Justin Willis welcome to acquiring minds thank you will great to be here thank you for this opportunity well Justin you and I were on stage together for a fireside chat at Georgetown University a couple weeks ago where you shared your story to a room of 450 people it took courage and humility to share that story because it is not one that ends well and so today we're going to share that same story in more detail for the acquiring minds audience and before we start I'll say now what I said to you at Georgetown we're so appreciative that you're willing to do this Justin it's it can't be pleasant to revisit such hardship to recount all the painful details especially publicly but as you and I have agreed people considering buying a business need to hear the stories where things go sideways or worse so your sharing today is a huge contribution to the ecosystem and we thank you for it let's get into it Justin start us off with some background please who were you what were you doing when you got the notion to buy a business yeah um so I grew up as a um pretty Hands-On guy always fixing stuff around the house with my father and uh that led me to an engineering degree every Virginia Tech started with Aerospace it was a little too theoretical for me I wanted to touch in the field of stuff so I uh transitioned over mechanical engineering at some point after school started working for a um um local engineering firm a lot of R&D stuff interesting work uh not too long after I started working there they were bought by a larger corporate entity the culture and everything began to change as expected and that was kind of my que to go look at some other opportunities so at that point I became a consultant worked with a lot of the same customers but a pretty wide uh diverse set of uh projects engineering R&D Motorsports Aerospace wastewater treatment construction project program management all kinds of stuff so the diversity was great uh did that for about 20 years and just got to a point where there wasn't much opportunity to grow both individually or even financially kind of tapped out I was midc career that's pretty depressing that there's not a whole lot more left so I started looking at other things and very fortuitously I had a dinner with a friend of a friend on a work trip his name was uh Rick Rick was a private Equity Guy and um he opened my eyes to the SBA and the lending possibilities and after that dinner I was off to the races with researching finding everything I could to learn more about how to leverage this resource and U buy a business couple follow-ups here Justin so just this point about reaching what felt like a ceiling what does that mean that that you that you weren't going to be able to like steps steps up in earnings weren't going to happen anymore or you were going to become a manager and didn't want to do that like why do you feel like you tapped out as you put it yeah as a consultant you're giving other people advice and recommendation recommendations on what to do right you're not an employee you don't really hold that much influence into the situation so you end up giving a lot of information out and it's ultimately up to somebody else to do something with that and um you can't make those decisions so sometimes that that information is used well and sometimes it's not and sometimes you feel like you're just wasting your time talking to people trying to help them so for me it was there was very little opportunity to have more influence in an organization or a business or whatever that thing was and actually drive change choose the people the teams and the direction of projects that I was working on ah okay so so actually it sounds like what you fatigued of was giving advice as opposed to being the protagonist implementing executing right okay okay your PE contact Rick uh he introduces you to the SBA typically uh well not always but a lot of PE is our buying business is well above SBA range sba's typically kind of targeting the individual uh again not always um so so just curious where did he play in the PE World why was he's so familiar with ETA because a lot of people in private Equity don't even know what ETA is even though they're effectively doing it he had transitioned um to a different role and where he was currently they were exploring the opportunity of um investing in people and then having those people go out and secure SBA Loans um so that's what recting you to do that yeah in hindsight maybe um I made the pretty quick decision that well do I really need somebody else to help me do this if I can go and get the loan myself so you liked this idea when you discussed it with Rick you liked the napkin math presumably uh and you also liked that it would get you in the game as opposed to being a consultant not that Consultants aren't doing work obviously but um that what you kind of felt Consulting lacked this delivered in Spades path yeah a lot of opportunity a lot of growth potential and and what did you to to say more about how you felt about the just the financial how this could change your financial picture what did your financial picture look like and how did you fantasize that this might change it yeah initially it wasn't a financially driven decision it was the financial part of it for me was more do we have the financial wherewithal to get into this opportunity and and we did I I'd made a good living for a long time we had saved a lot of money we had a a pretty decent 401K um so it was for me it was it was less about the wealth building going forward and more about being super excited about having influence impact in an organization that I could grow and be a part of that actually you know belong to me the the financial wealth implications didn't really start to sink in until I got more into the numbers and started running models and you know that's a huge upside obviously but it wasn't the initial hook for me interesting okay so so you would have kind of been doing done something like that this without the financial upside maybe and that was just ended up being gravy at least in terms of how the you know the ideal would have played out all right um you you mentioned your net worth you mentioned being mid-career can you put some numbers behind both of those how old are you at this point and what is your net worth if you can share or your 401k at this point in the story we had right at a million dollars in the 401K and um we had equity in a home but liquidity other than that was relatively minor so it became obvious to me that unless I could find a way to leverage the 401 K it was going to be difficult to us to come up with enough equity for any type of significant deal so that led me to this Rob's rollover business startup you've talked about that with some other guests um so that was the the mechanism by which uh the door really opened okay we've got a we've got a significant 401K we can use that now in conjunction with lending to buy a business in the future and how much in your home did you have given that that will come back around yeah um so we bought preco so we' we've lived through the the appreciation of of covid uh and artificial or not it you know hundreds of thousand many hundreds of thousands of dollars um in equity yeah yeah and and just curious on the tactics here did you consider a helck taking that Equity out of the home rather than out of your 401k to do this yeah I did you know at the at the time I back of the napkin math I was looking to maximize the sba7a loan so I was looking I didn't think I was going to have enough equity in the home to do that so that pointed me to the 401K and and so to just reverse engineer what you just said maximizing the SBA loan means buying a business whose purchase price is $5 million or north of to $5 million if you have to bring 10 or so per of that to the table plus transaction costs that's a minimum of half a million bucks but maybe closer to six or 700,000 depending on and in fact you went higher than that as the story goes but um so okay so it was going to require that uh CH that chunk that it was going to require more money than you had equity in a home it was going to require what you had sitting in your 401k right where and you sorry did you say how old you were at this point 43 I think 45 now this is only a couple years ago this whole thing started for me at the end tail end of 2021 and then I really started searching uh very early 2022 like New Year time frame and family picture yeah married um one daughter she's five now uh so do the math we we had been married a while uh which was a good thing as we progress through the story some stability and history there um but relatively newborn and we had just moved into our house not too long ago so um small family but nonetheless some responsibilities and you are in the northern Virginia area so in fact we're we're not far from each other all right yep uh and and so by the way what does your partner wife say to this project that she's all for it she's um over the number last number of years she's seen my dissatisfaction with my career path not that it's a bad one but she understands I'm yearning for something more some opportunities to create and do something else so she's very supportive of the idea all right Justin so tail end of 2021 you decide to do this you you and you get Kraken early 20122 what does your search look like we' moved around a little bit um both individually and together um so we we're pretty happy up here in Northern Virginia we liked our house so we started with a geographical search we didn't really want to go too far uh so that is the usual stuff you know I started looking in the surrounding counties you know 30-ish miles um and I was looking for something Hands-On you know given my background I like to touch and feel whatever it is that I'm my project is um so that that quickly refined the search and then based on the budget we had three things there so um you know started with all the usual resources Biz Buell and