Alan Turkus, welcome to Acquiring Minds. >> Thank you. It's a pleasure to be here. >> Alan, you recently bought a large home healthcare business in your home geography of Minneapolis-Saint Paul. There are many themes to your story that the audience will benefit from, so let's jump right in. Start us off with some background on you, please, Alan. >> Yeah, sure. Uh, thank you for having me. Um, my background is I am a later career uh searcher than I think is typical. I'm 57. Um, I started my career in book publishing. I very much wanted to be an editor. Um, and so out of college, I went to work for Random House and did um a variety of uh publishing jobs. And my my real dream was just to edit bestsellers and award-winning books. Um, I got interested in the business side of book publishing. I went back to school and got my MBA. And I was graduating from uh from business school in '99 when the internet was first taking off. And I also had a strong interest in technology. And so got diverted away from book publishing and went to work in product management for early-stage internet companies. I did that for about 10 years. Uh, but I never really got the publishing bug out of me. And um I I went through a a period where I was not really that happy in my career. I was um I just I was I didn't really enjoy the the product management after a while, and I just had a hard time finding the proper role for myself in book publishing. And uh it was actually quite a hard time for me. Um, I ended up though eventually uh joining Amazon right when they were launching their in-house book publishing group. And I was part of the team that grew that business from scratch into a big business over 5 years. We grew to a $100 million international business in 5 years. And that was like an incredible ride. Uh I got to run my own team there, went to school on how to run a business at Amazon, which was an invaluable education. >> >> Um while I was out in Seattle working for Amazon, I'd had my son. He was um when he was two, we moved back to Minneapolis to be closer to my wife's family. Uh my initial plan after that was to write a book. Um but it became very clear early on that what I needed to do is be a full-time dad. So I actually stepped away uh to be a full-time dad for it initially uh well, it stretched from a after about 4 years, I was getting ready to go back to work and then COVID hit. And uh my son just needed me. So um I all of a sudden 4 years became closer to 7 years that I'd been stepped out of the workforce. And at that point, I was really struggling to figure out what to do next with my career having stepped away mid-career. Um and it was just no one was going to hire me to really do the kind of job that I really wanted to do. I did some consulting which led to um which led to a gig that kind of got me back on my feet. And um after that gig ended, I decided to launch a search for my own business. >> And why a search? Did you um happen upon the concept? Say more about that chosen path. >> So, I had first learned about um when I was in business school, I had first learned about search funds. Uh that was very early in the whole search fund ETA world. So, that was, you know, almost 25 years ago. Um I didn't have the courage to go after it at that time, but the seed was planted for me. And when I would go through transitions in my career, I would it would come back up for me every once in a while, but it just never felt like the right time to go after it. Um but in this later part of my career, as I was thinking about what to do and I'm mid-50s, wanted a meaty role where I could really like lead my own business, manage people, and I was also I had just gotten tired of working for other people. Um and I wanted to capture the upside of my own work. And when I really sat down and figured, you know, what am I going to do next? Am I going to go find some corporate job that I'm probably not really going to be that happy or secure in? Um when I added it all up and and it just became obvious that searching for a business was the answer to what I was looking for. >> Interesting to hear you say secure mention security, the W-2 if you were to get one that you wanted. Um actually didn't feel like the secure option. Buying a business felt more secure. Say more about that. >> Well, I just feel like you know, there's no guarantees in corporate America. You know, you can get a job and and uh you know, things are always changing. People are getting laid off. You can get restructured, you know, businesses go up and down. I felt like I would have more security buying a business that I was in control of than working in a big corporate environment where you just never know. >> The exposure to search back in your MBA days had you been tracking it kind of since? >> It was really the seed planted long ago. Like I said when I would come up in transitions in my career, I would poke back into it, but I wasn't like deeply embedded in following it. Um when I hit that transition in my mid you know, as I was getting ready to go back to work after being a full-time dad and having this consulting job, I um I picked up Walker Walker Dievols book buy them build and also uh the HBR guide and really it just was so clear that this is what I wanted to do. You know, reading those books and getting back into it, it just immediately um just resonated so strongly for me that this was the answer to what I was looking for. >> And Alan, say more about your P&L experience. You had that run at Amazon, your own team, and then you mentioned that your consulting work led to uh a gig which I recall being running a local business of some kind. >> Yes, so um so the real story is I had at really had a hard time going back to work at figuring out what to do. I been out of the workforce for a long time. I had