Rob Carpenter. Welcome to Acquiring Minds. Thank you so much for having me. I'm really excited to be here. Rob, I've had guests who fled tech to come over here and buy a traditional small business. But I haven't had one whose journey saw him leap from one extreme end to the other on that spectrum. This is going to be fun. Start us off with some background on you, please, Rob. Yeah, I think if we go all the way back to the back, I was born and raised in Dillingham, Alaska, right on the Bering Sea, where we would have grizzly bears that would walk into the the mudroom of our house. Despite what you might have heard, I cannot stand on my back porch and see Russia, but it was a very very interesting life experience. So, I spent all 18 years up there, moved down to the states, got an undergrad degree in entrepreneurship, like probably most people on this podcast, read Rich Dad Poor Dad, Millionaire Next Door, and from a glossy surface level, I was like, that looks like a pretty nice life. I'd love to do that. And I have always kind of been on that trajectory, you know, lawn mowing business in high school, like a lot of people, advertising business in college, and then I ended up out in Denver in 2010, got a master's degree in enterprise technology management, and started my first company, which was a custom software development company. We built and launched native mobile applications. I did my first acquisition at 26. I bought a company in Hyderabad, India, to do vertical integration, and then I bought another company in London. So, over the 6 and 1/2 years that I ran that business, we built and launched 350 custom software applications, sold that company when I came up with the idea for my artificial intelligence company, Valient AI. Rob, let me stop you there because because Valient Valient is going to deserve a few minutes here. The Hyderabad acquisition and the London acquisition, how big were those? Um, not that big. They were more from like a labor standpoint. So, the Hyderabad, India, one was like half a million dollars, and then the London one was a couple hundred thousand. Okay. The India one was interesting because we don't realize how good we have it here in the states in terms of how easy it is to start up and run a business. It took us for even that small of a transaction, it took us a year to get it done. And we'd be literally having to like FedEx documents back and forth to India. I had documents get rejected cuz I used the wrong color ink on the forms. And so, with like intense focus and diligence, it was about 12 months end to end to buy a small, you know, half million dollar company. Yeah. Yeah. I've often heard that about India, that the bureaucracy and red tape is still kind of friction to to development. The And then your exit of that business, was that significant? Or and can you be specific? No, it wasn't. I had accumulated a decent amount of debt on that business. We in the transition from Obama to Trump, for whatever it was, like all of our customers kind of freaked out, and we lost like 90% of our revenue in that 30-day window. And so, I ended up taking on a bunch of debt to keep the company going. We got it back, we grew it, we stabilized it, but that debt was still hanging over my head. So, basically on that one, I got out without it costing me any money, and I still to this day consider that a win. Yeah. And the 300-plus applications that you developed, these are all mobile of all phone apps? Or the gamut, web stuff, phone, everything in between? I'd say 80% were native mobile applications, with the remaining mostly being back-end database type systems. The biggest, most notable app we built is the My Colorado digital driver's license app. So, our governor at the time was Hickenlooper, and he pushed that through Congress, got approval for it, the state the state Congress, and then hired us and hired two other companies to build that, and we did all the mobile app front end infrastructure, but Colorado is the first state in the entire country to have a digital driver's license. Oh, wow. Okay, didn't know that. That's a pretty marquee contract you have won. Yeah, it was basically the last one I closed right before I sold the business. And so, it helped cuz it's like, here's this massive contract and company, you know, here you go. Great. Thanks for that, Rob. Okay, so now, what year is it as you turn your attention to Valient? 2017. 2017, right, as Trump takes office. Okay, so Valient, tell us about your pivot here. So, the BHAG, the big hairy audacious goal for Valient is we were trying to build straight-up holographic employees. And so, we used a transparent OLED display, think a piece of glass merged with a flat-screen TV, and we set it inside of basically a kiosk infrastructure. So, it's about 4 ft wide, 6 ft tall, but you could look through it. And then we used an Intel NUC computer and the Unity gaming engine, and then we rendered a 5 and 1/2 ft tall, fully animated person. And we used the Intel RealSense camera, so it could recognize you, the AI could greet you by name, and the idea is that we could start to automate front-line labor tasks. You know, it could help you with a mortgage at a bank, it could sell you a cheeseburger, you know, it could help you at a retail center get directions around Home Depot, you name it. And so, we had conversations with Target, Walmart, US Bank, MetLife. We want to start up competition for Visa within their accelerator. But what we found very quickly is that we could make a visually interesting product, but and this is again 2017, 2018, the conversational AI, the ability to talk to it was horrendous. And so, I knew that if we were ever going to be able to scale this product, you had to be able to carry on a fluid conversation with it. And so, we decided to dial in and focus on fast food, and we decided to let the visual element go and just focus on the voice, and pivot from sort of an in-store experience to drive-thru. Which for anybody that doesn't know, 70 to 80% of the revenue for fast food restaurants come through drive-thru. So, if you can automate that from a labor standpoint, it's a no-brainer. It's quarter million-plus restaurants in the United States. That is a very big technology company if you can build an accurate product and scale it. And so, And by the way, that for anybody who's not tracking AI super closely, that is one of the favorite use cases for generative AI today. It remains one that people are really excited about, although I guess, as you'll you're about to tell us, easier said than done. But basically, yeah, the idea that that it's like, what where can we really add value by being able to speak have computers understand us and be able to interact with them in a pretty well-defined kind of set of commands and in requests. And it's a menu at drive-thru at drive-thru. So, it does seem intuitive that this would be low-hanging fruit for a kind of generative AI application. Although, of course, also you were before ChatGPT, before the whole world was excited about generative AI. So, keep going. Correct. We were we were the OGs in the space a little bit around this stuff. Yeah. So, yeah, so we started digging in. I'll fast-forward a little bit over the timeline. We raised over 18 million dollars. I personally closed deals with Burger King and Chick-fil-A, Wendy's, Hardee's and Carl's Jr., Checkers and Rally's. We had a lot of buy-in and a lot of support from the investment community and from the customer base, and everybody wanted it. Problem is, and I think this is still the case today, is that it's really easy to create an AI demo. It's very hard to build a scalable product at an enterprise level that is 98 to 99% accurate. I mean, when I left 9 months ago now, we were testing it actively, and it's like you could get ChatGPT to like 60 to 70% accuracy, but we just you don't have base-level control over ChatGPT, and so we just couldn't get it over that. When we launched in 2017, nobody was doing this, and during the time that I ran this company, we saw over 30 companies enter our space, make a big splashy announcement, and then die. And I would argue when I left, there were probably only three companies that still had a viable shot of bringing this technology to market. The fundamental challenge is you have a daisy chain issue. There's about 10 key things that have to happen in a row, and every one of them has to happen perfectly. Even if you have 2% degradation at every level, think like speech-to-text. If you have a 98% accurate speech-to-text system, that's like world-changing, like in this minute. And that's one of 10 things, and they all have to work perfectly. And if they don't, you've now degraded your overall experience to 60, 70, 80%. And so, we spent those 7 years just grinding and grinding, and you know, we were improving by 10 to 15% per year, but we just couldn't get it to where it needed to be, where the restaurants could really jump in and then mass roll the product out across their entire ecosystem. So, does this remain a a use case or an application that AI or technologists are excited about? Or do is it well-known now that it's a much more challenging problem than it first glance? Um, both. I would argue we're probably still 5-plus years away, and we probably need to see one or two like meaningful improvements in the core infrastructure of AI to really see rapid scale and rapid adoption, but it will happen. It's just a matter of time. Okay. Well, much as I'd love to spend another 15 minutes on this topic, we I want to get to your story. So, maybe we'll have a chance to return to it and riff on AI AI a little bit at the end, time permitting. But as CEO founder of Valient, how does the story wrap? Yeah, so, you know, thankfully, midway along the way, the board gave me the opportunity to sell some shares on the secondary market and so that had a pretty meaningful impact on my life overall but fast forwarding to the end basically I was burned out you know radical transparency here was creating issues in my marriage it was creating conflict challenges for our kids the stress was massive early on we'd get large chunks of funding but then towards the end we'd only get enough runway for like 6 months and so then within 1 to 2 months after closing around it'd be out trying to raise uh more money and so it really just kind of got untenable so I went to the board in August of last year and I was like hey I'm I'm done and I need to step down and they were basically like cool like we agree and like as I started to walk towards the exit they kind of like pushed me out but it's not it's not uncommon once the once the leader is done you need to get fresh blood in there so I don't harbor any ill will and I completely understand where they're coming from so took the rest of the year off uh spent time saying like I know I don't want to do another VC private equity backed company um I played around with the idea of getting but I'm like once you're an entrepreneur you just you're broken you can't work for other people after that and I'm in EO uh entrepreneurs organization with a wonderful group of seven other business owners and four of them of the eight uh had bought businesses through ETA and so they were able to kind of break down and explain the