John ikalowicz thank you for coming on acquiring minds thanks will really appreciate it John thank you especially because your story of acquisition is a difficult one you ultimately wound down the business that you bought stories like yours are hard to come by and not because they don't exist but because they take a lot of vulnerability to tell especially publicly but let me tell you that they are very appreciated by the audience in my experience from stories like this that I have aired so much of the standard content on this podcast and elsewhere focuses on the positive Stories the happy outcomes but there is as you well know tons of risk in buying a small business so there are of course plenty of instances where things don't work out um and often more to be learned from those instances than than the happy ones so John with that said let's get right into your story how about a little background on on you to start us off please great for sure uh swell Jana kalowicz I have been in business for over 20 years uh the preponderance of my career was in Commercial Banking and while I was a commercial Banker um my last student in banking I organized the series of vertically integrated CEO Roundtable groups and had the opportunity to sit with a number of CEOs uh during the formation of those groups and through that experience I really caught the the bug to go out and do what my clients did which was to be an entrepreneur and to run a business and concurrent with that in my banking career I financed a couple search funders for the acquisition of their businesses and that opened up a light bulb in terms of you know I should go do this myself so I it was very self-aware of the limitations of my type of personality and figured that I had always been in a sales role and needed someone needed a kind of employ more of a team approach to purchase a business and I found a business partner through my network that had a complimentary skill set sprung operations background and had scaled and built uh divisions of large corporations and on paper it seemed like a great fit so we after some initial courtship and getting to know each other we spent time with personality tests and went through that process to make sure that we could work well together and after a couple of months we decided let's try to find a business in Earnest so I embarked on that journey and was just kind of using my network to find proprietary deal flow and reaching out to intermediarities that were representing up business owners and we looked at about 18 different companies and finally found one in the automotive hail repair space and the market was still pretty frothy at that point and you know we hadn't seen deals north of seven figures of ebitda that were trading under four times so when we found this opportunity it was attractive in terms of the the value and the ability to self-finance the deal with our money a modicum investor Bond and then an SBA loan and you know we were able to acquire a meaningful part of the business let me stop you right there and just dive into a little bit of this this this pre-acquisition piece with your partner how well I understand that you did the personality test to kind of deepen your your to understand how complementary or not you guys would be but just kind of how well would you characterize that you knew him well we had it was a quick courtship in terms of deciding to become Partners it we had known each other for a couple months and had mutual um acquaintances and you know were able to kind of do validation on each other in terms of our backgrounds uh to figure out if we'd be a good fit to work together or not okay so you didn't know each other too well um and validating the other from that person's Network and then some of these psychology tests um filled in the gaps and when you said knowing your personality that you wanted to do this with a partner can you elaborate on that I was a quintessential connector relationship Builder sales person uh looking at the you know I'm a big fan of EOS or traction entrepreneurial operating system and in the org chart for Eos at the ownership level uh usually most people are Visionaries and you know people that are more on the horizon looking at what's next focusing on sales or Business Development have some deficiencies when it comes to operational execution so I intentionally looked for someone that had more of the integrator you know get stuff done you know keep to standard operating procedures and systemization because I knew that that wasn't a strong set of my personality great okay okay and so then you said the nature of your search was proprietary and reaching out to to intermediaries I assume you were leaning on your existing Network you probably already knew intermediaries and brokers in your geography and by the way tell us where this is all happening yeah so I am based out of Denver Colorado and had spent a number of years um in the business community so I had a pretty strong Network you know which definitely was an advantage um as I talked with people that are searching you know a lot of times people pick a city and then start to do a search I had the benefit of having a pretty robust Network to get deal flow great now and so take us back to this this particular Target you liked because it had a favorable multiple what were some of the numbers behind it again so uh just around two of Evita and we were buying it for under four turns which you know usually at that time when we were searching you couldn't really find anything with those metrics that were um you know south of six turns so um you know it was something that you know we didn't want to quote-unquote buy a job or have a huge you know waterfall on the deal so the opportunity to find something with uh you know metrics who's appealing on paper um but you know we knew that you know there were there was not recurring Revenue there was some risk uh due to the fact that we were buying a weather related business and uh you know we had plans in place to mitigate you know some of those issues but uh as I kind of dive into the story well you know it'll become clear of um you know what happened along the way that kind of disrupted some of the uh initial underwriting points that my business partner and I had looked at as well as uh you know our investor pool which were seasoned you know entrepreneurs and you know people that had bought and sold businesses and you know it was something that we had analyzed the risk but um you know as I dive into the story we'll kind of talk about what happened more great and when you say you wanted to avoid too much waterfall in the deal can you tell people what you mean by that sure I mean if you know if you have to rely more on and you've got your Capital versus your own Capital um the you know there is a way for a Searcher or the acquirer to be made whole you know provided that um you know upon exit that you know certain metrics are hit that would skew in the favor of the operator of the business to achieve certain outcomes um but you know when we're looking at opportunities our preference was to find something where you know our own investment paired with leverage would give us a substantial portion of the equity in the company rights in the get-go versus relying upon a private Equity Firm to back you and then you know on the outcome could give a disproportionate share of results to the operator but we just didn't want to get into that scenario and did you private Equity investors or not did you intend to grow and then exit the business uh or hold indefinitely Or you were open to both options depending on how the whole story unfolded the the plan at the acquisition was to grow the footprint of the business open multiple offices and then you know look for some type of sale to whether it be a private Equity Firm um or a strategic okay great so okay John so tell us tell us you found this business it's called it was called halko hail Co like as in hail from that falls from the sky haleco correct yep and give us a little bit more about the business you've told us um Financial numbers but size of employees Age Management layer Etc give us give us a shape of of hellco yeah so the company was you know about five years old when we had purchased it and it had a um yeah it took what was a very transient um storm chasing type of business where um you know hail would come into an area and then a bunch of uh technicians that you know paintless debt repair technicians would come into a market and they would set up shop and you know you see the scenarios like Texas and Oklahoma where uh when historic rolls through you know a bunch of people come throughout the country and