been basically just at home. And I was really struggling to figure out what to do next. I took a job as a cashier at our local food co-op uh grocery store >> >> to just get out of the house and start interacting with people again. >> Yeah. >> Uh well, and that was great. I loved it. It was just uh you know, I'm very much a people person and that was just uh really good thing for me to just kind of jump-start my my life and career again. Um I decided to run for the board of the co-op. It's a kind of member-owned um institution. I ran for the board, and I ended up not getting elected. But in the course of events, the CFO of that company reached out to me. They owned a large organic food warehouse in St. Paul, and they had done an ERP upgrade that they had totally botched. And frankly, it almost sank the whole company. They were losing millions of dollars. They didn't know what they had in inventory. It was just a real mess. She looked at my background, and she thought maybe I could help them figure out this issue. So I was brought in as a consultant to help with that. In the course of events, I ended up taking over leadership of the warehouse, which was roughly a $40 million business. And then I also became co-CEO of the parent organization, which owns two retail stores. So I mean, in total, that was an $80 million business. >> >> So I had had P&L experience at Amazon, where I um basically led my own team over there, which was the second largest business in Amazon Publishing. And um again here at the co-op, where I was uh leading the warehouse and um you know, participating and leading the parent organization as well. >> Yeah. So you're a person with a lot of manage management experience. And as you said, you're a people person. So uh one of the things in our world that we often bump into is that the people problems in the in management is something that a lot of entrepreneurs is an is is treated as a necessary evil. They'd rather not. Um but in fact, this is not part uh of this path that deters you. You actually are are and And you bought is a heavy people-intensive business, and you're looking forward to that. >> Not only does it not deter me, it's what attracted me to the path. I I love managing people. I love working with people. I love the challenge of building a team and getting everybody cohesively going after, you know, a common goal. Um and I'm just um people things really energize me. You know, the figuring out how to connect with different people and how to just that's that's really what motivates me. And so, in wanting to buy a business, I very much wanted the business to be big enough to support a team that I could lead. Uh which is one of the things that steered me not just to the path, but to wanting to buy a bigger business that would allow me to do that. >> Right. Well, perfect segue. So, you've decided to buy a business. Let's hear about your search, the the process, your criteria. >> Yeah. So, um I live in Minneapolis-Saint Paul, and I'm rooted here. Uh my my family's here, my wife's family's here. So, moving wasn't an option. So, I was very much looking at a local search in in the greater Minneapolis area. Um I was looking for a bigger business, you know, at least a million dollars in EBITDA. Um I really felt like you know, the stability of a bigger business was something that would be a better fit for me. Um I had I had the businesses that I had led had been at least $20 million businesses, so I felt like that was a size business I was comfortable running. Um and so, with with geography and size being important to me, I went into the search being open-minded about industry. Um and so what I found was that there were just not that many businesses of that size in in the Minneapolis-Saint Paul market that were available. >> How were you going about your search? Were you just doing brokered or say more about the kind of your your sense that Minneapolis is market you felt like you tapped out pretty quickly. What were the mechanics of your search? How how were you looking at >> focused on a brokered search. Um I just felt like um I felt like I really wanted to find a mo you know, a seller that I knew was motivated and ready to sell. And I was worried that with a more proprietary search that I could go 9 mi down the road with a partner and they could back out or decide it wasn't right for them. So I was pretty sure that and I also felt like having a strong inter intermediary involved in the process would be helpful. So there were a lot of things that just made me feel like brokered search was going to be the right path for me. I will say that as the search went on and it got harder, of course I considered doing more proprietary searching. Um but I was pretty focused on the brokered search. And when I launched my search, the way I conducted it was to just I really networked like crazy in the small business um M&A community here. Just having coffees and and meetings with anybody, you know, brokers, bankers. I was trying to also get familiar with, you know, people that might be on my deal team, lawyers, um Q&A providers. Um and just trying to network with anyone who might be able to help me find a business in in the in the area. >> I noticed you didn't mention owners in that list of people you were meeting with. So, you weren't you weren't trying to meet owners in your networking. I mean, directly. You weren't reaching out to owners directly. >> There were a few, you know, where um I actually met more with other people who had done ETA or who had searched for and bought businesses. Um >> >> but in terms of owners, I didn't do a lot of door knocking or cold calling to talk to um um entrepreneurs who are were already owned businesses. >> Yeah. Yeah. Well, you did the lab, Acquisition Lab, which is where we met at the at