Jason Andrews welcome back to acquiring minds thanks will happy to be here appreciate the invite Jason you first came on the pod in June so not that long ago about seven months and I wanted to have you back on now because in these intervening seven months you exited the business that you bought as an acquisition entrepreneur the business that we discussed in your first interview so very exciting for you congratulations thank you and so you've now completed the full life cycle of an acquisition entrepreneur you searched you bought you operated you exited and what I'd like to do here is of course talk about the exit have you share what you can and then have you reflect on this path that you chose as an acquisition entrepreneur you took a big swing to get into this as we discussed in detail back in June and now here you sit on the other side of all of that Victorious for lack of a better word but let's start off with a refresher Jason if you would a brief background on you and the business that you bought please sure so my I was a little bit of an older uh Searcher I guess I'd spent 20 years uh in uh in the corporate world uh mostly building and developing sales teams in the medical device Arena and anyway in 2015 I uh engaged a a company a middle Market company to do a buy side search for me and that search took about 10 months we talked about that a lot on the last episode closed in February of 2016 on group Source uh it was a larger company than I was expecting uh to get into but it was a Max SBA node a large seller node and I'll say basically every liquid dollar that I had that went into that purchase so that was early 2016 and and operated it so the company itself is kind of a niched born out of health care we basically negotiate discounts on all the things physician groups buy and uh and then we make a little piece of that um on but anyway it's a niche Healthcare business and and that's how we drive our Revenue a lot of sales and service so business business services uh type of company group purchasing organization gpos people in healthcare will probably recognize that but um yeah as you said kind of pooling the resources of doctors offices and non-acute Care um Health Centers and offices and entity entities to secure discounts for our for medical supplies essentially right and then you take a little piece of all of those transactions um great thank you for that um and just give us a sense of how big the business was when you acquired it in terms of Revenue if you can or Ballpark and number of people sure so uh around 10 maybe 10 or 11 people and we we did not grow in people size we've actually got a little smaller we outsourced a lot of functions that they used to do in-house we kind of beefed up our sales team and outsourced almost everything else I had a few operations people that uh that handled that and so I I don't know so we we look at we look at growth a few different ways it's either spend under our umbrella or or revenue and they just mostly correlate but I would say uh it was we were probably you know 300 million or 280 million in spend under our program when I acquired it we grew that to about 400 450 so in six years six and a half years we grew about 50 or 60 percent in uh in spin volume and probably uh most of that flows through so uh profitability probably grew roughly the same that sort of thing so 50 to 60 percent growth over the entire duration of your ownership correct yeah so that's not fridge growth sometimes you know if you you'll you'll hear some acquisition entrepreneurs get in there and 20 and 30 percent growth in a year as rarely as that sustainable over multiple years but still uh as a benchmark so um I think one of the interesting aspects to this story well we'll return we'll return to the growth uh aspect of that so let's just get back to where you were when where the business was when you decided to sell were you approached or did you decide to go out in the market give us a little bit of the story of the sale so I was approached so one of the things that people talk about really liking when they do a search is they want to Niche business that's very you know kind of small and specific in the things that they do uh that's great and I had that and and that was very valuable the other side of that is who's going to buy that business and that's one thing that you need to be thinking about probably not before you buy it but as soon as you do it's like uh you need to be thinking generally about what an exit might look like and so one of the things for uh in the GPO business is there's a lot of consolidation as there are in a lot of businesses and so the at least it was pretty clear to me that some the buyer for my business or the ideal buyer for my business was going to be a larger version of me and so my goal was to make it was to increase the value both in size and in desirability uh to those players so that in you know and build relationships along the way so that inevitably that would transact I didn't really know when or what that would look like but the goal of building a business that they would want puts you in a pretty good position so I've been approached by a couple of different groups and had met with them both about ways we could partner together and then maybe this one evolved into a an acquisition discussion and uh that started in actually early last year so actually when I met you in Orlando that was my first live meeting around the possibility of a sale and so um anyway that's kind of where where it's where it started so were they at SM bash or they were just in Central Florida somewhere well they're actually based out of New York but because I was going to be there we decided to meet around that meeting so we just had a day of meetings went to dinner had a full day of meetings where uh we went through a lot of things in more detail so it was still pre-loi but it was um I guess more than just theoretical uh-huh great and so going back to this kind of you're you're you know what you just described sounds a lot like built to sell I don't know if you've read the book Bill to sell but every business as you're building it you should be building it so that it is an attractive acquisition to some other entity whether or not you actually intend to sell it because as you build a business to sell you're just making the thing