the unique nature of this business was uh they set up you know a series of sales people that could go out and address on a local basis you know the need for people that um you know uh that that incurred hail damage so the um the company would be very into a door knocking company where we would go out send sales people out into you know shopping centers or public areas and talk to people that had hail damage so it was very much kind of guerrilla marketing and very much reliant on a intensive uh sales discipline to you know manage people get them out in the field and to you know ultimately bring in the revenue you know customer by customer wow so let me let let me um just dive into this a little bit so you've you've kind of already said so but just for people from the coasts or who might not be familiar with uh the kind of Colorado and north and south of that region hail storms are a thing it means cars get damaged uh with some regularity it means roofs get damaged with some regularity anybody who's lived in Denver knows that the roofing industry is a is a very big and competitive one there because there's always hail storms that are causing roof damage and so what a typical what might typically happen or who you might be competitors with are kind of more transient uh repair you know Mom and Pops or independent guys hanging a shingle from their pickup truck who who go around town when they're after there's a hail storm trying to get business you guys were a fixed presence a branded presence in town um but so that was one competitive differentiator and but the way that you got business was probably similar to the to your competitors where so as you said you you deployed your sales team into the parking lots of shopping centers looking for cars that had hail damage and then kind of trying to talk the driver into to taking taking their car down to hellco that is correct and you know one distinction would be is that the business model relied upon um weighting the potential customers deductible and then offering them a free rental car and it was an Arbitrage model where you know we would get um a certain amount from the insurance adjuster for the damage in the car and then we would use part of those proceeds to subsidize the deductible and then then to offer you know a free rental car and you know usually if you called Safeco or one of the insurance carriers and you went to one of their Auto Body Shop Network providers that opportunity does not exist in What's called the direct repair provider or DRP model where um you'd go through your insurance so our job was to kind of educate the consumer that there would be another option to procure a rental car if you didn't have that coverage plus a deductible waiver mm-hmm and you as somebody who has who've worked in sales and a classic kind of relationship Builder this kind of gorilla sales guerrilla marketing you know hand-to-hand combat in the parking lots of shopping centers did this excite you did this how did how did you see this as a seasoned sale salesperson eight it's like the ultimate test getting out there and you know especially when um you know when I get into a little bit more of the story when things started going sideways um I had to get out uh with our teams and go sell you know it was kind of all hands on deck I uh I brought my teenage Sons you know out with me and I wanted them to see um you know how you know how hard it is to make a living and I think part of that is if you're running a small business um no job can be um you know beneath you and there has to be a sense of like that's not my area everything's your area everything's a responsibility you know both the good and the bad um and especially when we were kind of re-pivoting the business it became important to you know lead um by example and you know get out with the team so um you know that was uh it was quite an experience yeah I bet and and were you relying at all on Google ads I mean is this something where you get online leads yeah so um systematic kind of SEO um Facebook marketing uh click funnels we employed a lot of different methods we had affiliate programs uh with different dealerships and then um primarily um you know what I also stood up in the business along with um you know some key people that I brought from my banking career is we set up a B2B Division and you know we uh we're trying to Pivot the business to get accounts like the state of Colorado and large uh fleets of vehicles so that if something happened uh you know we would either go to for um for the remediation and of their hail damage so you know the business had a core kind of b2c focus but from my background uh which was primarily in B2B sales um I wanted something where you know I could use some of those skill sets and um you know we we put a lot of effort into growing kind of the corporate account side as well okay and how many how large was the business in terms of people it would Flex up and down but um and the the off season it would it would range about uh 30 to 40 people and it could get upwards of um you know upwards of 70 people in the height of hail season okay and what was there anything else to say that that you you liked about it other than the the great multiple uh and ebitda I think there was an element of um you know just hearing some of the stories of the sales people that had come from um disadvantaged backgrounds and you know a lot of people this was the first time that they made six figures and you know had a compass in their life and that was very appealing and you know in terms of being able to work with people that you know maybe didn't have the white collar or um more privileged opportunities that I had in my life and you know this was a way that you know you could fulfill the American dream and you know that is something that I I did um even to this day appreciated out of this business is that um you know certain people took those opportunities and it created a great Foundation uh to go on and become entrepreneurs or to enter into different types of sales but this this was such a great sales boot camp and you know I really wanted to kind of serve people and and invest into people that were trying to grow and uh better themselves but you know that was very appealing uh you know upon underwriting the business well as we will find out that's also one of the areas where it turned out to not be not to be particularly challenged okay so is that do you want to talk about the transaction at all is there anything um unusual or relevant there do you want to kind of just jump right into to day one yeah so I think what we'll do is I'd like to kind of tell the story of what happened because of the you know that'll give context to uh The Listener base and then from there uh let's Circle back to the transaction and I'd like to cover some of the underwriting points or the reflections that I had when I'm kind of going through the tail of the tape you know of you know what I would have done differently great so um yeah so let's just jump in uh so we acquired the business in August of 2018 and the specific date was important because the uh Hill season in Colorado would typically go from uh you know may june-ish up until September so it's a very concentrated period where you're going to get most of the revenue so in effect we bought at the end of a hail season and knew that we needed to um you know run the business kind of tighten the belt and get into you know the next selling season the following May so uh when we structured the deal we set up an earn out with the with the prior owner that was that was tied to a seller note where they had to deliver a certain amount of sales so that we would have the cash reserves to um you know get into the next Hill season and we um you know the they they were actually able to make that earn out but in the process of um you know going through the earn out um we had kind of two sales general managers at that point and um when we got into January so at the you know the the height of the uh the off season of the business um you know one of the sales managers went and started their own company so this was a little bit of a surprise to us and we had a run on our you know on half the the employee base of the company um you know if they were going to stay with us or move on to the other company and it split pretty much 50 50. so so during that process we just kind of rolled with the punches at that point and said you know what you know we can't kind of unring that Bell but you know we do have to kind of Staff up so you know we put a lot of effort into recruiting and getting uh you know the core people that uh stay you know more responsibility and you