the lab's conference in St. Louis last year. And one of the things that the lab recommends is brokered search. So, that was reinforcing, I assume. >> >> Yeah, absolutely. I mean, it was um but I also, like I said, it just felt like that was going to be the right thing for me. I I just didn't Without having a you know, the other thing is, without having a clear sense of like what the industry was that I was focusing on, um I think it's just really hard to do any kind of proprietary search unless you focus down in terms of industry. >> Yeah. >> say as my search progressed, I did get pretty interested in the managed service provider space. Um I had heard an interview that you did with um Elliot Edge. Um I don't know if you remember Elliot, but um I got really inspired by his interview and by the path he was taking and um >> And remind people about Elliot's story? >> So, he um he had bought a small managed service provider and was in the process of doing a roll up of managed service providers. And there's a pretty clear path in that industry of if you buy these smaller MSPs, you can get them at a lower multiple. And then if you build a bigger business, when you exit, you can get a higher multiple. And that's like a pretty um strong playbook in that industry that really interested me. And I had a background in technology and really liked technology. And I felt like that could be a good fit for me. And so, as my search progressed, I did consider doing some proprietary outreach in that industry. Um but I um the I was having a hard time finding the right business there. And the more I got into it, the more I kind of got scared off of that um as being my path. Part of that was because you know, of what was happening with AI and how it's affecting technology companies and how um you know, I was just learning that AI is really disrupting that industry in certain ways. And I felt like people that were had more experience there were going to be uh I just felt like it was going to be hard. Uh and so, over time I kind of moved off of that as being my path. >> Well, the other thing that jumps out to me about that >> >> uh you finding that desirable is it's essentially a roll up, a consolidation. Um a kind of programmatically acquiring. And so, the nature of the project is very acquisition transaction heavy. >> Yeah. >> Uh it's it's now obviously Elliot's running his business, but a lot of his time, I haven't checked in with him for a while, but when we had the interview, is spent on looking at deals, talking to yet more owners, and having those meetings, and conducting those transactions. So, it the nature of uh that project would have been different than buying a large business and running that business and growing it organically. But, it sounds like um that motion that kind of perpetual transaction motion was appealing. >> Yeah, I thought it was, but um you know, I think I'm more attracted to being embedded in the operating side than I am in being like a real deal deal junkie. You know, as much as there were aspects of the search and the deal process that I really enjoyed, but I wouldn't say it's the thing that drives me as much as like wanting to get into the nitty-gritty of operating a business. >> Mhm. As I recall, you actually you did go down the road a bit with an MSP. >> So, um I did find uh a business that was that fit some of my criteria. Um it was more of a value-added reseller than it was a managed service provider. And my thought was, well, here's a way into that space, and I could maybe buy this company, and over time transform its business model into a more recurring revenue managed service provider business. That was the idea. Um but, I think I was kind of try talking myself into this being um the thing that I wanted it to be rather than what it actually was. And um there were a couple things that ended up blowing up that deal. One, we never did get under I did submit an LOI on it and we negotiated on it. So, one was it was a very owner-dependent business. One there were two owners and one of them was one of the chief sales people and he owned 50% of the customer relationships. And so, that was always scary, you know, him stepping out, owning those relationships. >> Yeah. >> Two was, you know, the more I looked at it, the more I thought it was really going to be a heavy lift to transform this business from a value-added reseller into an MSP. >> >> Um and third was, you know, as we got into negotiating the LOI, I just kind of lost trust in the sellers. And so, that was the main thing that ended up blowing up the deal, but I did have those other things kind of nagging at me, telling me, you know, this probably wasn't the right thing. >> That second thing, that second piece of the transforming your vision to transform this VAR VAR into a traditional recurring revenue MSP, that we actually at Mines Capital we we just looked at a deal where that had happened historically. The the MSP had done that. Um but it was a multi-year project led by one of the founders to do. I mean, it took them years to make that transition. Um and happily so it's it's not to say that it can't be done, but it's one of those things where in it looks good on paper, but actually executing that is is takes years and it takes years by even the owner founder of the business to do, let alone a new buyer outsider. >> Yeah, like I said, I mean, I think it's I think it was doable. I don't think it's a bad strategy, but I think it was going to be hard. And here's the the thing about be you know, I'm 57. I'm later in my career. I'm really only getting one swing at this, I think, you know, it's and um I think that would have just been a slog for me. Um and I don't think it would have been fun. It just sounded really hard and um the more I thought about it, the more I thought