Robert Graham and Aaron Blick welcome to acquiring minds guys thanks for having us will yeah thanks for having us the two of you have had an eventful last four years in 2019 you partnered to do something of a conventional self-funded SBA search and you looked up four years or so later and you've done five more Acquisitions and iida across your businesses stands at over $155 million and so we all want to know how you did this but first let's get some background on the both of you Robert if you go first then Aaron will go to you Robert a little bit of your backstory please sure will so um eron and I have actually known each other since we've been probably seven or eight years old uh we grew up in Houston together and uh played t-ball and soccer together growing up and then um we both went to A&M uh and I studied uh uh industrial distribution which like in the engineering school it's kind of like industrial engineering and went to go work for a company called Eaton was there in a variety of you know um management roles and then got lucky and got into Harvard Business School got my MBA there and then went to work in private Equity uh for a fund in Houston and uh and so you know that's my my background was very much industrial and uh you know um and then investing so um at a high level that that's it Robert were you an entrepreneurial kid no really I I had a dog sitting business and uh you know some other silly things that kids do but you know what was it inevitable that you get into business in one way or another yeah that's a good question I think that I always wanted to own my own business and uh and so that's actually why I wanted to private Equity I wanted to learn how to buy and sell businesses turns out private Equity is actually not that great of a training ground for uh owning a small business but uh I learned how to buy them so that was good training yeah well you and and many other acquiring minds guests got uh cut their teeth buying businesses in in a private Equity environment Aaron to you yeah so not a private Equity guy thank God uh no so my background is largely in healthc care so uh my dad's a physician in Houston Robert kind of mentioned that owns his own practice well part of a group of Physicians there um when I came out of undergrad they asked me to come managed their practice they had some a former manager embezzling um but at that point the bar was so low they offered me the job um so for about the first four years of my you know work career um I went and worked at a Physician's Clinic off 12 Physicians there in Houston um as time went on eventually I I left the the practice I was only supposed to be there for about six months ended up sticking around for three years um much to my chagrin but eventually left and started some physical therapy clinics um and pharmacies as well as an Accountable Care Organization um but fast forward to about 2019 um I was exiting those those clinics we had built about eight at that time and um it was clear that that was kind of the end of the road for the that um project that I was working on and uh one of my good buddies Robert and I had uh been grabbing sushi lunch there's a spot we love down in Houston and would go to pretty consistently and eventually we kind of came to a similar conclusion that we were both looking for Change and uh at that point we partnered that was probably January February of 2019 that we said look let's go you know buy business together and and go from there and see where it takes us Aon couple follow-ups so these clinics and pharmacies and what was the third business an Accountable Care Organization yeah okay it's a also called that's moreon yeah still unfamiliar to me in probably a lot of a lot of the audience you you started these Aaron yeah so I did not start the Accountable Care Organization I was just a partner there but the physical therapy clinics were Ground Up entrepreneurship find a space get a loan knock on doors ask orthopedic surgeons for referrals um they were more high-end we didn't actually take Medicare Medicaid so um more kind of the weekend warrior we had extended hours worked you know weekends hired the best therapists in town but yes that was what what that was and were those successful businesses and then the exit was that successful they were yes and the exit was successful um what happened there is I had a partner that um had another separate business that he ended up selling and he no longer wanted to participate in growing the PT Clinic business and I wasn't interested in doing that by myself it was a lot of work and so it it kind of came to came to a conclusion um we had somebody for a while that was kind of asking us to buy our clinics when we you know when that dat came so we didn't go through a rigorous you know exit process process we really just exited and I knew that that was the right thing to do at the time and I can't move on Aon before I ask you about Seminary which I see on your LinkedIn so you you as Robert said yesterday you almost went to the good side before going to the dark side so give us a little bit on that yeah so um interestingly enough my undergrad is in philosophy and Communications and for a while I thought that I would uh get a you know higher level education kind of in in seminary and and maybe teach um at some point and uh I got married and early on in in my life my wife said you know if there's anything else you want to do education wise go ahead and do it now because we knew we wanted to have a family so I did I went to Seminary um this would have been 2011 so a long time ago yeah um but ultimately you know my my life kind of took a different direction I did get a master's and was am proud of that but um we kind of went in a different direction and um been super happy with where I've been you know you kind of find your place and you go with it and this is where I am sure sure great well thank you for that guys Robert you came from private equity and and so buy and What attracted you to private Equity was learning how to buy and sell businesses although not operate them as you said um but aarin you who had done zero to one stuff why was the next project the thing that the two of you wanted to partner on buying businesses versus another 0o to1 project yeah that's a great question so I knew a little bit about ETA but I wasn't nearly as versed as Robert was um Robert took classes in school and had a couple classmates that had done this and um so you know operating businesses was something I was very comfortable with but buying them not so much and of course that's something Robert you know was good at um and and likewise I had you know experiences that would you know benefit our relationship that you know he wouldn't have to go reinvent the wheel right um and you know by Healthcare business you know it it you know kind of the way the conversation with Robert and I went is you know where and I'd like to buy a healthcare business but I have no clue anything about Healthcare business I'm an Industrials guy you know and I said well you're in luck I know way too much about Healthcare businesses and uh that's kind of how we we started you know and we there's been a trend for some years in in healthcare toward the inhome care space so I definitely knew that that was something that we wanted to move toward I was a little tired of brick and mortar brick and mortar is really really tough um and it takes a really long time to grow those clinics and and get cash flow positive and you know start getting people happy so um kind of the the zero to one experience I'd been through and you know I like I I used to have a real pretty head of hair well um it went away going through all those you know those years and that experience so um I was ready for the one to two experience and and you know Robert was certainly ready to to make that jump as well and so that's what we did Robert why were you ready was there something in your life at this moment that made now the time or was it was it really aon's availability that kind of prompted you to jump yeah that's a good question I think that you know um I was I always wanted to own my own business and it was just kind of a matter of when and I had learned everything I needed to I think in in the roles that you know I did an internship in Investment Banking and then spend a year in private equity and I had learned all that and the operations piece I think I had learned in my prior oper in roles and then you know Aaron and I obviously you know were close and um Aaron was interested and uh had the Ops background in healthcare and uh so it just kind of made a lot of sense at the time um yeah so it just kind it just worked out did you like private Equity Robert I would say that uh not a lot of people like private Equity or investment banking for a variety of reasons so it wasn't the right fit for me uh but I learned a lot while I was there certainly great and so it sounds like you guys essentially had a thesis that it was going to be a healthcare focused search correct I think so it was a little industry agnostic at first and then we kind of drifted into more focusing on Healthcare uh we got this deal This Home Health Home Care Hospice deal under Loi we were really excited about it and then we started spending a lot more time on the space and actually started talking to some other targets pretty early while we still had this deal under Loi some of those targets we ended up actually buing much later which we'll talk about later but um so the search evolved for sure uh it started out very much industry agnostic and then Aaron came on board and then I started probably spending 50% of my time on Healthcare with Aaron uh we looked at some non-healthcare things together too um you know so when I started it was a solo search also and um I didn't catch that okay so you started solo started solo brought Aon on board started focusing you know probably 50 60 70% of the time on Healthcare got under Rea with this home health Home Care Hospice company this group of companies and then really started focusing in that industry quite a bit actually even before we had closed how long did this search did your would you say your search took understanding took right out a year from from starting a search to closing on a deal and give us a little bit more of the criteria of your search industry agnostic but quickly dialed in on Healthcare um what else size-wise I mean any economics that you can share or or financial parameters that you can share uh a million of e plus so I think we were really focused on like one to three million of iata and um and then you know less than a 5x purchase multiple non you know all all the check marks of a of what a a good self-funded leverage buyout looks like right so like everything a lender's going to like right non-cyclical uh no customer concentration uh the basics right um but other than that pretty pretty much industry agnostic you know and geographically agnostic too so oh yeah yeah you you guys you guys were from Texas were in Texas at the time Ain you were in Texas right yep yeah you were having lunch together every day or excuse me every what was it once a week or once every couple weeks yeah okay um so but you were willing to move we were yeah yeah and Aaron you subsequently have which we'll get to Robert you're well known in in our world for being somebody who Advocates larger businesses don't buy small buy large the argument is pretty simple regular listeners will have heard it countless times the bigger the business the the actually less risky it is somewhat counterintuitive to to people who are new to this the more Capital you have to play with to make improvements to the business um I mean a lot of stuff just kind of works out but the more management layer it's likely