uh looking and talking and U refine pretty quickly you find out the things you don't want to buy and um what ended up coming to the top for me over and over again was construction based on the the Tailwinds of the industry uh Northern Virginia um there were a lot of opportunities in that Arena and I had some background that could transition over to that say more about the Tailwinds what what what are these Tailwinds for construction yeah so specifically to Northern Virginia and DC there's a large stability of government funding here for a lot of things but unlike other parts of the country we don't see the same as severe cyclical uh ups and downs as other places so construction here is booming has been for a couple years especially postco um some other contributing factors here besides the government itself uh are the data centers which um I think there's more here in Lowden County than any place else in the world and those are large projects requiring a lot of resources a lot of subcontractors and a lot of support and so great you just made it you just made the bullish case for construction in our geography the bearish case for construction is uh just broadly is that it is cyclical uh is your answer about how you got Comfort first of all did you recognize that did did had you listened to enough of the pods or read enough construction is actually considered not a great category for buying a business because of the of the notorious cyclicality did you were you aware of that no so backing up the resources even including the podcast for me didn't exist when I started my search I mean they existed but I wasn't aware of them right so when I started this it was literally uh by then build the book and then um I expanded from there but I didn't have a lot of uh advisors or res sources to lean on our leverage including podcast or even search funer and those things so it's very much um a discovery process for me I've got way more way more inroads and sources of information to draw on now than I did then yeah well just to be clear the arguments that you made for construction in this geography you know you always got to be of obviously more nuanced about industry assessments and um prognostications and you know if you're in a strong robust geography with a lot of construction happening then you know the argument for construction holds um but it is one as we as listeners know that uh that is you really got to convince yourself that the market is there for it because it's notoriously cyclical yeah and there's a lot of risk that you can't control in terms of the working capital and how you get paid collections all those things yep yep yep which of course we'll spend time on so you're dialing into Construction uh before we get to the business that you did buy or any anything to say about ones you didn't or things you looked at or not really uh I looked at a bunch of things uh we were open you know I said it was a geographical search but my wife and I met in North Carolina and I did look at a couple businesses down in the Charlotte area um and they're another good Market yeah I mean North Carolina's growing um Carolina's in general so there lot of there were and still are it looked like a lot of good opportunities down there um but ultimately this one really quickly checked all the boxes um and we started proceeding with this one tell us about this one it was um was a construction business subcontractor specializing in paint and Industrial flooring it was a $8.5 million deal and I think they were I'll I'll go over the deal structure um about 60% of that 8 and a half was 7A and then there was 20% of conventional financing on top and then another 20% of seller financing um and then we brought uh 830 isk as Equity to the deal the business had about 40 employees at the time um 12 million in revenue and the sde was quoted I like two and a half million something like that it was a significantly sized business for a first for first deal yeah sure was um okay so 2.5 million in sde uh and you acquired it for 8.5 so what is that three and a halfish yep okay so so also uh uh very favorable multiple if all this had held uh that would have been a pretty screaming deal for two and a half million bucks of SD or eiton um how did you feel about that size that is that's a that's a big bite for a first- timer as you just said uh are you saying that in in retrospect or did you realize that too at the time um I think I realized it but in retrospect it's obviously more clear but you know looking at the process to me it was it was going to be about the same amount of work the same amount of overhead whether we did a smaller deal or a bigger deal so I you know there's a Tipping Point a threshold uh as far as what you're going to be able to pay yourself in any of these deals and you got to have a large enough business that will sustain whatever income you expect in addition to the debt payment so a smaller deal for me was was going to be challenging if we wanted to maintain our our standard of living so maximize the the 78 5 million it seemed to make a lot of sense all the pgs were the same it it was all the same but there was more opportunity if you started higher up in the in the price bracket so that's the way I looked at it and what kind of lifestyle or or salary basically were you were you needing to replace or were you aiming for yeah I was looking at um I I think I needed or wanted maybe 160k a year maybe tell tell people a little bit about the loan that you got we we always hear about the $5 million limit of an SBA but that that per pasu um exists which is you know basically conventional financing on top of the SBA if your lender is willing to do that sounds like that's exactly what happened here yes yes so the the SBA was maxed at at 5 million or I should say the 7A was maxed Max at 5 million and the deal was 8 and a half so there's a gap there we we filled some of it with seller financing but yeah there was 1.7 million doll added to the deal conventional financing pretty much the same term same rate I think it was seven uh I think it was seven years if I remember correctly uh same bank um I don't know if that ever happens with two separate lending institutions but um it was effectively all worked as one and then just that 1.7 was added to to make up the difference it would seem that the bank liked your deal not only are they they give you the full 5 million for SBA but then then the 1.7 conventional on top of it I don't know if the logic of a bank is that if they're adding conventional financing on top of a 5 million SBA that that's a vote of confidence in the deal and in the sponsor Searcher you I assume it is um but how do you how do you react to that uh in retrospect it wasn't a slam dunk it wasn't as if the bank said yeah this is great we want to do it right away there was you know we went through all the usual practices uh projections industry analysis and for me and what I convinced the bank of was there was a lot of upside with the business so ignoring the valuation that we came up with the bank was still a little bit weary of the deal the valuation of the deal more specifically not as much about the project nature the project or the construction nature of the business um so for me that was clearly the data center a lot of the business that the the company was doing was in the data center industry that was growing like crazy there was tons of money getting thrown around so there was no shortage of work to be had in that specific Market okay but sorry so so the the bank was uncomfortable to the extent they were uncomfortable it was with the valuation even though we both just finished agreeing that the multiple you were paying for that much Ste was pretty good yeah so getting a little bit more detailed the business was actually actually consisted of two separate entities it was a construction business and then there was another janitorial uh escorp part of part of this deal we looked at it as one but it was really two businesses the janitorial business and the construction business had a lot of overlap based on the the contracts and the customers and the work sites um but the the janitorial component had a huge covid bump um based on covid cleaning and that was the largest variable for the bank trying to get comfortable with how does that how does that Pro uh forecast out over time okay anything more to say about the terms of this deal or should we get into okay so well actually how about this though this is maybe one of the most important details of all what is your relationship like your your interaction like with the seller during the negotiation and the acquisition it was good uh great relationship with the broker the broker definitely helped make this deal happen it it died and came back two or three times there were some other uh offers in there it took about six months to close this deal um from January we closed in at the end of June um met with the probably four or five times at least um the relationship was good we were both on our best behavior you know we're we're selling to each other so um not really any indications of of issues pre-acquisition your guts not telling you anything rais any Flags okay right um it's interesting because as we're about to hear in fact the seller was a terrible person to be doing business with and no but what's interesting is that is that so often the the people you can tell you know people often in our world say of a seller I just I just got a Vibe I can't put my finger on it um so so it's unfortunate that that he was he was on such good behavior obviously um because it's easy to look back and pick out little things that were indicators but at the time there wasn't anything that that stood out or yeah was enough to for me to come to that conclusion okay so you consummate this transaction what does it the transition look like day one is uh starts off in a bad way the the sellers already blowing up at me uh over the phone there's a mixup about the