this isn't the right thing. >> And could you say more about the trust loss? >> Yeah, as we were debating the uh the deal, um they want basically um their business had performed at a certain level, but in 2025 in the first half of 2025, business was softer. And I had submitted a multiple based on you know, the revenue, but I wanted to include 2025 numbers in determining what the price would be. And they didn't want to do that. They they thought, you know, this business has, you know, been a steady $10 million business and even though we're down in the first half of the year, it's still a $10 million business. But to me, that was crazy because they were substantially off in the first part of the year. Now, it was a crazy part. >> >> It was a crazy time cuz there was the tariffs were really uh you know, in the news then. There was so much uncertainty. Um and it's very possible that their business would have rebounded in the later half of the year, but I wasn't going to pay for that in my initial offer. Um I just felt like it should be based on you know, the last 12 months of revenue, not last year's revenue and forget about the most recent 6 months. That didn't make any sense. And so when I insisted on that, the one of the sellers um he just got really upset about it. He felt insistent that his business was a $10 million business. And um we were actually slated to meet for a lunch and he pulled out the day before. Um and when he got so emotional like that and you know, wouldn't even sit down and talk, I was like, I don't trust this person as a negotiating partner. >> Mhm. >> Um so I just lost faith in the deal. >> Sounds very wise, Alan. And uh I'll I'll actually just say another thing about the Acquisition Lab. We're doing a webinar on Thursday. Um I think it's entitled Kill It Early. Red flags How to spot red flags before engaging in diligence. And it's all about this. What what can before you spend thousands of dollars on a QofV, what are some soft signals that you can identify uh with your other party or the target business that um should scare you off and and tell you you don't even need to proceed. Uh this is just a perfect example of that. >> The you know, one of you know, in my research and like from listening to interviews and um reading and everything, the one of the things that that really stuck for me was that um deals that don't work the number one thing is the relationship between the buyer and the seller. And I really wanted to find So I the entity I formed when I was um when I launched my search was called Legacy Bridge Capital. And I was really focused on the idea of like wanting to carry somebody's legacy forward. And really wanted to find um sellers that um that I resonated with and that I you know, I really would be proud to carry their legacy forward. And the idea of going through with a deal, given how I felt about it with someone that I didn't have a good feeling about, just seemed not right to me. >> A non-starter. >> Yeah, exactly. >> Okay, Alan. Um and so how do you find the business that you do buy? >> So the interesting thing was that deal uh for the the value-added reseller that fell through, um that was represented by um a local boutique investment bank called Quasar here in Minneapolis. And um through that process, um I established a good relationship with them. Even though the deal ended up falling through, um I developed a lot of trust in in them. And I think they got to see evidence that I was a serious buyer, and um we just had a good relationship. And so when um a couple months after that deal fell through, they tried to revive it and when I said I wasn't interested, they had another company that they they suggested I take a look at. And it ended up being the company that I bought. >> Great. And so lesson there being comport yourself well at all times uh cuz you never know who's watching. >> Well, I think that that for sure. But also I think, you know, there's something about going after you know, if I hadn't gone after that other opportunity, it wouldn't have yielded this, you know. So I think you do have to kind of get off the sidelines and get out there and go after something and you learn I learned a lot by you know, submitting an LOI the first time and negotiating that and having it fall through. I learned about what I didn't want and I learned but I also um was able to build this relationship um with um with the broker and that led to me finding the deal. >> Tell us about that deal, please. >> Yeah, so um the company that I bought, it's called Interim Health Care. It is a um a large home health and hospice business. It's uh mostly Medicare certified home health and hospice. Um and so it's um um it had the owners had owned it for almost 20 years and they were ready to retire and um it is part of a franchise. It's uh part of a 60-year-old franchise system and it's one of the biggest franchises in the whole system. And um when I looked at it, I mean, I loved the size of the business. I loved that it was local. So, it checked two of my biggest boxes. >> How big was it? >> Um it was roughly a $20 business in revenue. Uh about 150 employees. Um and but the thing about it that resonated most strongly for me was just the mission and purpose of the business. So, that's something we haven't really talked about but that's been a um a driver throughout my career >> >> is to find roles where I feel like I'm contributing to making the world a better place. I mean, I know that sounds idealistic, but like really finding like a mission and purpose that is beyond just dollars and cents has always been really important to me. It's the thing that drew me to book publishing early in my career because I you know, obviously I love books, but I always felt like undeniably books make the world a better place. And