know more uh you know leadership roles in the organization and um you know but it was a slog you know we ended up uh eating through you know my my partner and I took very little pay during that period and you you know it was kind of that first dose of uh that entrepreneurial Journey where you know if you don't have the cash flow you don't have a paycheck so uh that was like the first dose of reality that you know things don't always go the way it looks in a spreadsheet so we just had to kind of tighten the belts and do what we needed to do and um yeah we got through those months and you know we're gradually getting the support of the team and in uh may you know we had a massive hail storm so may of 2019 and uh the company uh was Off to the Races and my partner and I said you know what uh let's just put all this behind you know behind us and let's just go and um we're in hail season we finally got there and uh you know June was a record month for the company with uh with that hail storm so um you know we had you know brought in over 300 cars and the average ticket on those was about you know five thousand dollars a car and um you know it was amazing so and you know we had good energy in the sales force um and then uh we had a follow-up hail storm on July 5th and I will never forget that date uh but that hail storm happened to hit our production facility with over 250 cars in the lot uh which caused a major um disruption of the business as we had 50 cars that were completely finished that we had to redo we had to shut down the operations take inventory of you know what happened in the incremental damage and at that point I made a phone call to our insurance agent and he said yep you don't have any coverage for that and at that point we were truly in the emergency room and you didn't have time to process things so we just said all right we're just going to have to you know repair these cars for free and eat the rental car costs and just see if we can kind of climb our way out of that but with the um you know incremental operational issues we faced from you know having you know our whole um you know inventory of cars damaged um it sent kind of our production time some 20 you know 20 days of uh you know to return a car to a client to 60 days and that effectively kind of eviscerated all the profit in the company and you know at that point we were faced with a tough decision do we just wind out the business or do we try to make a go of this and kind of fight and get into the next year so at that point speaking very candidly um you know my business is part you know my business partner and I you know it was a tough period you know we have a great relationship today but um he would agree that um you know we we went through a lot of stress and you know it was just an amazingly difficult period um just going through that process and trying to figure out what to do and you know what would be the path forward and so just to be clear so on the story so you've got all of these cars on the lot that had 300 of them that are exposed and have been repaired or or maybe not maybe they haven't yet been repaired but the point is that when this this July 5th hail storm comes there's going to be additional damage or new damage that you're going to be responsible for for 300 cars so you're going to have to foot the bill for all of that labor and because of your model well regard maybe regardless I mean the point is the the responsibility for every day that you have a customer's car you're paying thirty dollars in their rental cars wow correct so you know it was a you know an operational cycle time issue where every day that we did not return that um car created a um a dent into profitability at the tune of thirty dollars a day so it was from primordial to turn the cars quickly and you know prior to the storm there was something it was one of the key operational metrics that um we were managing to in terms of cycle time so um you know this was a catastrophic blow and at that point you know my business partner and I had the candid conversation do we just shut down the business and um you know we had done an SBA loan and um you know I had um you know um a cushion at that point you know financially and knew that it was going to get taken if you know one way or the other if we didn't kind of plow forward with the business and at that point it just didn't sit well with me to say you know what I'm just going to shut it down um you know I think part of being an entrepreneur is having that you know that that cage fighter mentality where you just got to roll up your sleeves and you know have the grit to deal with what um curveballs are gonna get thrown at you and um shutting it down ultimately was not an option and you know as painful as the experience was um that's something I look back at it was absolutely the right move to you know put your money where your mouth is and you know I wrote close to a half a million dollar check um you know to try to save the business and you know that was really to get us into the next year and all the while we knew that we wanted to diversify away from a business a consumer model and we pivot it into a B2B model and um you know we got in front of over a hundred different Fleet directors including the state of Colorado different municipalities different construction companies and um you know all with the guys of uh developing a robust uh B2B pipeline so that you know in the iterative hail Seasons we wouldn't have to fight out in the parking lots for every dollar of Revenue but we could have these Fleet or wholesale accounts um to kind of augment um you know the uh the the b2c business model so uh you know so we went through that process and we had that little thing called covet you know mixed in you know in you know that same period so this was like a a lesson in management 101 you know of dealing with crisis after crisis because you know we you know we had to deal with the hailstorm then we have to deal with uh you know getting the morale the staff back together you know certain people quit you know during that process and you know we have to fight to get the culture back and you know regain the the reins on the company um to be able to fight to live another day and that second off-season was uh very trying but you know um you know one thing that I look back on was that we got the the key people in the right positions and the right seats you know we promoted people from within people stepped up and uh we rebuilt the sales organization we got the the fleet accounts that we needed and and as we got in our next hail season there was an ex you know an intense amount of optimism that we had pulled all the levers that we could to move this business forward so um at that point um we were fairly optimistic where it was like we'd gotten through covid we had rebuilt the sales team we'd got the fleet accounts and uh my partner and I we kind of used the term we're gonna get we're going to pull off the Miracle on Ice that after all these um tribulations and trials um you know we got into the next year and um you know God has a sense of humor um you're relying upon access God for your business and uh we got goose egg to hail so after all the preparation uh we were forced to send uh Crews up to Wyoming you know which was a 60 000 person addressable Market in Cheyenne versus a couple million person market like in a Denver and uh you know there just wasn't the the volume to um you know make the revenue numbers work and at that point I'm sorry John you you said you said in the second hail season there was what did you what where did you say there was we had no hair we had no hail in Denver wow so the second season so the season you're going into with such optimism and you get a completely dry season you have to and you're at a couple million a couple million population of Denver to just get any business at all you have to dispatch some of your crew up to Cheyenne that yep closest Urban Market but of course Cheyenne is a very small City comparison compared to Denver so that is just a stop Gap doesn't really solve anything go ahead yeah so we we had sales people living in vrbo's that we rented for everyone and you know this was their livelihood too and you know it was a big effort just to get the revenue in and we were you know at that point we had an office in Fort Collins which was about uh 45 minutes from Cheyenne and we were shuttling cars back and forth between Cheyenne and Fort Collins um just trying to make it through and the Hope was uh that we would get a storm in Denver and then be able to kind of get back and um you know get into our you know our Peak production again um and at that