to have not necessarily likely Liker so that you can be working on the business rather than in the business so goes the theory and you've been very vocal about this sounds like you knew that from day one or you knew that from private Equity that that has always been I mean I I almost think that the million dooll SD thing in my own mind that was thanks to you that you were so you you're you're so strong on that point and we've had conversations since my earliest days in this but it sounds like that was already gospel it's a good question will I mean it's not like I came up with that on my own right I mean there's a lot of uh Searchers and mentors that you know push me in that direction and then honestly I mean a lot of people disagree but for me it's it's obvious you know I mean if you and and a million dollars of SD is kind of arbitrary because every business is different right there are million dollar SD or EA businesses where the um the owner is like doing dat today operations and is in the job and you know and then there are and and that's why it's a million dollars because they're not they're not paying for people to help often times yes that that's a serious constraint on growth um then then there there are 500 I businesses where the owner is not involved in day-to-day operations so it's an arbitrary number but you know I think what it helps with is generally weeding out companies where it's a job rather than you as a buyer taking an ownership position rather than taking a really a job and um and also the opportunity for wealth creation right so with a million need to business if you just run it and it continues and really I mean every time we buy a business whether that's SI or pillar the the kind of thesis going in is this has to work this has to do well even if we don't knock it out of the park right if we just grow this thing kind of like it always has we should be getting a return that makes up for the risk we're taking because buying a small business is very risky and so you know I tell everybody I talk to and you know I a lot of people call me about ETA and I tell everybody you know if you're going to take this risk you should be compensated for it and um if you're buying a company with 300K of IA you probably could make more money just working at Mackenzie uh and not taking a personal guarantee and you know and not uh being up at 3:00 in the morning thinking you're not going to make your debt payment or payroll you know um so that's my opin on the thing is a lot of W2 folks Rober are not in W2s that pay like McKenzie so they might be making 70 or 100 Grand a year and so making 130 or 150 at their own business while riskier uh is a big step up and means autonomy and big upside not do this I would not do this for an incremental 50k I gotta say uh Aaron you're a UTA Entre would you do this for an incremental 50k or just keep your job I would have kep my job yeah yeah so but yeah yeah I mean risk reward right you know yeah give us a a little bit about what the search was like the the mechanics of your search um proprietary uh especially if you were geographically agnostic I mean that that that's a wide net so how how' you approach it oh it was like 100% brokered um so 100% through business brokers investment Banks we didn't do any proprietary sourcing really at all and the vast majority of self-funded deals if you look at the study s did for example which is on our website you know you can see the vast majority of self-funded deals are through some kind of intermediary they're not proprietary um and there's a lot of reasons for that but you know if you go direct to business owners it's very difficult to tease out whether it's even a business you want to buy because a lot of business owners don't even know what they're even is even is not a word that most business owners use in a day-to-day basis and um and then knowing or if they're really ready to sell exactly yeah if they really have an intent to sell um and uh and then even you know figuring out if their financials are correct or if there's anything seriously wrong with the business can take months so it's not a very efficient way of searching for a business I think the biggest argument for going the proprietary route is that there are good deal you can get a better deal than you'd get get if you were going through an intermediary but the truth of the matter is is there are fantastic deals on the intermediary side and you know we'll talk about one of those later today I mean there just are there are a lot of really good deals it's a very inefficient Market you know any below three two three million of IA it's it's an extremely inefficient Market in my opinion yeah and will to answer your question a little more directly um I mean Robert and I were sourcing all day right so um you know up at 7 down at 7 there's you know Brokers on the east coast and on the west coast um we accommodated their schedule as best possible we're having those conversations each of us 12 hours a day I mean it is as as much as we could get on calls with with Brokers we would be um we we had a couple deals under um under exclusivity that you know of course didn't make it but when we did have that we were on a plane and and you know flying to those locations and shaking you know sellers hands and seeing if it would be a deal that we could get done but um we were very aggressive in our in our in our surge um and aggressive in our you know diligence aggressive in our you know offers aggressive in our you know attitudes toward them and we made it very clear that we were you know we were going to get a deal done no matter what and so yeah it happened to be that you know the deal we closed was in was four hours away in in you know DFW which was great we were happy about that but um I mean we we flew to you know Utah um North Carolina I me we we we we did a lot you to get there and this this AG aggressiveness with which you approached your search was that just because you just you knew that that's what it would take or that you were just eager to get in the seat and and the search part is just the thing to to power through so the harder you the harder you work the quicker you'll power through it yeah both um I mean we we we discussed this thoroughly that this was a full-time job and so we approach it in that same way so we were organized like that uh we were responsive you know like that and we weren't trying to search for two years that was not my plan or Robert's plan um at the time I had young children so you know that wasn't going to happen yeah um so you know this is also to to Roberts earlier point about a broker search we we we had time that we were not going to waste and so we were you know we we were searching a binary result here we were going to do it or not yeah and in our case it was going to happen yeah yep yeah I was working I was working probably a comparable amount of hours uh as a Searcher as I was in private Equity so and I think that's how most people should probably approach it and once you had narrowed down to healthare I assume then your search was just in that industry so you were talking to intermediaries just within that industry targeting owners just within that industry or or Sims just with that industry it was probably 70% Healthcare would you say Erin yeah I would yeah you know we could speak a little more intelligently to the industry so it made those conversations with sellers beneficial for us just because we kind of had a feel for what you know what an EOB was and you know what Links of stay are so there's certain you know just you know conversations that we could have I think that probably other Searchers or folks talking to these guys maybe weren't having um so you know that was probably helpful um but we we we were still looking at other at other businesses for sure yeah and were you going to take investor capital for the equity injection or were was this all going to you were yeah yeah always yeah we knew we were going to buy a business with over a million of Eva so it was kind of like well we're not going to put every dollar that we own into this you know so uh and it you know we knew at the terms were probably going to be in the equity Market you know in this space and so um and we were still going to be able to maintain control of the company and majority ownership and we thought that was you know very likely based on you know what my classmates had experienced and what we'd seen with other Searchers so to us it was a no-brainer I think to take outside Equity well it's funny Robert that's this is another example where I feel like a large a sense of my um my own sense of what self-funded terms are with respect to investors comes from early conversations with you and on behalf of Sig you really have tried to educate the market that you can do a self-funded deal a sizable self-funded deal and still own well over half of it again it sounds like you didn't invent this that these were already terms that were out there you've just helped amplify that point yeah I think that I think that's fair yeah yeah amplify is a nice way to say that well yeah I've got a lot a lot of opinions that's right okay uh great guys well let's hear about the buiness that you found or businesses as the case may be tell us tell us about it it was a trio of companies some same ownership three different companies there in the DFW area um really three service lines Home Health home care and hospice um so three different you know services to you know kind of a typical similar you know patient clientele if you will um about 1.2 million of evid I believe is what it ended up being Robert um and uh we we paid under four times for that deal and we were you know very happy with that um it was a bit of a sleepy business in that you know earnings were pretty consistent we didn't see a whole lot of growth um the owners were you know very comfortable in you know in what they had and it's probably not an uncommon story um you know they spent time you know traveling to Europe and you know would kind of come back and you know take care of the business and then take off again but um relatively owner Centric they did have some some middle management um again probably because they were a little bit larger of a business they did have kind of an administrator that was in the business all the time and and one of the owners was a nurse so she did um a little bit of Nursing in the field um and then the other owner really uh you know cut some checks and you know was really interested in his real estate um business but um you know it looked it really looked like ripe for opportunity been been around since I don't know I think it was 95 or something like that so all you know Legacy type of business um pretty good reputation particularly on the east side of DFW um but that was that was our first acquisition um and it was pretty much pretty much down the Fairway for what a you know self-funded deal would look like 1.2 give or take of iida and the re what what does revenue look like on a business like that it was about six million in Revenue okay so and that's perfect 20% margins is that kind of standard in this world it's a little high but not too hi and so what was the big Vision guys um to do be kind of conventional self-funded Searchers grow it like you can then maybe exit in five eight years or not whatever have the optionality um or was it to build something really big like you have I think it was always to to build something big and to own our own business and to do a rollup honestly I think that um I think I I we still would have done an acquisition in a space that didn't make sense uh for a rollup but um that was definitely something that was um in particular attractive about the space I had read about um have you ever heard