you know, that that gig that I talked about right before I launched my search where I um where I worked for the co-op, I was really drawn to their mission of supporting the local food ecosystem. And so when I found this um it just was immediately clear to me like that this of course finding something with mission and purpose was what I was looking for. And I knew that that was important to me in my search, but as I as I said, you know, I was running when you're running a local search and you have to be open-minded and you know, I'd looked at everything that didn't have mission and purpose and and it was in the background for me, but I wasn't forefronting it. I think in retrospect I should have forefronted it from the beginning. Um but when I found this and it had that mission and purpose, I immediately knew, oh yeah. That's the thing for me. >> Well, it's great to hear you identify mission and purpose with this business because we hear on this podcast and in private equity broadly about a lot of acquisition stories in the space of home care, home health care, hospice even. And what everybody not everybody what a lot of people are attracted to are the you know the fundamentals the economics of this business the the tailwinds the recurring revenue and so on and so we we always try to mention >> >> or more than mention what the service that is being delivered is in these businesses and how delicate and important and valuable it is and how it shouldn't just be about the dollars and cents but point is though there is just a lot of capital coming in here because the fundamentals are so appealing. So it's great that to hear somebody an entrepreneur or private equity person type >> Yeah. >> come in here leading with mission and purpose. >> Yeah to me honestly that is the thing that's driving me. Um like I said you know this is probably the last chapter of my career and I would get a chance to devote the rest of my my work my working life to making a positive impact on people's lives. Um and you know to touching people at some of the most vulnerable moments of their lives and of their families lives. So whether it's you know um we work with a lot of elderly people and um and then of course in the hospice side of the business people who are dying and the the opportunity to um be of service to people when they're in such need is just I feel so lucky to have found something with that where I can devote my time and energy to that and also to serving the caregivers that are part of our organization. >> Right. >> Um so it's just incredibly motivating to me to and I feel like if we can maximize our positive impact on people, you know, the the the the business results will follow. >> Great, Don. >> Um well, >> I'm so glad you underlined all that. Now, back to the numbers and the business side of this business. >> Yeah, of course. >> Can you share what the earnings look like? You mentioned that it was 20 million in revenue. >> Yeah, so >> I assume that easily hit your million-dollar threshold of S&P. >> It Yeah, so um interestingly, the business had So, in 2024, it did about $2 million in EBITDA. Um but that the business had performed, you know, at that level pre-COVID. So, like in the in the late 2010s. But during COVID, it had really hit a rough spot because, you know, um the business serves people in assisted living facilities, and um when when COVID happened, they the facilities basically locked down. They wouldn't let people outside the organization in. Um So, there were some real tough years there. So, there wasn't like a steady um earnings at that level um to look at going back four or five years. Um and in fact, they had just really 2024 was like the first year they got back to that level. But what I saw was a story was, you know, here's a business that performed at that level, had had some hard times for totally explainable reasons, but it had now was was coming back. And so, um to me, it felt like an opportunity to buy a business of that size at a relatively good price. >> Well, speaking of good price then, do you factor into is the multiple based on a blended average of the previous 3 years when it was, you know, years 1 and 2 it was much uh doing a lot less than it did last year the or the prior year or did the owner kind of insist on just the last year? >> Well, I ended up um so I paid about four times for that that um um most recent year. But, the way we structured the deal was that there was some downside protection. >> Can you elaborate? >> Yeah, so um there were there's two seller notes um that were part of the deal and they were dependent on the they're dependent on the business hurting hitting a certain level of gross profit. And if the business doesn't perform at that level, then the they're they would be forgiven. >> And are those significantly sized seller notes? >> Yeah, so there's two seller notes of about 1 and 1/2 million dollars each. So, yeah, they're significant. >> Okay. Okay. So, you paid $8 million for the business. And two seller notes of Go ahead. >> Yeah, so 8 million, but if it performs at the level that it had in 2024. >> Exactly. Okay, thank you. $8 million and so let's say it performs continues to perform a million and a half is one seller note, a million and a half is another seller note. And sorry, why two seller notes? Do they have different they have different performance thresholds? >> Yeah, so one is for the one's based on the performance of the first 24 months and one's based on the performance in in second 24 months. >> Okay. >> I mean the second the first 12 months and then the second 12 months. >> Okay. Okay. And then the remaining 5 million came from SBA loan and equity? >> Yes. So, um it was a $4 million SBA loan. And in order to do the deal, so this was a bigger deal than I I although I was looking