Jeff Homer welcome to acquiring minds morning thanks for having me Jeff another Searcher had met you and thought your story what they' heard of it seemed super cool and actually wanted to hear the whole thing so he put us together so he he could hear it uh when I got just a taste of your story I similarly wanted to hear more thought it sounded really cool you rolled up music schools so that is what we are going to learn about today let's get right into it start us off with some background on you please Jeff sure so I have a pretty traditional uh sort of private Equity Finance background um so I went to Harvard um out of school I worked for B capitals credit Fund in Boston um did a couple of years at a New York City private firm called Reservoir Capital um and it was around that time that I started to get sort of introduced to the ETA space um it was that time mid um Mid zero interest rate phenomenon where multiples for large cap businesses started to really expand private Equity started to pay you know mid teens to High Teens multiples for businesses and um sort of started to wonder how we were going to uh create value and make money from such a high starting point and it was right around that time that I started to get introduced to the world of the lower Market where businesses were still for sale for you know three to five times and um I started to dabble with that um it was right around the time that I moved to Denver in 2018 um I actually came here to join a family office I was is running a long short public Equity strategy for a family office here um and I got introduced to a woman who owned a music school and uh you know I thought that would be sort of a fun and interesting side project but very much a side project I was envisioning that being something that I did on the nights and weekends it was perfect for that because it's an after school program so it's primarily happening outside of typical work hours um and yeah it just seemed like a really fun and interesting community- based opportunity to do something tangible that exists in the real world trading stocks and doing investing can sometimes see seem a little abstract and uh you know spreadsheet based at times divorced from The Real World so it seemed like an opportunity to do something kind of in my community um but let me let me stop you there because I got some follow-ups to your your background the low interest rate environment it often seems like when people come out of school and they get their first job or their first five or 10 years of their career that kind of um they assume that's what normal is but you just finished telling us that obviously having zero interest rates or very very low interest rates for so long was a very unusual environment do you but it also seems like you actually have that perspective even though those were kind of your formative professional years you you understand how aberant that was do you think it has had an influence on you I mean just say react to that yeah I mean I think I was sort of the Frog being boiled you know at you know like so especially sitting on the credit side of things you're you know you're looking at leverage levels for businesses creeping up to all-time highs you know I remember when you know you could get a second lean bank deal done that would you know that would have six turns of Leverage on it and maybe a a hold co- pick note sitting behind that going to seven times leverage and these were sort of new these were new structures that were created to reflect the fact that private Equity firms that we were backing were paying more for the businesses they were requiring so it was actually somewhat easy to observe it happening in real time and and actually changing and the the impact was you know it wasn't like rates went to zero and all of a sudden multiples went to 14 it was it was a it was an incremental process whereby you know leverage was added to the system and hey that didn't work that badly let's go even further and let's go even further and and I think you know it I was working during that time at a relatively conservative shop that was pretty mindful of what was happening both in the present context and in the context of history and so I think to your point about you know at 26 you know how did I have that Insider observation it was because I had you know people around me that had a lot more experience with you know Decades of of investing across Cycles telling me that this was pretty unusual okay and you've just given us a few examples of multiples that you were seeing first at six then into the teens many you're comparing debt in equity multiples so I was talking debt leverage ticking up past six to like seven turns of of leveraged Finance for a private Equity buyout and the private Equity Firm is paying the the difference between the debt at seven and the you know the actual Equity purchase at at 14 or 16 times gotcha okay 14 or okay well there's the there's the multiple I was looking for the EA multiple 14 or 16 correct okay so a lot of people that I've interviewed who come from Finance backgrounds are have been exposed to multipoles that in the public markets or in large cap private Equity or what have you and then they see the kind of three four number down here and their eyes go wide so what is maybe you've just answered the question what are the multiples that people who come from institutional Finance used to seeing that three is just unbelievable 14 15 yeah I mean I think a a reasonably high growth high quality business of the type that like if you took the the target profile of a traditional search you know Enterprise SAS recurring Revenue like the you know all the things that you want to see in a in a traditional search business and you made that business 10 times larger it would trade for 15 to 20 times I think generally okay great so 15 to 20 versus three three looks nice on the preall you also made a really interesting observation about down here in the lower lower lower Middle Market um not just about multiples but about risk premium do you recall yeah and just that there's less heterogen gen ity in valuation in the lower market so you know in in in the public markets in large cap private Equity if you have a high quality business it might trade at two to three times the multiple of a business with perceived lower quality so you know the difference between uh you know traditional you know lowquality business some kind of like Junior minor speculative thing you know and like a Google Facebook Amazon like the difference in multiples between those is you know several times different um whereas in the lower Market you maybe this spread is like three two to three times for a lower quality business and five to six at the very high end for a higher quality business and I think that um you know that shows that there is not as much of a premium on quality and that was sort of the starting place for my very very you know naive beginning to a self-funded search was just to say Hey you know down here in the lower Market there are probably some highquality businesses they are not going to be priced at nearly as much of a premium as they would in other you know in in larger Capital markets um so I'm going to just take the first initial approach of trying to see a bunch of volume you know go look at a bunch of businesses with the hopes of finding a couple things that you know that might fall into that higher quality bucket with the confidence that you know if I'm successful in finding them they're not going to be priced at a premium to the other lower quality stuff I'm looking at um and that was you know that was truly the starting point for my journey in ETA well I'm impressed that it was your starting point because I don't feel like I've had that observation made to be yet after 200 plus interviews and it had never had quite crystallized to me until you said it that's why I wanted to call it out and and indulge me while I just kind of repeat it back to the audience because I think it's so profound the band of multiples that we see down here is at the very low end two and a half and you'll hear the random story of somebody pay even less than that but let's call it 275 up to 4.25 so many of my the vast majority of my guests had paid in range and yet there's also as you said a ton of heterogeneity there a ton of variety and quality of business so the idea that you might just pay 4X for a business that's much higher quality than a business that's trading at 2.75x that difference of 1.25 when you compare it to public markets or or um large cap private Equity is is really really really not much so you're getting a much better business without having to pay much more for it and that's a unique feature of our market and an attractive feature of our Market does that s right yeah that's exactly right and and I would even go one step further than that which is you know the the end of The Ensemble story which you know we're going to get into is part of our value creation play was as we got to be a larger business I mean Ensemble today is does about 65 million in Revenue as we got to be a larger business we climbed up that value creation curve where you know now we're a middle Market business and we're trading you know we probably should trade in that you know mid teens kind of range from you know from our starting point and so the value creation opportunity for a higher quality business as you scale from lower Market to Middle Market is really profound and I think that's you know that's part of The Ensemble story uh you know in terms of why the lower Market rollup it's one of the levers you have in a lower Market rollup that that really is powerful um relative to a you know single single business you know buy and build organically story well and and so what I what I just heard you say is that basically you you enjoyed multiple Arbitrage if you can assemble these really small businesses into larger ones the multiples that you're that are paid for the the group as opposed to an individual business starts going up and and the audience will be familiar with that phenomenon but you made it seem like there's something um specific to multiple Arbitrage down here but I thought I thought basically no matter how high you go you can continue to realize multiple Arbitrage so even if you to what we would