of Wayne hunga before will yeah the waste management was management Blockbuster guy you knower too yes so I mean that's the thing about you know a lot of self-funded search ends up with somebody buying a company that they grow organically and you know they just own one company and that's what a lot of self-funded searches look like but if you can buy a company in a fragmented industry um where a rollup makes sense and there's a few factors that wouldn't you know uh make that make sense um then a self-funded search can be you know really interesting and returns can be Amplified significantly now Robert what's interesting so I I um on stage at your own conference in Dallas last year there was a conversation about rollups uh and you advocated actually not setting out to do a rollup where you identify an industry you you do all this industry research identify an industry that seems ripe for a rollup and then just go after that industry I'm putting words in your mouth so you'll correct me um so so if that's if my interpretation of what you said is correct it sounds like what what this was was you found a business you liked in and the Cherry was that it's also in in an industry that that seemed ripe for rollup but that wasn't actually one of your criteria filters I think that that's you put it really well will um I think it's really important for Searchers and when Searchers work with us at in si and our accelerator we we push them to be industry agnostic and geographically agnostic as much as poss possible because I think you need to have a wide filter the truth of the matter is is that it's just very difficult to find and acquire a good company it really is and if you limit yourself to one industry it makes it that much harder significantly harder I I believe and reduces your probability of getting it done in 24 months or however long your search rway is the company we bought being in an industry we doing a rollup made sense was the cherry on top it it was um we I think we still would have acquired a company that didn't have rollup potential that had organic growth potential and a lot of self-funded Searchers are perfectly successful without doing rollups you know it's just kind of that was the cherry on top for us for sure although 15 million ebaa is likely to be the headline of this episode so if if people see that and they have a big appetite and a lot of ambition and they want to see similar numbers for themselves after four or six or so years it seems like choosing an industry where there's rollup potentials the only way not the I never say never but the most likely way to get there uh growing from a million dollars is of eitaa that you guys had with this first acquisition to 15 organically was not going to happen in four years so so I so I I take all your points Robert but I guess I'm pushing to say if you really want to go big then maybe you do choose a industry where there's rollup potential because you can't go that big that fast through organic growth no I think that's I think that's fair a lot of our growth to 15 million of EO was organic I want to make that point right that the Texas business has tripled in size the Arizona business has almost doubled in size the Oklahoma business has also done fantastically and those are the Acquisitions we've just had for a while the newer Acquisitions are doing well also organically um they're just brand new you know so we're just getting into the swing of things but um I think that it's difficult to grow you know 10x for example uh you know in four years if you're not doing some m&a or unless you're in a very unique environment right where maybe you bought something on the cusp of you know uh some new trend like assurion would be an example right where yeah you just it's kind of there's some luck there and some you know um uh what's the what's the word the star is kind of a line for you I think if you're going to grow that fast generally um with a with a higher probability you know rollup is probably the way to go yeah well and the assuan case where it's kind of just you're almost creating a new market You' you've kind of gotten into kind of tech tech startup land even though you might not have realized it that's essentially what that Venture end ends up looking like and it's really like you said Robert really hard to that from the beginning yeah um well as I hear you say as we talk about this Robert I'm reminded of something else from the the the uh self-funded search conference in Dallas that Kent Weaver said in our my conversation with him on stage which was the real magic is when you have organic in and inorganic together yes um because then you're just I mean you're getting amplification to use to this seems to be the theme of the episode you're getting that much more amplification um you're just getting it on two fronts and it's just the numbers get big quickly yeah and and Will it's a common theme with each one of these Acquisitions that we've made it pillar that story of just kind of and I don't say lazy owner as if they're not working but they're very comfortable owners right these are typically people ready to retire they've got you know it's turned into a lifestyle business they've got grandchildren or traveling they want to do and so you know typically when we're buying these businesses you're not seeing a whole lot of growth um but when we come in I mean that's what we're doing I mean we really are I mean bringing in like a marketing arm if it if that's what it needs extra management if that's what it needs um you know typically you know we we bought a business that didn't have any type of pnls we built them so yeah I mean these are you know these are typically businesses that are you know they're just you know they're owned by you know folks that are in a different stage of life and you know kind of we're coming in and bringing in a whole new energy and so usually the teams there are also really appreciative of that so U we've seen that at every acquisition we've had actually yeah and so just circling back to an earlier Point Robert you said about the risk of reward of doing this that when you could look at Acquisitions they need to do perform well even if you don't knock it out of the park but that wasn't to say that you're not going to try to knock it out of the park you guys were very growth oriented the whole time very aggressive uh but but um but but what you're doing is covering your downside so that even if these growth plans didn't pan out it still would have been a very nice yeah investment margin of safety right will I me that's how we have a margin of safety yeah great and so the rollup uh thing what what about this industry did you see that made it uh right for rollup small mom and pop fragmentation are usually the two things you the two criteria you hear and I think those are the case here anything else I mean fragmentation is the number one right um and also fragmentation where you've got an m&a Market um at reasonable multiples right um reasonable multiples right there's other Dynamics too right so for us we're doing leverage buyouts of every deal we do so does the industry is it conducive to leverage right and the Home Health Home Care industry I would argue overall is for the most part um do you do you have some benefits to scale right that's another big consideration for rollups um you know you might also look and see are other people doing rollups in the same space have Roll-Ups ever been done before and if not why and if so you know can I do one also you know um um is there a you know a is there a active m&a market for these right because if you can't find Targets um you know uh that are of good size also right so here's another example I wouldn't want to do a roll up in many industries that have you know the average businesses you know 300K of IA because that would just be a ton of work I you know how many you'd have to buy I mean and buying a company is a lot of work I would argue it's the same amount of work to buy 300K ebit company if you're doing it the right way as it is to buying a million EB company everything else the same it's probably about the same amount of work so you know are there are there sizable targets that are available at a reasonable valuation expectation and a lot of those targets um you know those are all kind of the things to think about anything to add Aaron does that sound right no I think that sounds about right um I you know the the price is key here too right I mean then and you're able to do what we're able to do because we're paying you know three four under five times on these deals um you know when you start getting any of these you know businesses that are larger although we did you know have a larger acquisition at a lower multiple you know typically you're not going to find them right so those businesses are going to trickle out of your out of your range very quickly and what about the role of private equity in in your chosen Market because on the one hand the existence of private Equity suggests Robert to one of your criteria that that um there's m&a activity a good thing and that there's going to be buyers for what you're building potentially um on the other hand the existence of private Equity is all it's it's got to be like a sweet spot because if there's too much private Equity interest in a category then the multiples already will have been driven up so there's a window of opportunity I feel like there is ABS that's exactly right on the other side no private Equity is a bad sign we assume too because Who Who Are You Gonna sell your business to if if that's the path you choose to go yeah potentially I mean if you want to sell you know a lot of Searchers want to run their business forever you know um and what I would say I I think you hit the nail on the head though um when private Equity gets caught on to an industry for a roll up it just ruins everything for people like me and Aaron right so you know um you know there's been so many spaces like that vet clinics dental clinics um right now HVAC right HVAC you used to be able to find these small hvacs for like really reasonable multiples and then just in the last few years here they've just been blown through the through the sky I mean so um you got to get there I I think definitely if you can develop a thesis on an industry for a roll up ahead of that happening it helps so I I I do agree with that and so where are we in your your industry for the life cycle of private Equity interest well I'm biased of course but I I don't think that um the Secret's out yet about how great this industry is um and and how much it's a fit for a roll up um yeah so that's my opinion yeah I mean there are some larger players in the space you know that are publicly traded there are some you know privately held organizations that do what we do so they they they do exist but to the point being made earlier you know we're still able to get these for reasonable multiples which is good yeah yeah well the secret uh sure seems to be out among Searchers because you guys will have been the third if not the fourth guest uh who's who's bought a home care or home healthcare style business so well let me you know caveat I just um I wanted to mention I think several guests have bought franchised private pay home carees right which is you know one did Jerome one okay it was just one okay well then you know I I uh stand corrected I um I think that that is quite different of a space than where we are for the most part so um well Robert I I want to do the whole story but then before we leave toward the end of our convers ation I'll want I'll ask you guys for a primer on the industry and we'll get into all of that the different shapes and sizes and categories and sub niches and so on um because there this is a