for a big bigger business, I thought I would be able to buy a business uh totally on my own. And even at this size I thought maybe I'd be able to buy a business totally on my own. I thought you know, perhaps with a max SBA loan and some pari passu debt on top that um you know, I'd be able to just do it by myself. Um but I ended up raising um outside equity to um both for the down payment and also to put extra cash on the balance sheet. >> And so why why did you um I mean it sounds like you were in a financial position to be able to do it. But you opted not to. So, talk us through that a little bit more. And and starting with if you would, what was the amount from your balance sheet you were you were prepared to put toward a business acquisition? >> Yeah, so I was prepared to put $400,000 of my own money into the deal. Um so it was you know, if >> Which is 5%? That's the 5% which >> Yeah, so it wasn't really enough to do on my own. Um so I needed I needed to raise money in part for the equity injection. Uh that became clear pretty quickly. Um and so um you know, I had to uh go out and try and raise some money to do that. And um um Luckily, I found some great partners who were willing to invest in me. >> You mentioned the the working capital injection. So, this wasn't just about the equity to to for the to reach the 10% or whatever your lenders wanted to see and you wanted to put in. >> Yeah. >> But, this is a working capital intensive business as well. So, you wanted extra room there from whatever was in the business when you were to buy it. Talk talk us really quickly through how you thought about working capital from the outside looking in. >> Yeah, so what I would say is so I um As I raised money from investors, one of they they they were the ones who came to me and said, "Look, we would actually like to invest more in this business than you're you're looking to raise." Uh we feel like um it's a capital intensive business like you said. Um and it would be better for you and better for for us and better for the business if you raised extra money and had that money on the balance sheet and more working capital. And um you know, that was another thing that it resonated strongly for me throughout the process was that I never wanted to be in a position where I wouldn't have enough working capital. I knew how important that was just in the early days and just overall. And so, when they suggested that that I I went along with it wholeheartedly. >> Can you share your investors? >> Yes, my search for investment capital was was I think a little bit unique in that I didn't end up going out and um talking to a lot of investors. The deal came to me um right before I attended that um Acquisition Lab conference in uh, St. Louis in September where I saw you. And um, I had just found the deal and I knew I was going to be looking to raise money. And that conference ended up being really focused on raising investment capital. And um, there were a number of investors there and in fact I pitched the deal um, to a room full of them at the conference and had some side meetings and I ended up meeting um, Grant Hensel of Entrepreneurial Capital there. >> >> And uh, Grant and I uh, really connected and we stayed in touch after after the conference and he said, you know, I'm I'm interested. I'd like, you know, just keep me informed of how it's going. And as I was as I was negotiating the LOI, he was actually very helpful. I would, you know, go back and forth with him about um, some of the deal terms. And in fact at one point I thought about increasing the purchase price. And um, he reached out and said to me, um, you know, we don't think you should do that and if you do that, I don't know if we would be interested. And that led, you know, that I stood my ground on price in part because of Grant's feedback. Um, um, Grant ended up There was another another of my investors is Jacob Paul of Condo Capital. Um, Jacob also runs the ETA program at the University of Texas. And um, I had met um, Jacob at that conference as well. At the time he said he was not interested, but then we we spoke again and I think he really saw that this business was a good fit for me and um, he he knows Grant and um, so he got on board and Grant also brought in um Adam Markley of the Prox Capital Group. And um so that ended up being my three investors. >> Great. Well, I also met Grant and Jacob for the first time in St. Louis at the same conference. I was actually on a panel with Grant. I knew him from before cuz he'd been on the podcast with his wife who whom he helped buy businesses or was there supporting her. Uh and Adam has also been on the podcast. So these were all familiar names uh to me as well. And then and then yeah, I met Jacob in St. Louis and uh a few months later I was there at uh University of Texas as he as he kicked off his conference. So um good good team there and small world. >> Yeah, so I would say a couple things about that. One is um one is that like I really locked into it because um like I said, I didn't have to go out broadly and talk to a lot of investors. I kind of fell into meeting these guys. Um the second thing was I felt great about working with them because as we kept talking, I just felt a strong sense of alignment with them around they understood that I was really motivated by mission and purpose from the beginning. Um and I just felt a really the the more we worked together, it just was clear that all four of us were very aligned. And so I felt great about that. And I will also say, you know, these are three guys who are very active in the ETA community. Um they they're out at conferences, they're doing podcasts, they're active on LinkedIn. And to me that actually gave me a strong sense of comfort. Like these guys have real reputations to keep