schedule when we're going to introduce uh everybody to the deal when I'm coming into the office and um the mix up's not on my end and um so immediately there's some friction there that the seller wants more influence and control over the way this happens I get that um but it's not well coordinated so we get off to a bad on a bad foot right away well what say more here Justin this is where you show up day one and he hasn't what is it he hasn't and then uh you know he calls in a in a fury why what are you doing there well this is what we coordinated where are you that's not what we decided on his mistake leads to to miscommunication and now I'm at the business nobody knows who I am besides the president who I've already met ahead of time um and the owner's not there or the previous owner's not there to coordinate and smooth and grease the skids and do the introduction right so we end up having to to cease that and reschedule the introduction of of the business being sold and me uh for another day the the seller later apologizes for that but you know how he handled it at the time was totally unacceptable did you at at this point were you like was this kind of like an oh moment or or were you able to write it off just one and done maybe he's stressed whatever yeah I wrote everybody was super stressed I mean leading up to the deal I I could see it in them we were super stressed trying to close the deal everybody was doing their best to close the deal there were a lot of last minute things that came up but everybody was was doing a great job of just let's figure it out move on to the next thing so stress was high and I gave the sellers a tremendous amount of Grace understanding this was a huge transition for them in every way shape or form that I probably didn't understand um so this to me was okay mistake let's move on and and we'll move on to the next thing and figure it out okay um so you push through that very clumsy kind of day one yeah then what yeah we get into the business and I really start learning what's behind the curtain so to speak everything really seemed to be held together with uh you know bubble gum and Band-Aids um the everybody seemed overworked um the owners had not really been intimately involved with the business for at least a year some would say that's a good thing in this case it was not because they didn't they hadn't addressed issues that were growing and they didn't know what the ground truth was about Personnel uh lack of attention to detail stuff like that the um there had been very little Capital um investment across Machinery equipment any of that stuff and there was really not much in the way of process or structure so you know it's all the normal stuff you hear about a small business um yeah I shouldn't have been surprised by all that but the I quickly understood there was a lot of work to be done to make this into the business that I thought it should and would be and that you paid for yeah yeah what the ground truth you called it on Personnel what was what was not what it should have been with respect to the people the um so the the wife so they were they were two sellers husband and wife team the wife had been running all the finances and accounting and I had hired a controller prior to the acquisition to come in and start on day one which was great it was probably the best decision I made made throughout the whole process because the previous seller was going to transition out of that role there was because she had only come she I think she came into the office like one day a week there was an accounting staff there was somebody doing AR somebody doing kind of payroll someone do an AP um out of that group there was you know the one person that was kind of doing a decent job um the accounting department needed a lot of work and we had not the best people in place to start fixing stuff that was the biggest hurdle um besides Personnel you know it's a construction business but the president we were very fortunate to inherit a incredible president that stayed on during their transition and he ended up having and maintaining a lot of the relationships with customers um resources in the industry had it not been for him it would have been a very difficult transition even at that point in time and certainly one of the appeals of the business must have been the the presence of a president so you were going to be able to come in and kind of in Theory start working on the business rather than in it or sooner than later since there was somebody who was already the executive running things keeping the trains running on time this President yeah what I didn't realize is that president was super saturated with trying to pick up all the balls falling off the table that the the previous owners weren't taking care of themselves okay what else do find um so as we start how's the revenue how's the quality of Revenue in this the the claimed revenue and more importantly maybe claimed SD yeah as we start getting into the books we start to find and recognize issues discrepancies gaps um the first one is the whip you know the work in progress report we have uh one of what is that for for people who don't know yeah it's basically it's a list of all the all the projects upcoming and in process you know how much how much is the project how what's it going to cost and what how much money you're going to make off of each one so that whip is really kind of the Bible for a construction business of this size and we start looking at the contracts and and the projects that are being Bid And as we're starting to get into some of these projects the the margins are not what they should be so the the proforma for the for the data we received prior to acquisition the gross margins were Blended uh I think about 39% across the board as we as we start actually doing some uh decent job costing and accounting on these we're we're closer to 30 um so why is that happening so we start looking at the jobs and how they were bid and we've got a lot of jobs on the books that were bid super low and we don't know the extent of this at that point in time but over time we we come to the conclusion that over the course of the last year because construction bids happen over a long period of time the the whip is probably um we're probably going to lose about a million dollars on jobs over the course of the next year that we should have had in profit on those jobs so they were super low bid and we come to the conclusion rightfully or not that these these jobs were bid in one in order to be able to State a certain Revenue prior to the acquisition we fire that estimator that was involved with all that um that doesn't really fix the problem today it just addresses the problem going forward now this would also be the moment to ask about a quality of earnings you did not do one right um talk about your decision to not do one and do you think having done one would have caught some of this stuff yeah I'm convinced that having completed a quality a good quality of earnings report would have found or at least indicated issues that we would have discussed prior to acquisition so yeah we didn't we didn't pay for one we had all the books we had all the all the information I looked at it with a variety of CPAs other smart accounting people and you know we came up with our own valuations we looked at the data we didn't dig super deep though so you know we didn't have access to uh the actual accounting software so to speak where you really got to get in this this required more of a forensic effort to start finding some of this stuff so yeah although I hope like a quality of earnings may have may have pointed to some of that stuff I'm not entirely sure we would have gotten all that information out at that point in time one thing to say here too is that there are there's definitely a wide range of quality of earnings that you can that you can by so you know the lowend there's kind of a $5,000 version on up to well into the five figures for quality of earnings um and presumably that correlates with the depth and how forensic the quality of earnings how thorough the quality of earnings is just to just to explain to the audience um but it it certainly doesn't sound like you were you know dismissive of the of the idea that you needed to to do some real Financial diligence here you just did your you just kind of you just kind of home rolled it uh did it yourself and took it around to CPAs that you trusted yeah exactly we kind of did it internally and you know there was a valuation that was outsourced by the bank preceding the sale um I look at it as kind of a rubber stamp but we got that report and it didn't indicate anything that we should uh dive deeper into and just curious Justin did you did you not do a formal quality of earnings because you're trying to save money or or what I I didn't think we needed it it was less of a financial decision and everything to me not that I was an expert at that point in time every everything looked like I thought it should and other people agreed with me so it was it was well do we need to spend another 20 or 30k on a quality of earnings to confirm what we think we already know and I decided at the time no we we don't need to do that okay so as you are finding the ground truth of the numbers here the financial the the the whip the work the work in progress uh the um profitability of the jobs or lack thereof what do do you bring this to the seller so no right now we're information gathering and pretty soon after the sale the relationship with the seller begin to deteriorate to the point where I felt like they knew there there were skeletons in the closet and I and they probably weren't going to be forthcoming with helping me find them um kind of tying into the whole accounting thing not long after the sale this was probably a month in the sellers both came to my office uh my wife was there and said hey we'd like to sit down and have a talk absolutely come on in and they they proceeded