um an industry that's easy to generalize about but as you've pointed out many times the nuances from one subcategory to the other are make them very very different from one another absolutely great so you guys okay so you acquire this business for under Forex for 1.2 million in IA um you it it has these great characteristics four hours away you're not scared to jump on a plane clearly but now that you're buying this business are you moving to D to DFW or are you GNA run it four hours away we we ran it four hours away we hired a president to help us run day-to-day operations the day we bought the company um or actually a little bit beforehand so we didn't have to be there every day but for the first six months we pretty much were there every single day uh and then we you know know Co happened actually not that much not that far after we bought the business and so you know about a year later Co happened and so at that point it made a lot of sense we transitioned a lot of the employees to working remotely and we started working remotely and um you know it just kind of was a natural a natural thing when uh the pandemic happened so uh and then since then we've pretty much managed that business remotely with you know obviously we have a president who's also an owner in that in that business who's been very instrumental in the organic growth we've had we had always planned to at some point transition to not being daytoday on the ground because if you are day-to-day on the ground you can't do Acquisitions you can't think really long term right you're worried about paying invoices and you know things like that day-to-day stuff that's that's you know that's the reason you would need to be in an office all day every day which are very necessary tasks it's just that you can't focus on working on the business if that's what you're doing every day which is you know kind of alluding to what you were saying earlier will the nature of this business too is actually such that being in the office there not that many people who are in the office to manage because everybody's out in the field or the vast majority of the workforce so a lot of the the stuff that's happening at the office is just back office stuff that's right and okay yeah all right that is right do people do people in this world again lots of nuance for all the different categories but generally check in at the office every morning like they would at HVAC or a field service business or no no the clinicians do not come into the office every day they come in okay you know maybe once a month um or once a quarter for trainings usually or maybe some employment paperwork or supplies yeah so this is a this is a uh Workforce the clinicians at least that are very independent very autonomous they'll go weeks without seeing anybody else at the organization if they're doing their job right potentially yeah potentially yeah yeah okay and then on this point about hiring a president so uh common theme of the Pod is that it is a fantasy to I don't mean to say unrealistic but it it is the hope and dream of many people to buy a business that's generating a million dollars of cash and and also not have to actually get in the dayto day and just hire an operator hire a president have them do it we generally try to disabuse folks of that um at least as a first step uh because you should just expect that you're going to really need to get your arms around the business and be in there and be a leader and learn things and so on then on the other hand of course delegation is uh seen throughout the business world so the idea that you would have a business unit or an entire business that's run by somebody other than the person who owns it is actually how the the world functions so it's not that crazy uh and and I've had guests who have who have done it from day one they buy a business and and as they're as they're closing on the business they're hiring an operator or a GM or a president and intend to put that person in and then do and it works although I haven't had them back for the second episode just the just their first one um so so respond to all of it doesn't sound like you guys were it sounds it sounds like you had a lot of confidence that you'd be able to do that um respond to all that and and then and then I'll ask a followup yeah I I guess I'll respond I think that being able to delegate in this space if you want to get past a million of IA if you want to get past the business that you just bought as a Searcher you're you're going to have to be able to delegate uh and if you cannot do that then you're probably going to continue managing a million ebit to business or a 300K EIT to business or whatever it is it's so important to be able to delegate and um we've been really lucky to have uh hired and also partnered with uh the presidents you know and and management in our company um we've been we've just been lucky to to find really good people to work with and um that's helped us have incredible organic growth on top of the growth through acquisition position yeah I I do think will it's important too especially with in our first acquisition you know it wasn't that we bought the business and threw a president in there and closed our eyes and hoped for the best right we were still very intimately involved um and as time went on and as we got comfortable with him and he got comfortable with the business and you know we established what the kpis needed to be and what we were looking for and expecting and what he was you know what his goals were for for the business as well um you know then that was where we could have a little less of that day-to-day invol um but you know for the first you know for the first six months it's definitely you know you really do need to get to know the team that you're working with um because you are a new face for you know a group of folks that probably work for the same person for five 10 15 years in some cases you know in your case Robert you're needing to learn the industry and Ain you knew the industry somewhat but maybe you didn't know this particular industry within Health yeah so you you guys both needed to just be learning kind of yes ading yes me I don't think anyone should have the expectation that they can just hire a president and not be on the ground day one every Searcher we work with at s we tell them plan to be day-to-day at a very minimum of a year yeah at a minimum of a year so you need to move to the city where the acquisition is and plan to go into the office every single day for a year um yeah first one and last one out yeah yep well you know this is such a this is such an important distinction that I feel like I fail to make whenever I talk about the the two options here it's not the where where we should be skeptical is putting in an operator and then not and then acting like you don't have to think about the business and I do think that that is a fantasy that also exists that I'm gonna buy a business and keep my W2 and just have somebody else run the business for me yeah and this is this is the dangerous this is the dangerous notion but theide a that you would buy a business and be expecting to be working on whatever in on around on top of the business full-time uh but just not doing the operations just not doing the blocking and tackling that is what your president or your operator is for that is that's right kosher it works it worked for us very very well maybe it worked very very well for us because it's kind of like you know ying and yang right if if if you don't have Ying which is day-to-day operations and Leadership you're not going to be able to focus on the Yang piece which is um long-term growth plan strategic projects m&a things like that um you have to have those two components for the the second piece to be successful at all and I'll tell you Michael's our president in the Texas Division and uh last year organically that business grew Eva to 50% % um so it's just he's he's been wildly successful in his role as president and he was that he was the person that you hired from day one no not from day one but he started with us probably a year after um so we we ended up changing presidents about a year into it um because the other the other president had a a personal life situation and had to move across the country but it's gone very well we're we're lucky to have the team members we have yeah anything else to say about the transition so you know we we we've kind of skipped ahead to the great hor Story Time Horror Story we got to jump all of the the great stuff and and and the cream but you know yeah getting there there was certainly challenges um you know we we we bought that first business unfortunately the the seller was you know dishonest in a lot of ways um and so you know Robert and I were the beneficiaries of you know some sleepless nights um at the beginning uh let's just put it that way um you know not to get into too many issues but there was you know paperwork that wasn't filed with the government so you know within a couple weeks of owning the business we're receiving a demand letter from the IRS for $650,000 something like that um there was another form that wasn't filed that was a sell's responsibility with the state of Texas so they decided to hold our funds for almost six months it was a rough couple start let's unpack those real quick so the IRS saying you owe 600 $50,000 how did that resolve itself well first of all how how can this be could this have been diligen was this oversight in in your all diligence or not it just some of some of the stuff is going to slip through yeah it was diligence um it was it was it was um not disclosed properly by the seller so um one of the questions is have you filed all you know all this paperwork that is required for the Accountable Care Act ACA of which this company was you know qualified for he said yes it was and it and it wasn't um but you know going so basically it was from you know two or three years back that you know they had not received paperwork that should have been filed so um you know thankfully we remedied that situation I mean we got the paperwork done and sent it over so that was you know it was an achievable you know problem that we fixed but you know it's not pleasant when you're working on everything else in the business and you know you open your your mail one day and you're like holy cow what is this uh but we we got on top of that we worked with the payroll provider and got the paperwork filed I mean he he was doing what he was supposed to just not telling the government that he was right okay U so we did get that remedied the vendor hold was really probably the most unpleasant situation the vendor hold this was the second issue where some paperwork hadn't been filed with the state of Texas and vendor hold means what yeah so vendor hold means um the government will hold the payments that they that is due to you until the situation is remedied which we went to remedy it right away but you're working you know with a lot of bureaucracy and so it takes a lot of time to get that you know fixed um you know so your your customer or your payer is the government the state of Texas one of our payers correct yeah we have a variety so that was one line of business where you know they're now holding our payments until we get this fixed and we you know we we sent in the proper paperwork I would to say the day of the next day that was required um but they you know there's a whole process that they have to go through on on their side of the fence so um in the meantime you know we're trying to pay folks to do their job and not receiving revenues for that service that's being provided um so it was very very unpleasant and did you have to did you just have to manage cash super super tightly or at some