up in the community. And I felt like in a way that validated them for me because, you know, they're not going to take advantage of me and you know, ruin their reputation. Um so, I just felt and they proved to be a really great asset to me throughout the process. My deal ended up being there were lots of up and ups and downs during the deal. And um they were an incredible resource to me to help me navigate those. And um um you know, that just felt made me feel really good about, you know, building a long-term relationship with them. >> Hearing your experience of raising this morning, what also jumps out at me is just how much more mature the self-funded search equity raising process now is because you have these dedicated players like a Grant and an Adam and a Jacob and now Acquisition Lab, of course, has a capital has a capital product. Um versus even just a couple years ago long-time listeners will have heard me refer to Sam Rosati's spreadsheet that floats around the internet that has a has a list of of people who are interested in investing in search deals. Um and that was a great resource, probably still is, but it but it was also a hodgepodge of serious people and and kind of random people who just anybody could add their name to the list. With but now you have these in these three and and I probably others that I'm forgetting really dedicated people to this ecosystem and to this model of buying a business. Um and so that that um more mature process is probably a benefit to everybody because deal raising can move more quickly. You can You can um you know, as with any capital raising process, it's kind of dominoes can fall quickly once you get a couple people interested. Um so, I I just think it it's a it's a testament to how far in a little bit of time the self-funded search capital options have have come. The other thing I'll say is you mentioned their visibility in the space, their commitment to this self-funded space, and how that gave you comfort in them. Um so often as first-time capital raisers, people are worried about, you know, getting the approval of the investor, but you too should make sure that you like the investor. Of course, you're you're it's a it's a two-way interview. Um and one thing we hear over in the in the independent sponsor world, on the other on Minds Capital podcast, is there are a lot of capital providers, big institutional capital providers, investing in independent sponsor deals. And there are a lot of these horror stories where a capital provider will a an independent sponsor will raise from a capital provider who screw them, for lack of a better term. Um there's a number of these stories. And so you'll hear this now conventional wisdom, this advice, that when raising, you as an independent sponsor, business buyer, when raising from a capital provider, make sure that capital provider is committed to the independent sponsor space, because then you know that they care about their reputation. They're they're they're committed to this space, and they're going to they see themselves in it for years, and so that acts as a kind of self-corrective, uh so that they behave themselves. As opposed to somebody just, you know, a deal comes across some capital provider, they a deal comes across their desk, they're interested, maybe it doesn't go well, and they and they squeeze and squeeze and squeeze, cuz they don't have any it was they were just doing a single deal. They're not in They're not They don't see themselves as players in the ecosystem. So, um just a interesting pattern there that that wanted to call out. >> Yeah, well, a couple couple other things that came up as you were talking, too. One is it was really important to me to find value-added investors. So, not people that were just going to provide money, but wouldn't provide counsel as well. Um it became clear right away what good advisors these guys were going to be. Um and um I really valued that and wanted that. Um I also think that these guys are really committed to wanting to see searchers have good outcomes. You know, they um you know, like the whole idea of raising extra money to put on the balance sheet is so that you can be more successful and so you don't go bankrupt, you know what I mean? And these guys were um I just really believe they Yeah, of course they're in it to make money. Um but I also think they are supportive of the broader ecosystem and wanting to see good outcomes for people. And so, you know, that gave me you know, just felt like a good fit. >> Yep. Yep. Well, those guys are all good guys as well, just in my in my interactions with them, my experiences with them. >> Yep. And the other thing about raising money from investors is, you know, it um it makes me feel like I'm not doing this alone. They're my partners and um it makes it more fun. Honestly, to have partners that you feel that you have a good relationship with and I also know when I run into things, I have people I can call that are that are invested in my in my deal that you know, will work with me to figure out you know, what to do. So um I feel very lucky to have found the investors that I did. >> Let's hear a little bit more about let's get into the weeds there. Um So can you share how much equity you raised and how that changed your own equity or ownership on an ongoing basis and then I also want to talk about how much you're paying yourself? >> Yeah. Um So I will say So I I ended up raising initially when we went into the deal, the investors were going to put $2 million into the deal. Um Along the way um among the many twists and turns of the deal, we ended up having to restructure the deal partway through because the business in the last quarter of the year um took a hit. And so we revisited the structure of the deal and then once we did that I didn't need