point um you know candidly you know my business partner and I we had deal fatigue and you know we were just like we just have to kind of shut this down so um you know at that point um it was almost a relief speaking Cadbury because we had fought through you know trial after trial and you know at the end it was just kind of like all right we just have to get on with our lives and um I had an SBA run with the full guarantee so you know at that point it was um you know filing for bankruptcy and going through that process and um you know so I I experienced the full gamut of a wind down where it wasn't just kind of a non-recourse loan and you just move on with your life um you know this this um permutated a lot of personal sacrifice uh to my family and going through that whole process so um but you know when it had been so difficult for so many years it was just like all right I just have to check the box get through this um so I can kind of move on with my life and John going back to the first time you considered when after that horrible the hail storm that did come in smashed your 300 cars and you guys could consider at that time shutting down the business and you decide against it you mentioned having a lot of stress that that's a moment of tension with your partner but also you said to yourself no I don't want to shut down now I have a cushion you said I assume that means basically your kind of your net worth whatever was in your savings account that you would have had to you would have lost that to the bank but in fact you deployed a lot of that into the business anyway to try to keep it going do I have that right that is correct so you know I was a former banker and you know it was something the conversation we had with our clients when things started going wrong you looked for the entrepreneur to make the injection to put the money in and it was something from a character perspective that you know I I had to do it and I didn't ask my investors for that money this was kind of on me you know having you know a recourse loan at that point and um you know it just was the right thing to do to put the money in and you know as difficult as it was we didn't know that we weren't gonna have hail the next year we didn't know that we were going to have covid and go through you know the beginning of the lockdown and we didn't know a lot of those um you know those variables that came up but you know it it definitely was the right move to try to save the business and get into the you know the next selling period so uh here that's something that I I would redo over and over again and and when you say that you you mean from kind of a um a personal ethics perspective or strategic or both yeah an Ethics perspective and you know I think as an entrepreneur you have to have that mentality that um you have to throw everything you know everything on the kitchen sink and trying to make a business work and that's something that as I talk with people that you were very successful in private Equity or Investment Banking that you know want to employ um you know an entrepreneur entrepreneurship your acquisition or search fund model um and go into you know the um the process of buying a business you know I share parts of the story to kind of say you know what you've been really successful in everything that you've done but you know it's still a W-2 it's still a job yeah uh but when you're running a company like you have to be prepared to do everything in your power to make it work and that predicates a lot of sacrifice you know the last thing I wanted to do was to write close to half a million dollar check you know into a failing business to try to save it but you know that's the the attitude and the mentality that you need as an entrepreneur in that half a million dollar check I assume was a significant portion of your own net worth uh very significant wow and okay and so so just reminding everyone of the timeline that check after the first catastrophe with the hail storm on the 300 cars that was about a year into the business and then it was yeah a little over a year into the business that is correct and then it was a year later now we're talking um where uh the where you're now you make the decision to uh to in fact wind down the business yes and at that point you know probably the the best phrase to summarize it would be deck chairs on the Titanic because you could have done all the strategy you know got the sales pipeline figured out but if you didn't get the weather you didn't get hail that there's really nothing that you could do at that point yeah so um so at that point uh I I kind of pivoted and like when I did the personality test um you know I'm in like the 99 percentile of optimism so um I you know I I I I had to kind of like look at my mentality of going through this experience and figure out you know what are the what are the lessons that I learned and and how ultimately was I gonna not have a victim mentality for having to wind down a company that oh all these bad things happen to me uh and I spent a lot of time I I have a deep spirituality and can't just leave that's the only thing that got me through the uh the challenge of you know those difficult and very dark times and just to give a flavor for this um when you know I was kind of at my lowest point um I remember I did insomnia one night I went to sleep in um the bedroom in our basement um at our house and I just remember shaking uncontrollably of saying what did I do like I don't know how to get out of this situation and I think at that point God gave me the grace to kind of see you know what um I'm not just having you go through this you know for some kind of cruel and wicked sense of uh sense of humor you know I actually have a plan and I have a reason why I'm sending you through this Darkness um and it was that sense of like I can't control what happens I can't control that we had a hail storm hit our facility I can't control that um we have to deal with covid and you know we're relying upon sales people that were going out to generate revenue and we couldn't do that I can't control what happened with the weather but the only thing I can control is my attitude and figure out well what you know what needs to change in my life you know how can I become a better person through going through these experiences and that gave me a lot of peace that um you know a lot of this trial a lot of the tribulations were ordered towards helping me to be a better person and more importantly to be able to serve others with these experiences so um you know as I Look to kind of my current state where I'd wound down the business some of the most meaningful things I do is supporting entrepreneurs that are in dark times and you know it's easy to call someone that's had a bunch of successes and never had something go wrong but the harder one is to talk with people that have gone through you know truths and you know the experience share can be that much richer because you've been in the balance you've had to face some tough decisions and I still see this as a mission to serve entrepreneurs that you know are going through hard times and say you know what we can find our way through this so um you know that's you know that's kind of a crucial part of the story where I have no regret no pity for what I went through but simply This was um something that God gave me as a gift uh to be able to share and to serve other people and you know if I didn't have that Faith um candidly I think it would be really hard and you know to get through it and I could see how entrepreneurs have um you know self-harden themselves or did things when they face the the trials because um you could go into the drain of hopelessness and you know I was very cognizant that I didn't want to go down that path but I wanted to have a story of redemption through these difficult circumstances to serve others John that I mean what a what a powerful and uplifting way to experience something like that and what I'm hearing you say is that you uh parlayed for lack of a better word parlayed this pain into um kind of benefit and goodness that you're paying for now to help other entrepreneurs but you also said um to help you become a better person uh you know God was kind of putting you through this trial to help you become a better person was there any specific part of like your personality or the way you yeah or the way you did things or behaved that you felt needed to shift in light of this maybe you used to be impatient and got were being taking it out on your family and learned that you needed to not do that or you know something like that something on the ground where if I interacted with you before