consider very large businesses there's multiple Arbitrage to be gained above that is there something different down here like the multiple Arbitrage there's there's kind of a curve and it's steeper down here and you can see better multiple Arbitrage faster sort of thing yeah I think it's it's the steepness of it right so I think if you're talking about um again just that quality premium being absent in the lower Market you know the spread between what you pay for it when you're you when you're buying a business with less than a million of SD versus what you can realize at you know 10 million of iua that spread is larger than you know if you're buying a $5 million IA business and rolling it into a100 million do EA business ah okay so you were about to tell us the about the business that you found but before we get into that give us a picture of how your search what your search looked like yeah again I want to be you know totally upfront that it I embarked with on this with a very naive thesis right and just sort of talking about exactly what I said before which is hey let's go meet a lot of businesses and you know let's hope to find something that you know that sort of is is really interesting among this kind of um I just went digging through the Hy stack like looking for needles was was really my Approach so I I love by sell or talk local accountant sort of thing yeah yeah local business brokers business by sale the whole bit um I was just looking to get in front of folks in in my local market that had a business for sale and I was you know I was hoping to learn a bit through that process and maybe get a bit more refined over time and I just had had the extraordinary Good Fortune of you know kind of finding something through that initial work that that actually worked for me yeah um but like I would love to tell you that I did a wonderful you know kind of top down analysis of the US economy and identified you know music and dance schools as being this sort of pristine rollup opportunity that that had yet been yet been untouched but that's that's just not how it happened I mean I I just I was out there you know meeting with folks and and it was pretty early on that I came across again this this listing for a music school um it it sort of connected with my personal background I have a uh I have a personal background in music I took about 10 years of piano lescence as a kid I was in my high school and college choirs I took drum lessons for a few years when I was living in New York i' I've lived that student Journey um and kind of the original thing that clicked for me was hey I had the same can teacher when I was a kid for like 10 years and I don't think that's an unusual experience this is a very sticky long lived customer relationship that is you know at its core between a student and a teacher um and it's you know that's a really unique relationship in a child's life it's often sort of the first non-school teacher non-parent adult friend that that a child has um and so for that reason it's a really sticky you know powerful relationship um and yeah there you know as we Dig Dug in you know there were other things to like about the business it's a recurring Revenue business model the parents pay on the first of the month every month it's credit card auto debit um you know you actually pay the parents pay in advance you pay your teachers in a rear so there's a is a modest negative working capital cycle that's present in the business there are lots of things that are you know that are to like about how this business operates um and you know one major drawback which is that the majority of operators in this space their passion and their background and their focus is music education so they're really focused on the product and the student experience and they're not really focused or maybe even interested in the operation side of their business and so they're not you know they're they're just not doing the uh what I call the 10 PM tasks right they you know they're often teaching during the day the students are there in the afternoon you know after the students go home for the day and the staff goes home for the day you know that's when you know payroll gets taken care of and other things of that nature and it's just not their focus and not um you know something that lots of them have lots of operatives in the space have experience with prior to owning and operating their small business so it's often just not done very well right you said that's something not to like but in fact that was the opportunity so sure it mean it means it makes the the businesses maybe lesser quality than they could be but of course that was a that was in the Pro column as you analyze the business yeah I think in terms of like why why are these not higher quality business as a starting point you know that's generally why um and the ones that have been most successful generally are uh kind of uh husband wife pairs where one party is bringing the you know the music or dance education experience and one party is bringing more of a commercial background to the table Jee one other thing to push back on is the longtime relation ship as you put it between student and teacher uh and as we might put it in our clinical way lifetime value the lifetime value of a customer right long time on the other hand I would imagine in this world there's an enormous amount of churn how many of you know for every for every one student that becomes a 10-e long relationship 20 have gone to a lesson or two and and churn after you know a single lesson or six months I mean not every kid is is is committed in fact the probably the few are committed and and the majority are uh churn and burn so when you look at the true median or mean or whatever it's going to be lower than that than that 10year example Fair that's fair of course but um one of the advantages we have is that many of the students that are not committed have an external Factor driving their participation which is their parent deciding that they should that this is something that they should be doing so you know there's there's some some amount of you know the parent signs their kid up for lessons kid takes a while to figure out if they like it or not you know um are I mean this is we're you know we're at the beginning of the story this isn't information I had access to during due diligence but today you know I can tell you with confidence that the average life of our enrollment is over two years oh wow so that's that's true on an average basis and the the child that comes in for two lessons is practically non-existent unless there's really a mismatch between the student and teacher in which case they're more likely to go to somebody else as opposed to leave entirely well and you also might for a student who comes up for literally a single lesson or two you might not even count that as an actual customer but just kind of a customer acquisition cost where part of our trial conversion yeah yeah the before we get off of your search and into more about the business you were doing this on the side correct yeah in the preall you had recommended that maybe more people also do do it on the side say say what you told me please yeah well this is a dangerous thing to put on the record but uh my my my observation here is that um the difference the level of time and effort it takes to be a high performer which I expect is you know typical of most of the folks that are interested in ETA and interested in sort of making this bet on themselves the level of time and effort that you are used to putting into your job versus the level of time and effort that will get you fired is you know more than enough time to run a search in um and uh yeah that's now out there in the world for everyone to hear okay all right um well and I appreciate that so you are taking a rather informal approach to your search and you find this music school was it called Ensemble or was that a later brand no so Ensemble is something we came up with after the fact the school was called Dana V music named for the founder uh based in Lewisville Colorado which is a suburb of Boulder great okay and can you give us some numbers about Dana V music students Revenue Etc all the bullet points sure yeah so doing uh about 200 to 250 lessons a week um so that's the number that's the enrollment school would have had about 15 or 18 part-time teachers at that time um was only doing about half a million dollars of Revenue um and margins were kind of in the low double digit range not a high margin business but the Insight just to just to distill what you said earlier was long lifetime value and probably a lot of opportunity to better oper to to improve the operations of the business because maybe not Dana but in general a business owner in this category is more focused on delivering a great product I.E music lessons than they are digital marketing let's say yeah I mean there were really two digital transformation opportunities that were present in this business from the beginning one was operational so the business was you know sort of run on Google Sheets and pen and paper sort of a mix of those two things from a scheduling perspective um and there you know like everywhere um there were uh there were vertical solutions that that cater to appointment based businesses and even music schools as a subset of that um so there were you know there were opportunities to you know to operate the business a little more efficiently save some office staff time and then hopefully reinvest that in marketing I think one of the things that we observe in the vast vast majority of the schools that we acquire is they're not full meaning they are not sold out from you know 3:30 to 7:30 Monday to Thursday kind of prime time and they're not even close to full you know outside of that Prime window um and you know the the historical marketing budget at Dana was probably in the I don't know 0.5% of Revenue range and when you think about the unit economics and the you know lifetime value of a customer that stays for two years as we discussed earlier you know their their lifetime value measured in gross profit not even measured in revenue is in the thousands of dollars and you know we expect our customer acquisition cost to be in the 200 to 300 range um and there are not a lot of opportunities in the world to