point did you have to have outside cash to come in and give you the working capital to get through great question we did not have to inject any more cash um we were able to to make it through that we did have other business lines that were not being held under a vendor hold um but you know probably could have a whole lot longer than that yeah that's right back taxes to the IRS which you handle missing paperwork to Texas which means you're not getting paid by one of your big payers customers if you will any anything else delightful about this transition well I mean another issue was generally you know when you do a stock purchase of a company the bank accounts come with the company and in our purchase agreement we had spelled out that the bank accounts were coming with the purchase but um the seller refused to come off the bank accounts as Aigner um which was really an irregular thing to do and had us worried because we were in a position where the seller after selling the business to us could have gone and wired all the money out of the account or or really done anything with the money in the account cuz he still Aigner on the accounts which shouldn't really ever happen um except except in really you know extenuating circumstances but he was very difficult about about that and so we were in a position where how are we going to force somebody off the bank account without getting an attorney involved and at the same time you know we needed this person who just sold their business to us to train us and to to get us into you know other systems and and things like that so it was a very difficult position to be in absolutely well it's such a perfect example of this how dramatically the dynamic shifts when you're the buyer pre pre-close and you can negotiate and push and walk and you always have the leverage of being able to just walk and then the moment the business becomes yours you need that seller and and that seller has so much leverage over you usually I mean if the seller is going to be helping you with a transition which 99 times out of 100 they are then all of a sudden they have all this leverage because you because you need them to play ball with you and help you so so how do you how do you lawyering up obviously it's just going to completely alienate them and and create animosity and they're not going to give you any more help and maybe cause even more trouble so that does seem like the wrong path how do you deal with it well um delicately yeah yeah it's a really difficult thing to do um and sometimes you've got a 90-day training plan or whatever it is and you need to get what you need to get from a seller before you do anything and you just got to kind of play nice sometimes you know and for us you know we got this horrible letter from the IRS and we realized there was a pretty good chance that this relationship was not going to continue being positive but we didn't do or say anything because we were in a very difficult position we needed passwords and usernames and training and you know you're in a difficult spot when that kind of thing happens so you just kind of have to do what you you have to be a diplomat um to some degree and that's what we did yeah oh the other the other thing was I mean a few months after we bought the company um the seller's daughter actually started a competing business uh very nearby the business that we had purchased uh and that competing business ended up hiring away uh some key employees which was also a very difficult thing to go through and extremely frustrating um but uh you know so it was just an extremely stressful transition the seller's daughter so so there would have been obviously a non-compete for the seller but not one for the rest of his family so the seller's daughter and and she hires key people away from his old team so while she's presumably within her rights to to hire somebody it sure feels like there's some sort of um not upholding the spirit of the of the non-compete there I know you probably don't want to make any accusations but it sure smells that way my interpretation you don't you don't have to you don't have to respond unless you want to yeah well you know the non-compete was with the seller and so I think that the lesson for Searchers to take away from this is that you need to think about who the sellers relatives are and close friends and confidants um because if those are people likely to start a competing business you need to have your eyes open for that right if the seller's son or daughter is working in the business currently and has a bunch of responsibilities and when they sell you the business the seller and daughter or son are going to leave um How likely is it that the son or daughter goes and starts a competing business down the street you you need to think about that as a seller as as a buyer well actually it's it's a great I'm glad you made that followup Point Robert because it actually has not necessarily anything to do with the family it's anybody at the business and so and so this is actually not uncommon that you'll hear the the GM or the the owner's lieutenant or right-hand man yes goes off and starts something day one I mean there I've had a couple horror stories on the Pod where that happened yes so and there's just no there's just really no preventing that I guess there are should force you absolutely there are mitigations right and things you can do to protect yourself against that so if you have a really key employee that you think would have a high likelihood of doing that you know in the first in the first you know month of buying the business think about giving that person some kind of a a retention plan right uh you know where if they're with the business for the next 5 10 years they they get some really nice bonuses uh but they have to stay with the business that's an example have them sign a uh an employment agreement with a non-compete non-solicit you know and other Clauses in it uh that protect you as a as a business um so there's there's quite a few things you can do to protect yourself in a situ from a situation like that and mitigate if it happens okay but it's something every Searcher should think about because it's a it's it is not that uncommon and it is a significant risk yeah and and the risk probably is mostly that they're going to steal not that there's just a new competitor because in most of these businesses in in our world these small businesses there's lots of competition so so this isn't you know Tech land where there's intellectual property and a single competitor can completely you know really uh undermine your business but it's the either the key people at your team them stealing them or the the this person starting a business and stealing the key people or stealing key customers yes so that's and that's and that's really so often what you're buying is the team and the customers so they can swipe that away so it was a rocky transition yeah but I guess you were undeterred at what point are are you then looking to kind of execute on this rollup and and do the next acquisition we don't have time so to be clear for for the audience you bought eight businesses technically but this first acquisition was three and then you've done five more so kind of six acquisition processes let's call it we're not going to go through all of them obviously but we are going to hear the story of one more which was a big one Aaron that um so to lead us into that when did you start going again on this rollup uh plan so we never stopped searching okay so throughout this entire process and the horror story that we just disclosed uh we never stopped searching so actually um business that's that's here in Arizona that we acquired we actually found it in about October of 2019 actually believe it or not and is that before you closed on the we closed right about the same time so we we closed we're under exclusivity on another opportunity uh but then of course Co hits so we we we Tred to get that that second deal done there let's call it January February of 2020 but you know at this point you know you're starting to SK Sky starting to fall around everyone you know and uh you know the business takes care of you know a lot of vulnerable people and so you know the seller got to a point where she said look I got to focus on like my core business right now like there's no way we can transact and yeah she was right um so you know kind of fast forward through Co we continued you know continue to dialogue we weren't under any contract or anything like that we just you know developed a really positive relationship um with the seller of that business and um you know it took a little while to you know let Co do its thing and you know get past that you know era for the entire world um and uh eventually the seller called and said I think we're good now you know things are stabilized and they were um and actually through Co that business continued to grow and um so fast forward a couple what about a year and a half we then went back under exclusivity um to make that transaction happen um business never went back to Market you know we continued a dialogue that was you know very healthy and uh she you know sent over updated financials and you know we rewrote another you know Loi and eventually a purchase agreement and bought that business as well and the growth that it had experienced in the meantime did that mean that the that your original offer needed to be take that into account it did um not a whole lot but it did there was there was growth um the seller had a number that that that she wanted to be paid she was very specific about a figure um typically when we're doing these deals we're bidding on a multiple of earnings and that really wasn't how this seller was thinking about what she wanted out of the deal she had a number that she wanted so we were focused on getting her you know what she was looking for usually Ain when a seller has a number it's unrealistic and inflated well but it but it sounds like maybe in this case it worked in your favor as buyers yeah that's correct it did and that is exactly true typically it is you know Out Of Reach and and you know asking I say Cadillac prices for a Camry um right uh in in this case you know the seller you know this you know this is a seller that um was certainly you know business savvy but you know social worker at hard and was very concerned with you know the the folks that she took care of um you know at at some point she had spoken to you know the suits in New York I like to call them that you know were interested and she just wasn't that wasn't what she wanted for her business um she wanted somebody that you know had a a little more compassion and understand this understood the space and how you know how important the people were you know the dollars of course are important as well but um for her that there were certain priorities that she had that were maybe a little different than some sellers MH um so we did we did we did have a we were happy with the purchase price for the for the business can you can you share any of the numbers about that business and about the transaction Robert would you like to share that um you know I think we probably you know should keep that confidential um but you know I'll tell you that the size of the business it was um you know it was it was probably four times the size of the Texas business so you know it was a sizable acquisition for sure it was I like to BR about this it was the largest SBA deal that lioke bank had ever done at the time and as you know lioke bank is the largest SBA lender in the country so uh the founder of live o Bank actually flew in on his private jet and uh and shook our hands at uh in the boardroom at uh one of the uh jet Landing strips over here in Dallas it was