this event and after this event I would feel a difference well um probably my wife's uh commentary on that is the most honest that I could share and you know I I had always done well um professionally it never really had setbacks up until I became an entrepreneur and um achieving success in business was easy making money was easy you know I had um you know the means to go you know actually do this to buy a company and had done well um and I think when you're in that mode of operating you can kind of believe your own line of arrogance and you know ultimately this was a story of humility of you know what um can you still um have a self-worth and a self-meaning even when you go to trials so probably the biggest thing was just having a sense of empathy for others when they experience trials and tribulations um it was hard for me to see the let you know the world to that lens before because you know I was privileged I dug very well and really had unabated success in anything that I did so you know ultimately um you know it was just an opportunity to to to gain uh more of the virtue of humility of you know what you know my self-identity can't be either wrapped up in my own successes or my failures but my identity has to be merited and you know how I serve my family how I served uh my teammates my friends those in the community and um you know a lot of you know what I want to do is I'm meeting with people in the business world is really to hear their story and figure out how I can serve them so it really was a call to service okay beautiful John now can you tell us how this was um affecting your family in in these darkest moments yeah I mean it it was extremely stressful because you know we didn't know where we were gonna live we didn't know what was going to happen and uh to my credit you know my wife Ann was like just the most amazing person and said you know what if this is for your own spiritual good going through this we're gonna deal we're gonna figure this out and you know even if we have to live in a one-bedroom apartment it's going to be fine um you know the truth was is that um you know we were very lucky and it was almost miraculous on the other end where you know we were able to get into another house we weren't you know we didn't have to live in an apartment you know I've been able to kind of reset uh professionally and you know find a a career and a passion you know for um you know employment now on the other end of it that's been beyond expectations you know I've had the opportunity to invest into you know some other adventures and still um you know work in kind of that entrepreneurial genre and you know it's been a beautiful experience on the other end of it but I knew at that point I just needed to write the blank check and say you know what like I don't know what's going to happen but it's gonna be fine and you know my wife and I rallied you know around that um and you know it's just been good on the on the back end of it where I've been able to spend more time with my kids and invest in the relationships with them um because it was just very hard to be present when you have that monkey of you know what I'm I've got this this weight of running this business and it's not doing well and at that point uh when we made the decision shuttle down you know probably one of the big drivers was you know what I I have to be more present to my family and uh you know to be there for them which was candidly very difficult when you know as as an entrepreneur and as a man and a provider you're trying to you know like make everything work and you know sometimes it's hard to get that balance John let's turn to the mechanics of winding down a business that you have a personal guarantee on uh what is that what does that look like I mean what are the what are the um kind of progression of events there uh you get a good lawyer no I mean yeah did you do you just declare personal bankruptcy yeah like we had to we definitely consulted people and you know so I really leaned upon kind of you know a professional network of um people to get the right advisors and you know similar to like when you're buying a business and you have a deal team that's going to go into the deal if you're going into a crisis like that um I think it's really important to get the right advisors and um you know I I went through that process um earlier just as a contingency you know I said I was an optimist but when you become a business owner you also have to have a sense of realism and I'd spent the time along the way to map out the plan that if we had to go into the uh the situation of a wind down that we would you know have the ducks in a row and kind of know uh what we would need to do and that was probably one of the biggest I'm ahas that if someone's dealing with an issue it's very easy to say hey I don't want to face the oddpal tree your reality of having the midi declared bankruptcy so I'm not going to deal with it but it was um it was very helpful from a Stress Management perspective to have kind of got my ducks in a row albeit as a contingency plan um you know uh so that when it happened you know I I had the clarity of knowing all right this is what we need to do and it made it ultimately less stressful and can you just paint a picture we don't need to spend too much time on it but can you paint a picture for what it what it looks like what like what happens well um probably the the trigger is you call the bank and say you know what we you know this is where we're at and we were um it was not a surprise to the bank because we had been dedicating you know all along the way you know and during the summer when we were up in Cheyenne we made it very clear to them that if we didn't get you know a hail storm this is um going to be a wind down you know but ultimately uh when we got to the point where we knew and you know the end of September that there was not going to be a you know be any more hail you know that's where we just said you know what this is what we're doing um and you at that point you're just trying to make what I call imperfect decisions um you know as you're you're determining you know what gets paid what doesn't get paid and you just try to apply a lens to do the most Humane thing in a very difficult situation um and you know but ultimately uh that's it's it's a real tough spot to be in you know as you know someone's gonna get caught holding the back where it's it's just an unenviable position to wipe down a business and to be able to make those calls yeah and and they at some point there's a conversation they and they say what are your assets give them to us well you go through a you know a plan of what code did the bankruptcy would go through and um you know it's a process and that's going to look different for each person um but you know what I would stress is um you know Wikipedia is not the source to do that you know you have to find the right advisors to you know look at someone's personal situation figure out you know what would be a good plan and uh you know thankfully you know I did have um very good representation and um you know getting the right people to support you you know is just is huge and and what about delivering this news to the employees in your team what is that like that that was a um that was a tough uh conversation um as we had said we had we had promoted people in the business had done through the difficult times and you know we had some really loyal people that um you know were supporting us and helping us to kind of um you know turn the ship and you know get the business back into uh you know to period of success again and I remember we were at a coffee shop and they knew it was coming I mean they knew that there was hell and uh there wasn't a dry eye at the table you know there was just that sense of like you know we gave it all that we could um and you know we fought through this but we just didn't get the weather so I think it was um you know kind of that Mutual sense between you know my business partner and our kind of key people that you know we had left it all on the table we had fought we had sacrificed and you know at the end of the day it just wasn't meant to be um and you know I'm still in contact with um you know those key people and they've been great friendships and it's been great to see them go on and succeed in other things and um you know I'm happy to have shared part of that Journey with them but um you know getting the loyalty and you know their support through you know what was a difficult chapter you know that kind of creates kind of friendships for life because um you you shared in kind of this difficult Crucible together it creates friendships