get that kind of LTV to CAC and the reason it exists is because you know this school wasn't marketing itself and this school is a is a well above average school in the context of music schools and music teachers and so there's just not a lot of competition for that you know piano lessons near me kind of keyword it's a$ three to $6 click on Google um you know we can convert that at a reasonable percentage and and that's where we get to that kind of coup hundred customer acquisition acquisition cost um so you know that those were the two opportunities we saw was was you know save some operational time using some you know using $200 a month worth of software reinvest that in marketing and you know deploy a marketing budget and you mentioned earlier that the the starting starting margin profile of the business was not very high but the incremental margin is very good because your you know your gross margin meaning the difference between what you charge your student and pay your teacher is about is in the is in the low 50s so every dollar you add you know minus a little bit of of you know kind of additional operating cost or variable cost below the the cogs line is coming in you know at at 45 50% um and so there's opportunity as you do marketing and you grow the business to actually grow margin significantly um so that was kind of an opportunity that we saw the tied to that that digital marketing opportunity so should should we all run to Google now and see what other services quote Service near me has a$3 to6 uh CPC and start buying those businesses especially if it you know if it has a high lifetime value I mean I think that's you know that's the other side of this that was that was attractive but but yes um yeah and you know like just to make the point which I'm sure will be intuitive to many people that are listening I mean this was this thesis is pretty similar to folks that rolled up veterinary medicine and dental clinics and you know all sorts of places where you have a specialized service provider that you know is sort of for forced into business ownership in order to provide their service and you there's been a lot of success sort of divorcing those two things and having somebody operate the business and letting the letting the vet letting the dentist letting the music teacher letting the dance teacher just focus on teaching lessons yeah um and you know both parties are are happier in that arrangement for the most part and the business is much more successful and I think that's you know that's again sort of looking at looking at you know searching on Google to find you know things to you know Industries to focus on you know this was sort of uh something that rhymed with with a a thesis that was pretty well tried and true at that point just sort of hadn't found its way to to this Market in particular and to your point about kind of um bringing in a uh Pro business attitude to just running the business as opposed to kind of it just being artists who are in business because they have to be that that just happens to be the way they deliver Services you got to have a some sort of business entity there was there any cultural um friction there you business guy coming in and and making things more you know more efficient and and more operationalized or is it like no fine like help me do my job better I'm I'm now speaking both the owner reacting to you this way as as well as the teachers yeah it's a great and and very insightful question because there is absolutely a negative predisposition to all you know kind of business or commercial activities uh you know for many artists right so you know growth is not intrinsically good um you know lots of lots of the things that we want to be doing are know they they're sort of they're subject to immediate suspicion and sort of guilty until proven innocent uh from a you know from a from an implementation perspective so I I had to do two things to be successful one I had to really sand down the elements of my personality that were like Harvard New York Finance you know like these no I was like no hey I'm a Pianist like that's that's going to be my identity when I'm in this building um you know I'm a Pianist who knows some stuff about running a a music school or that I think would be applicable in running a music school um I'm not a private Equity guy kind of coming in from the outside and um yeah I think that's I think that's a journey that a lot of Searchers especially Searchers with you know pedigreed backgrounds that end up in you know blue collar or kind of blue collar at Jason Fields have to go through um you know this is obviously different but I had to you know I had to really work on on that and then also trying to put myself in the shoes of the teacher and sort of identify like what what of what we're doing is relevant to you you and you know really it comes down to hey like do you like filling out a paper time card do you know like do you like having to look after this thing for the week and like Place check marks and you know um not get real- time email updates if one of your students cancels so you can come in later if that's your first student of the day um so that seems good for you right there's a Time Savings and a and a and an ease of use here where you're going to have an iPhone app and you can check in your students right there and like that's all you have to do and you'll get an email if they cancel and um that seems like a a benefit to the teacher and then the other obvious one is our teachers are all paid by the hour right so if they don't have a student they're not getting paid and so our efforts to market the business and grow our student count are going to go directly into their paychecks and so those are kind of the two core value propositions that we offer for teachers are hey we're going to basically make it easy for you to show up teach and leave with a minimum of administrative overhead um so you know do what you love don't do what you don't like to do and you know going to give you the maximum earning opportunity that you can fit into whatever time you would like to dedicate to you know to being here as a teacher and make sure that your time is full and and that your paycheck you know grows accordingly it's a pretty it's a pretty compell compelling value prop uh and I imagine particularly to artists the the the basically increasing their paycheck specifically that category because that category of person professional artists because being an artist is notoriously a difficult way to make a living so they're probably much more uh enticed by you know being paid more than than maybe plumbers who can pretty easily get a job at the you know the plumbing shop down the street if that's the business that you bought um really enabling artists to support themselves by teaching or at least supplement their income in a in a in a material way um is probably really really appealing to them yeah I mean this ends up being sort of the low beta part of their portfolio and then they have you know some sort of Performing or composing project on the side you know for the most part so you know they're in their band and they're you know they're out there giging and working and having fun playing and then you know Monday to Thursday afternoon which are not you know big nights for gigs you know they're coming in and they're teaching the Next Generation which can be really fun and rewarding for them but also is sort of the stable part of their of their earning portfolio across you know two to four different jobs you know to try to make ends me which is an unfortunate statement about you know how Arts are are remunerated in our you know in our system Society but that's a that's a topic for another time okay and then give us a visual paint a picture of what this business looks like is it's a physical location where the students are taught so what does that look like yeah so it's it's kind of a honeycomb of a bunch of private lesson rooms with a front desk so you know typical layout for you know for one of our schools which is you know kind of approximately true of Dana V is you sort of walk in you have a waiting area there's a front desk there's somebody there to greet you and that person is doing kind of schedule and administration it's you know if you called the business that's the person who would pick up the phone and talk to you about uh lessons and and scheduling um and then there's you know eight to 12 in D's case 11 uh private lesson rooms so it's a room with a piano and a music stand and a mirror and a bunch of books and you know space for a teacher and a student and a parent and uh yeah the it's it's loud um in a in a really fun and positive way there's music leaking out of every practice room and um that was one of the things I really liked about the business actually was it was uh it was very immersive it felt really fun to be there um you know the space is designed to be engaging and exciting to an 8-year-old um so it's it's bright it's loud it's fun um and it's so different than the kind of sterile Corporate Finance environments that I've been in previously and being there actually motivated me to practice more and to get back in front of the instrument and i' I'd bring my pan books and I'd play at the end of the day when the rooms were empty and um it was just really it was really fun for me and I think that's part of you know sort of advancing the story a little bit you this is sort of how this became you know more than a side hustle for me and more of something I knew I wanted to focus on was sort of the combination of two things one I got really immersed in it and I really enjoyed being there and I wanted to spend more time in that space relative to the other things that I had going on and you know the things that that we talked about as being kind of lwh hanging fruit improvements had success and had impact you know right away to the point where I started to feel like hey this is probably not a one-off opportunity there are probably other schools out there that have this profile of outstanding product and student experience and sort of uh opportunities for operational Improvement and you know we can probably create a platform to go do this again back to that you know vet Dental Specialty medical consolidation thesis you know started that started to ring true