whole process to me and I'm like I like that that sounds like I can find a business to buy I knew I wanted to buy small I knew I didn't want to buy with any outside capital and I wanted something that was just kind of easy to run while I like rested and recovered and I still don't know is this a two to three year play is this a five to 10 year play to be determined just going back to Valient for a second you were really experiencing the tech VC ride what I mean by that is it was a very high profile company as you said you you were talking to blue chip names you had some of them as customers or at least trials or what have you you also got press from blue chip publications what was that say say a little bit there yeah we got we were front page of the New York Times I got interviewed live by Lou Dobbs on Fox Business you know you typed in Valient the number one search is like is Valient public you know I mean that the demand was there CNN BBC like everybody was already on the wave of like oh AI is coming and this was really even before chat GPT launched two years ago they was like AI is coming it's going to be big we're interested oh here's a company that's talking about massive labor automation for frontline employees which is its own thing to discuss um we were interested in that and so we got massive amounts of outreach from news publications that were interested in learning more so even though it didn't end up with uh you know going public event or some giant liquidity event for you you still did experience what it was like to be kind of the hottest thing or you know in that you know you know a young founder CEO of a very hot startup in a very hot space and getting just tons and tons of attention um anything more to say about that you've you've talked about how the stress was starting to kill you part partly kind of with the relationship with the investors and they were started to eventually only trickle out the find the finding that you needed but anything else to say about flying high was that exciting at times or was it kind of all stress all the time uh it got it was more like all stress all the time the last like 18 months and the first year was fine but nobody knew who we were and then those middle like three to five years those were a blast it's fun and it builds up your ego it's hard not to it's hard not to get excited about these things that you're doing we got invited to the TechCrunch AI and robotics competition and we actually won that competition and so those types of things like they get you a lot of notoriety and it it's easy to build up your ego in those types of situations fortunately or unfortunately at this point I've been an entrepreneur for about 15 years and I think where entrepreneurship can kill you is if you let the highs get you too high and you let the lows get you too low and what I've learned over the course of my career is you have to learn how to not get too excited and not get too down and you just kind of ride the the wave of the ocean of entrepreneurial startup yep yep and just little pressing here on the personal stuff but when you said it was really starting to affect your family life what did that look like were you just were you just grumpy at home so I I don't mean to minimize it but it was it just kind of like you were not present and you were short tempered and so forth in the house kind of picture yep yeah definitely all of those kinds of things you know Christmas Eve I'm taking investor calls and they're angry about one thing and you know they might be yelling at me and stuff like that cuz it's not growing or expanding as fast as they want to and so it's like then it's hard to then leave that and just be like okay I'm going to leave that in the office cuz I'm working from home right and then go out and like perfectly matriculate and be in a good mood with my family and so I think that all played a role the other thing that was going on which which had a meaningful impact is that my wife was diagnosed with effectively terminal cancer in 2020 and we had a one year old and a four year old at the time so I'm like trying to run this high growth startup my wife is like battling can't like an aggressive cancer right and we have these really small kids and so you know the process of going through that my my wife is stable and everything is going well now but during that period right like how do you not just take on massive amounts of stress in that kind of situation wow Rob well that was a a curveball jeez well um well you know it's life nobody gets out unscathed right right well it's wonderful to know that she's she's stable now she's doing great good uh another thing in your back story that I need to need to pick at I heard you use the word easy um what what did you what was the word that you used when you what you thought small business buying a small business was going to be relaxing what no I'm there was a word in there what was it uh I'm just going to buy this business and do chill something post uh and maybe after the experience that you went through this small business land which we always hear is for my guests are always talking about how how gritty and not easy it is maybe from where you the the where you were coming from it it is a lot easier we'll we'll get there but just to just to hear again so you were in this EO group and four of the eight of your compatriots in this group all bought their businesses and they they were all kind of ETA searcher types or were they are they all kind of young oh wow okay anybody that we know any anybody from the pod um no nobody that's been on yet although I pinged them and told them that they should come on the pod one guy who's like just your like you know total outdoor enthusiast bought a white water rafting company and it's like talk about like a perfect business to fit your personality and at least once a year he like hosts us all to come up to his business and do intermediate white water rafting with them so it's super fun cool cool okay well you like this idea it was still going to be entrepreneurship it was going to be something that you could do well at financially so this is the path you choose okay so now we're in January of this very year first January 1st and what do you envision what are your kind of the parameters of your search yeah so I had a couple of different things that I was looking for I decided to self fund the whole thing and I did not want to take out again happy wife happy life and the idea of taking out you know two to five million in SBA debt was sort of off the table from a happy house standpoint so I needed something that was basically a million dollars or less but something that could be managed something that could be run and grown and ideally something that I would have you know some level of capability to do versus like a you know bio life science was out I I had just come from restaurants I didn't want to touch restaurants with a 10,000 foot pole I know some people on here have done wonderful with them it's just not not for me so I was really looking for something where honestly I had the fewest numbers of employees possible with the you know greatest amount of profitability I really wanted recurring revenue I didn't want any project based work and ideally something that was sort of low lots of customers so I didn't have customer concentration issues and preferably something in the commercial space versus residential okay well all of those seem achievable although finding all of them in one business maybe less so but except for the high profitability per person that is not something that you typically see particularly in blue collar business when coming from tech for example where you know in a software company you can have a million dollars of revenue generated per employee if you were going to buy a blue collar business you weren't going to find that did you not realize that or were you okay with that or did you envision buying a white collar business or say say more about that particular metric that I'm picking on no I think you're absolutely right I don't think it was possible to find something that hit every one of those categories perfectly and if you you know let's say what did I throw out like eight metrics you know I just rated on a zero to eight how close am I to my goal and if I hit eight out of eight great but if I hit six out of eight that's still really good too and I think because I've been in entrepreneurship for a while I've bought companies before even if they were smaller I don't look at this like other people do where it's like oh I've got to do this for the next 20 years you know if you're in a VCP company that could be a 15 year commitment right but with some of these businesses unless you don't fundamentally fail or there's not something fundamentally wrong with the business if you really hate it in you know two years three years like you sell it you know and go buy something else right so I didn't look at it as some sort of massive lifelong commitment wow okay well sounds very logical when you spell it out like that the other thing that was important to you was speed talk to us about that well I think that is really important and I think the number one reason that I reached out to you will specifically because of that speed component. Um I have found Acquiring Minds to be amazingly valuable. I learned so much listening to this podcast. Over the last like roughly year as I kind of sort of started thinking towards this direction and I learned so much in the process. And the one potentially unique thing that I think that I bring to this is there's a lot of people that you've interviewed where it's taken them a year, two years, three years, five years to buy a business. And when I look at this as a potentially two to five I'm like, "Five years, I should be out and onto my like second set of businesses by that point." And so I had just out of the gate a bias towards speed. The other critical thing for me is that I was self-funding this. And so not only was it money coming out of my pocket, but it's also money that I need to live on. And so the longer it took me to buy a business, the less money I would have to buy a business. Now, this baby doesn't apply as much if you're a more traditional searcher and you're getting capital from investors and things like that. But if you're self-funding and the money's coming out of your pocket, you need money to live. And so as that money gets used, you have less money to work with, which is orders of magnitude in terms of impacting the top line of what you can buy. And so in my mind, I was very clear of like, you know, geography is an important thing, industry is an important thing, size of the deal is important, but time is also really important. And so I kept all four of those factors in mind when I was looking for a company to buy. Mhm. Great. And while that all sounds that sounds very logical, Rob, the counterargument would be the obvious that buying a business that is not a good business is really perilous and better to buy no business than a bad business. So the reason that people are very careful is because they, to your point actually, they don't see that they can just if they get in that they can get right back out or even that they can get back