to ask if I would terminate a specific employee now this employee worked in the accounting department and up to this point I had no reason to even consider terminating this woman she was doing great work they said well we want you to terminate this person we promised some other employees that we were going to get rid of her before we sold the company but we couldn't do it because of that because of the transition it we it wouldn't have been a good idea I'm sure sure you understand that but now we need to go ahead and fire this person I said well I I I can't do that uh in good conscience unbelievable unbelievably presumptuous yeah and um I was it was total listening mode for me I just sat and listened and I said I understand but um that's that's not going to happen right and the next the next couple sentences were really what solidified how the sellers were viewing this transition relationship the next sentence was um I would I also want you to stop start copying me on all of your emails so that I know what's going on around here and if we can't agree on on any of these things then we can't work together going forward and it was almost like is this really happening is this a joke and it was it was just it was definitely not a joke um so I didn't say much at the time I said I just kind of included the conversation and and uh we went our separate ways but after that we didn't really have much of a working relationship and coincidentally that employee that the sellers wanted us to terminate at the time had had background dirt on the accounting department um she she was shown and and told to actually remove jobs from the whip that were not profitable or or losers so that the the margins would look better and that whip would look better when they shopped it out to the shity and the banks and all these other people so that to me indicated that there may have been some personality things going on internally with that employee I never saw any of that um but there was probably an ulterior motive for for wanting to get get rid of that person coincidentally that employee was still around as one of the best workers and the rest of the accounting department had been uh either left or let go so uh I feel pretty good about the choice I made at the time and and others um agreed with me how did you interpret the fact that this seller and his wife or the sellers um everything had they you know their behavior had been sound up until that day one you but you can explain that to yourself by well everyone's just under a lot of stress deal closing stress this moment where you know we might say got weird yeah you know it's like it's such an escalation and and so sudden yeah you you must have just been disoriented totally it totally caught me off guard and um you know the first thing I I'm still in discovery mode like I'm trying to figure out the the lay of the land here I've got 40 employees I don't know who's doing good work really I don't know who's doing bad work I don't know necessarily what everybody's responsibilities are I've got like a thousand balls in the air I'm trying to I'm drinking from a fire hose and um so the first thing is like well maybe this is true maybe I do need to fire this employee but I can't make that decision right now so let me let me dig into this a little bit so you know I start having conversations and asking questions and you know my gut was right like there's nothing wrong here with this person um I went and talked to our president right away and you know he we're still trying to figure out who is who right like can you trust me can I trust you are we in this together so there's there's just so much there's a lot of instability and not enough trust at that point in time with anybody to make really sound decisions H okay well that so so the relationship going forward with the seller is dysfunctional this moment just kind of craters it yeah for sure then what let's see after that um well let me ask you this Justin at at what point your emotional state like when it when it becomes clear that the business you bought isn't what you thought quality of the business isn't as good revenue and profitability certainly isn't as good the seller's getting weird um have you gone fetal yet what's your where's your head at no so all this doesn't happen at one time right so really this happens over the course of the next probably five or six months accumulating data information putting the puzzle together finding addition issues so the stress just continuously amps up over time um we talked a little bit about working capital earlier construction extremely Capital intensive uh business part of the deal was a it's really like a line of credit but we called it a sweep account so part of the deal was uh the sellers got to keep um a couple million of AR prior to sale but they were going to leave that in essentially an escrow account for us to access for the firste business as a line of credit free like 0% interest right I wouldn't do that again but it sounded great in theory because we didn't have a lot of credit right and we knew we were going to have to weather the working capital requirements over the next number of months so a couple months in you we got some I think we got $1.2 million of working capital from the actual actual closing um we go through that relatively quickly and you know we're not we're not spending or buying anything other than what the company needs we're not even making our debt payments yet so we had a six-month stay on starting our our lender payments lender payments were like $93,000 a month so the first six months we we don't have to make lender payments we're just paying employees and all the usual materials for vendors so a couple months in we don't we're we're out of money we need to access the sweep account and I think we had done this once the sellers were okay with it and we went back and said we need we need again we need to make payroll right we don't have any money this month and they wouldn't do it they said we we don't think you need to I said well can you explain that to me well we think you're we don't think you're using the money effectively or wisely um I don't I don't understand understand that so from day one we had provided total read access to all of our accounting records to the sellers trying to make them comfortable so they still had a log in they can go in there at any time and look and see all the transactions The Ledger you name it um so there were no secrets to be had but there was clearly an insinuation that we weren't managing the finances correctly so I had no choice but to tap out the rest of our 411k so we' used 830 for the transaction we had another 170k left we went ahead and made that transfer to make payroll and pay some vendors that month um so our 401K was gone at that point and then we got to go back to the table with the sellers to figure out how this sweep account this line of credit is going to be accessed in the future um it it was really just a a a power play by them to say hey we're in control here and there should have been much stronger language on who and how that sweep account was accessed in hindsight um and the lawyers start getting involved at that that point right so that's an added communication barrier because we don't have a working direct relationship with the sellers anymore that makes everything even worse this sweep account structure Justin is this a common structure I've not I've not heard of it so just to just to re Again State it for the audience it was about what did you say 2 million bucks in accounts receivable so as as payments from work done are coming in that was work done on when the seller still owned it that money goes into this account from which you can draw credit you can B you can um borrow and then you'll have to of course pay it all back but yeah so that it's an interesting structure as you said it eventually it um essentially becomes your line of credit you're yeah yeah I don't I don't know how common it is I haven't heard anybody else doing it but um it it had there was a concern by the bank that we weren't going to have enough working capital rightfully so and this was a way to address that yeah and so uh reminding the audience it was one point you got 1.2 million in working capital so when you your purchase price included 1.2 million liquid for to operate the business now how did you calculate that 1.2 million number it sounds like the bank felt that it you just said that they it had was being underestimated how did you arrive at 1.2 what's the math there curious we just we looked at the bank records and and the the pace of projects and even over the course of the year the the industry is pretty cyclical what we didn't account for was Summers super busy so there's tons of expenses going out the door including wage and then you're not going to collect that AR for at least 60 days probably so there there's a gap there that I had accurately accounted for in that working capital requirement and we didn't have enough margin to weather the the summer peak of activity well this two things there um this is a great reminder that you know seasonality it we would consider that a weakness in a business but it's something that can be managed around um but it what for our purposes as business buyers when you actually buy the business when you matters significantly if you close in High season versus low season um as you as you painfully felt first point second point the talk to us now about Collections and how hard they are and how important it is to be aware of it yeah I think when we average AR was aging AR was probably 80 some days when we got the business we had whittel it down to closer to 6 over the course of the first year but you know some customers are a lot better than others about paying out and in general uh in commercial construction most of these contracts are are 60 days if you're lucky so assuming your vendors and you're you know we were playing paying our employees