for me um and that's where this turned from being you know a neighborhood music school that I was going to be involved with on the side of my you know my job you know working at a at a family office to yeah I think this is a a full-time you know National consolidation you know rollup opportunity and just to be clear that I got the improvements that you made it was better Google advertising basically piano lessons near me and it was out with the pen and paper in with whatever SAS tool can run a music school were those were there other levers that I missed uh they would fall under those two buckets right so you know payroll software and getting rid of paper checks and um you know like you know investment in SEO sem you know Facebook things outside of Google in particular but yeah sort of digital transformation and digital marketing would be you know two of the largest levers that that we pulled there great and just a little bit more because there's an interesting history here on why this opportunity continued to exist yes we understand that the profile of somebody who starts a music school is probably not somebody who's thinking in terms private Equity or rollup or or giant you know build building an empire of these they're going to be a teacher first and foremost there are private Equity people and Searchers now in over the last five and 10 years looking for opportunities like this that's kind of what this podcast is about so I I still wonder um why this has been totally overlooked why somebody else hadn't had made the observation that you had um and and really maybe what so I want to hear a little bit of the history here um because I'm not saying that people are going to go out and go after music schools which is kind of now being done but what abstract principles might we learn from your case to find other Industries with maybe similar characteristics or similar history yeah so maybe a little bit of history on music schools so I I mean I think there's two factors that are are relevant here one is you know industry structure I'll come to that second but the first is just sort of there's a natural predisposition to associate kind of Arts businesses with nonprofits right so there's sort of a blurring of that line that exists where yes when you think you know when you think music and Performing Arts you think nonprofits in a lot of cases and you know charity and fundraiser and you know the need to support the Arts in a way that they appear in many cases to not to sustain themselves on their own Merit yes um so I think there's that predisposition where um and I certainly I faced a lot of it's easy in hindsite to be like oh well we own 65 music and dance schools and this is a you know this is a large Enterprise for people to say okay well that you know that seems obvious in retrospect but when I had five schools or one school it was Preposterous that this is what I was you know this is what I was doing when I told my friends and family that I'm quitting my hedge fund job to you know to go you know to go continue a roll up that you know the time had about two million of Revenue um but yeah so I think there's a natural kind of predisposition there where you know you think Arts you think artists uh and and again back to the level of operatorship in the space there hadn't been great examples of people that had done this really well um and you know even the ones that were successful you know these were people that were making a good living in their Community you know we see schools that gross you know maybe as much as two to two and a half million of kind of four- wall Revenue in their neighborhood you know maybe they're making four 500k off that you know that's a great living but it's not interesting to a you know a private Equity story um the other the other piece you know goes back a little bit further which is um sort of the the prevalence of of music and our society has kind of been on a steady decline for you know for a hundred years um and you know every home used to have a piano in it that used to be kind of a primary source of entertainment everybody could play that was sort of a universal principle of you know kind of pre- Radio Society was that that was you know that was where your entertainment would come from would be you'd have a piano in the home some you know you get around you singing you know that that would be how it would you know that that was a lot of uh of of again pre- Radio Entertainment so you know every every every Community had a music store in it to you know to meet those needs and fulfill that and it was during the kind of of you know 70s ' 80s 90s big box transformation that uh you know Guitar Centers and music and arts kind of sprung up and started to you know very Walmart esque started to set up you know next to the Community Music store and you know offered big box prices and big box selection and you know sort of gradually put those music school music stores you know kind of out of business and generally speaking the ones that survived uh were the ones that made a successful transition from offering retail uh which was now you know being done to the Big Box level and then further you know ended up being done on the internet um made a transition from retail to lessons and so your your local music store became a music school and sort of you know hacked off the back thousand square feet of their building and built a few lesson rooms and um you know over time that 15% of their square feet generated 50 plus percent of their revenue um and often a lot of their a lot of their profit um so that's you know that's kind of where we are today and and it's interesting to actually see Guitar Center now starting to offer lessons like they're now on that Arc themselves where um yeah they they they've done exactly the same thing they a lot of their stores now have lessons they've built these lesson rooms off to the side they didn't used to be there um you know so they're sort of coming down that path um but yeah that's that's sort of the history of the industry is you know used to have a lot of Community Music retail it was substituted first in at The Big Box level and then on the internet and a lot of those folks either you know went out of business entirely which unfortunately was a pretty common you know story at that time or pivoted to offering uh you know lessons as a as a as a complimentary service and also one where you then own that student relationship and you can you know it's a lot easier to do retail if your students coming into your store every week for a lesson because now you're a convenience factor right if if they need strings they need a book they need to you know read for their instrument like especially on the accessory level you know they're already there you're faster than Amazon at that point because they're you know they're in the building already right sure well it's why when I go get my haircut I'm always offered some shampoo or other product to put in my hair that was a great history lesson thank you for that Jeff and and give us now what what did the terms of your deal on this first business this first $500,000 Revenue business look like can you share that sure so we bought 90% of the business um it was uh there was a we we did not use the SBA so we didn't have uh we did not have limitations around Equity roll over so there were two um there were two owners of the business um both of whom were were sort of key teachers one was you know looking to you know one was pretty motivated to leave one was open to staying and sort of being involved on a go forward basis so um that second individual her name's Dana vatra Jan she she ended up rolling about 10% of that stake um and you know is still involved in the business today she's um you know she's helping us to um ensure that we have you know great um resources available for our teachers now you know we have 1,200 teachers today you know she's still in charge of making sure that those folks have access to professional development opportunities and networking opportunities within our portfolio um so you know fast forwarding a bit that that ended up working out great um but so she you know we bought 90% she ruled 10% um we funded it 100% in equity you know sort of cash off of our personal balance sheets and um you know sort of we're going planning to use it as a as a learning experience it seem you know it's a business it wasn't something we needed to finance it seemed like something we could Finance in the future if that made sense um so you know I think the the 100% Equity structure is you know not something that you're going to see very often but um I think it was sort of the the right thing for me and uh and for this business in terms of you know being able to get in there and really learn about it before having to to go out and pitch this to a lender yeah well yet another difference between our Market what can be done here in our market and and and much big bigger businesses you can buy buy a business outright what you paid for the business was typical multiples that we'd hear three to four and so we we already heard what margins were on this business so we can do some napkin math to arrive at a number that's one two $300,000 sort of thing yeah we paid we probably paid in the high twos kind just below three times yeah okay all right and side project how long is it a side project uh you're putting in these you're putting in place these changes you're loving being at the place like this this kind of opportunity is continues to expand and excite you um but you are working your day job so when does it become your the your soulle focus I did both until we had five schools um so we bought the first business January of 2019 uh I quit my day job February of 2020 which turned out to be auspicious timing uh if you uh if you remember we remember but uh yeah and and also I mean the part that sounds kind of dizzying and retrospect is it was only about four months from closing on the first deal to closing on the second one um and that still sounds incorrect to me I don't know how we managed to do that but we did the second one was more of a it was more of a test balloon for the rollup so it was based in Las Vegas it was a smaller School even than the first one which was small you know to begin with and it was really intended to be a test of whether