pretty cool um but how does the SBA even I mean this is such a big transaction you've already spent some of your SBA money on your previous acquisition oh and oh by the way is this your second acquisition or were there ones in between well let me actually yeah go ahead let me uh politically answer this so okay um so first the first piece here is that Aaron did not PG the first deal only I did right they're separate deals they're separate companies right so the Texas deal is pillar health group and the Arizona deal is pillar Health Group 2 um and Aaron is the guarantor for that deal I'm the guarantor for the Texas deal so we didn't use up any of our $5 million SBA guarantee threshold um so so to so to be clear Robert that what that means is if you're partnered then you basically have 5 million bucks of SBA to work debt to work with per partner if you if you structure it the right way uh that's how we've built pillar health group actually which we'll talk about later I guess but we have quite a few Partners in pillar Health Group all the presidents are Partners pretty much um and so um anyway um I think that the other thing here is that we were able to utilize um uh parasu debt which is conventional debt that lenders like live o bank and couple others will extend uh for deals that they feel strongly about um that they have a lot of you know belief behind um so we were able to get some conventional debt underneath the 7A debt um and then we had a seller note and then we had Equity preferred Equity that we raised so that's how we were able to structure the transaction and to be the largest SBA deal that lioke has had ever done means the the SBA slug of 5 million plus the parasu yes that's what I mean and and when I say SBA deal I mean a deal involving SBA financing it was the largest deal that they had done involving SBA financing at the time and this parasu can is there anything more to say about that so is it's just to repeat what you said it's essentially if your lender your SBA lender feels really strongly about your deal and you need and it's a larger deal so you need more maybe than the SBA loan allows this is a way for them an instrument for them to ex you more debt is it just another million or two or can it go all the way to 10 you know another 10 million giving you fully 15 million like what give us more about it please well it's really at the discretionary of the lender because this is uh I mean that's that's the lender's debt that they're extending to you so okay um theoretically it could be any amount um I don't okay you know um so I so it's just conventional conventional debt behind an SBA loan yes but they call it parasu debt because it's really on the same terms as the SBA debt which makes it incredibly attractive for example you have a 10-year principal amortization you know ah versus conventional conventional debt which the amortization is much shorter it would be shorter and you would have to have a larger Equity injection most likely you would also have Financial covenants um so with par puru debt you really would have very few Financial Covenants um like 7A debt has so and financial covenants for the audience are your business when you take debt and there are covenants your business needs to perform hit certain kpis yes to be compliant with the debt agreement so it's not just versus SBA where it's like the SBA is not looking over your shoulder making sure you're performing as long as you get them their check they're totally not not paying attention to you that's actually less common in the world of lending often lenders are watching the performance of the of the asset or the business that they've lent into to make sure it's performing according to the criteria that have been agreed to exactly and you can be in default of your loan even though you've been making your payment that's not the case in SBA Loans or with par Pursuit debt by default well congratulations uh on on the Arizona acquisition hanging around the hoop so good I guess the obvious lesson here is you know just keep reaching out to people don't never never stop never let the the relationship fizzle yeah and well to be you know to be very clear we also didn't sto searching even while those relationships were continuing with the Arizona opportunity right so we we still didn't know if that was ever going to happen right we just continued a dialogue um in the meantime we did we did with a partner bu a business in Oklahoma um and then you know of course since then you know made a couple other Acquisitions but um yeah I I don't normally recommend sticking around the hoop and just crossing your fingers and hoping the business that you'll be able to buy a business in you know in two years um but in this situation you know we did continue to to search for deals and Source deals and run you know the day-to-day operations and um support our president there in Texas um well and to be clear sicking around the hoop hanging around the hoop doesn't mean that's the only thing you're doing you're doing that in parallel with all of your other sear exactly exactly but just keep keep keep relationships alive yes for sure great so you did Texas the first three that we covered then you did Oklahoma which we didn't cover then you did Arizona and then you've done three others yes that's correct you're losing track there's so many no that's correct we we yeah we we partnered with Searchers and and bought businesses in Oregon and Pennsylvania and then another acquisition there in Texas to grow the footprint in Texas we have two more two more under Loi right now and just going back to um Arizona well and Oklahoma and Oregon so you're your Geographic agnosticism has never faltered your your your your buyers across the country that's correct same model obviously president on the ground you manage the president closely you make your presence felt at the locations but you are the president is really is really the is the operator um and you're sitting above that continuing to do m&a but but Erin you you moved to Arizona why did you move to Arizona and not to Oakland or to Oregon what was what was IC about being in Arizona well number one Arizona was very large um so you know we found it necessary that you know boots on the ground would be very important um you know this company did have infrastructure you know to the again to the comments made earlier in in in the call here but um so there were supervisors and directors um but you know yes it was we we found it necessary that I move out to the desert where are you I pulled the short STW yeah I'm in Phoenix yes we are we are we are throughout the entire State though we have offices in Tucson and Flag Staff and um Poria so you know we do service the entire State it's a it's a large it's a large company yeah and uh Erin how big is your family I've got two kids I've got a 10-year-old and an 8-year-old and a wife school teacher wife and we packed up and I guess that would have been two years ago now um and moved out here and made friends and found a little community and went to school and church in whole n all right so yeah we fit in really well I think great great oh that's your neighbors that's right exactly um okay all right guys well we're let let's oh last question just on on the mechanics of this whole project then I want to remind people where you are today and kind of ask what the future looks like and then we'll close out with just a quick primer on the industry so last mechanical question equity just give us a picture of what that has has looked like you said on your first deal that you were going to have Equity um that you going to have investors which you did was that the only time you took Equity took outside Equity or what we've taken outside Equity three times for the Texas acquisition for the Oklahoma acquisition and for the New Mexico acquisition excuse me the Arizona acquisition and um total raised was I think just over three million of equity um the rest of the Acquisitions have been funded with cash off the balance sheet fantastic yeah so just three $3 million raised to have a business now that's 15 and a half million run rate of 15 and a half million e but up pretty pretty and and uh where how do how do your investors what do their returns look like that was a softball well we've returned we've returned we've returned all the capital that was initially invested and um I think they're pretty happy um so yeah okay I think so okay and and so guys this is a little bit more on rollups but so is the way rollups typically work we won't get too technical here but give us two minutes on so each of these Acquisitions is its own Independent Business you raise equity for that particular deal essentially that's it and then there's an umbrella hold Co basically well not exactly every one of the Acquisitions is a separate company technically so we have pillar Health Group pillar Health Group 2 pillar health health group three pillar Health Group four you know I I don't know how many pillar I think there's six pillar Health groups formed as of today and each one is a separate SBA loan uh and each one is uh you know a separate Equity injection um some of those Equity injections were from outside investors some of those Equity injections were from the other pillar Health Group entities and the go now let's Circle back Robert to the what You' mentioned as many of your presidents are partners in the business so these Acquisitions all have independent SBA Loans so the person your president on the ground there is a part owner is a is the personal guarantor of the loan tell tell us more about what that structure looks like because that seems like perhaps not so common that seems like in in in rollup land although I don't I don't it's very uncommon it's a very uncommon structure so uh the initial presidents in each acquisition are the person who who has personally guaranteed the SBA loan and so um um you know that that person who's the initial president you know has equity in the business and um and then you know a salary and um um so like actually for the Texas business originally I was the president like technically at the very beginning the initial hire we had was a general manager so I said we hired a president at the beginning but the person fulfilled that role but was in a general manager role and then we eventually hired a president and I stepped out of that role um but uh it's a very unique structure you know we have all these different SBA Loans and different entities pillar Health Group entities but what that's allowed us to do that that the there's downsides to that and that's that the presidents have had to take personal guarantees on the debt the upside um to that and it's a bit of a complicated structure right you have all these separate legal entities so those I I'd say those are the the complicated and those are the downsides to the structure the upside to the structure is what you talked about earlier The Leverage we've been able to achieve uh while you know it's it's it's high leverage in terms of percentage of the cap structure it's still reasonable and uh you know I would say relatively um a conservative level of Leverage when you think about in terms of risk and debt service coverage we've been able to only put in just over 3 million of equity to build a company with 15 million of IA there is no way you could have done that um using conventional debt not SBA debt and um without it just being like a complete organic growth play like a startup you know um and so that's uh that's pretty amazing and has allowed you know us to maintain self-funded search type terms right um whereas if we did a traditional search for example and use conventional that uh that'd be totally different we wouldn't have control of the business uh and you know