more valuable either for some third-party buyer or for yourself so were you you were going through that exercise but did you envision that yes like there would be an exit you would exit this business at some point uh you know before dying or um or were you just open to it maybe maybe it doesn't happen or were you kind of like uh I'm gonna hold on to it forever yeah where did you fall there well I was never thinking I would hold on to it forever I also wasn't thinking that I would only have it for six and a half years so it was something in the middle um but pretty early on I knew when I bought it it was a stretch for an individual buyer right that was going to be SBA it was like pretty good in size I mean it wasn't quite an eight-figure purchase but it was close and so so I knew that as I was growing it an individual buyer was going to be a difficult and so it's like that's probably another person that looks like me is probably not going to be the buyer um so private Equity had been approached I'm like I don't really think it's an option for private Equity due to private Equity wants to put a lot of resources in it grow it fast and then exit it and it's not that type of business I mean it's a steady growing cash flowing business but not super sexy not super scalable in that way and so it was like well the most likely and then there's another stakeholder that's a part of this wasn't just me it's like well what what about the company I mean I do care about the people that are there they're good at their job they do a nice job I want to make sure that they have a future that works for them and opportunities and so that's where it kind of led me to of those three doors it was probably going to be a strategic and um and so that's that's the direction it went and so not necessarily the perfect timing for me um if I were to draw it up but everything else checked the boxes and and but why not hold it indefinitely why not hold it for another 20 years um yeah and you know it's a good question I don't know I mean the the uh the consolidation within the industry made me wonder if you know it's like you kind of you am I going to be able to pick my timing later right or is it is you know yeah as the options get less and less you know uh if I'm if I'm convinced that that's going to be a buyer and there are only a few of them that are looking to acquire through or build through acquisition um if no one's buying or deciding build your acquisition I don't I don't maybe don't have a buyer uh if and when I'm ready to sell so yeah that was that was part of the I don't know that I was right on that and I certainly wasn't at a point where I needed to sell in 2022 but I don't know that I could have played it forward to 2032 and the game board would look the same yeah well you know and that that's actually I don't think I've ever articulated this or heard somebody articulate it but that's a weakness I guess of of these Niche businesses that that we Searchers look for which is if you buy an HVAC business there's all I mean okay maybe not always but there's let's just for the sake of argument there's always going to be a buyer for that HVAC business so you can put it out to Market and sell it at almost any time within reason yeah whereas in a super Niche Business Like Yours there's just maybe a small handful of strategic buyers and so the timing is much less in your control uh on the exit on the exit in particular I agree um you did not have investors when you bought the business and so you had the freedom that what we're talking about now the freedom to sell the timing of selling um even though the market conditions maybe maybe forced your hand a little bit internally you could decide when and if you wanted to sell and one of the big things for small business buyers when they do take an investment which is many folks is that you know that exit um is going to be more of a collaborative decision with their investors and they're going to have to find you know they might not agree with the investing with the timing of their investors and often the exit is quite important to investors because that's really where they see the realization of their return and they get that that their their money back and so I always just have the sense that when working with investors they um whether they're maybe going to be less amenable to just holding on to a business forever because they at some point want to see their Capital back that's a huge generalization um but I'll make it uh do you have a reaction to any of that like did like in retrospect are you glad you didn't have to you know talk to yet another party the third party namely investors to get you know get their input on whether or not it was a good time to sell um I'll say yes and and maybe a little bit no I mean you need to you need to be thinking along those lines so maybe investors start thinking about that always right they're always thinking okay I need to get my money back and what does that look like and when it's not a forever decision if you're somebody like me you need to be thinking about that with a with a smaller subset maybe it's just you and your spouse or maybe it's a small team of advisors but you need to be thinking along those terms to understand okay under what circumstances would I be interested in exit what would it need to look like because because there's two sides like there's a logic component and there's an emotion component and and they sometimes can battle against each other and so um you know you wanna before things start to fly you want to have a framework and a structure in place maybe for both of those things uh so that it makes the decision making process a little clearer yeah that's a great Point yeah okay the can you tell us some details about the sale itself and the acquisition price and and so on what what can you share there yeah so it was um so the acquisite the price was I guess not double what I paid for it um if something between 50 higher and and double uh what I paid for it um so that's that was the amount of of I guess the acquisition one of the things that we had done um over time is really aggressively paid on the debts we had about six and a half million dollars in debt uh at the start and then six and a half years later it was down to just under two so there was some debt uh there was still a a note