we could run one of these businesses remotely and whether it would you know burn to the ground either figuratively or literally we didn't go check on it you know every day which is kind of what I was doing at DV music I was I was there pretty often um because it was in my it was in my backyard so we bought this business in Vegas and it was really intended to be a test of is this going to work on a you know sort of national semi you know sem semi- absentee is not the right word but you know what I mean in terms of we're not going to be there every day and we're not going to be able to drive over if there's a problem on site is that gonna you know is that going to be a successful operating model it's a it's a question of not only can it be done remotely but can this scale I mean you are you as the entrepreneur are in the business every day um so is there is there some way that this can scale without your attention and presence you said that doing going from deal one to deal two in about 4ish months and that that was dizzying and you and you still kind of Marvel at how quickly that happened one thing that that tells me is just how decisively proved your thesis was I mean you must have just had a lot of confidence you were like wow that really works well so well let's do again you know I I just kind of feel like the speed there is is an indication of of of bolstered confidence do you yeah I think that has to be true and also you know just sort of some of the work that I had done during the search process actually generated that second opportunity so it sort of like a latent thing that kind of like washed across my desk I was like oh like that could really work um and you know you start to see the upside where you hey like you know if this works then you know then we have something for here um and so you know it's worth it's worth trying you know for that reason and you know the risk was very manageable relative to you know I'm still employed at a you know at a good job and I'm you know I'm I'm doing fine if this you know if this check is a zero which is very unlikely since we're buying a profitable business but if this check is a total zero you know I'm going to be okay and you know this like this is so different than a you know multi-million dollar SBA personal guarantee kind of you know this was a this was a trial balloon and it was sort of of sized appropriately man I feel like the more guests I have the the stronger the argument to buy very small becomes uh you know we we we generally the conventional wisdom is not to buy small buy as big as you can million dollars of SD is kind of the coveted uh number but um you're I don't know the fourth story in just a couple of months where it was like buying really small had all this Merit namely in your case it was very little downside tons a potential upside which is in fact what happened and we're going to hear but very little downside if this thing went to zero as you said you could absorb that yeah look you need a path to to getting to you know multiple millions of SD right so you know for me buying these two music schools if that was going to be my full-time living like that wasn't going to work for me um so there needed to be a path to something different that's part of why I held on to the job as long as I did was I wasn't buying something that could replace that you know even if I was willing to take a pretty significant you know even if I was willing to meaningfully downsize my expectations from a lifestyle perspective um so I I think you know you need a path to getting you know to getting out of buying a job and into buying something that has Enterprise Value that you can compound over time um and I think if you're going to buy one it's got to be big but I do think that the lower Market rollup up opportunity is really really interesting and you know this is this is fast forward then but I'm spending a lot of time now talking to you know Searchers and perspective Searchers about exactly that which is you know hey you can go buy a million dollar of of SD in four transactions instead of in one transaction and there are lots of great reasons to do that but you need reasonable confidence that you can actually go find four you know four deals that are going to Total to that level if you buy one you're in a really unhappy position you know sort of on on an extended basis yeah yep well I want to return to that in just a second but one question first just about the framework of owner and operator so you kept your W2 which meant that you had I guess Dana in the business operating it for you Dana and and the front desk person and whomever give us a picture of that yeah so our partnership at that time and also you know at most of the businesses we've acquired in the future in in you know further down the road is is generally not with the owner um so and Dana's motivation for selling the business at that time she had among other things two kids under five um you know she wanted to focus on being a mom she wanted to go back to teaching as her primary activity as opposed to administrating the business so she was looking to step out of you know running the business in that in in the way that she had been and focus her time in different areas um so it was really a partnership with the front desk um person who we elevated to being you know a true general manager of the business um and she was the one who was really working hard on implementing you know software changes and a lot of the things that we wanted to be doing um so you know Dana was present and her presence was really valuable because she had you know all the experience in running the business and lots of ideas and opinions about you know what we were doing well what we could be doing better um she wasn't implementing um and so it was really it was really U myself and Chelsea the general manager um you know who were responsible for a lot of that transformation and and that's typical of of the majority of the situations we have where um either the owner either the owner is leaving entirely and you know that's just because they've you know they've sort of by the time they're talking to us about selling the business they're good and ready to leave um you know selling is not celebrated in you know back to back to sort of um predispositions in the artistic world you know selling is almost sort of like defeat in some circles and sort of you know I why yeah isn't that that where the phrase comes from from like musicians oh you sold out yeah he sold out um so yeah I think we're you know we're trying to reposition that as being a really you know a really exciting and milestone for a business to have that grow to a level where it can stand on its own and sort of outlive your personal involvement and continue to serve your community and we have a lot of messaging around uh around that in our B2B marketing to sellers um but yeah so so the the majority of the time the owners either leaving entirely or focusing on teaching which was their original passion right that's what they got into the business to do it's what they love to do um it very very very infrequently have we had owners that have truly operated the business post closing and if they did it was mostly because they were sort of On The Fringe of retirement and they wanted to sort of sell the business now be able to quit their job at some point in the future sort of retain their their income and as the platform grew we gave them the opportunity to kind of narrow their scope of responsibility to just sort of hey lead the community welcome the students you know be part of the faculty we'll do payroll marketing Finance accounting tax HR for you those are the things you don't like about the business um so we've offered folks as we've as we've become more of a mature consolidation platform that's been part of our value proposition for certain sellers has been hey sell the business to us and let us um you know do the unfund things and you can just do what you like to do um but but for Dana you know she was in that that that second category of hey I'm you know I'm a teacher at heart I want to be in the classroom with my students I don't want to be in the office taking phone calls and you know dealing with with customer complaints or worse implementing software changes that I you know in my 15 years of own of owning the business didn't feel like were you know were worth my time to do so I definitely am not going to do it for your benefit um but yeah so it was myself and and the general manager there and that's typical again of our of our structure where we really rely on those general managers to you to lead those communities and be responsible for that on the ground implementation at a lot of levels well speaking of scale and figuring out if it could work in using Vegas as a test balloon to figure out if this can work across the country and Beyond the the market where Jeff lives this question of having competent general managers or elevating somebody who's at the business to General Manager this too is is is kind of the entire project hinges upon your being able to successfully do this so I don't know if you want to speak generally about that you you kind of just did give us a picture or just in the case of this first school where you elevated Chelsea she was front office maybe maybe that would be the direct question how did you what did you see in this front office person that you thought they could be general manager and I'll just add some color to the question I feel like most many of my guests if anything they fumble there where they feel like they've identified somebody in the business that they can Elevate to general manager and then learn the hard way that oh actually being general manager is a very different job profile than the one that this person I'm promoting had before and it's they don't and it they don't necessarily do well as the general manager did you get lucky with Chelsea or was there some special sauce there that you could share with the audience I don't think we got lucky because we've been successful at this you know 55 to 60 times in a row um okay so I think we've had a lot of success being able to take either a front desk administrator or even a tenured faculty member that that has been part of the community for some time is going to have the respect of the