in life if they thought that your leadership through this hard time was was worthy you know there are lots of business failures where it's because the leader you know LED drove the thing into a ditch and so I think it's a testament to your leadership to that time that folks are still in touch with you people um still happy to be your friend and connected um John you um is that is that kind of where we want to leave the story because we I know we I think we want to Circle back and kind of postmortem the the acquisition the diligence and and some things you do differently in retrospect yeah I think that's this is something that I always share when I'm working with people um that are looking to buy a business today is some of the underwriting lessons that I learned so um so probably like you know the the obvious one would be don't buy our weather dependent business um you know for the aforementioned struggles that we've talked about today in the podcast but you know but ultimately that's going to affect such a you know small percentage of people that are you know searching to buy something so I I did you know go through some introspection or like some things that I would have done differently uh that you know maybe would have eliminated you know um you know just buying the business to begin with and you know if I look back at the transaction um you know one of the things that you know I noticed was we really did not get any face time with the key lieutenants and The Business and we didn't really um therefore get a sense of what the culture of the company was like and as we um got involved in the business let's put it this way that there was a values disconnect between um you know how I had operated um in in my life and you know just some of the the value uh patterns that we're seeing in some of the employees and that treated a little bit of a dissonance um you know as we took over because you know ultimately it led to people self-selecting out of the company and we had to you know fill them with people that would be more aligned from a value perspective but you know why buy something if you're just gonna have to turn over all the people so you know if a Founder is exiting a business um what you're left with is the human capital that remains and you know can you get along with them you know are these people that you would even open up an equity pool in terms of State bonuses um and you know in the situation that we were in we did not get any line of sight into the key personnel and had we had that opportunity um I think we would have potentially pulled the plug of saying you know what um there's not the right alignment here and you know this is going to be an uphill battle uh because you know ultimately we're gonna have to turn over um you know people and key leadership positions and John um two follow-ups to that first um I know you're being euphemistic about the values dissonance but is it is there any can you be any more specific question a question B if you had had the opportunity to meet some of these folks do you think a single meeting would have done it I mean how how do you capture the the essence of a of a company culture or or at least the kind of the the character of Key Personnel in a single lunch meeting even if you had been given that access yeah I think it would require a little bit more time with them um and in order to do that like um this business had very low barriers to entry and as I mentioned when we bought the company within a couple months you know a sister company splintered out of our acquisition and there's you know as I said very little to stop someone from going and just doing it themselves so uh especially in a deal like this where there are low barriers to entry you know once we had kind of agreed upon a path to purchase from management the subsequent conversation would be um you know we need a read-in of your key people and we are going to go into this transaction with an allotment of a prophet's interest or an equity grab structure where um we will give them the opportunity that you had Mr founder to um you know realize the American dream to sell a business and say that uh we want to come alongside of your key people give them a part of the ownership and we can build you know the 2.0 generation 2.0 of this company together um you know that's the only thing that I um would have gotten to and with that that would have given you the permission to do off-sites to spend time with them just to make sure that um it reciprocally was the right fit now I don't think the founder would have given us that opportunity because if the deal ended up not going through he didn't want people to know that um he was looking to transact on the business uh but you know in this type of scenario it would have been a non-negotiable for me that you know if we didn't get um you know some type of interaction you know with the key leadership that it would be a non-negotiable and you know a walk away point the cultural mismatch or values mismatched that was there can you can you give us a little bit more color yeah it was a rough and tumble you know typos um culture um I had an employee missing for several days and one of our sales manager went to jails and hospitals and um you know after a couple days we finally found them with a cracked open skull uh because you know people decided to do psychedelics together and um they let someone walk out and operate a vehicle and yeah I remember going to the hospital and saying you know what God gave you a second chance at your life like you legitimately should be dead now and I said this isn't about work at this point you know this is about you know how do you want to live your life and you know what do you want to do moving forward um you know that was one of the toughest you know kind of conversations in my life because you realize that uh when people like engaged in self-destructive behaviors um that had real ramifications um you know in their lives and at that point you know you just want what's good for them and it was very painful for me to see uh people get into that Loop of some you know self-destructive behaviors and you know you're trying to say look there's a way out but that's going to require some personal discipline and accountability to not do the things that you're doing and to elevate above you know some of these demons that you're chasing okay and you know to kind of change your life and you know that was kind of the hard thing about um the culture is that you know you had certain people that did Elevate and change and you know they you know they had some Freedom through you know getting the sales skills and making money but you know we saw a bunch of self-sabotaging as well and um you know witnessed kind of the accounts of that and you know that still is kind of a you know a painful chapter that you know people have free will and sometimes they you know they engage in you know self-destruction yeah okay so access to Key Personnel would be something that you would demand uh in the future or wish you had demanded or whatever any anything else yeah I think the What's called the age demographic of a Founder um I had um you know I bought a business or you know we had transacted with someone that was around my age and as I talked with different Searchers subsequently and just different people in private Equity that do a lot of Acquisitions um I think it's a judicious thing to look at um a Founder that has run a business for many years but doesn't have kind of a familial point of exit uh because there's um you know there's for one a longer track record of the company going through ups and downs so you know this was something that it was around for just around five years and you know during those five years there was always hail uh but we didn't you know have the eye on the financials of like well was there a year where there wasn't what do you do with that right and so just having more of a longevity in the track record of um you know a 15 20-year history where you can look at the ups and downs how did a business um do an you know disparate economic Cycles um and then you know that sense of you know what if I'm turning the business over um to the next generation of buyers that there'd be a sense of supporting um you know the subsequent entrepreneurs coming in to buy it and I think it's it's just a better construct when it's someone that's trying to higher from a business for those two reasons that you know there's more of a maturity they've made their money and it's you know a conscious decision that they don't want to sell their strategic cut the business trip down um and they're they're trying to find the right Suitor that