out in two years that it's really going to be a commitment and they're going to be stuck if they don't like their business or worse the business doesn't like them and it's going in the wrong direction. Why do you think that you were so comfortable with the risk essentially of buying a bad business whereas whereas it can cause real paralysis or extra extra conservatism from other guests you've heard? Yeah, I mean I think one is just experience, right? Having run businesses for, you know, going on almost 15 years at this point. There is some level of like I've kind of seen a lot, I've done a lot, I've been in really bad times like, you know, the situation where we lost 90% of our revenue and I had to take debt out to keep the company afloat. So I've seen bad times. And you start I got a level of comfort with that and with handling the ups and the downs of the experience. So it doesn't affect me as much as it might somebody that's new that's coming in. And I will qualify like even having bought other companies when I was buying this business, I had a little bit of that like, "Ooh, am I really doing this? Am I really writing this check?" So, you know, still human and I get that everybody kind of feels that along the way. Um but I think fundamentally, you know, the business that I bought I felt like it would be hard to truly screw it up where the business would straight up fail. You know, and enough equity was going into the business that I had some wiggle room to play with if it if it really went poorly. But, you know, we'll get into this. Other than a massive recession, I have a hard time seeing this business really like lose 90% or something like that. So I think I felt somewhat comfortable from that perspective. Plus because of my budget and because of what I was looking at, it just tended to be a lot of blue-collar stuff that people need. Like you need HVAC. If you live in any state that's getting hot right now and your air conditioning goes out, you're hiring an HVAC person, right? So there was some element of it like I'm specifically going away from risk. I'm not trying to invent brand new technology that's never existed in humanity, right? The business I bought, you know, goes back to the Romans. So it's like this business has been around forever and it's probably not going away until the Tesla bot, you know, actually launches in a decade and and truly does the work that Elon says it'll do. So I think I felt protected from that perspective. Yeah. Well, all of I I think all of this comes down to kind of where you're anchored. And because you come from zero to one VC entrepreneurship, startup entrepreneurship, where you yeah, you are doing the thing where you're creating something new, putting it out into the market, trying to invent a product that works and demonstrate that there's actually demand for this product and that people will pay what you need them to pay and have it be profitable. I mean, there's so there's so many unknowns there that we all know and why we all try to avoid that. And that was kind of your where you were anchoring from. So coming from that and into small business where market demand is is is there. It's just your ability to operate and execute that's really the more of the variable. Would certainly make it seem safer. And indeed, it is safer. That's that's that is the pitch of ETA. But but exactly. But what's so interesting though is that people can come from ETA. They might they don't not everybody listening comes to ETA from where you did, from startup VC zero to one land. They might come to it from from an investor's perspective where they're really downside focused and where they're really scared of, you know, going the business going to zero. Or they, you know, they're just they're just anchored to a lot less risk. That's where they come. So this now feels a lot riskier. So it's kind of like maybe maybe I'm just I'm I'm convoluting the point that everybody has a different risk threshold. But I also just think it has to do with like what path you enter ETA from. Is it a more risky place like in your case then ETA is going to feel pretty safe. But for others, ETA they're coming into ETA and they're going in a more risky direction. So could be that. Every Everybody's reality is their own. And I think at the end of the day everybody has to make their own decision about their risk profile. And the other thing we haven't talked about too much is like what percentage of your net worth is this, right? Like if you have a million and a half net worth, but you're going to max out SBA and you're going to take on a $5 million business, like, okay, that's super scary. Like be thoughtful about that. You know, this was a smaller percentage of our overall net worth. And so I think that also helped to reduce a bunch of the risk. It's like, okay, I could lose every dollar and it's not going to fundamentally destroy our lives, I guess, from that perspective, right? And so I think that's another important thing. But for anybody that's listening is that thinking about this from a spectrum perspective, you know, you can just not analyze it for yourself. And I just want to provide a counterpoint that it doesn't have to take a year or two or three years to buy a business. You can get these done quickly if you want to. Yeah. Well, thank you. That's another excellent point because going to my other point about anchoring. Because we hear, "Oh, a year is kind of the norm." Or we hear 18 my year to two is the norm. And so as a searcher you think, "Okay, well, if I'm at month five, I still have a long time to go." It's a subconscious thing. You're like, "Oh, I I'm not taking too long because it's 12 to 12 to 24 months is normal. But that can be a little bit dangerous because it's kind of like it it doesn't give you the sense of urgency or it doesn't cause you to act when maybe you could. You're just your mind is anchored to this 12-month number. Um and you did a good job of really resisting that anchoring or maybe because you were just I I don't know. I mean, or maybe be because you just had this great this this great insight that like every day I'm not owning a business, there's a big opportunity cost of time and or you're just thinking in shorter time horizons. You want this to be maybe a five-year project where others are thinking about this in over more years. I don't know, but you were able to kind of not have that influence your thinking. Yeah, I think that really had a big impact on how I went about this whole process. And again, it's my way is not right for everybody. But consider it as a counterpoint. And it was one of your podcast episodes where somebody was at the end of their two-year runway and then they ended up buying a blue-collar business that they had passed over and they're like, "I don't want to do that." But at two years they're like, "All right, I need to either do this or quit and go get a job, right?" Yeah. And to me that was just a little bit like, like you could have done that six months in and then that was a year and a half you could have already been down the path of paying down debt and growing your company, right? And so that struck a chord with me and that also pushed me to go faster. Great, Rob. Well, it is a great counterpoint or or, you know, data point your story here. Okay. So tell us about the business that you found. So I bought a three-territory Merry Maids cleaning franchise, which I have to say when I was flying high with an AI company is not necessarily something that I thought I would have done. And I'm not perfect. I don't have everything figured out. There are definitely times where I have to check my ego and I'm like, "Huh, man, am I really doing this right now?" But, you know, I'm I think I have a plan and I've got a vision and I'm excited about that. And so it's like I probably won't be operating a lot of the other businesses that I buy with this sort of kind of the next chapter in my life. But I think going through, getting dirty, doing the operations of the business out of the gate is it just a good way to fundamentally understand the business. And basically the calculus that I'm making, what I'm trying to do is I bought a Merry Maids cleaning franchise. I want to go buy more businesses and I want to grow my total EBITDA dollar value. So what I bought was about 200,000 in EBITDA and I bought it for 2.8 times EBITDA. If I can go and I can grow that to 7 or 800,000 in EBITDA both from organic growth and from acquisition, I get arbitrage. And now I can get 3.5, four, I'm seeing some things here in Denver at 4.2 to 4.3. And so now even if I'm taking on debt for these other acquisitions, the value of what I can sell it for is substantially higher. And again, in five years, you know, I could easily be at that number and be ready to then sell the whole portfolio off or recap it and then use the cash to go buy more stuff. And I don't want to burn two years of a five-year journey looking for a business to buy. And I think what's interesting about this business is that there's a lot of owners that have been in the space for decades and it's getting ready to start turning over. There's more younger people that are coming into the space that are buying these types of blue-collar businesses. The person that owns the territory where I live, you know, they're over 70. That's a natural person to say like, "Hey, I've got financing. I've got everything. You've known this other owner that I bought from for 20 years. He'll tell you what a great job I did. Do you want to retire, right? Here's an LOI." And so, that I think is kind of what what gets me excited moving forward is just looking at a roll-up in this space and professionalizing it and there is a lot of opportunity to professionalize and modernize this business. Just on your point about the ego there, Rob. You said if sometimes you're like, "Wow, uh I was on the cover of the New York Times and now I'm doing the the Merry Maids thing." Um but you said then I have a plan and a vision. So, what what is the plan and vision that you feel like quiets your ego? Is it basically a roll-up that you sell for a number of millions of dollars and and that's kind of that kind of assuages your ego if you do that? It does. Yeah. So, the goal is 800,000 in EBITDA. I've got a bank uh that will finance 100% of the purchase of additional territories. It's SBA financing. So, basically for no money down, I can go roll up all of these other territories with a bunch of people who want to retire. There's things that are being done that are super analog. They're super slow. They're labor-intensive mostly from a back office perspective. I can make these businesses exponentially more efficient. You know, and let's just say round numbers, I pick up four of these businesses at 200,000 a pop. Now I've got an 800,000 in EBITDA business that I can go and sell, let's round numbers, you know, for four times EBITDA and I'll try to pick them all up for 2.8 to three times. And that really comes back to my massive calculus of moving from AI to Merry Maids is that in AI you have a whatever percent chance, 1% 5% 10% chance to sell your company in 10 15 years and then you make your 20 to 80 million dollars, right? And you're you feel great. But the odds are stacked against you