peers of their peers and the folks inside the building um and elevating them into a general manager role I think you know looking at School number one you know all we had access to was my personal services right there were no there were no there was no infrastructure Beyond you know the fact that I was going to be there and I was going to support it but as the you know as the story Advanced you know we now have infrastructure set up where we're doing a lot of things on behalf of our general managers to the point where we've sort of simplified the job to take care of the people that walk through the door so your students your parents your teachers make sure that they have what they need to be successful and make sure that the trains kind of run on time from an Administration perspective if you can do those two things you will be successful as a as a general manager because we will take what you've done you know there in sort of facilitating the interaction between our clients and our service providers and we will run the rest of the business right so we will do payroll we will do marketing we will do HR we will do you know tax and compliance and like all these other things and um that job is is not easy by any stretch of the ination but it's it's doable um and someone who cares about the business which you know the the the the biggest advantage that we have in our in our staff is without you know with with very very few exceptions they truly care about Performing Arts education and the experiences that our students are having in the classroom they want those to be to be good they're passionate about it and it's not just a it's not just a punch the clock kind of corporate job it's not you know it's they can be making a lot more money at other places but they they value the fact that this is this is music this is dance this is something that they're uh that they're personally excited about and you know enjoy that environment as much as I told you that I enjoyed being in that environment um so yeah we we've really we have had success taking that general manager wrapping them with you know in the early days my personal services in the later days you know sort of a a community of people you know today our our what we call our shared services function is like 35 people um so those folks are working to support those schools and giving them lots of support and lots of specialists in each of these areas that they need help with but we're trying to make that job again just like a if you can be a competent administrator and a great customer service person and leader of that Community you can be successful as a GM and that's probably not true of you know being GM of you know a larger business like the ones you're talking about maybe having difficulty with that transition Jee one more question before we bang through about 20 20 I positions that you that you're just you're perched to to do the you said when we were talking about size buying small versus buying a million dollars of s you need to see a path to multi-million dollars of SD you need to see some sort of consolidation possibility add more uh color to that maybe in your own case what what did the market opportunity look like to you you said to yourself if we can buy and integrate these then the market opportunity looks like what yeah I mean there there are probably three to 5,000 music schools in the country um and on top of that there's you know tens of thousands of individual teachers teaching out of their living rooms or out of small Studios um it's a large Market it's very fragmented there are very few um multi-site operators there are very you know there's a couple of franchise systems that serve this space you know school of rock is top of mine there's also a a smaller program called Bok to rock um School of Rock only has about 300 us locations right so their you know their market share is you know below 1% and they're by far the largest operator in the space and interestingly there are very few multi-site operators within that franchise system so this is not like the McDonald's or Wendy's franchise system where you have folks that are operating hundreds of units you know these are largely mom and pop operators Within These franchise systems as well so it's a very fragmented very mom and pop space um my original pitch to uh to investors uh sort of you know friends and folks that I worked with was that we would we would consolidate 40 schools that would get us to uh you know something on the order of 20 million of Revenue and 3 million of eah um and uh that that would be enough to where the business was you know could be exited for you know a uh we could capture some of that multiple Arbitrage you maybe it would trade for you know six maybe eight um that was sort of the original pitch and so we would kind of you know you'd be creating kind of two to three times uh multiple accretion you know from three to three to six or eight or nine um and you know we would have organic growth opportunities within the portfolio as we went so hopefully that would be you know that would add to that um you know to that we'd have cash in the interim but that was my pitch was let's go buy 40 of these it's going to take two to three years and uh you know there's a there's a really interesting uh you know kind of threshold we're going to cross around that level where we're going to become we're knocking on the door within kind of throwing Striking Distance of kind of what is Middle Market in in uh you know in institutional Finance land Jeff the number that jumps out to be most in your plan there your pitch is the two years I mean that's a lot of acquisition activity to be signing up for you said let's get to 40 schools in two years is that what you said yeah mean I said two to three years maybe maybe I should maybe I should say three to four instead but look from the beginning I mean we if you look back at at our history we've we've executed on an acquisition a month um you know obviously there's some acceleration in that period of time but we've done a deal a month for 5 years and you know that's how we that's how we turned a bunch of little you know small businesses into a into a decent Siz opportunity was um yeah just doing it one at a time really consistently over a longer period of time and and you know compounding you know had has had its effect over that over that period And so kudos for having been able to do that but still as you bring this pitch to me your prospective investor not having done it I'm going to say that that that that seems like too high a frequency so I guess one question would be integration so I to to realize frequency at that level one a month one every two months all over the country your the integration needs are pretty low they're really templatized right so these businesses are highly similar you know and so we have the ability to to you know to do a good job of integrating in a in a repetitive system you know sort of programmatic way um you know so there's a really there are there's not a lot of range of starting points in terms of what we see um you know in terms of you know folks that are Farther Along on the digitization or or sort of uh operational path you know that's only work that we don't have to do when we get in there um so you know you're either starting at the beginning and we run the whole Playbook or you've done certain portions of it and and you know we can sort of do pieces of it but yeah I mean I think I had the Good Fortune of you know having worked in finance I I had lots of peers that you know were now 10 years into their Journey had money you know knew me had seen rollups work you know sort of I got a very friendly reception um which I'm very grateful for um but they sort of saw the thesis and sort of said you know I've seen this work in other spaces I'm sure you'll figure it out and you know I'm going to invest in amount that's not you know super personally meaning personally meaningful to me you know good luck and let me know how it goes okay all right uh and so at at after acquisition number what you you went out looking for growth Equity this was after Vegas your number two acquisition or had you yeah so we we raised Equity around uh the sort of concurrently with our third and fourth acquisition so October of 2019 we did two deals one was in Tampa one was in Boston and we we we closed on our Equity round that same month so that was sort of to me that's when this becomes you know sort of a real commercial Venture you know in its own right um and uh yeah I think you know if I can offer just sort of a couple Milestones from there in terms of where you know where we went so you know so we raised some friends and family money in October of 2019 for you know for for schools three and four sort of concurrently with schools three and four um we got a a local bank involved um called First Western trust here in Colorado they were really they were really creative given our size right um in terms of sort of giving us an underwriting box and saying we get what you're doing we've seen you know we've seen five opportunities of this type um we're not going to give you any back leverage meaning you know you know you've funded the equity into the business that you funded but we'll give you leverage on a go forward basis at around two times um so you can you know we got we were able to meaningfully sort of start to scale our Equity dollars you from that point forward um in January 2021 at at 12 schools we raised our first trunch of institutional Equity from a growth Equity Firm called newr Ventures um pretty tight connection with a a guy there who was a founding partner there who whom I'd worked with at Reservoir um he was a managing director when I was an associate we' you know we worked on a few things together um he was out on his own doing uh doing growth Equity deals and and he thought The Ensemble story was interesting again kind of back to this kind of tried and true rollup thesis seen it work in a lot of spaces hey you're now at 12 school that seems like a good amount of traction there's some really good case studies that we can that we can dive through you know it's 2021 you've survived covid you know good job let's keep doing you know let's keep doing what you're doing um and then uh we you know we got we did we did get to 40 schools uh in