I think every every two weeks at the time maybe every week I forget um subcontractors as well we had a large contingent of those so all those all those funds are going out all our vendors accounts were 30 days so there's a negative negative uh cash flow there on a cash collection cycle I was able to to to close that Gap over time but you're still would waiting 60 days to get paid um and that that adds up over you know 20 or 30 customers pretty quickly yeah and that Dynamic was that something that you didn't understand or you did know but it's kind of like you didn't really truly feel until it was your p&l to be responsible for yeah I did not thoroughly appreciate it um prior to acquisition yeah and then finally taking your last penny your last 170 out of your 401k just to make payroll knowing that payroll is going to come right back up again in two weeks what did you I don't know is that what you said you pay your people every two weeks yeah I think it was uh I think two weeks at the time so how did that feel was that fetal uh or were you just kind of in survival mode kind of sort of thing like yeah it was very much survival mode and just problem solving each new thing that came down so I every time something reared its head I viewed it as okay this is another challenge after we fix this then we can we can start moving ahead but every time you fix one thing another obstacle got thrown in your way so the like drawn on the payroll or on the 401K to make payroll it sucked but I looked at it as a temporary pain okay we're going to get this back in the long term I'll do whatever I need to right now to make the business to live as it needs to and then we'll figure out how this all washes out in time yeah gota say Jus I mean you just explained why you were kind of getting comfortable making doing this stuff but still um people of a shakier disposition might have be panicking uh and now having heard your story a couple of times you seem pretty uh even killed in the face of all this adversity you just explained again you just explained kind of intellectually why you were able to kind of the logic behind all these decisions and that there was strong logic there but still I mean clearly this is not going in the right direction you've put everything in uh so again I think a a more delicate person would be have panicked a long time ago there's not there isn't a moment of panic in your story is there uh I have my times oh you do we just haven't gotten to them yeah but I mean my Panic is much more internal so I'm I'm pretty introverted by Nature I deal a lot of this I deal with a lot of this on my own okay but col is contagious I've got a lot of people looking at me as all of this is happening wondering how we're going to figure it out right between my wife and the people at the business some of them know what's going on and some don't you know the president is getting blowby blow what's going on so he's already he's already pretty stressed so one of my biggest jobs throughout this was to be calm maintain an even demeanor and Shepherd people through all the challenges now it didn't mean I wasn't torn up on the inside trying to figure out how we're going to solve the next problem but you know worrying doesn't do any good and getting other people riled up doesn't do any good solving those problems either so yes I was I was fortunate enough to be able to keep my together amongst everybody else but it's still pretty painful experience yeah yeah calm is contagious I haven't heard that that's that's great um I also think that there's so much in there's so much literature out there about qualities of a good leader I'm sure calmness is one that's talked about but I I I feel like maybe it isn't talked about um as much as it should be you know um whatever the the Visionary Tech types Steve J JS or Elon Musk they're not known for their calmness their steadiness um maybe it's more of kind of in on the milit and Military contexts you would hear about that quality of leadership but um it I just feel like it's one that is overlooked a lot and and this story perfectly captures why calmness steadiness is such a an essential uh leadership um Quality at least in in in when you're experiencing when the team the organization is experiencing your adversity so kudos to you um that's great um where were we okay so this point you you have said that the that the seller your your interactions with the seller are no more you're communicating through the lawyers at this point what else um let's see the um we talked about the 401K funds this at some point in the in the fall the seller directly calls our lender and tells them we're running the business into the ground wow like how they even well I guess I guess during the transaction had access to the lender yeah yeah so I get I get a call from the lender on a Friday afternoon like hey I um how are things like things are fine uh how are you and eventually it comes like well I just got an odd call well you know tell me about that call so there at this point it it changes from a Founder who who has his feelings hurt that he's not being involved with things to now a more active pursuit of trying to undermine our success in the business um so it's like it goes a degree deeper there um and now we now we've got a an adversary rather than just a somebody pesky in the background that's yeah making things more difficult um and there you know there are a lot of other knickknack things we we didn't get all the accounts email accounts passwords credentials you didn't no uh there were email accounts they wouldn't turn over there were iPads with you know IP on them um there was when we did finally get one of the email accounts all the emails had been deleted uh in an effort to uh just OB yeah um little did they know that all those can be recovered pretty easily in today's age um so there was a lot of little stuff like that um and I don't know where we want to fast forward to but um well here's a question Justin the as you're now experiencing this seller's personality this seller that's become a sabur really of your efforts um what are you hearing from the employees is everyone like oh yeah he was a nightmare or is there a Schism where there are there are the faithful to him and and then the faithful to you or how's what's that looking like what are the yeah what has the teams kind of dynamic yeah it's certainly A Tale of Two Cities I I think everybody many saw him for who he was and had very negative experiences and stories to tell employees vendors customers I spent a lot of time massaging relationships after the fact and um I remembering one people that had had been treated poorly by him yeah I remember calling up one of our gc's um I said hey um I understand we used to do business together can schedule a lunch and they said well don't bring so and so I'm happy to meet with you um wow so there was a lot of that and then there was the other side of the coin that had drank the Kool-Aid we always used to say um and they they thought he walked on water and could do no wrong they didn't see who he really was um so trying to trying to navigate those tool pools of people depending on how valuable they were to the business were was challenging at times was he charismatic why did the why did some people think he walked on water yeah he was a Salesman right so he he was able to project a very positive um front um somebody who was important and knowledgeable and had done all these great things in the past and people really subscribe to that uh the things that came out of his mouth over time and just those who were loyal to him did you find that you needed to kind of do a purge yeah yeah we started parting ways with people accounting was part of that um the estimators were part of that it was a husband and wife estimator team who were both pretty poor at their job anyway um so establishing trying to figure out who was loyal to the previous ownership um was relatively easy to do um and then yeah then we had to part ways because because not only was all this stuff happening but there were also information was also leaking to the own the previous owners on stuff that was happening so there was there were multiple fronts here I was trying to stick my fingers in all these holes in the dke while keep the business running at the same time holes moles you had moles in the organiz well the you know and and it's so unfortunate that those who were loyal to him were the very people who controlled the kind of financial picture the estimators and the accounting folks I mean these are the people who we got to be careful of making accusations but uh cook the books I'm using that very very lightly but are are are able to manipulate the financial picture of the business the estimators and the books people together can can paint a picture of financial performance that isn't true right um okay um am I jumping ahead by by bringing up the confession of judgment which is which is kind of yeah so let's back up the stage for that it happened so uh let's say March time frame so that we mentioned the seller financing part of the deal $1.7 million the payments on that promiser note to the sellers were contingent upon meeting a 1.5 debt to service debt to service coverage ratio that was stipulated by the bank it's in the it's in the paperwork um so the first of the year comes around um we don't have our numbers closed out for 2022 so we went ahead and make I think we make two sellers notes payments for January and February because things are already shitty and I don't want to make them any worse right so I I we pay them the first two months by March we've cleaned up enough of the books to figure out what our numbers are and we haven't met the ratio we're not at 1.5 so we communicate this with the bank we communicate this with the seller say we're not there we're not obligated to make any payments we're not planning to make any payments and by the way we don't have any money anyway we need every we can scavenge