we would own a much smaller portion of the business yeah yeah yeah yeah so so maybe so just by contrast give us if you can like a a a more conventional rollup that's not using this this structure that you guys have kind of innovated what it would look like for the principles for the entrepreneurs you guys you'd have less than 50% of the business you would have raised a ton of money right and you'd be buying the businesses with a lot of equity uh and and maybe seller note there'd be no SBA anywhere right yeah so I'll just I'll just do some round numbers okay so let's say you wanted to do a rollup in this space and you we'll take organic growth out of the picture because that kind of muddies the water let's just say it was it was all uh growth through acquisition and you wanted to build a 15 e to company through acquisition okay so you would as an entrepreneur if you wanted to do that Acquire eight companies to get to 15 million of EO what you would need to do initially probably is go around to investors and raise a blind pull of capital and blind pools of capital um you know if you're going to get to 15 million of EIT call on a Forex let's say Forex average purchase multiple that'd be 60 million total and with conventional debt you're probably going to get like 50 50% LTV so 50% leverage so that means you need to raise 30 million of equity so you would need to go around to investors and raise a blind pool a blind pool fund of $30 million and what kind of terms are you going to get with that well there's a big market for that type of security and the terms are that the person putting it together the sponsor is going to end up with you know somewhere near 2 and 20 right a 2% management fee and 20% carry um you can get a little more attractive than that if you find the right investors or if you do you know like a traditional search traditional Search terms are you know you can get up to 25% ownership but um you know that's a very different thing raising $30 million of equity uh and getting 2 and 20 is a very different proposal than basically doing a self-funded search and raising 3 million um you know and the expected returns to equity are extremely magnified when you only put in 3 million of of equity for a company generating 15 million of EA right absolutely Amplified so um the terms are are you know understandably extremely different that was great Robert that was um very helpful this structure is was I right to use the word Innovation that that the way you guys have figured out how to do this is is really quite clever when you compare traditional rollup structures like the example you just gave I have never seen another group use a structure like ours so I would call it Innovative and uh this might be the one thing you give me credit for for innovating today will but I think that this was you know this was kind of a pretty Innovative thing about what we put together I eron have you seen anything like this before no I haven't no not at all but I I think that a great distillation too Robert of of of to do something like this in the conventional way would mean $30 million of equity and you guys have done it with $3 million of equity now let's do Circle back up to one of the downsides you acknowledge to the model Robert which is that all of your presidents are um have to take have to accept personal guarantees which is is going to be something that turns off a lot of people and even for those it doesn't turn off it means you're going to have to incentivize them back to our risk reward you're going to have to incentivize them with a nice chunk of the business so you're you're going to be giving up more Equity to them than you would to the presidents that you'd have in the conventional rollup situation correct yes that is true a personal guarantee is not something to laugh off I mean it's a serious thing right and um if something bad did happen which you know um knock on wood and um we're we're very lucky and blessed that it hasn't uh we haven't had a a you know a a company unable to repay debt but if in a situation like that the person who had personally guaranteed the debt would be personally liable um and that's a very serious commitment um and so um you know you you get compensated for that because that's something that will keep you up at night absolutely it's it's a serious thing yeah well and um but I assume one of the the things that mitigates their risk somewhat is that they are part of this larger organization so if there if one of the if Oregon got into Dire Straits the rest of the the mothership would help out absolutely we all right absolutely right Y and that's that's part of it right is like you know we know how to bill we know how to pay payroll we know how to manage people you know we know this game and um and we also have resour ources as a larger organization that absolutely uh helps with the risk aspect that Robert and I did not have any in 2019 yeah yeah that's right yeah and are these so um actually before I ask that question the equity that you give to the Presidents is it in their entity or is it in pillar Mothership their entity in their entity interesting and do you is there standard terms that you offer and what are they it varies by entity you know um but to some degree so this segue to my my followup which was there's been a little bit of um overlap here with SG because some of the S Searchers that Searchers that have gone worked with s partnered with SG have ended up buying and businesses that are now part of the pillar um the pillar brand right yeah so they were Searchers who who they were kind of Searchers that found the deal or you found the deal so talk to us about how that's worked versus just you and Aaron doing your own m&a activity your own searching to find more targets so and and then find pres s is like an accelerator for self-funded Searchers right and they come there there folks who want to do a self-funded search they come on board with us we help them Source um you know um submit Lois we help them get through due diligence we help them raise Capital the whole shebang right from start to finish I want to find a business to buy to closing on the business and several of the presidents of pillar Health Group were formerly Searchers with SG and we ended up finding home or Healthcare companies you know home care or Home Health companies or hospice companies um and then they became presidents of those businesses under the pillar Health Group umbrella so there's a overlap there that works out really interestingly yeah yeah yeah that's also a very aspect to the model wh which piece well that we have several Searchers under SG who are looking for Home Health home care and hospice companies all the time yeah you know and if they end up acquiring one often they would want to become a president within pillar and that company would fall under the pillar then so that's a very unique model all right guys we got to start wrapping up here but still got a couple minutes so all right where are you today remind us give us the Eva number the audience has already heard but tell it to us again the revenue number employees all the all the pretty metrics uh so five 15 A5 million of adjusted iata on a on a TTM basis 60 million of Revenue and about 1500 employees so we're very we're very um lucky and and happy with how it's gone so far yeah two two additional Acquisitions hoping to close in the next you know 30 to 60 days you know again if all goes well um and what will those do to revenue eron um at about another two and a half million of evida we're hoping to end 24 oh sorry oh fantastic we're hoping to end 24 at close to 20 million of Eva if organic growth and projects and Acquisitions come through yeah we talked about about private equity in this market earlier um that you know so that's that's always in the back of one's mind doing a rollup but you guys are just having so much success continuing to buy and seems like operate these businesses so what's the game plan what do you think is next for not just next year but beyond that I think that we have so many opportunities in front of us at Pillar it's really exciting um I'll give you an example I mean our hospice division when we acquired it um four years ago had like three patients and today it's 100 50 um that's just one example we have growth opportunities in really pretty much every one of the markets that we're in and um you know we're really excited about the the future potential of pillar um you know organic growth and both you know opportunities for m&a so um I think hopefully we you know continue to grow and uh do a great job of taking care of our patients and clients and uh and continue offering addition services and and uh and continue to you know our commitment to offering high quality services as well um so um I think that you know we've got a lot of lot of runway in front of us and we're really excited about that Aaron did I miss anything yeah I mean no we we have a great time doing what we do well we've got you know presidents that we get along with very well personally as well as professionally I mean obviously we're young guys we're all on the same page you know looking for the growth opportunity commities I mean one of those Acquisitions we talked about happens to be a competitor for one of the you know business units that we have that approached us they said I see you're doing a great job I'm ready to retire would you guys like to buy our business we said sure yeah um so to Robert's point I mean you know when we started this a few years ago we didn't necessarily recognize all the opportunity that we see today in front of us and so we uh anticipate continuing to be opportunistic in our growth well just for the audience to have a sense when you when you had a business with 15 million of ebit maybe 20 by the end of the year you know the multiples on the to to the valuation of that business the multiples are going to be themselves into the double digits very likely so I'll leave the audience to do to do the math on on the overall Enterprise value of what pillar could could be uh at the end of this year guys let's let's close out with just a quick education on the industry we've we don't have a lot of time now and so we're not going to go as deep on this as um as I might have liked but um let's start with one let's start with one thing which is just the nature of the work that's the service that's being delivered which is people who in the case of hospice are at the end of life it's a an incredibly difficult and sensitive um moment time for them and and and the actual yeah so the actual service that's being delivered is uh really not something to be widgetized you know so I don't know and I I'll maybe I'll make this a clearer question by saying that Jerome who we referred to earlier who bought um a couple home healthcare businesses in North Carolina talked about that the employees in these businesses are really people who are drawn to this world the clinicians because they're just they want to help it's they're kind of like the social worker mentality um and that's beautiful and also can sometimes be can sometimes be difficult because they're maybe not the most business oriented people so just I just put all of that out there to respond to let's not forget what this work really is yeah that's I mean we we actually say something similar to what you just said well we're not delivering pizzas right we are we are providing care for some of the most um uh vulnerable members of our society and we take that very seriously um and um and so there's there's a high uh um I guess expectation in terms of quality customer service um and and and the types of people we want on our team are the people who this is a mission for right and it's a mission for us too and I think that's