January in I guess about the 40th in October of 2022 um so you know pretty much exactly three years from when we raised the the initial trch of equity so we did what we said we were going to do um and we also did what we said we were going to do in terms of uh you know actually sort of looking to sell the business and taking on a single you know majority Financial sponsor at that time that you know was more appropriate to the size of business that we' built uh you know at that moment in time and sort of you know rather than my friends uh you know getting a real institutional sponsor that was you know capable of supporting the business at its current size and you know taking it to where we thought we could go you know in the future which is sort of taking that initial goal of 40 schools and saying hey this is really working we've got a lot of momentum this is fun um the space is still really fragmented and our market share is still zero um you know so let's let's let's take what we've built and and sort of run an Institutional volume of capital through it with the goal of getting to maybe like two or 300 schools um and so that was that was January 2023 we closed on that on that transaction I sort of view it as being two separate things I feel like I sold the business and I got rehired as it CEO in sort of two different transactions um you know to continue doing je why is that not kind of a typical seller stays on to run the business rolls some Equity why is this why it sounds very kind of conventional to me but you're making it seem like it's a little different no I agree with that I just feel like in terms of mentally how I so maybe like I think this is of interest to your audience but like I got into ETA for the personal freedom right I was like I want to bet on myself I Want To Be My Own Boss I want to have absolute control over my time like these were some of the things that I was you know motivated by as I got into the space sure and I give up all of those things in the course of taking on a majority investor and a board and a you know and a sponsor um and you know so I viewed it as getting hired again and that that's specifically what I mean is like I I took the job of CEO um and yeah I'm a you know I still have a material Equity stake in the company it's still really important to me I'm I'm super motivated and focused on it every day but I have a job again and you know my job is to be CEO of this business that is um of now of a very different scale than the one that we started in 2019 um that was you know maybe more typical of like an ETA size business um so yeah it was a really interesting professional opportunity for me to go be CEO of a you know 8 figure and growing uh you know mid-market business but uh that's a different value proposition than the one that I took on when I was like Hey I want to quit my job and be my own boss and and kind of run run my own thing it's not like you just took a job you did get a paycheck like a a Payday have a a really big payday when you sold your business uh but I I I take your point Jee I want to hear just a little bit about the two um moments where you got debt and then Equity because we hear a lot on this podcast about what the terms of of a first deal of a first acquisition look like like we spend some time on eurs typically it's an SBA deal not always but uh the so let's do the first the debt with that local bank that you talked about and then growth Equity from the person who'd been the managing director at what was the name of your previous firm reservoir reservoir so the debt uh assume not a not a ton of knowledge about about the non SBA uh debt you said they offered it at two times what did you mean just walk us real slowly through that yeah so so basically what what the bank said was we think what you're doing is interesting and you know we've done this five times now we can see the Merit of the strategy we are not willing to give you back leverage on your portfolio meaning you know we're not going to loan you against what you've built so far but we'd love to support you going forward in your future Acquisitions so um basically you know for school number six we said hey you know it's making X and the bank said great we'll pay you you know we'll loan you 2x against that and so from the bank's perspective you know 2x is a reasonable threshold to advance on any business but they also have the coverage of you know the portfolio so they have you know they have some some Equity coverage behind them and then of course you know this is this is Regional Bank debt so this is fully personally guaranteed so you know they they also have you know uh they have me on the hook you know behind that so I think it was you know I don't think the bank took an extraordinary risk or anything in doing that but nonetheless it was a very creative structure for a bank to you know to take particularly given that the business was like A2 million Revenue business it was a small business at that time um and I think that's one of the great things about the banking EOS system is there are so many small and medium-sized kind of regional local banks in this country um it's just a numbers game you know if you go talk to enough people somebody if you have a reasonable you know business propositions you'll find the right bank that's willing to do it and and we were fortunate that we got in touch with which with First Western trust and they you know they're great to work with um but that was sort of how that structure worked was it was a facility for funding go forward Acquisitions where they said we get what you're doing we get that you're going to do it a bunch more times we're not going to ask you know you to to sort of take us from the beginning every time that you're doing it we're going to take the cushion that that exists in the business and we're going to use that as the basis for giving you kind of a programmatic delayed draw facility so you know here's a cap that you can draw against you know up to that cap as long as it meets criteria just like email us and we'll you know we'll Advance you the money and so let's let's let's play with some easy numbers as an example so say acquis position number n had $100,000 of of cash flow and you were going to buy the school for $300,000 they what they would give they would give you a check for 200 200 right because it's cash flowing 100 they'd give you twice what it's cash flowing so they basically give you 66% of and then you and then the remaining 33% you'd bring from your cash flow from the existing business correct okay gotcha uh and you had enough cash flow to do that again I mean you had to bring 33% basically for every acquisition you had enough cash flow coming out of your Acquisitions to do another however many it was well I guess that's why you had to go get the growth Equity then right exactly yeah so yeah we we raised mean we we did I mean cash flow was a meaningful portion of that of that story as well but yes we you know we raised we raised three tranches of equity over five years to get to where we are today and so can you give us a sense of what growth the growth Equity what a growth Equity deal looks like again assuming here that a lot of folks including me don't really understand what a typical growth Equity structure looks like what does it look like yeah so so the both of the the first two deals were sort of were structured in a similar way to Venture kind of series a financing so you basically set a mark for the business and say it's worth X today and you know you're we're investing Y and as a result we're going to want we're going to own y over x% of the business when all is said and done here so so um you know we did we did two deals of that sort where we basically said hey there's a business that exists here let's value it there's Capital coming in you know that's you know it's worth what it's worth as a percentage of that on a post money basis and so we we basically sold two you know 15 to 20% stakes in the business in succession um so uh yeah that's that's how we got there and um you know the first one was was a really friendly you know kind of like I said sort of friends and colleague kind of you know kind of deal and the second one was was very institutional in nature but they had fundamentally the same structure which was value the business you know decide how much capital is needed that's you know from there the math is easy in terms of what percentage you own there's some negotiation around what rights you know you're getting beyond that in terms of liquidation preference and board rights and governance and controls and you know what can management not do and not do with the money that you've that you've put in the company um but you know it's exactly like a a venture or growth Equity series a you know term sheet is kind of the the nature of what we did I keep coming back to this because it's such a spectacular story and people are just going to be listening to this and being like Oh how can I go do what Jeff did uh and and some and somewhere else have you seen and you probably won't want to share what it is other Industries where you're like oh I could go do what I did here in that industry if I weren't CEO if I hadn't taken on the CEO role and you know your hands are full um or do you feel like you really found something that is quite unique and it would be hard to find something like this again I think both are true so you know one of the reasons why I tell people I'm still really excited and motivated about you know the opportunity that's in front of us is I don't think that I could sell the business you know spend the obligatory six months on the beach and come back and find something that was as interesting and and also as personally meaningful to me as you know as the Performing Arts is but I definitely think that there's lots of opportunities that are out there I mean I think even if even if all you want to do is is sort of use the lens of kind of specialty service provider and folks that end up owning you know owning small and medium-sized businesses because they are trying to provide a service and not because they're trying to run a business I think there's tons of examples of of that out there and you know we've gone you know we've done music and dance but you know Gymnastics tumbling um cheer is fully rolled up