component to it but we'd pretty aggressively paid that down and um you know that was so we had taken some distributions but I hadn't distributed I mean I kept a lot of cash in the business uh taking distributions obviously for cash and maybe for some other things uh but it was not a drain the bank account at the end of the year uh type of thing I don't know that that was the right decision I could have done that and put it into other things and maybe that done better but there was a sleep at night component that was uh aggressively paying down debt that was important to me and uh so that was the the route we chose okay and in terms of the structure of the acquisition uh can you can you share that at all so it was uh since 80 of close and then uh 20 uh most of that front loaded in into year one and so there is a recurring uh component to our business uh there's not most of our customers are continued customers but they aren't contractually obligated to be and so there is a little bit of a tale to the business it's probably about a six month lag so I had a lot of control over year one so the majority of the I'll say earn out component is a built into year one uh we're a little over six months in year one I would say is pretty well baked but there is a piece that's in here too as well and is that kind of 80 at closing and then 20 percent earn out let's call it uh over the over those two years is that kind of a standard uh structure for a deal like this or or is there no such thing as a standard structure for a deal like this I think there's probably no such thing as a standard structure it would be very difficult to not have an earn out component at all but how much and the the length of time I mean that was a there's a fair amount of discussion in negotiations about that right there's the amount then there's the amount up front versus earn out and how does that play out and what are those you know what are those levers to pull it's sort of you know you've had people on your show say this you can get your price or you can get your terms you can't get both but you need to understand what's important to you what's important to the buyer and find something that works and who is helping you through this I mean you're this is the first time you're you're you're involved in a sale like this did you have counsel of any kind well it's a great point and so yes I mean so I had I guess I have my deal team my attorney my accountant that I worked with on the acquisition I called them both up when we were getting to the LOI point and said let's kind of get the band back together we've got it we've got another thing but but it's like they help with certain things right they don't make business decisions they're not going to say oh yeah that's a bad deal don't take that or hey don't put that over here or you should ask for this I mean they've got their their pieces but it's not around the deal terms it's not business decisions and so you need to have some advisors that you can bounce things off of either they have experience they need to probably know you and how you react to things emotionally that's really important and they need to have some uh understanding of some options just so you can have those I think that's very important uh to have those people that you can bounce ideas off of to walk you through this otherwise you're you know you're Flying Blind the other part of this is if you're in a business like mine you you're running your business while you're doing these things and so you know that's a that's another layer of complexity that you have to really be ready for and so you did have an advisor or advisors who could who could help you think strategically about this sale yes absolutely I mean I thought it was I don't know there's some business owner groups we've got one here based in Kansas City that I've you know kept close with 12 of us that meet on a regular basis and so you know I'd known these folks for a number of years we talked through business challenges and so um you know uh that is uh they were invaluable to me during the process and then just other you know friends and colleagues great uh let's talk a little bit about just your years of operating quickly um going backwards a little bit um one of the things that you said in our pre-call just a few minutes ago was uh I was asked I asked how you felt and you said well you know it's it's it's hard to sell a business it's it's it's messy deals die all that we you know all the things that we talk about in the show it's hard to buy a business so going all the way back to 216 it was it was an arduous deal for you to get across the Finish Line in the first place what about the the in-between years the operating how did you find being an operator I mean it has its ups and downs obviously with but I I loved it I mean it's like it I was in a very unsexy business I mean if you were I mean like if you were sitting next to me at a dinner party you're probably looking for somebody else to talk to it's not a not a fun uh super fun business but I loved it I mean the challenge of business and kind of the levers to pull and how do we do this and how can we do that better I mean it led to some operational changes of of off uh or you know Outsourcing a number of functions and it led to how does our sales team and how do we change and pivot and grow and do things like that and those puzzle pieces and putting that together and figuring out how to continue to grow and win and have success was very fun it wasn't always you know it wasn't a straight up path or anything like that but that was I always enjoyed that um and so you know that so the operating part was uh was fun much more fun than buying or selling for sure because you know you hear for a lot of people that um once they get into the the seat a CEO of a small business it's uh it's a rude awakening you know it's a lot more difficult it's different than they expected um so not always nice to hear when somebody says that they actually really enjoy it I should say that most of my guests also do enjoy it but it still bites them in the butt in ways they they weren't expecting uh going into it for sure you mentioned already that you kind of made the organization more sales um forward more and outsourced a lot and and built up sales team I can't help but notice like your own