will you know perpetuate the legacy of the business and in those situations I think there's more of a you know a likelihood that you're going to get access to uh the key employees uh to make sure it's the right fit you know so I've made commercial insurance today and uh one of the first deals that I did when I visited from being an entrepreneur into insurance was uh you know a good friend of mine that bought a business and you know we ended up doing the insurance first transaction but you know one of the things that I really kind of pressed him on was you know this this very issue you know who are the people that are exiting have you gotten time with key management and since it was kind of a controlled transition um the lieutenants in that business did not have the means to you know to buy the business um there was a lot of exposure to the management so when he flipped the switch and bought the company he knew what he was getting into and by and large he's able to retain a good amount of the employee base and even you know areas where there was tension it wasn't a surprise and he was able to kind of figure out you know contingencies and knew what he needed to do um so I contrasted that with my experience where I didn't get that um and you know sometimes in a you know with the younger entrepreneur I don't think you're always going to get those those opportunities because um you're not when you're in your 30s or 40s you're not dealing with that idea of legacy but if you're in your 60s or 70s and you're selling to an individual buyer versus a strategic um you know there could be more of a conversation of you know I I want to transition this business to individuals not a competitor and I really want to be invested in making sure that this goes smoothly so that my people are are accounted for that's such a interesting point John I don't think anybody has made any of my guests have made you know so certainly it's the more common pattern that a Searcher is acquiring from a retiring owner and we always talk about the retiring owners but I think we do that just because we because the pool of businesses that come for sale the vast majority of them are that pattern that the owner is retiring silver tsunami Etc but we I don't think it's ever been articulated like that that also often makes for a better seller in in perhaps like a more healthy transition maybe more healthy culture more healthy business than a younger buyer pretty interesting yeah because in the psychology of our seller he said you know what if I don't sell this I'm just going to continue business as usual right um so therefore we did not get um to look you know peek behind the curtain and get to know the company better but if it's a planned transition um then you're in a healthier spot where you can really get to know what you're buying with a greater degree of transparency and certitude great any others yeah so I think one of the things that um when you know I had an executive coach uh during the process of buying the company that had known me very well he'd worked with me um for several years and it knowed me uh you know for probably I don't know five years you know prior to the acquisition of the business and um you know at one point during the transaction um we um got to a point where you know the deal was about to fall apart and um he strongly encouraged me at that point of saying you know what there's something not right here John you know even if you have sixty thousand dollars of due diligence costs you know in the railroad tracks are coming down and I think you need to stop the car and you know I had this sense of you know what I've been in sales and sales is a psychological Endeavor especially B2B sales and you know I kind of took it upon myself to say all right I'm gonna get all the parties back to the table between you know the bank and the seller and my business partner and myself and you know I'm gonna play the hero and make this deal happen and at that point it was just like um trying to get a sale done you know versus saying you know what what degree of introspection should I be having now and is this a sign that you know there's going to be a friction along the way and we shouldn't do this deal and it was that overconfidence that made me just kind of steamroll through the process and I wasn't listening to you know my advisors to my coaches and oh I'm gonna get this done you know I you know I I don't I don't want to fail at acquiring a business and you know as my coach Jan said it I I just ran right through those railroad tracks and you know onto the incoming you know training that came and you know at that point if there would have been a little bit of a degree of introspection or saying you know what what's going on here you know is this a sign of things to come uh and you know should I just kind of pump the brakes because in reality I didn't need to do anything I had a successful career um but I felt this like intangible that well I've been trying to look for a business for a year and I just need to close um and ultimately I should have had a little bit more patience and self-awareness to say you know hey if if you're getting kind of the EBG Visa the deal is not lining up for different reasons you know maybe it's best to just pull the plug but John I gotta I gotta push on that one a little bit um yep because it's all about having the insight to choose when it's a good reason to when you know when it's a deal breaker and when it's not a particular reason because um there's actually more there's kind of more um of a chorus on the other side saying you know every deal is messy every small business transaction is messy every deal dies three times before it lives you know so so we all go into a deal expecting to get positively beaten up and and honestly like if somebody gets through a deal and it felt easy that's almost more of a red flag in this world it's like whoa did I just really overpay or was this you know was the seller so eager to get out of this business that they just really wanted to get this deal done like a little a little bit or even a lot a bit of tension in a deal um is almost like uh an expectation of Health in a transaction so how do you s so so square that Circle for me yeah so I agree with you every deal is going to die a few times uh but that being said there were um you know a couple instances of things that um we had brushed over and just tried to solve for that ended up being kind of bigger issues and were leading indicators of you know what could be some more systematic problems um and you know I'm not saying this is a universal I'm just saying that every entrepreneur needs to follow their gut and not have a bias either way because there could be people that are over you know pessimistic and they are uh you know looking at an obstacle and it's primarily driven on fear scarcity and they don't have the confidence to kind of um you know overcome something or there's people like me that are over optimistic um and we're a healthy degree of pessimism would be handy and you know ultimately you know that's why you have a coach and that's why you have someone that knows you and as we had gone through you know some of these deal points um you know he had some Sage advice of you know what you should be careful about that and I just was like okay I'm gonna go into problem solving mode and just fix this or that without the reflection on whether you know these were issues that should be fixed at all or walk away points and you know this is one of the hardest things for people to figure out but I would say if you're over optimistic employee degree of skepticism and try to talk yourself out of what you're doing and if you come at things from a degree of pessimism then it's a matter of kind of calling the fear um so that you're not letting your own scarcity or insecurity um prevent you from moving forward but it's more of the self-awareness of like what bet you come from and that'll help to kind of triage through um you know when when a deal dies or there's some warning signs that come on but you know you can't just you can't just act you have to kind of take the time really reflect upon what's coming in front of you and figure out if this is something you want to deal with um you know and I I had another in my insurance business I work a lot with people that are buying businesses because of my background and you know there was a deal that we ended up not doing uh because there was a big sales and use tax issue with the business and I challenged the entrepreneur who you know has become kind of a very good friend of mine and I said you know what with what you're seeing here in this transaction what