that you're going to be successful. But you come into a business like this and, you know, if you're thoughtful about the business, you buy the right one, you've got a plan, I can then go and I can, you know, sell this roll-up for, you know, two to three million dollars. And so, the the two to three million is substantially less than the 50 million, but maybe instead of a a 5% chance of success, I now have a 85% chance of success. So, in in baseball terms, it's like instead of trying to hit the home run and betting everything on that, like let's just go for a really nice single or double, basically. Sure. And when you talk about that roll-up plan, is that a concrete plan or are you going to build acquire these additional businesses, build up to 800,000 in EBITDA and then basically have optionality. So, if you want, you can just keep building then. Maybe you become you just maybe you diversify into buy other businesses and have some sort of hold co or you sell or what have you. You don't need to know that right now. Um sort of thing or are you pretty committed to like a a PE style roll-up? Um absolutely I want to buy and sell companies. Um almost think of it, you talked about this as well in a prior episode of like trading cards, right? I'm almost looking at these blue-collar businesses as trading cards. I'm like, "Let me collect a few and then I'll turn those in, I'll get a better one and I'll trade another one." And like and I just want to kind of keep growing this portfolio. I think right now, although I could have massive access to capital cuz I've got a tremendous amount of experience in fundraising, I love the freedom of not owing anybody anything other than the bank, which has its own things, right? But it's in my mind it's fundamentally different because when you owe the bank money, as long as you pay your debt payment, you can to some degree do whatever you want with the rest of the money. When you owe investors, you need to account for every single little penny and you you need to know where everything is going and from my perspective there's a lot more pressure from that standpoint. So, in this moment I'm really liking the idea of having no investors, no board. I start smaller, I start more humble, I check the ego. But if I can grow and build this over time to something where I never have to report to an investor or a boss again, I think that's the ultimate form of freedom and so I'm willing to check my ego, restart a little bit and then start to build that up. I think it's 50/50 and it really will come down to how the next three to five years go of do I recap this and take that and go buy something else and then I have somebody sort of run the cleaning, you know, port co or do I just bundle it up, sell the whole thing, get a dump of cash, you know, and then go try to buy uh you know, 1.5 to two million dollar EBITDA business and then just keep, you know, ratcheting it up like that. It'll I think in my mind come down to right now this business is fairly labor-intensive, obviously, right? We sell labor hours, but it's labor-intensive from me to manage this business. And if I can get to a point where I have the right people in place and the business is effectively running itself, then I think I'd hold on to it because the cash cycle in this business is fantastic and we can get into that now or we can get into that later, but I love love love the cash cycle of this company. We'll get into that a little bit later. Um So, when you talk about Merry Maids being a three to five-year adventure, you mean Merry Maids specifically. But it sounds like in terms of buying businesses, you see that as longer term and the way I just just heard you like you're like this is your career now. Yeah, this will be my career from now on. Well, you're what? Five months, six months into this new career? No, I'm like two months into it. Well, starting with your search in January. But yeah. Oh, true. Yes. Yes. Yeah, but starting as an operator. Um and and actually I wasn't going to I wasn't trying to make this point, but now I'm it's occurring to me to make. How can you be so certain? Are you so smitten that you're just like, "No, I know this is the way." What if you find out you don't like small business compared to the the glory of startup land, for example? Then I'll sell it and go do that. That means I think I'm looking at it from a freedom perspective, you know, like I'll have that ability to do that. But it does feel like a fundamentally different place in life to own this company where it truly is the first time ever where I like don't really have to worry about the the cash flow, right? Which I had with my custom software company. I don't have a board of directors to respond to with my AI company. And then before that I had jobs and I had bosses. Like it's hard to explain how free this business feels relative to the things that I've done before it. And and I'm not trying to be too arrogant with that. Everybody has their own perception and everybody's had tough experiences with businesses, but your perception is your reality and I came from a pressure cooker. Yep. So, relative to that, I mean and we talked about this in the pre-call, but I'd say my stress level is down 90% from where I was with the AI company. So, it's just it's all about your perspective. Exactly. Yeah. Well, I guess audience, that's the secret to buying a small business and having it not just be beat the crap out of you is just come from come from a harder one first. Exactly. Like everything, just do harder first and then scootch back down. And then backtrack. Yeah. It feels a lot better. Well, before we get too far away from just the transaction and the search, I want to ask a couple follow-up questions there. We glossed over this, but it's an important point. Your net worth that was probably bigger than a lot of the people listening. Not huge, you never had some massive exit from Valiant, but you did say that you had the opportunity there was a moment where you sold some stock in the private market. That was some liquidity. So, you have a nice nice balance sheet. And forgive me, how much of that net worth did you see putting at risk? Uh I'll be a little cagey on that one cuz otherwise you can do the math on my net worth, but I'm happy to talk about the finances of the business. But it was a smaller percentage of my overall net worth. My wife would be really unhappy, but I wouldn't lose a tremendous amount of sleep over it. So, even so, if it went to 100% zero. If it went to 100% zero, you still have half your net worth left over at least. More. Yeah. Yeah. Okay. And and that is clearly a a different going back to this point about people taking two years to find a business. That is a big difference between that me and you is that, you know, a lot of people listening to this, they, you know, the the business that they buy they're putting all of their chips into doing that. So, it's got to it's got to be a safer bet than than you were able to do. So, I'm I'm very comfortable Right. And and I by the way don't know that I would do that, right? And everybody is different. Everybody has different perspectives. I don't know, especially if you have a wife and kids, I don't think I would risk everything. You know, I would take on investor capital before I would take on pure debt and go at my net worth or multiples of my net worth to buy a business because especially if you've never been an entrepreneur, that's how you don't sleep during the night. That's how you end up having a heart attack at 45, right? Like the amount of physical and emotional stress and the pressure that that puts on your family is huge from my own experience, right? So, again, just it's I'm one data point, but I would not do that cuz that it's not fun when you can't sleep at night. And follow-up point to this. So, so the business that you bought was 200,000 of SDE. Yep. And you bought it with a What was the structure of the deal? Tell us I'm not sure you told us. Super random. So, uh I don't even and I don't even know that we talked about this point yet, but I bought the business or I went under contract in six weeks from when I started this process and this was the fourth offer I put in in 6 weeks. So I mean like I was getting after it. So one one was a landscaping company, one was an HVAC company, one was a commercial garage door company and then I got this this cleaning company. So the the numbers on this one they had it listed at 650. I got the LOI accepted at 550,000 and I got the owner to take like 85,000 in seller financing on top of that. Um but the reason I brought up the prior deals that I submitted offers on specifically the commercial garage door company for a million in revenue they only had five employees. And so I was like I was like that sounds great. Like that's what I like, you know, and for con- contrast I've got uh 13 employees in the cleaning company and the landscaping company had 25. Um and so I liked the commercial garage door company and I wrote a full price offer with SBA financing and I asked for a little seller financing and they're like you came in four of four. Like we almost didn't even bother telling you that you didn't get the deal. And uh that was that was offer number three. And so I realized like I need to find ways to make myself more competitive. And so the offer I submitted for the Maid Brigade franchise I submitted an all cash offer but we used alternative financing for it and just financing I could put together faster. And so I put uh you can take debt out on like mutual funds and stock market investments that you have. I have Vanguard they'll let you take up to 50% of what you have invested with them as debt they'll just give to you. It's called an I lock. So I did a portion of it as an I lock and then I did a portion of it as a mortgage on our primary residence which my wife was not super psyched about cuz we were able to get that paid off. Um but I was able to get that done in like 2 weeks. So I was able to get all the cash together in a relatively short amount of time to then buy the the business and hit the timeline to close. Um it's got some things that are a little annoying about it. It's not the end of the world but especially as I look to buy a second and third company I'll see what can be done to sort of recap and see if I can just get everything you know subsumed into one loan. But it did allow me to close very quickly and I did get the deal. Yes, but I I would assume that those sources of financing are pretty expensive. So why or correct me if I'm wrong or maybe they're not. No, I mean SBA is expensive. So at least you know when we're doing this in June of 2024 SBA is 10.75 or it was 2 months ago when I was going through this whole process. Um so the investment one was right around there. It was like 11 12%. So we'll say that one was higher but I got the I mean I got that in 48 hours. Like they write checks quickly if anybody wants to do it. Uh and then on the commercial loan I think it's like 6.5 and that's what the bulk of the capital is that I used to buy the business. And so that's like almost half of what the SBA was. So that made sense from that perspective. And sorry the the commercial loan by that you mean the second mortgage on your home? First