something that we we pride ourselves on you know every day we realize that we're making serious differences in people's lives um and we take it extremely seriously and there's um you know a high level like I said a high expectation uh for the type of care the the the care we give um so and I'll say this also I mean there is the business side of it too uh and I talked to you earlier about the ying and the yang right if you don't have a profitable um if you don't have a profitable well-run business uh back office and things like that you're not going to be able to on the front side provide excellent and reliable care so those two things are and and you're not going to have a successful business in a profitable business if you don't provide the good care right so those two things are very much you know dependent on each other yeah it's also a very reputational business you know in all of our in all of our you know different states and different regions you know we we carry a very like Robert said a very high level of conviction with the work that we do and so you know we take every complaint very seriously um you know we expect all of our staff to go above and beyond and they do and we don't have to tell them that like they know that will and um they know how important the folks are that we take care of and um so we're we're very engaged in the community we're very engaged in other community events and we want to be a part of that you know a toz um so reputation is a lot of what we're buying here as well I mean these are businesses that have been in these you know spaces for 15 20 years and so you know that's that's another you know weight that we're carrying when we make these Acquisitions do we want to maintain those reputations one of the things now now going back to just strictly looking at kind of the business opportunity here one of the things that this industry attract people um opportunistically to this industry is the growth in demand because of the Aging Boomers which are of course a giant demographic swell um is that is that really kind of the the the story underpinning the growth of this business are there other this industry are there other things to at play here that's certainly you know uh part of the thesis we serve a lot of individuals outside of the geriatric Community though we serve individuals in the disabled Community as well uh and other communities also um and so that's not you know I wouldn't tell you that a core of our thesis is that you know more people aging um you know it certainly is a Tailwind that people point to um you know but uh that's one of many Tailwinds that the business is um benefiting from you know so what other Tailwinds uh you know I think that there's additional funding for a lot of the services that we provide because there's more focus on it for example in Oklahoma um the state government decided that they weren't going to have no longer were they going to have a a large backlog of clients wanting to receive home care services that couldn't get them and so they allocated more funds to the programs that we participate in which is a great thing for the community um you know for for the people we take care of and um and also even for our employees who rely on those funds to be able to take care of those people so I was a huge win for everyone and you know uh I think a lot of states are moving that direction realizing that hey look the more we spend on things like Home Care the less we will have to spend on things like hospital stays institutions um things like that right um and it's good for everyone earlier we talked about how I I've kind of wanted to stay away from brick and mortar that was a prior life I was in this is a big Trend you're seeing right now as well I mean that you know the government payers you know even individuals are recognizing there's so much more benefit to being you know taken care of in in home we call it Aging in place or getting support inside the home so all of our services are in the home or in the community um we are we are really you know trying to stay away from that brick and mortar model and I think that's the the trend you know across the industry yeah better put by Aaron yes they do sound like good Tailwinds on the other hand I'm um they they surface the point that that there's pen stroke risk to the business right a lot of this is um yes your fortunes are very are very tied to legislation legislation that is true I mean luckily the services we're providing are critical and uh it's it's politically sensitive to cut the services that we provide because um the folks we're providing these services to are 100% dependent on them right and so um you know we certainly don't think that would be the right decision and I think a lot of constituents involved in a decision like that would certainly disagree with a you know significant cut to those Services also last few questions uh a very quick breakdown of the industry hospice Healthcare home healthare and then and then maybe the different communities break those down for us please I'm going to break it into like three I think categories or ways of thinking about it I think the first way of thinking about it is what service are you providing and the spaces we play in are Hospice Home Health and Home Care Hospice is you know end of Life Care um right um home health is going to be skilled care in the home so generally nursing or therapy in the home uh there are some unskilled Services provided under Home Health but it's not most of what the the care is and then home care would be the um you know Aid type Services where you don't have like a clinician actually providing the care it would be you know like an an aid um for example that would be an example title helping with assistance with daily yeah or daily living activities shopping bathing cleaning medicine those types of things yeah yeah um so that's one way of dividing this industry up um and you could argue that those are three separate sub Industries but you know they're all in home care right very similar in some ways the other way to divide them up is by payer Source um and so um you've got private pay is a payer Source um so where people pay out of pocket you've got Medicare um which is for the most part for you know geriatric population you've got Medicaid which is really for the lower income population you've got Commercial Insurance um and you've got like the VA for example you've got workers comp you've got a few other payers as well so that's another way of kind of filtering the industry um and then I guess the last way I would think about is the conditions of the population right so you've got the geriatric population um which has a different set of conditions than the disabled population which has a different set of conditions and needs than the Pediatric population um and uh and so those are the three ways I would probably divide it up that are going to give you the the big differences um I don't know eron did I miss anything yeah we also a part of our business as well is what's called vocation Rehabilitation yes um so that's helping um folks get jobs yeah right so um if you you know if you see somebody you know sacking groceries at a grocery store you know typically that's another state program that supports folks and teaches them like life skills and how work in the community so that's another part of what we do but yes great and for Searchers out there who might want to buy a business in this very broad industry are there any particular ones that you would say that are particularly you don't like those businesses you as acquirers don't like those businesses for some reason and on the other end of the spectrum you you you do particularly like them I mean a big one what's I'll let you go first I got a big one but let you go first I think we probably have the same one but I might be wrong I think franchise private pay Home Care is not a good place to be in general um for a variety of reasons um so I would steer way clear of that space if I was a Searcher Ain were you gonna mention something else that was one I've got another one uh group homes that's another we just you know that's again it's kind of a brick and mortar it's it typically is a state payer um there's a lot of liability it's a very difficult very very difficult business you can get tough to staff you can get in hot water very very so we don't we don't go anywhere near that yeah what about the distinction between just just the broad bright line between skilled and unskilled so Home Care on on the one side and then uh home health and hospice on the other how how to think about that well they're very different um we don't have a concern obviously Crossing over between those lines because we do skilled and unskilled care in our business um but uh I think there there are significant differences for example on the skilled side most likely you're going to have a government payer on the UNS on the unskilled side um it's a mix there's a lot of private pay on the unskilled side there's also government payers but it's mostly Medicaid instead of Medicare so you're worried about State budgets rather than Federal budgets um yeah so I mean there's a lot of considerations between the two and then on on the skilled side you've got you're going to have more of a you know a clinical Focus which is different than the on the uh on the unskilled side for sure and in terms of who the payer is either private pay so the patient paying out of pocket versus all of the other options either insurance companies or the government either States or feds um any preference there I assume paying out of pocket is better no I wouldn't say so you know one really nice thing about being paid by the government is they pretty much pay on time and pretty fast actually so Medicare and Medicaid they usually reimburse Us in like 10 days that's amazing right and if you're on the private pay side you may have to chase down your clients to pay you and you will have bad debt yeah you will have bad debt yeah we we we don't really have that issue in a very large portion of our business yeah also a lot of that on the Medicaid side that is an entitlement so um when those individuals are you know qualify for that support um they they get that support and we we're you know going to be there to support that the government and giving them that care that they'll need yeah yep you mean they don't have the same kind of discretionary thought should I pay for this should I not that a private that argument could be made certainly yeah great guys um in one little Minor Detail I I meant to ask much earlier but I heard you say stock sale versus asset sale so that's not typically the way the way we do things here buying businesses why why do you do stock sales in this industry in this industry keeping the license and cont you know payer contracts and licenses is very important uh and so almost all of our purchases are for legal purposes stock sales uh but you know uh for tax purposes maybe asset sales because we do an election but uh you know our our other Acquisitions like through s we're industry agnostic we do a bunch of asset purchases through S you know just depends on what the industry is and the particular situation all right guys well uh congratulations on building something really large and meaningful and it feels like the momentum is only increasing so very impressive to to hear this whole story and what you've built uh I I think it'll make a lot of people interest a lot of listeners interested in this this industry so thank you guys for coming on and sharing I hope it encourages people will yeah we appreciate you having us I hope you enjoy that interview make sure you subscribe to the acquiring minds 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