for working capital and they're not the sellers aren't happy with that um they said well basically we still want our payments we don't really care if you're meeting the ratio or not uh the bank goes so far as to send them a letter says we're not allowing to them to make any payments um shortly after that there is a legal complaint made with the court by the sellers um that we are defaulting on the promiser Note so now again lawyers added to the equation so there at that point there was a threat of a garnishment or a confession of judgment a confession of judgment was a tool an Implement a legal Implement attached to the promiser note so that confession of judgment says if we don't make payments the seller can take that piece of paper which says confession of judgment on it down to the courthouse to the clerk and tell them that we haven't made payments and the clerk can then garnish our accounts to collect those funds so in March we said with the back and forth we just went ahead and made another payment um said we're going to make another payment now and then we're going to work this out with the lawyers and then that's going to be the end of this we're not going to do this anymore so March comes and goes um we think it's all done we're we're still not profitable enough to make any sellers notes payments we're actually in fact working with the with the with the bank to skip a couple months of of payments based on where we are financially um skip payments to the bank yes so we've coordinated with them we said this is the situation y um we need a little relief here they're they're kind enough to recognize that that would be a good thing um and then in um so that was March in June's the the one-year true up so that's where that uh sweep account line of credit comes back into play um we had gathered so much dirt so to speak at that point we said we're not paying you this I think it was $2 million we said here's um I think we paid like $ 830 and then we had a spreadsheet with all the other stuff you know there were there were IRS audits um the we had to move offices and the um the electricity was not being paid for at the previous office so we didn't get the security deposit back the whip there were all these things that added up to quite a bit of money so at the one-ear true up they said well we don't agree with that but we're willing to make you an offer so they at the one-year TR up they said we'll we're willing to settle on the on the Delta think it was $1.2 million of true up um we'll give you a 10-year loan interest only and um at the end we'll forgive the note H um so the numbers worked out pretty well I said okay done deal we can put all this behind us and start moving forward two weeks later they were send the offer um and things start going really poorly at that point the um the previous owner begins to solicit employees including our president um and starts working with nearby competitors so now we've got all this other craft in addition to violations of the non-compete non-solicitation agreements um so like worse keeps getting worse right um in September is the infamous confession of judgment that you bring up so September I think it was August 30th September 1st it was a Friday I get a call from our bank uh hey we just got a letter from the court that says all of your accounts are garnished okay why well that's what we're ask that's what we're calling you about so the the sellers had used that confession of judgment and gone down to the courthouse and given the clerk the notification and the clerk had um 30 days prior sent notifications to our bank which includes all of our checking accounts our line of credit that we' established at the time it was million doll line of credit and all of our customers all of our GC customers so we had like $5 million of AR at the time so $5 million plus a half million doll line of credit I think we had maybe I don't I don't know how much money we had in the bank at the time but it's all Frozen it's all garnished instantly overnight and we didn't have o any opportunity to cure or combat that in any way so now we've got a business running a whole lot of uh cost on a daily basis and we don't have any way to pay anybody uh that was the beginning of September the first week we were able to make payroll through some creative movements of money based on what was left and then I think the shy one of our shies which was fantastic actually paid payroll the next week um expecting that this was all going to get fixed in the court right because we knew this had happened in the court the the garnishment the confession of Jud but nobody in their right mind thought it was done legally so so the the lawyers are all working to file emergency motions to have this fixed stayed whatever you want to call it um three weeks rolls around and none of this is fixed the court will not hear any of the emergency motions by us our shity or even the bank our lender all try to influence the court to at least hear the case prior yeah to the the court um the trial was not for October not until October so uh September 22nd we shut the doors we send everybody home we walk off all our job sites and the company is is no more after that as soon as you walk off a job site on a Construction contract they're not obligated to pay you anything anymore and then all the balls start falling off the table Justin why let me just understand this legal thing situation why did do you think that the um the judge was unwilling to hear your side especially when you had all these all these other entities kind of lobbying them to do so I have been told that by numerous other attorneys that I've consulted with and even elected officials that this specific Judge has a very poor reputation uh and was not well equipped to deal with this matter to begin with he's probably not going to be in his seat next year from what I'm told so I think we we drew a pretty short straw on on the judge um which exacerbated all these issues okay and then bigger question this confession of judgment thing how is how is there such a h how does it exist that unilaterally a seller so so the seller who's got a seller note who's the junior lender can claim that you haven't paid them and cause this horrible freezing of the accounts in in ripple effect um why are there no why are there no ways to protect against precisely what happened yeah so it's it's not supposed to happen uh which you obviously noted the the clerk only knows that piece of paper at the courthouse they don't know any of the backstory they don't know there's a secured lender they don't know there's a stand by agreement with the SBA that's supposed to prevent this stuff so there there are these contractual governance terms that are supposed to prevent this but ultimately T tactically there's nothing preventing in this case the seller from actually using that as a tool to totally destroy the whole thing and this confession of judgment is this something that that people need to watch out for that that like had the clerk been doing this the way they were supposed to is it some is it fine to have in there or would you tell everybody like if you see these words run sort of thing yeah I would don't sign one run um but it goes going back in time this the confession of judgment should in my opinion not have ever passed scrutiny from the bank or the closing attorneys it's legal in Virginia I've been told it's not legal in other states that gives you an idea of how how it's viewed amongst other other localities um yes ultimately don't sign it I signed something that I shouldn't have um I have spoken with others um Heather erson got in touch with me not long ago and she had a customer here in Virginia and they were pushing for a confession of judgment um so we talked a lot about that and you know ultimately they didn't do it um so it's a it's a really bad instrument it's very aggressive you could view it as predatory um but ultimately yet don't sign one you you give away all your rights because you've literally already signed away your confession on that note by doing so and then you've given control of it over to somebody else yeah certainly it again just the risk of belaboring like how did somebody else not catch this the professionals mhm uh the attorneys whose job it is to catch something like this and then your lender who who's own so so they're the senior lender so they get paid before people below them namely the seller so if the seller can basically collapse could basically cause the business to shutter its doors then the lender is going to get screwed too cuz they're not going to get their loan paid back so you would think that the lender it would just be all kinds of red flags for the lender we're not going to we're not going to allow a junior lender in this deal when we're the senior lender to have so much control over our future debt payments it may have been an oversight it may have been a new thing maybe they hadn't seen it before or maybe this particular uh team had not seen that instrument before in conjunction and maybe it just got lost in the in the paperwork leading up to closing when everybody's trying to do a thous things yep well your sellers sure seemed to know what it was all about yeah okay Justin well that's horrible um but and I have to ask that day where you just literally close the doors and tell everybody to go home what was that like probably one of the worst days of my life yeah the frustration of knowing that something is wrong but not being able to do anything about it is just a a burden that you can't imagine you know and for me it wasn't the fact that I was going to have all these issues come to find down the road financially it was you know Bob's not getting paid this week and Bob's got a mortgage and we got 40 you we had 80 employees at that time 80 people that are still owed wages um and have bills and mortgages and all that stuff and not to mention all the sub contractors right we had probably at least 40 subcontractors