um Varsity which is a a ban Capital portfolio company is a big is is the you know more than 800 pound gorilla in that space And so there's there's another example of what this kind of looks like immaturity MH um but you know like Chiropractic like you know Physical Therapy wellness centers Med Spa is a really attractive rollup opportunity right now that lots of people are doing um you know Professional Services accounting firms consulting firms that are you know kind of subscale and part of that kind of rollup ecosystem there there's tons of examples of um and you know some of those I know because I've talked people that are doing them and sometime some of them I you know just sort of have in the back of my mind but I think there's a there's a lot of of white space out there still great Jeff anything that we didn't get to that Searchers should know about your story should understand well uh I mean the the big the the the last incremental shift in the business is is when we expanded from music into dance right so that's not a that's not a small leap um in terms of you know those things are adjacent but they're they're pretty different yep um so and you know required bringing in you know folks that would be more authentic in dance world than I am I mean I took a a couple of dance classes as a young boy but uh you know C certainly not the same level of personal experience with it that I have with music and so yeah we had to kind of retool our leadership team to make uh you know to make dance a you know a priority and a realistic possibility within the business so that was that was a 2023 project was you know kind of a you know one of the things that I credit our our new you know part partner and sponsor with was you know pushing us to get into dance sooner and in a more in a larger way than we probably would have on our own I kind of always felt like dance was a natural adjacency but it was just sort of out there and we'd get to it eventually and they said no it's let's do it now uh before somebody else does you know to your question uh from a few minutes ago yeah um so I think that's you know that's the other big change in the business is you know we had a we had a really large High Velocity opportunity in front of us in music that was working and we actually you know sort of stood up a second vertical to kind of mirror that and leverage what we were doing in in music and then figuring out the incremental pieces that we needed to do dance well and and going out and finding those and standing them up so that we now have kind of twice the service opportunity and we're now we're now doing two Acquisitions a month um so you know it's kind of helped us from a velocity perspective to have that additional surface area but um yeah totally you kind of transformed the business yeah oper let's compare a little bit so so starting with what is the bigger Market just crudely are more kids doing dance or more kids I assume are doing musical instruments I assume dance is a smaller Market dance is a larger market uh oh and in in some ways it's because a lot of what you're thinking of as being music is happening in public schools so it's not part of the Tam so like I I can't I can't do school band which is a meaningful portion of like musical instrument participation in the United States so dance is private dance is bigger than private music yeah um and the biggest difference in the two business models is dance is primarily taught in a group setting and music is primarily taught in a private lesson setting and there there are big pros and cons there so private lessons really sticky one toone relationship um High customer lifetime value lower margin dance group lessons less connection between a student and teacher um much higher margin but the the margin is very you know the incremental and decremental margins are very large right the the ninth student you put in a class is nearly 100% profit um and so you know the the um coefficient of uh you know of profit to revenue is really high and so taking you know taking a school from Break Even to you know 20 to 25% margins is you know is is a matter of growing Revenue by 10% but the reverse is also true um so you have kind of this kind of super high beta product in your portfolio where you know when times are good they're really good and you know when times are less good uh you know it can be a bit of a challenge and what about the footprint a music a dance studio takes a lot of space whereas if you as you described it in a in a um a music center it's kind of a honeycomb and You' got you know basically two chairs and a music stand that's all you need for to deliver a lesson yeah our music schools are probably 3,000 square feet on average dance schools you know 5 to eight um so you know twice twice as big on average really interesting Jeff um and so by the way since at every stage you were kind of talking about what the the goal was and where once you reached a certain threshold what the liquidity event would be for the business is that also something that you're the the the institutional buyer who acquired you and now you're the CEO of the business 4 that they have a goal and plan for I mean does it go public or is it to sell to yet another larger private Equity concern yeah I think public is not a realistic expectation for you know for business in the space um so yeah I think it's it's really just sort of you know will be privately held and will be you know kind of traded amongst Financial sponsors for you know for the remainder of uh of my time here um yeah I just think you know the minimum size and and growth opportunity for being a public company has meaningfully increased over the years and there's there's lots of reasons why that's actually not you know not very desirable uh just from a compliance perspective so no I think think we're we're a private company and you know we'll we've grown the business to a point where we don't actually need to we will not be sign the business will not be impacted by who owns it to a large extent um and you know that's part of you know in terms of like what what is the value creation that Searchers are doing in the lower Market it is taking jobs and turning them into Financial assets right so that's the that's the scale up process that you're doing is you're you know you're going in and you're buying a a business that previously was somebody's full-time job or you know um or less depending on how kind of Lifestyle oriented it was but it was a job for them and you know you're turning it into something that can be it can be invested in at an Institutional scale and that's where the that's the driver of multiple arbitrages why exist and um you know we've now crested that and we are now a financial asset and um you know on the investment side is that what you tell your music teachers well I was going to say exactly that which is like my job is to insulate them from that at the you know at the operating level but at the ownership level you know that's definitely true and and so yeah we you know our business exists to provide you know outstanding classroom experiences to tens of thousands of students each week um and that's how we you know that's how we create value at the student customer and you know societal level but you know at the institutional equity in in the world of institutional Equity you know what we've done is we've sort of taken a space that was previously incredibly fragmented and sub institutional and turned it into something that that they could get access to and you know by the way the uh like kids extracurricular sort of Youth enrichment space is is is all the rage right now so we we sort of benefited from a a uh kind of thesis Evolution that happened you know independent of us where people are really excited about that space and sort of just believe that parents will spend any amount of money on their kids and their experiences which uh to a first approximation we've seen to be true you've seen that to be true and that and that Trend will continue because I feel like sure as a a father of a young daughter myself I feel like there's grumblings among parents that you know we're going to do it differently we're not going to be schlepping our kids all over the suburbs to this practice and that game and that whatever extracurricular to the end of our days um so but maybe every parent grumbles about that and they do it anyway sort of thing any so personal question personal interest here uh no no no slowdown in sight for that sort of culture of extracurriculars no not not that we've seen so far that's great Jeff uh I think that is it if people want to get in touch with you how would you prefer they reach out do you like LinkedIn yeah LinkedIn on there uh the uh Jeff Homer Ensemble music schools um and uh yeah I mean I'm actively looking to connect with folks that are interested in ETA I'm in the I'm in the sort of dispensing free advice you know phase of things um with the hopes of connecting with folks that have kind of interesting uh interesting thesis and interesting opportunities that might align with kind of what we've done and um you know I am looking to to reinvest some of those proceeds back in the search space so um eager to hear from folks careful Jeff you might you might get barraged with uh that was a a very open and generous invitation so take him up on that everyone Jeff if I if I search piano lessons near me I mean how many schools do you guys have now in the portfolio we have 65 music schools and five dance schools 65 music schools and five dance schools so are you in kind of all the major markets and 20 States yeah look there's some big places we don't have a presence like Dallas but um you know we're in yeah we're in we're in the majority of other kind of top 15 markets great I'm I'm so curious to just kind of Google around and see see your your local outfit here in the DC area DC area yeah middle SE Music Kent School of Music okay great I'll check it out Jeff Homer what a what a story fascinating uh very educational for us thanks for walking me through uh a bunch of the finer points and congratulations on this on this out thanks I mean it's been super fun so appreciate appreciate you having me on and happy to chat more about it great thanks Jeff I hope you enjoy that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business