done and I know that it's not impossible. It just takes the right moves um along the way to to get there. And so elaborate a little bit on those on those moves specifically the ones about acquisition. So you just see all of this all of this spend in the in the pipeline, infrastructure spend, government basically government money in the next few years and so you're acquiring to be able to meet that demand. Yes, exactly. Exactly right. Yeah, so we're acquiring to you know, meet that demand. Um but more importantly like you can sit there and try to grow sales organically, but lots of times it's relationships and it's just much easier. Like let's say you had you know, $300,000. You can either buy you know, that you know, a few sales people or something like that and have them go out there and you know, hit the streets and try to build relationships from zero or you can take 300 and use it as a down payment towards a business that's existed for 20, 30 years or more and already has all those relationships and you get the sales people with them and you get the operational capacity with them and then and you get the cash flow from that business to pay itself off. So it just makes it ton more sense to do an acquisition um you know, and have like you know, inorganic growth. I mean, they you can grow to to a larger scale really, really fast. Um so we're always keeping our eyes out for that. Um but you know, doing so in a way where it makes sense. I mean, you know, some we've had people We've made a bunch of offers. I mean, we've probably put out like 10, 15 LOIs since we've been in this deal and valuations are still completely wild. You know, we're careful to still bring uh value to investors and make sure we're not overpaying for for a deal in order to you know, just grow. So 10 or 15 LOIs out there, but nothing nothing has come to fruition. We have one that we're moving along with, but they're more in the industrial services space, you know, nothing to do with sheet metal. And then um the other ones, I mean, it's just the valuations are crazy. We know what the sellers want. We would just never pay that. You know, it's just you wouldn't be able to make money like that. You'd run into more problems than it's worth. And Jules, as a last question, what is your what is your overall plan here? Are do you see building this up and perhaps selling the company yourself in kind of you know, private private equity sort of timeline or indefinitely running the business? Yeah, so um the company was purchased in a way where we would indefinitely run the business kind of like more of that Warren Buffett model of take the company, buy it in an old age industry that's never going to go away, pay down the debt, you know, refinance at a higher valuation, pay out you know, investors in profits and keep cycling that through indefinitely. And then um you know, I think we can we can continue to do that um as you know, more manufacturers you know, want to leave California like the owners of those businesses want to leave California or whatever, you know, we'd be happy to bring them into our umbrella and keep the companies going. Um so we want to see this grow. Um we recently did a rebrand to industrial succession to be more encompassing of industrial services and industrial software. So we've been looking at that as well as transportation and logistics and trying to find acquisitions in those space that can service platforms. Um personally like overall goals with this after we build out enough of a portfolio of industrial businesses, I like to start taking those cash flows and diversifying them into different types of assets that interest me such as like real estate and venture capital. You know, um I like startups but not being the operator full-time would be great and you know, finding ones we can invest in or find operators that are good and you know, give them the startup infrastructure around them to scale. Um are all things that really interest me. Uh but we'd like to do it on you know, with the one we're in a stronger position of cash flow and um you know, when we we pay down debt on these assets. And and do you have any kind of goal number for revenue and EBITDA for this platform plus family of acquisitions that you're making? Yeah, I think um you know, in terms of the sheet metal, I think we can get to 100 million of revenue. You know, I've seen other like partners that are in the space where they're getting there. You know, they acquire enough businesses. I mean, you know, literally like a week ago we looked at a deal that was like 24 million in revenue that we could have gotten to 40 had we gotten in there. Um you know, we'd like to see that sort of stuff um develop over time to some like a hundred and a a hundred when you're dealing with metal is not, you know, it's actually not as big as people might think. You know, um it's it's a lot of lot lot of shops that you own, a lot of employees, but it's you know, it's not that big. Um so I'd like to get there and I think um you can get to a hundred you could probably find yourself at some pretty decent EBITDA probably in the teens. Um and the valuations are like more like, you know, eight times um when you get to that point, too. Um so we really tell like any like from the investors we tell them like, you know, if you're an investor or a business owner looking to like roll over equity with us like think of it as like more, you know, you're not investing in like, you know, the deal itself but more of the ISG um team and the acquisition and the roll-up model of the economics, you know, we plan to do more deals versus just stay in one like a lot of self-funded searchers do. If you look at the website, it's built a lot more like a micro um acquisition group uh versus a private equity group that has to churn the deals every five to seven years or an individual that, you know, wants to stay at a certain size and leave it alone, I think. Yeah. Great. Jules, uh this has been phenomenal and and really for me and I imagine for a lot of the audience a good education on kind of how to think about manufacturing and opportunities there. Anything we didn't touch on that you'd like to say? Um no, I think um thank you for having me. I think it's important to continue to like, you know, kind of pay forward with the um search fund community. It's like a lot of people struggle in the search. I think just, you know, take a positive outlook and optimize for certainty of close. I think a lot of people get too fancy in the industries and the specifics of the companies and um you know, there's a lot of like um different tools out there to close a little faster these days. Um and then, you know, if there's any like, I don't know, sellers listening to this or always happy to chat about, you know, succession in general. I write a lot of like articles on different stuff that you can find on our website, different industry associations and um you know, any investors that want to chat, happy to do that as well. Um always love to get to know people early on before um any action starts happening with deals, so. Um other than that, well, thank you for having me. Um always, you know, love these sort of things, so I really appreciate you setting us up. Yeah, absolutely, Jules. I was I was thrilled to have you on, so so thank you very much and congratulations on um uh a long somewhat painful search. Seems like you are making up for lost time now. Uh Jules, what's the best way for people to reach you? Um sure. So website is um industrial succession.com or or manufacturing succession, that's your old domain. They both will lead to the same place and then um my email is on there. It says jbrenner, my last name, at industrialsuccession.com. Um happy to take calls or whatever. Uh and um other than that, you can check out acquisitions and videos and learn more about the team on there as well. Great. All All that will be in the show notes. Jules, thank you very much. Till next time. Thank you all. I hope you enjoyed that interview. Make sure you subscribe to the Acquiring Minds channel below. 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