background is that is as a sales leader as a salesperson and then somebody who then you know ran sales teams do you think that you that that was just kind of your bias to do that because that's what that's the world that you're comfortable in or did you see very kind of objectively that that's what this business needed uh maybe a little bit of both probably the first one so it's like every small business does some things really really well and so it behooves you as a small business owner to understand what those things are maybe it's you maybe it's some key personnel I mean there were some operational things that we did absolutely excellent and we kept doing those functions but understand what it is you do really well and hire out the rest of it you know or what are the things that really matter in your business what are the you know what are the the levers that are really going to ratchet uh value either to your uh to your customers or value to your organization what are those things and focus on those things and then inherently stop focusing on the other stuff so it still needs to be done the HR functions payroll the benefits all of those things are important but they're not you don't have to do them in-house there are people that are experts at those things probably better than you and so if that's not your area of expertise spend very little time on them and and Outsource that piece you had mentioned that um you didn't take a lot of dividends out of the business but what you did do with the excess cash flow was paid down the debt faster than you need than you needed to how did you make that strategic decision like why not hire three more sales people rather than paying down the debt faster so so the first thing that was the goal of excess cash was to keep a fair amount of it in the business the fir except my my one of the best pieces of advice that I got early on was don't pay down your debt too fast right so first thing is build up a big nest egg because most small businesses don't fail they run out of cash so make sure you've got a war chest of cash it's not going to make you any money it certainly wasn't then it's paying nothing but it's important so that's number one that was the first the second is where can we use the money to grow the business and so with their word opportunities that we passed up on that were good growth opportunities um but but it was you know kind of a decision of okay we've invested in these growth opportunities and now like throwing more money to try to it's sort of like it's this cake is going to bake and it's going to take it 45 minutes if I put it in the microwave I can't do it in four minutes it doesn't work out and so once we made those Investments we gave those time to grow and then the other excess cash that we had beyond the stockpile and the Investments went to pay down uh mostly went to pay down debt one of the things I I just we've already kind of been touching on but I just want to address it explicitly is the power of the buy then build model the acquisition entrepreneurship model because you had a very significant exit for yourself and just to put a little bit of numbers for this for people as you said you sold it for somewhere between 50 and 100 more than you acquired it for we know that you acquired it for we don't know what but call it 789 million so you sold it for we don't know what 13 14 15 16 million um and you had paid down most of the debt you still had two million dollars in in principle to pay down so you know call it 15 million minus two million 13 million rough number you're not you're not you're not nodding at me or doing it you're you know you've got you've got a poker face on but I'm just giving giving people some sense of what this event this financial event for you could have looked like um the so that is just an enormous amount of money I mean it's just a wildly successful uh financial event for any individual to experience in their lives and so it's doubly remarkable to me about it is that there wasn't a ton of growth fifty sixty percent of over six years in total so I I think that's just a really really compelling evidence of how this model um is how the Biden Bill model is so powerful because kind of just paying down the equity and getting you know some modest amount of growth can still realize an incredible exit at the other side care to weigh in on that no I think that's I think that's I think that's right I mean the I'll say one thing people are buying businesses they're like oh I'm gonna do this and I'm going to grow it you know in in my model I'm going to grow it 100 in three years I'm gonna double it in three years and a lot of people do those are usually the ones that end up on your podcast right there are a lot that don't right some it's very difficult you know and and the things that you think are going to be levers that are really going to ratchet up the business may not be what you think they're going to be um so you know when you're modeling it's probably worth understanding it's like hey this might not this person that owned it for 20 years might have done a lot of things right that you're probably not just gonna immediately double in three years that as a that's possible right so factor that in and so at least for ours I mean so if my if the business that I had purchased I maybe thought I was going to purchase was significantly smaller then then the growth would have needed to be a part of the component it was a larger business and so it became more um I mean there's growth opportunities and we did grow but it was more like a buying a large asset than just paying down that asset and and the overall Enterprise Value came from that as opposed to taking something that was smaller and tripling it in size it was taking something that was bigger and paying that down and realizing the value it uh at the exit of that spread yeah well that that's a strong argument for the you know by by bigger rather than buying small and in fact one of the one of the interesting things from our conversation first impact in June was that you anticipated buying much smaller than you did you didn't go out looking to buy nearly as big as you did you thought it would be kind of more Searcher style million two million dollar business and and it was multiples of that size um but yeah all to say that um on the exit