else have you kind of seen that would lead you to believe that this could be like the tip of the iceberg and is this an isolated issue or is this kind of a systematic pattern that if they were loose on something like you know taxes right should you be really buying this business and ultimately that entrepreneur pulled the plug on the opportunity um you know after that conversation and it turned out that there was uh you know several other things which made him feel uncomfortable from a character perspective but you know had a not gone through that experience I would not have been able to share you know that hey you know when issues came up I was just trying to triage them and not really reflecting upon what was going on and you know did they point to kind of bigger more you know systemic issues well I think that's a great uh a great framework John it's you see an issue in the deal and the business that you're looking to buy and maybe a good framework is okay is first of all do I think this is isolated or do I think this is systemic is this do I think this is a proxy this one thing I've uncovered is a proxy for similar stuff like this up and down throughout the business and if so if I do think it's a proxy if I do think it's representative uh and this whatever this thing is this systemic issue that this little thing I found is representative of can I deal would I be able to deal with that um you know one a good uh example of this is how aggressive expenses through the businesses through a business might have been from the owner and and how gray because there's always some you know we all have some tolerance for some of the you know some family expenses or personal expenses kind of being run through a business um but you know some business owners can really push that to the point of you know being unethical or even illegal and if you encounter that you can say you know I've seen conversations like this on Twitter well you know okay so he shouldn't have expensed that through the business but we'll it will treat it as you know we'll add it back and it's fine and then others being saying no because if if they're dishonest in one corner of the business they're they're it's a signal that there could be minor dishonesty laced throughout the business and you don't want a business where there's kind of dishonest like you know kind of like an undercurrent of dishonesty um throughout just an example yeah that um that would be a very good illustrative um point that you made right there that you know patterns can point to something deeper yeah yeah but I guess what we're what we're talking about here John is really what makes this so hard other than the operations itself which of course is is really where the rubber meets the road but what makes every deal so hard is figuring out the issues that are deal breakers and those that are not I mean that's really what so much of the of all of doing a deal um kind of distills to okay um in reflecting back any were there any other things or were those the big ones tell me tell me when you're when you when you don't have anymore yeah we we covered kind of the main points so um those are great those have been great John okay is there anything else is there any kind of anything that's happened subsequently that you want to tack on to the story or the postmortem or um have you said everything that you that you wanted to share with this audience of business buyers yeah so so just two things in closing here um I think for anyone going through this I can't encourage enough uh looking at different CEO peer groups to have the support while you're going through that process of um you know becoming an entrepreneur and you're stepping into this it's really important to have uh your tribe and when I had the business I you know you know hit the ropes um one of my good friends from entrepreneurs organization you know had gone through a wind down at his company a couple years before and I really you know leaned upon him in terms of like hey this is going down you know and not everyone gets this and I need some support you know I need some help you know getting through this so um leaning upon uh those people that have you know went through difficulties you know it's just huge because you know your spouse can't bear the burden of it your family can't your employees can't on other entrepreneurs are so pivotal you know because um they're going to be able to help you see your way out and it's really important to have that tribe um and you know with regard to entrepreneurs organization it's something I'm still involved with and they have a you know off-site every year and at the last off-site that we had um they brought in an entrepreneur who um had gone blind during college and he went through a lot of the victim mentality of um you know facing you know a life-changing illness or medical condition and you know he had to kind of walk his way out of self-pity and you know he said you know what once I kind of said that this is not happening to me but this is a gift that I was given uh and I would not you know I'm going to be more successful in my life because of this adversity uh and this is going to give me grit and this is going to give me resiliency and he was like I would not have been as successful as I was at a knock on blind anyway you know that was where you know my eyes had opened and said you know what um running you're widening down the business um ultimately it is a chapter of my life but you know I think I had that sense of like I'm gonna be way more successful for having gone through you know one chapter Crucible then had a you know just had success along the way and didn't face the adversity that I faced and that gave me a lot of Peace um but that really points back to you know why you need to kind of be in the room with entrepreneurs and hear speakers that are geared towards entrepreneurs because um you don't always see it clearly sometimes you need a blind man to lead you to the light great uh and so EO was your organization but um so I guess I was going to say do you want to plug any in particular but you already have and was there was there a second thing no I mean that's basically it I think it's um you know find your find your tribe and you know take advantage of subject matter experts that you know are um are appealing to the uh the demographic of entrepreneurs because you can get nuggets like that where you know uh organizations like EO or vistage are very intentional about getting content that's germane to the entrepreneur um and you know some of the the best ones here you know speakers like that that have gone through adversity and you know can help people to you know find a path forward well John I think that we've reached the end then um I just want to thank you again I want to um stress that the message that you received in your darkest hours that this was going to be something that you could then help other people with I think you're doing in this very conversation thousands of people are going to hear this and um and while they might not be in adversity in the moment they hear this they will take it I'm sure carry it with them because um I know that there's a lot of appetite for stories uh of people who buy businesses and and it doesn't work out and uh everybody who considers this path on the personal guarantee and the enormous life change that it represents and maybe becoming a leader for the first time um it's just there's just so much risk and uncertainty there um and it's to hear from somebody who where it didn't work out well but they learn so much from it and are stronger for it you've grown and as you said I think you're even thankful for the experience I think we'll be both encouraging to people but also just really really valuable to um just hear the other side because acquiring minds is usually happy stuff but as I as I said at the outset it's not always thus so thank you John thank you very much this has been a very valuable conversation oh and what's the best way for people to reach out how do you prefer LinkedIn email feel free to share the URL my LinkedIn page and also my cell phone so just uh I'm old school so just kick out the phone and give me a call or send me a text and you sure about that yeah I love you sir love to have a dialogue I mean I'm this story and my journey happen for a reason so anyone in the audience base that just wants to chat um I I'd love to hear how I can help and mainly how I can serve um as you know you're wrestling with that um immense challenge of going out and buying a business thank you very much John thanks will really appreciate it thank you 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