at the time so it was it was the whole ecosystem that was being impacted it was everybody loses everybody's getting screwed in this deal and so there's there's no Lo logic in any of it and trying to convey or communicate why somebody would do this to all of your partners your customers your employees you just sound like such a c because it doesn't make any sense yeah before we're going to start wrapping up here Justin but before we get to the aftermath so that was that was last year so it's been a year right yep yeah it was September 2023 correct yeah so it's been a year so I want to hear about the aftermath uh and of course Lessons Learned the biggest things that you would you would want to impress upon the audience but before we do that let tell us too about actual the the actual improvements you made to the business as you saw it so so you were making progress yeah we so financially we had made great progress so let me go back to the numbers because you know going in we had I think I quoted $2.5 million a eida um was was quoted in 2021 that didn't turn out to be the case as we saw so in 22 we netted so we ran the company for 6 months in 2022 the business netted $122,000 not making any debt payments even um so not nearly as profitable as as was expected right so in 23 we had done a lot of work we had grown Revenue to we were on track for $18 million so we went from 12 to 18 um and then we were on track for doing $1.8 million at eida that year as well so we had we had really turned everything around a lot of effort a lot of work by a lot of people but we were at the Tipping Point and that was the other frustrating part of this whole sequence is SE in September when everything got shut down we were kind of at the precipice and we knew everything had had gotten to a point where we were going to be comfortable going forward from a cash flow perspective employees businesses processes benefits all this stuff had kind of been worked out and we could see we could see the future um yeah really unfortunate this might sound trivial but um is there a part of you your emotions that feels proud of what you did it's hard as as a silver lining um I'm probably most proud that I'm just still breathing more than anything yeah it's I'm more most proud of just weathering the adversity than I am anything because y all this other stuff is kind of chump change in the end right so perspective has been a a part of my daily selft talk throughout this whole process so understanding what's important what's not important it's hard to be proud of all these things for a business that doesn't exist anymore it just doesn't matter so I mean yeah Pride doesn't get you anything in this world what uh what do you tell yourself to keep perspective hard moments yeah I mean we' I've listened to some of your other guests whove arguably had tougher times different challenges um sick spouses sick children um we've been we have numerous times said we're healthy thank God we're healthy um we've got a healthy girl she goes to school we have a roof over our head things could be a lot worse I'm not saying things aren't difficult but things could be much worse than they are and I'm I'm very I'm happy to have those things that we do have wonderful perspective Justin okay let's um let's hear about what what the aftermath has been what what happened after you shut the doors these last 12 months so September the business shut October the was the actual trial the judge didn't agree with any of it uh didn't change anything in December the bank oh sorry Justin so to be clear when you do a confession when a confession of judgment that triggers then a trial your wages are garnished until that's reversed at the trial if it's reversed yep so there so it also triggered a trial and then but the trial didn't go your way because same judge exactly yep same judge um no way around that apparently unless we drew a different straw so the judge you know listened to everybody and said uh no I don't think so um a quote that somebody told me who was Employee one of our um employees said there's a couple different types of lawyers some of them say they know the law but it's more important that your lawyer knows the judge um so I you know I couldn't help but wonder what's going on in the background that I don't even know about because it it all seemed like such a a show to me at the trial um the argument seemed compelling but it didn't matter yeah but actually a little bit more on that Justin like when you saw the other side so you're looking across the courtroom at your adversary here at your seller and his no he didn't show up too just the attorneys yeah too cowardly to show up in person just the attorneys but could you see any Force to the arguments they were making that to help you empathize with the fact that with the judge who chose in their favor was there any there must have been something where it's like oh they are making this sound like I'm the bad guy here no it was all technical jargon for the most part it was it was precedent uh and and verbiage in the complaints and there was there was no context of all this other stuff that had happened and it was only about the confession of judgment this paper what allowed them to do that and so all the other stuff didn't get discussed I see yeah okay all right so that's October um in December the bank sells off all the assets of the business there wasn't much I think that there was maybe a half a million dollars of equipment and you know I spent at the time I spent a couple weeks going around to job sites and even people's houses collecting equipment and tools for the bank uh in a box truck I had some help from some of the employees stuck around for a little while and helped me thank thank you very much but you know after that it was me literally showing up and with a box truck throwing in the back so the bank would have as much as possible um yeah so they auctioned everything off in December that's a dent half a million dollars is a dent when you're talking about five or six million doar on the loans yeah and then in um I guess it was July we get a foreclosure notice from the bank um and this was not that I knew that could wasn't going to be a possibility but the the bank had not communicated that to me so the the bank filed that paperwork in March and then we get a uh piece of paper in the mail in July that says your your house is being foreclosure uh foreclosed on and auctioned in September okay great thanks I appreciate the heads up so now I'm in uh you know emergency mode trying to figure out how to retain the home uh we're still working out a deal with the bank to try to do that but they had a second you're speaking currently like as of right now September 18th 2024 exactly yep so so we think we have a deal but there's nothing in paper I don't trust anybody to do anything at this point so um there's still a lot of ramifications to trying to retain our house you know the bank has a second deed um um bankruptcy may or may not be part of our future based on all the personal guarantees so there's still a lot of very complex and interwoven aspects to all this to see if and how we can salvage anything including the home at this point so you're really still in the thick of it I mean kind of knowing whether or not you're going to lose your house is a one of the biggest questions of all and also have to go through bankruptcy yeah it's a it's an unsettling daily uh um presence you know I spend quite a bit of time still talking to creditors and attorneys and the bank and um a lot of people on a regular basis both trying to gain information and knowledge and and figure out what our options are but also just massage the situation the best I can so it's it's in in no way shape or form is this over for us there's still a lot of uh a lot of things to work out over the next probably six months to a year and what about your own ability to put food on the table yeah that has been an issue thankfully my wife went back to um she was a dental hygienist she had come into the business as well to to work when we acquired it which was actually a blessing um working with her turned out to be a pretty positive experience despite some concerns we had um so she went back to work uh as a getting a normal job I went back to Consulting with you know previous customers and clients um and so putting food on the table is the easy part right um we we have what we need on a regular basis but trying to figure out the long-term implications of that and are a little bit more complicated okay Justin well uh it's an excruciating tale um do you let me ask you last question kind of on on the emotional piece uh the darker emotions here you must well putting words here I would hate and I use that word you know sparingly the seller I mean I would Harbor rage toward this individual who you know you might bump into around town sort of thing how do you feel about your adversary in this all this yeah I agree with all that uh it's not productive it doesn't change anything all those thoughts and and emotions or feelings are are still valid but um you know they don't accomplish much unfortunately no no but hard to control at the same time okay Justin well from from your Battle Scars here what do you want to leave the audience with yeah there's so there's quite a few lessons that to take out of this the biggest one is people and character assessment um trust Integrity character are still Paramount when in a business relationship with anybody the way I had previously viewed buying something from somebody is different now you know when when you buy buy a business from a person you are doing business with that person and they have a significant amount of influence control leverage over how that whole transaction is going to go both during acquisition and afterwards so character assessment is critical I'm not sure I would have done anything different there but you know word to the wise for others as they search I would have gotten