mortgage. We had our house paid off. Right. But you can also do a heat lock and so that's an option as well. And they'll loan upwards to uh 80%. I don't know if it's 80% of the value or 80% of the equity. Um but you can get heat locks again within a week to 2 weeks you can get pretty attractive interest rates on those that are substantially lower than SBA financing. Good tips here Rob. Surprised I don't hear about these these instruments more often. We're just trying to be competitive. So if you're writing offers and you're getting your butt kicked by all cash offers these are some tricks you can decide if you want to employ or not to have a more attractive and a more aggressive offer. And and when you put in the offer for the Maid Brigade and you knew you were going to have faster access to this capital did you just articulate that as part of your offer? It's like this is these are my sources of capital I can get them done in a couple weeks. They didn't ask and I didn't tell them. I just said it's cash. Don't worry about it. It's not SBA. Okay. Okay. Okay. And they never were like specifically where are the funds coming from and I didn't offer it up. Okay. And the third deal that you put an LOI that you put an offer on and it was rejected and they said you were fourth of four we almost didn't even bother telling you. Your offer was so unattractive because you were the only SBA? You were SBA one? No, three were SBA only one was all cash and the all cash offer got the deal. The second, third and fourth place we were all SBA and then I was the only one of the four that asked for seller financing. And so I asked for I think 10 or 15% in seller financing which wasn't even in my opinion that aggressive of an ask. Um but it's again June 2024 it's a it's a tough market out there right now. It is definitely a seller's market. Um and so it's really hard when you're asking for them to carry debt cuz even with SBA which has some pros has some cons um they get all their money for the most part right when the deal closes. And so my banker at the time I think he said only like 20% of his deals that he was working on had seller financing. Really? So it was a very unattractive tool in my very very small data pool. Oh that's so interesting. I um clearly have a different set of data in my guests versus your your lender because I feel like almost all of my guests do 10% or something there give or take. Yeah. Yeah and this was just one lender and this was just Denver and this was just March right or April you know and I was getting this deal done. So everybody's going to have their own data point. That was just my direct experience of actively writing offers. Okay. Okay. But But I did for contrast get seller financing on this deal right? So it's still not 100% from a data point perspective. And jumping a little bit forward but since we're on the topic of financing now tell us a little bit more about this this agreement you have with a lender now who will allow you to roll up these businesses without any additional money down. Where did that come from? How did you negotiate that? Tell us more please. Yeah so this is Huntington Bank. I think they're regional bank but they're pretty big out here in Colorado. And so I mean I met with probably five or six SBA lenders when I originally thought I was going to go that trajectory. I really liked the guy that I was working with on this transaction. But then after I lost the deal because of SBA and because of asking for seller financing I just told him I was like look I'm going to try to put this alternative financing together so I can get these deals done. Like I'm sorry we can't work together but I really liked you. And he was like totally fine. He's like I get it. Just so you know if you want to go buy more territories we will finance 100% of the purchase once you are in the system. And you still got to meet some of our like debt coverage ratios they have to be viable businesses and yada yada yada. But for no money down we will finance all of your other purchases. Now I haven't done one yet. I'm going to hold their feet to the fire here in about 6 months and so we'll see. Um but yeah that's what I'm shooting for. And he said that they would do that for both acquisitions of existing Maid Brigade businesses and for white space new territories. And so what does that tell us? Does that tell us anything that we can extrapolate? Do SBA lenders in general just really like franchise system roll ups or franchise system development or just it's just a we you'd you'd be hesitant to to extrapolate. This is just what this guy does at Huntington. Yeah. I'm I'm meeting him for coffee next week so I'll keep grilling him on the details. Um but I think if nothing else for anybody that's listening it's a question to write down if you're interested in these types of existing franchise systems. I don't know if this is an SBA deal. I don't know if this is a Huntington deal. I don't know who is making up that 10%. Um that'll be all the stuff we'll find out next week. Well now and let now let's turn our attention to the fact that you bought a franchise. I don't think I heard that as one of your eight criteria that it be franchise or not be franchise. Interesting cuz that's always that's usually one of people's key key criteria and usually no franchises. I was very against it on the front side and then uh somebody kind of forced me in a friendly way to take a look at a new franchisor that's getting going called Rolling Suds. Sure. Um and they're like a power power washing business. And so I was like looking at the unit economics and I was like okay I kind of get this. I think both of my prior businesses they're the zero to one startup and it's a little bit of you know when you don't have a lot of knowledge it's easy to be blasé and arrogant about it. So I'm like you know I don't think I really need the franchise system. Why not own 100% of the whole thing? Um and so I think I was initially very against it until I started looking at some of these businesses and then starting to get in and look at some of the details on it. Um and honestly I really like it. I like the infrastructure. I like that there's all these other owners. I like that everybody shares their data. Like I've got my P&L uploaded into an online platform that Maid Brigade uses. I think benchmark myself against everybody. And so I can see like where am I spending too much? Where might I be spending too little? You know what do you want to do? Take it from a million to 2 million? All right we'll call the guy with 2 million. What do you want to do? Buy cars? We'll call the guy down the road that's got cars right? He'll tell you his insurance agent. So there's a a level of information sharing that I think is really really nice. And it is to some degree nice to have this sort of step-by-step playbook. And I actually just went last week to Maid Brigade training out in Memphis, Tennessee and it was a week and it was insane how much information they tried to impart on us while we were there. Um one of the other more sophisticated owners that was there when I was there was the former CEO of TGI Fridays. He was buying a Maid Brigade location down in Florida for his wife and he's currently a GP at a large private equity fund. And he's like I've been inside of a ton of franchise systems and he's like I'm very impressed with Maid Brigade. He's like I would consider this training and this process in the top quartile for franchise systems. And so there's a lot of places where I've gotten lucky so far with this business and I think that was one of them. Cuz I didn't really do a tremendous amount of due diligence on the franchisor, the health of the system the relationship because there are some franchise systems where the franchisees and the franchise or like hate each other and there's a tiny bit of animosity at points in Merry Maids but by and large I would say it's a pretty healthy corporate entity. And what of how mature is it? So and and just to plug Brian Beers who's been on the podcast a good year and a half ago now you probably know Brian the guy who has he and his brother have 30 odd Midas franchises franchise locations or excuse me maybe it's it's 30 million but I think they're probably a million per shop so yeah it's probably 30 35 locations yeah and the Philadelphia area and beyond and his whole thing is to roll up franchises and look for mature brands where a lot of the owners are going to be boomers. Midas is a decades old brand so perfect fit. How does Merry Maids fit against that exactly so Merry Maids is pretty mature. Right down the center of the fairway so Merry Maids was really the first national kind of corporate franchised cleaning business it goes back to the mid to late 70s and then the owner sold it in the 80s to ServiceMaster for it's like 10 million dollars or something which in the 80s is a massive amount of money and then it was run as part of the ServiceMaster business up until the early 2000s or 2010s and then it was sold to Roark Capital and Roark for anybody who doesn't know owns like half of the fast food franchises in this country and they've got I think eight different kind of home and business based franchised businesses of which Merry Maids is like one of the eight so all Roark does basically is run franchised businesses and so I think they have very good systems and processes in place. They've just brought over several of the leaders from Dunkin Donuts which Roark bought for I want to say it was like 11 billion about 18 months ago and they've now moved into Merry Maids and their focus right now as a system is to triple the size of Merry Maids over the next five years and so Roark's investing a bunch of money and I would say 60% of the owners are boomers with several that are in their 70s and they're all looking to start retiring and then cleaning as a whole which was very attractive to me is extremely fragmented and then as a result of that there's massive amounts of customer business that can be won and the labor pool is so challenging that there tends to be a lot of customer churn. It's not like I'm a point of sale system company which I dealt with a lot in restaurants where it's like well we've worked with these guys for 20 years we're just going to keep working with them right like you know the average life cycle of a customer with a cleaning company is like two to four years and then they're coming up and they're unhappy for one reason or another and they're looking for somebody else so business is fragmented customers are fragmented I would consider a fairly healthy franchisor entity and I think that's a really nice recipe for rolling up businesses. Well this point about the abbreviated life cycle of your average customer although two to four years is is is a lot longer than one-off project based business let's say but it does say I've got customers that go back to the 90s right so it's not across the board so I do have customers that have been with this specific territory for 30 years. Okay all right but you are painting a picture of basically dealing with fickle consumers consumers who we who we all are in our private lives when we're not business people and and so you feel like by applying best practices that actually is an opportunity not