you know you're likely to I don't want to overstate this or or generalize too much but it feels like you're likely to see a more handsome exit if you're getting into a bigger stable or business because you just don't need as much growth to be there to have it be really material for you the individual acquisition entrepreneur when you exit one of the things I like to ask people is there anything that you look back on now that you did wrong could have done better mistakes you made anything where as as great an outcome as all this is and is frankly happiest story is all this is could have been even happier if you've done X differently you know uh probably right I mean definitely there are I guess the main thing I would answer that too is you're going to make a lot of mistakes um you don't nothing about small business ownership needs to be perfect uh it needs to be purposeful effort over a long period of time and you need to be open to analyzing your decisions you know or we're trying this are we measuring it did it work you know it's like well we did X and Y happened well did y happened because of X or you know was it because every business grew 30 during the pandemic because there's this flood of cash you know not every business is great well how did every business grow 35 what are the levers in our business I mean if you're be as critical as you can on the business piece um but yeah you're going to make a lot of mistakes hopefully you're making a lot of mistakes because that means you're trying different things but you know try and measure them stop doing the things that aren't working do more of the things that are wash rinse repeat and just keep doing that over time and let the you know let it let it build um that's the so it's like you know don't be afraid of failing because the successes come in the same places as the failures you just gotta um you just got to measure those correct quickly that's right well just to wrap up Jason so what do you think is next for you are you gonna go out and buy another business and become an operator again or are you going to sit back and uh become a capital allocator and invest in other Searchers or a combination of A and B I know you're going to be at SM bash in Austin so you got some sort of plans for yourself yeah I think I mean so what am I do I want to be the one throat to choke again I don't know right I mean I know so I was 49 when I exited and I had a different energy level at 49 than I did at 42 when I bought it um I the the tank isn't empty I'm still very interested and engaged I'm looking but I don't know I mean is the answer I mean I don't I feel like I would definitely not do it all alone again uh whether I'm involved or um I guess whether I'm the chicken in the ham and egg breakfast or the pig I probably lean more towards the chicken I want to be involved but not as committed as as I was last go around and is that because of uh for finance the financial risk of it or because the energy required and operating or or or what piece kind of is less appealing to you now specifically yeah I think I mean so so obviously got other things that I want to do and so starting something at 50 that may so I just look at things a little differently I mean I bought a business not to make a lot of money I want although I wanted to do that I bought it for freedom I wanted to be home I wanted to be there with my kids up two of them are in college now and I've got one still in high school my dad passed away at 63 I'm 50 and so I want to do a lot of things over the next 10 years that don't involve anything about business and so what I don't want to do is you know but I still want to be involved so I don't want to get involved in something that then takes me away from a lot of things sure so um so that's that's what I'm wrestling with Mom behind it so some fingers and pies but you don't want to be anchored to to a desk or you know in into a business and so just to close this out Jason what are some of these things on your bucket list well I want to travel some I you know I just uh you know so that that's mostly it I'm going to travel some different places and sure experience some different things and just be able to um be able to say yes uh to Opportunities um without without checking a calendar sure well that's that that is the dream so congratulations for um getting there and having the option to do that now Jason thanks for coming back on and and sharing with us details of the sale and how you thought through this and uh I guess I will see you in person in in Austin and be eager to hear you know where your head's at at that time well thanks will appreciate you having me on I had a number of people reach out after the last one and I would encourage anybody to do so I'm not that active uh in social media forms um but I'm very happy to have conversations and and uh and help anybody that's searching so I've I really have enjoyed that part of it had a number of people uh that did that I don't know if I was much much help but I'm happy to uh um to talk with anyone that um anytime so thanks for the Forum I appreciate it well great and and one reminder to people of course there will be a link to your original interview in in the show notes and it really was a great interview one of the things that we spent time on as you already mentioned is that you used a buy side advisor which many searchers do not very few of my guests if any other than you have and we really got into it it was a really it was really expensive the kind of the headline was it was quite expensive but it was also extreme like more than worth it and you couldn't even remember exactly what you paid because in the grand scheme of things it was kind of immaterial um even though it was you know north of probably two hundred thousand dollars um so really a really fascinating kind of conversation around that and I and the group that you use your buy side advisors DVS group has subsequently gotten in touch with me and they also heard uh from a lot of folks after our conversation so I'm glad people have really listened to your episode and hopefully your first episode and hopefully this follow-up will will boost it again so thanks very much Jason and uh good luck to you and a hearty congratulations appreciate it will thanks again 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