the seller out of the picture as soon as possible um I really thought they were going to be valuable and needed during the transition that did not turn out to be the case so think about that and I've heard that from other folks getting into businesses um never underestimate the motivation of somebody to sabotage your every effort and it no process or software package is going to fix or replace Bad actors so you know all this really still boils down to people the attorneys I had on the deal team were insufficient to deal with the complexity of all this from day one um so bad on me but you don't necessarily know what somebody's limitations are until you get into a process so having the right deal team and advisers is very important and you got to do that early you can't be reacting um down the road once stuff like this happens and and so attorneys that know transactions as opposed to attorneys that in your case maybe didn't or didn't have a lot of transaction experience yeah and it's not just that it's it's it's having attorneys that are willing to be proactive and assertive and aggressive on issues rather than constantly reacting to an opponent and we were always on our back foot playing catchup and that did not service well over time okay um last on the people list is the partner the partner you choose in this case it was my spouse who's been incredibly supportive who has probably dealt with this a lot better than I have most of the time and that's been a a critical piece so whether that partner for you is a spouse or a business partner it it can really make the difference um between success and failure whether that's uh familywise or or business wise so again be careful who you who you choose to do this with I think we talked a lot about these other things already um the conf well go bang through them just to reiterate yeah confession to judgment right don't sign one um yep the QV QV yep um lender I would I would if I was to do this again I would probably consider or opt for a smaller Bank who might have a little bit more um interest in your success so when you deal with a big Bank your failure is a small piece of their pie but when you deal with a smaller bank they have a more a a more vested interest to to make sure you're successful because their bottom line is going to be affected more significantly and the bank that you dealt with what is a big National brand people would recognize yeah yeah yeah and they were like uh pre-closing working with them they were great right very well-oiled machine for sure um I I I would have liked to have had more support from everybody throughout this and the banks on that list yeah yeah yeah we talked about Q um institutional line of credit it took us probably 8 months to get a real line of credit after the sale um it would have been nice to have had that going in if at all possible oh I I feel like I missed that you got a line of credit that was not that that sweep account thing that you had with the seller okay yep so we we had to switch Banks um you know referral referral referral finally found a bank that was willing to give us a line of credit if we moved our money over there um that was a half million dollar line Half 500,000 yep oh yeah oh yeah okay I was garnished in the end so it didn't matter yeah um last couple things go ahead Justin just I want to just circle back again on the seller and trusting the seller because that uh is probably the biggest detail here um although these other ones they're all quite important the ones you just rattled off here at the end but now we all know I mean it's a cliche I mean it's it's a it's a it's it's on the 10 commandments of buying a business right trust thy seller um we know this and you knew it and yet he was able to to obfuscate his bad intentions or whatever his bad character you said at the top that there were now reflecting back there were a couple little things that you maybe were were tells um what were those and and I guess big bigger question is just like push yourself to to answer how could you have diligen his character better yeah ideally being able to interact with or interview employees vendors and customers would have probably given me a lot of that information now a lot of times that's not possible Right but interviewing the people that had experence with him would have most likely highlighted some of his character flaws um he had some other weird things like you know he was he was deathly afraid of accountants and attorneys and in hindsight that's because they're datadriven professionals and they speak on information instead of rhetoric and lies so and that was an indicator that that I just didn't pick up on like okay a lot of people people don't like attorneys I get that yeah yeah but yeah um he had this other weird thing where he'd never look anybody in the eye when you were talking to him he'd never look in the eye and and I never knew what it was exactly maybe it's some physiological thing but in hindsight it's weird and I don't know what that means riffing on your point about you said it at Georgetown um where you had thought in the past about buying things very transactionally so your your your analogy is if I buy a used car from a sleazy car salesman I'm okay that they're a sleazy car salesman as long as I'm not getting ripped off because I'm not I'm gonna drive my car off the lot and that'll be that but with a business when you're buying from a seller you are effectively partnering with this person at least for a moment in time um so it's it's not we call it the transaction but it is not a transactional interaction no and and my Riff on that was it's almost like ask yourself about the seller imagine you met this seller and you both had a business idea that you liked would you do a zero to one with this person W would you would you do you like do you trust this person that much that you'd start something from scratch um you know it's it's a proxy it's not a Perfect Analogy but if your answer is o no I wouldn't I wouldn't start a business with this person well then maybe you also shouldn't be buying their business yeah or there's got to be enough protection in place so that there's a a clean cut in some way shape or form and there's other ways to probably accomplish that but you're buying all of that baggage whatever the seller bring uh seller had you're going to buy and retain some of that so if you're not comfortable with that or can't figure it out it's something to consider yeah okay last thoughts uh let's see going forward so many times uh this has been a huge like psychological um learning experience for me but often times looking forward has been the only thing to keep me moving meaning what's what's the future hold what's positive I'm highly motivated to do this again um just because I had a really poor experience doesn't mean fundamentally this wasn't a a good idea and isn't for other people so um I will figure out a way to do this again um I don't know at what point in time that's going to meet financing from some other source so anybody out there that's interested in trying to help me figure out non SBA financing would be greatly appreciated um I'm still trying to find the right people to help uh navigate the whole SBA situation um continue to talk to people on that front and and you invite anybody who might be listening that can help to reach out please yep and uh the last thing on last thoughts is just I'm happy to share my story it sounds odd but if I can help others prevent some of the same mistakes offer the lessons that I've experienced I'm very willing to do that the community has been very uh communicative and supportive of me to those I've reached out to who I'm total strangers to it's it's amazing what people will will share and discuss with you from authors to people on your podcast to people on the internet so don't be afraid to reach out and ask for advice guidance resources it's amazing what people will share even if they don't know who you are well that's great to hear that there's been support coming back uh to you and hopefully uh you'll hear more of that after this this episode airs Justin um uh at the risk of sounding like a cheerleader for ETA here we got to highlight the point that wow even after this you want to basically this path you want to do it again that says a lot about your belief in buying businesses yeah all the same things exist for the the reasons that I wanted to do this before are the same reasons I want to do this again opportunity growth being and having flexibility influence and impact on an organization those are all still things that I want to be a part of so it didn't work out with this one um I'm not going to get that as an employee I'm not going to get that as a cons consultant I'm probably only going to get that professionally by having a large equity share in some type of business whether that's outright ownership or otherwise anything else Justin that we that we didn't get to I'll leave you with this I always slept good I never had a sleepless night and I say that because I worked my ass off and I had a clear conscience at the end of the day all we have are our values don't compromise on what they are because it's the only thing you might have when everything else goes to hell wow totally I love that your seller ain't sleeping well no but that's that's um yeah I love that when everything else is taken from you you still got your values uh and you slept soundly with a clear conscience really really poetic and a powerful Point Justin thank you again for doing this um the this will be uh an episode eagerly listen to this will be an episode that travels and has legs and has life to it uh and people will listen to it um well into the future so you've really done the community of service by coming on exposing your whole this whole ugly episode in your life um for us to to pick through and learn from very generous thank you very much sir thank you will 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