a threat. Oh my God there's so much opportunity so I secret shopped the Merry Maids where I live when I was looking to buy this business the entire process from my initial outreach to like finalizing the payment and concluding the transaction was a week at one point they're like interviewing me on the phone to learn about my house and then I don't hear from them for four hours and then I get an email with an attachment that's a picture of a carbon copy receipt so somebody like wrote down all the notes when we're talking they're like I don't know it's like 400 bucks and they circle that take a picture of it and then email it to me like it's very very antiquated today was actually the first day but I just joined the IT council for Merry Maids specifically so from a big picture perspective I can start to help move some of these technology initiatives forward so I would say you know problems from a brand perspective they have no mobile app no website no really commerce presence it's still a very old very analog business I mean when I came in here 90% of the operations of this business was run on paper. We're probably down to 5% and we're going back and we're shredding 30 years worth of data like don't know that we need that customer's credit card info you know stuck in this filing cabinet and so there's just there's a lot of opportunity to bring AI in certain places software in a lot of places I'm using virtual assistants where I can't get software to try to automate and sort of speed up the process of running these businesses and professionalizing the company. Well let's let's hear about a few of those specifically Rob because we we talk about that as a we often just kind of gloss over that putting in tech improving the processes what are two or three hard examples that you can give us of of stuff you've done in the business to make it so much more tech forward so quickly. Not 100% tech but one is call center so system wide Merry Maids averages about 14 to 15% of leads are converted. When I started and I was taking customer calls and I was working on quotes I would average about 21% but I've now brought on a call center company which was one of your prior guests Garth at Top Dog and when a customer picks the phone up they have a 40% conversion rate and so those are opportunities where you don't need to buy more leads but if you're converting three times more customers than the system average like you're going to grow like without a doubt and so I think that's one of the key things and even here where I'm like in the day-to-day of the business it's hard to take leads cuz I might have an employee walk in I could have another customer that's called me I might need to be out doing something and and I in general just don't want this business to need me and so if I have to be here to take calls then I have to be here and that's not what I'm looking for in this type of a dynamic and so I'm automating and I'm outsourcing that corporate has just started to test their own internal call center and the they're running about a 20% conversion rate so for your average rank and file Merry Maids employee that's still a substantial improvement from when they're doing it themselves but I I think it can be a lot better and when I look at the franchised home services businesses that I want to emulate most of them are private equity backed and one of the things is that when you call them they pick up right away or if you submit a lead somebody's calling you within like 60 seconds like that is modern home services right and in some of these situations with Merry Maids it can take hours for somebody to get back to you and talk to you and it's like the CEO of HomeAdvisor which is now Angie's they say that if it takes you more than 16 minutes to follow up with a customer your chances of closing that customer go down by 80% so speed to lead is super super important and so getting that call center automation I think was really helpful. One of the other things we started looking at and I will say this was not successful was starting to build e-commerce where you shouldn't have to call and even talk to a human like if you're a millennial and you just want to get online and you want to type in the data for your house and you want to get a quote do it you know you should be able to get a quote in five seconds you shouldn't need to wait an hour for somebody to call you back and then take you through a 15 minute questionnaire I built a prototype of that within 30 days of starting but we use Salesforce as our back-end infrastructure and it's an old instance of Salesforce and it just has no real modern API infrastructure and the way that we price is also a little convoluted so we didn't find the conversion rate to be as good by giving the automated quotes and so now we're just going really heavy into the call center and just trying to get back to people within 60 seconds of them submitting a lead and trying to pick up every single time that they call so those are two examples. Okay it's great thank you. What else did you do take us now a little bit post transaction and what has the transition been like so two months into the business how's it going? I mean you've tell us about really well yeah I mean I just completed training so that's always good right it gives you a ton of energy and vigor and and motivation so I think that's really good I'm probably averaging about four hours of working in the business and I'm constantly with my other four hours focused on how to get that down as much as possible and so I would say that at this point I have 80% of the day-to-day operations of the business off onto my office manager and my like lead house cleaner are basically handling the bulk of the work and now I'm building up a VA and the goal of building up the VA is I can take work off of the office manager's plate and I can have the office manager start to focus on retention and so that's the next critical thing is like we need to hire better we need to train better and we need to do better quality for customers and we need to do better follow-up and so that's all the stuff I'm going to be working on over the next 60 days cuz right now we have very high turnover and so then it doesn't matter how much money you spend on PPC or how many leads you convert if you're losing the vast majority of those customers you're not really moving your business forward so I did a lot of work on inbound leads which are going great and call center which is going really well and now I need to turn my attention to focusing on retention and providing a best better customer experience and then I'm actively starting to network with all of the other Merry Maids owners around the Denver metro area especially if I can get the 100% financing letter in place then I want to be there like go-to that if hey hey, you're late 60s, 70s, you're burned out, you have a tough day, I'm like there's that like LOI sitting on my desk from Rob. Let me give him a call and see what the opportunity is there. The turnover that you're experiencing with experiencing with customers, that's because that's the nature of the business or because the quality of your of the business's service left something to be desired. I think it's both and but quality is definitely an issue and I can own that. I don't come from a cleaning background. I don't have all the knowledge. I inherited a lot of systems from the prior owner who this is a super random tangent. His name was Brian Peterson. His dad Dallen actually founded Merry Maids. When he was like yeah, my dad started it. I was like oh, you mean this location? And he's like nope, he started the entire business in the 70s and sold it to He was the $10 million exit guy. Yeah, yeah in the 80s. In the 80s, yeah. And Brian was his last son that was still running a Merry Maids location. So, you know, there's a lot of really good things that Brian was doing but there were a lot of probably not best practices as well and I inherited a lot of those and I think some of those were leading to turnover. You know, last year turnover was close to 200% for labor and I think there's a direct correlation between labor turnover and customer turnover. Because if you're a customer and you're inviting somebody into your house, your private space and every single time it's a new face and they don't know your intricacies and they don't know how you like your couch vacuumed, right? I think personally that that leads to a lot of turnover and so if you can find good people and you can retain them and they do a good job for the customer, you should extend that timeline and that LTV of the customer and so starting Monday when I got back from training, I'm now super focused on that. One of the first things that we're doing we used to invite people in for a working interview and then we would just send them in the field and kind of sink or swim. How did they do, right? How did the team captain say that they did and then okay, we decide if we bring them back or not. You know, now we're going to you know, take the jump. We're going to invest in them. We're going to keep them back in the office for several days. We're going to do a bunch of training with them and we're going to try to send them out into the field significantly more equipped than what they were previously. You just run the risk that they go out and do it for a day or two and they're like well, this is really hard or this sucks or it hurts my ego and they bail and you've invested already a bunch of money into them on the front side. So it's I think for me, it's more conversations from a labor standpoint. It's being a lot more choosy about who we bring in and then it's significantly better training, better support, you know, better guidance when they're in the field. Mhm. And but would you say that it is characteristically a bit of a high turnover labor pool? So it's when Oh, absolutely. Yeah and that's just because I guess the doesn't take any I mean to to the extent that you can train them all the better but it doesn't take any schooling or certification or anything. Uh and so it's a kind of people I imagine it's a very fluid workforce. It's a very fluid workforce. Yeah, okay. And it's different, you know, coming from Valiance and the company before that, you know, I'd average 5% turnover per year and now like system wide, the average is like 100% turnover per year. So, I will also say right here, any business you buy, my own personal opinion, it will have a problem. It will have a red flag and I think a lot of people that can lead to the delays in what they buy cuz they're like I don't like that red flag or I don't like that red flag. I think you've got to pick which red flag you want to deal with cuz very few businesses are perfect, right? And I think labor is a challenge to this business and I knew that going in and part of what I wanted to do when I left the AI company is like I'm tired of solving the same problem over and over again for 7 years. There's always problems as an entrepreneur so like give me a new problem to solve. So, labor is now my new problem that I get to solve. Well, I love your pick your poison point because it is so often I think people come into this space looking for no red flag as opposed to looking for the type of problem that attracts you. Um because if you can find your briar patch, uh then it it can be that's really what you want because there's going to be there's going to be no business that is easy or perfect or problem-less otherwise it wouldn't be on the market probably. Yeah and I mean I have deep discussions with all my friends that are entrepreneurs and nobody ever says oh, it's perfect. Everything's great. I've never had a problem. Yeah. And if they do, it's like you're lying and you're not being up front. Like what's really going on? And when you get a truly transparent and significant amount of time with other entrepreneurs like it all you do as an entrepreneur is solve problems. It's all you do. And so every business has problems. You just pick which problem you want to work on. Yeah, yeah. It's it's such a good way to see things. Let's hear a little bit about the cash cycle which you were such a fan of. You have now been in businesses where working capital was a big problem. I guess in your agency business or in your development shop business and now working capital's not a problem at all. So, it's a topic that comes up again and again on this podcast. It's seemingly easy to understand but it's one of these where you only really understand it when you experience it. So, tell us what you can about how magical it feels to have a negative cash cycle. Yeah, indeed. I'll go back just a little bit too to provide perspective cuz again, everybody's perspective is their own and things I talk about, people might feel totally different. It's just my perspective, my data point. What I I'll just it's the negatives what I hated about the agency is that it's all project based. So, there's no recurring revenue. You know, so if you don't close customers, suddenly you got a bunch of labor and staff and you don't have money coming in to service those customers and then generally and I know some people do it better, we didn't do it great but we'd get paid, you know, a third to half up front, a third along the way and third to half at the end of it but when you're doing custom work, there's almost always misunderstandings and I mean we'd get to the point where we'd have like 60, 70 page detailed wireframe documents of what we were going to build and we would still have arguments with the customer and it's the customer would be like well, it just makes sense to have X feature and we're like I get that but we didn't estimate it and we didn't put it into our budget for you. We can't do that and then you end up in these really conflict based systems. So, for me when I was looking at this business, kind of my third main act from a business standpoint, I was like I don't want any project based work. I do not want to be arguing with people about budgets and stuff like that and we had three to five customers at a time. So, I also really dislike that element of it as well. With the cleaning company, I've got 200, right? So, I don't have any customer concentration issues really and it gives you in my opinion a lot more leverage around negotiation and pricing versus oh, I've only got three customers. I've got bandwidth for five. I really need to get that fourth and fifth customer in the door so we can make payroll so I'm going to offer better deals. I didn't like any of that. I also and I I have this in the residential cleaning company. I really don't like dealing necessarily with individuals. Everybody is always a lot more stressed out when it's their personal money cuz we worked with a lot of entrepreneurs in that custom software company and so in a lot of situations, they were taking out 401Ks. They were taking cash out of their checking account. They were so much more intense about it versus when we started to work more with customers, it's just somebody's job. Like it's just a job. It's not even their money. It's the company's money. Like the stress level working with an individual on custom projects versus a business on custom projects was like 50% lower and so I've always to this day just sort of liked commercial customers more because of that and then a lot of that carried through with the AI company where you're dealing with these huge corporations. They can be slow which was a challenge and we had massive customer concentration. We might have only had one to three customers at any given time. So, there was so much pressure to make every single one customer work and not leave which was very, very stressful. Getting to your question, what's glorious about this business is that we charge customers day of. So, if it's a $400 deep clean of their house, the team heads out at 8:30 and by 8:45, my office manager is going through and charging everybody. So, we're collecting all money for that day, you know, within an hour of the day starting and then we don't pay people until a week later and as we all know, labor's one of our big So, then you go all the way to Friday and then that starts the the week period and then you pay them a week from then. And so you collect all the money and then you don't pay anybody for one to two weeks later. So, you basically you don't really need working capital unless you're going to be making investments to grow the business. So, anytime you can just bill people which is more residential than commercial but you can bill them the morning of that you're doing all the work is amazing and it's all agreed to up front so there's no negotiation around pricing and things like that. We don't discount it if we're out earlier and we don't charge more if it took a little bit longer. It's just that's what the price is. We've already charged you. We'll be back in two weeks. And so I really, really like that element. A lot of businesses, especially when you have commercial customers, you know, you could be net 30, net 60. I have a friend that works with the government that can be net 120, right? So, you've now outlayed massive amounts of cost of goods sold and labor and things like that and then you're not going to get paid for one to four months later, right? And so then your working capital needs are massive and you've had guests that are like I love that. So, this is my perspective. Everybody do their own thing. I love getting paid well in advance of having to make any payments to anybody else. That was fantastic, Rob. Pretty pretty convincing as well. Okay. All right, I want to start wrapping up but and I want to kind of zoom back out but just one more in the weeds question about your current business and your plans for it. I don't think did you tell us what the revenue of your of your three territories are? Your the total revenue? Uh it's it's a it's a million. A million bucks. Okay, so this is a 20% 20% net margin business. Um where do you think that you can get it in another two or three years? Of course, so much of that is contingent on how many other territories you can acquire but what's your what's your spreadsheet say? Um I mean I think within 12 months I could grow 50% if I can get the retention stuff dialed in and I've got a couple months to get that figured out, but that's my goal is to grow organically and be at Yep, organically to be at 300,000 in EBITDA instead of 200,000 on a 12-month look forward. I think I could probably get this one to 2 million in top line versus 1.5 million in top line which is the 50% growth, but that's probably getting close to the top. So maybe I could get this territory to 400,000 in EBITDA, but I think 300 is a well-run business and 400 is I'm a rockstar within the system. And then from there it's buying the other territories. And I get the sense that a lot of the other territories are doing about the same. About a million, about 200,000 in EBITDA. And so in my model right now I'm just looking at growing this one by 50% and then just tacking on other $200,000 business locations. Um obviously long-term the goal will be to grow all of them cuz the more total dollar figures I have the better the multiples are at exit. Mhm. Sure. Well, as I think about a lot of what you just said about the lack of working capital needs, the very low CapEx here and the deal that you have that's the handshake deal nothing set in stone yet with your lender. You know, it really seems like you could acquire you could acquire really quickly because you're in a franchise system. So there's very little to no integration that needs to happen everybody's already on the same systems. Um all you really need to scale up is kind of your recruiting function. Although I guess every territory there might be quality improvements that need to be made like actual service delivery just like you're experiencing here and so that there would then require that would require a training regimen and standing up a training program. So not to not to minimize it but there's this is such a light business, an asset light business and it's so systematized and the cash cycle is so favorable and it's inner franchise. I mean it just it feels like one where you could you could start knocking down some Dominos pretty quickly. Okay Will, you've convinced me. But am I am I is that not Rosie? You you're feeling the same. No, I would agree with you. Yep, I feel totally the same. I think you can have office managers in each one of the individual territories that you own and then you can start to split costs whether it's a trainer or QA person or a virtual assistant, you know, and you can spread those costs out over multiple locations. Plus at 200,000 in EBITDA it's not a lot compared to a lot of businesses we've talked about, right? So you tack on debt and you tack on my salary, not a ton that's left over to invest in the business, but you go buy another $200,000 business, 200,000 EBITDA business and you've got 40 to 50,000 let's say in debt. Well, that 150 to 160 now accrues to the bottom line, right? And so I think that this is a system that once you get going the momentum will start to carry you forward from that perspective. And you know, there's one side which is just take all the debt and get the lower multiple and there's another side which is go to these owners and say, "Hey, let me take over running your business. I'm going to automate a lot of stuff. We're going to professionalize everything. We're going to standardize everything. Come along for the ride and in 3 to 5 years join me in this, you know, exit multiple whether it's a recap or a sale." Come along for the ride meaning what? They retain a chunk of the equity. Yeah, roll a bunch of their equity in. What is your incentive in doing that? Why wouldn't you want to just say, "Thank you, sir or madam, but I'll take over from here." We don't have to go and talk to my wife about taking on a bunch more debt. Yeah. Well, I wanted to ask that. How's she feeling about this about this adventure? A couple of times you've said she needed some arm twisting. Uh she's feeling good about it now after I was home for four or five months. She's like, "Dear God, get out of the house." She's like, "Go do something." She's like, "You need a toy to go play with. Go entertain yourself." So she's happy and again stress levels down like 90%. The the home life is is massively better not only because my stress is down, but she's actually been off of her cancer meds since last fall and she's still going strong. So Oh, great. like, "If it's another like year we can call it a recession remission and if it's another year or 2 years after that we could call it potentially a cure." And it gives me goosebumps every time, but the medicine she's on was approved by the FDA 30 days before she was diagnosed. So it's just crazy and anybody that's touched by, you know, cancer the only thing I would share real quick is that cancer today is not what cancer was 10 years ago and it's absolutely not what it was 30 years ago. It's amazing how far they're coming with some of these medications that they have and maybe it's not an outright cure, but it's it's almost like the HIV drugs when they came out they extended everybody's life so long that it bought time for more and better drugs to come out. Yeah. And I think that's what we're starting to see right now. Well, the pattern that she that you just described in her case that where she was just within 30 days of she should kind of just reached where this drug was released and she could take advantage of it. It's what we hear about this phenomenon of of longevity that eventually somebody's going to be born pretty soon we think or futurists think that is never going to die because because they're going to they're going to be Is that Does Ray Kurzweil talk about this? Yeah, I know he's the futurist guy. Yeah. Where if they can if you can just get to the other side of when some drug or some development in health is released that extends you long enough to buy you enough time to then be alive for the next one. level. It kind of perpetuates itself and then you've got escape velocity in your life forever. So my I'm a total like sci-fi nerd and so I don't know that we can get our bodies to do that, but I think what we would be looking at is some ability to upload our consciousness cuz if you really think about it your brain, right? What makes you you, your personality and everything else, it's just little neurons that are firing back and forth and some some people think it's other things. I'm just saying from a purely scientific perspective and so it's like could you map those 80 billion neural connections and recreate that in another environment? So that's how I think I could see people living forever. Sure. Yep. Um well, good segway to my last few questions which is which is circling back to the top now and tying this all back up to your experience in a high-flying AI startup. Two questions. First on the My First Million podcast Sean Puri will talk about startup business as kind of the Olympics of business. You know, at the highest levels, the highest stakes, the most competitive. Um and business doesn't have to be that. You can, you know, you can compete at frankly an easier level and still have a wonderful life and wonderful outcomes and get wealthy and be a self-employed entrepreneur etc. etc. etc. So coming from the the the the Olympics business Olympics as you as you did is it Do you find that basically this is easier? I mean are is this kind of the phrase that we we kicked around on the pre-call? Is this you bringing a gun to a knife fight because it's it's just the business is easier. You're you're not building cutting-edge technology. Cut the competition probably isn't as stiff or as ambitious. The many different facets of of the business here being different than what they were in a high-flying startup. I I mean it's massive. It's night and day. It's it's hard to quantify. I've met a lot of really really wonderful Merry Maids owners. The vast majority of them are individuals that have worked in the business for 10 or 20 years and the owner has retired and the manager is basically like, "Oh, I might be out of a job if you sell or shut this company down, so I'll take an SBA loan to buy it." But they don't have any real professional business experience in terms of running the overall organization and they they generally by and large what I've noticed is probably don't have traditional education. Um and so it it very much is a different situation coming from, you know, 15 years of experience of running companies and a master's degree and all that kind of stuff, but I don't know. It's dicey. I get too far down this path and then it's just arrogant. So all I'll say is like I feel well-equipped to be successful in this space. Yeah, but I and I and I do just want to explore this for a minute because one of the things that you often hear one of the cliches about businesses down here is small businesses are small for a reason and it's not that the owners are incapable. It's just a lot harder than it looks. Um and the scalability for one thing, you know, when you're dealing with humans like there's just kind of there's there's there's just the the friction there is just you can't outsmart that in some ways. But it doesn't You you feel like maybe it really these businesses don't have to be that it's not their fate to be small forever that with the right appetite and the right whatever critical thinking or, you know, more sophisticated business skills that you bring from from an AI startup down here that indeed these don't have these aren't these aren't destined to be small businesses. No, I agree with you completely. I think these things can absolutely be scaled. I think, you know, I'm guilty and I think other people are guilty of it's easy to look at a business from the outside and be like, "Oh, what are they doing? That's crazy. They don't know what they're doing." And you get in and you're like, "Oh, wow, they're actually pretty sophisticated, right?" You know, in usually in terms of that the operations of the business there's there hasn't been quite as much sophistication around well, we've done it this way for 20 years. So I think we just have to keep doing it this way. So there is significant benefit for your listeners for myself included that you come into these businesses with a fresh set of eyes and it's like, "Why are we printing all of this stuff? This doesn't make sense." Like you know, you got to be careful you don't change too much too fast, but I have found by and large most of that stuff is like well, we've just done it this way for 30 years, right? Like I mean I had to throw out like fax machines, desktop computers from the late '90s, right? Like there was just so much physical, digital, paper you know, legacy that was going on that it just needed to be cleaned out and things needed to be looked at from a different perspective. There's also just some fundamental things where like most people in this business, whatever is left over from a profitability standpoint goes to them. They work really hard and so they have a hard hard time saying like, well, the franchise wants me to spend 5% on marketing. So I'm going to spend 2%. So it's more money that comes to me. And I'm coming in and saying I'm going to spend 10%, you know, like I'm going to just dump a ton of money into this thing and try to like get, you know, get escape velocity from some perspective. You know, depending on how localized you are, I think you start to run up into some type of infrastructure constraints and then I think you need to start looking at buying other territories, opening up new locations, things like that. Within any demographic market, at some point you're either saturated or there's only a certain number of people, in my case, every month that are looking for cleaning services, right? So there there I think there are some of those natural limiters on it, but there are ways to grow asymmetrically. Right. Right. Namely, acquisition. Correct. Yeah. Okay. Um Or or you could expand into other, you know, verticals and things like that. You could buy a commercial cleaning company or you could buy a window cleaning company, right? There's bolt-on things. There's other ways to grow. And then the last question tying back to your previous experience, Rob, the how do you feel about just the intellectual stimulation? So before you were working on cutting-edge technology and deploying cutting-edge technology into a use case that could really be transformative in a way that was really visible to consumers. I mean, those of us who eat fast food, raising my hand, we we experience the drive-thru and and that could you could really be you know, bringing a a a large change to society. Um there's excitement to that and this is not that. How does that feel? Right now I just feel liberated. I feel that feeling of my wife just wants me out of the house. She's like, go do your thing. I have no board to respond to. I have no crazy cash cycle working capital crunch issues. I get to play with different projects, you know, call center took 30 days to get stand up and get humming along, right? So some of these things can be done pretty quickly versus like AI, it's a multi-year, multi-decade process. So it's really fun to have like an idea, implement it and be like, that's great. Let's scale it or like, yeah, that sucked. Let's let's take that down and let's try something else, right? I think that especially there was a lot just to learn the business, the lead-up to training, during training, now coming back with a massive amount of additional things that I want to tackle. I'll be busy for the next few months and then I think I'll have it pretty optimized and automated where it can be and VAs where it can't. And then from there forward, I think then my focus moves towards the acquisitions and growing from that perspective. And so I think those things will keep me interested. If the ability of the holdco wasn't on the table, additional acquisitions for whatever reason weren't on the table, then I think there would be a real risk that in another 6 months it'd be like, all right, I'm starting to get kind of kind of bored with this process. So I don't know. Have me back in a year. We'll see what's going on at that point. Yeah. Indeed. Rob, anything that we didn't get to that you wanted to share with the audience? Um I mean, again, the reason I reached out is just it's one data point. You don't have to do it, but if you want to, you know, from kickoff to under contract, it took me 6 weeks and from, you know, contract to close, it took me 6 weeks. So it was 90 days end to end from starting my search to owning a business. So it is one perspective. You can go fast if you want to. Uh and look for businesses with a with negative cash cycles cuz it's awesome. Great. Great great pair of takeaways for the episode. Rob, if people want to reach out, how can they do that? Uh email rob@frostrivercapitals.com or LinkedIn. Although now that I'm post my big AI tech startup, I don't spend as much time there. So feel free to feel free to email me. I'm an absolute entrepreneurship nerd, so I love talking to people about this kind of stuff. At least half a dozen of your prior guests have taken my calls and chatted with me and given me advice. So I think it's a really cool community that you're building. And last thing is just thanks for doing this. This is super super It was for me super valuable. I think a lot of other people find value in it. So thanks for being here and thanks for helping the community. Well, I appreciate that, Rob. Really nice of you to say. Uh wonderful point to end on. Rob Carpenter, thanks a lot for coming on. 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.