to raise as much money. So they ended up putting a million and a half dollars into the deal. Um and so I had put in 400, they put in a million and a half. Um and the way it worked out is that we will end up being roughly 50/50 partners. >> Mhm. >> I will have slightly more than 50% of the the the business. Um and they'll have >> And that that's slightly more is key cuz it means you have control rights. >> Yes. Yeah. >> It doesn't necessarily mean that, but it probably It sounds like in this case it does mean that. >> Yeah. Yeah, I will say, you know, when I went into the idea of raising money, I was hoping to end up with more like 3/4 of the business. >> Mhm. >> Um but, you know, I felt like raising the additional capital was was a good decision and um of course I want to do well. But um I felt like I kind of took an abundance mindset about around the whole thing, which is I really believe in this business. I really believe in myself. And I think I wasn't going to worry about like getting an extra that extra 10% as much as I just feel like if I do well, the business does does well, everyone's going to do fine. And >> Yeah. >> You know, and I feel like having found investors that I'm in alignment with was more important than trying to get that last 10%. >> It's a great point and probably a wise move, Alan. I mean, it is very tempting to want to just have as much ownership as you can. Um that is one of the things in fact that's touted about self-funded search, SBA search, that you can you know, own these businesses 100%, 90, 80% even if you have to raise capital. Um but it can be short-sighted. Um especially You're You also bought a big business. So, the bigger business you buy, the more likely you are to own less of it. It's a bigger pie. So, so there's that dynamic. You bought a $20 million revenue business here um generating in its most recent year about $2 million of earnings. So, um yeah, not bad to own a little bit more than half of that as a you know kind of first time searcher. So also good to keep things in perspective here. And just a reminder to everybody when you look at traditional search funds, when you look at independent sponsor land, uh none of those people own anything approaching uh you know, what self-funded searchers get. It's really the standard is call it 20 to 30%. Sometimes they'll be super carry, but really it's um you know, more like 20 to 30 and that's that's uh um so in some sense where I don't want to say spoiled, there's a reason for it, but the the the numbers of ownership that we hear in self-funded search land are really uh an exception to the rule. >> Yeah, and like I said, you know, I mean they enabled me to buy the size business that that um that I did. And buying a bigger business was important to me and I wouldn't have be been able to do that without without the investors. So. >> Yeah. Paying yourself, Alan, your salary. >> Yep. >> What can you share what that is going to be? >> Um my salary is going to be about $150,000 a year. Um and anything on top of that will just come from distributions that me and my investors share in. >> That $150,000 for somebody of your stature in your career feels a little bit low, little bit below market. >> Mhm. >> Do you Do you agree? How do you respond? >> You know, um I would I would have liked it to be a little bit higher. Um that was something that my investors felt pretty strongly about. They want They wanted to come from They want me to be motivated to have the business perform and and for for us all to do well. I mean, the way the the is structured is that my equity is um the same as theirs. So, um you know, if I if I generate distributions, then then we'll all benefit. And so, they'd rather see more of my pay come from that. And I'm totally aligned with that. >> Yeah. Yeah, it creates great alignment. And it's And it's not to say that 150,000 will be your take-home once and for all. Um that's just the base, if you will. >> >> Uh the You've got opportunity for upside every year depending on performance and dividends distributed. >> Yeah. >> Great. Um but that And And as part of the process of raising capital, that is something that you negotiate up front with your investors. >> Yeah. I will say, you know, um it is. It is. >> Okay. We haven't talked about a couple other themes here. Your attempt to use ROBS, let's maybe kind of hear that really quickly cuz you ultimately didn't use it. We'll want to hear why. >> Yeah. >> And then the fact that this is a franchise. So, let's hear about your your exploration of ROBS first. >> Yeah, so um I thought that I would use ROBS for my equity injection um for whatever company I would buy. As I researched it, I felt like that was a good fit for me. I had substantial assets in retirement accounts that I could use. Um and I would be able to um not incur taxes selling off, you know, uh other parts of my balance sheet. Um so, I felt like that was going to be a really good fit for me. Um what I found was if you are raising money from investors and there's a preferred equity preferred equity structure to the deal, you cannot do that with ROBS. ROBS the the rules around ROBS do not permit sort of a preferred equity um everything has to be treated equally. It was just not it was going to be either you couldn't do it at all or it was going to be so restrictive and complicated that it really wasn't possible. Um and so you know, I just ended up having to pivot off of that. Frank you know, luckily I had other assets that I could use. It did require me you know, incurring some taxes that I would prefer not to have incurred, but fortunately I was able to um you know, fund the deal elsewhere. >> Yeah. And I should have defined ROBS at the start. Many listeners will already be aware, but in case you're not uh I can't remember what it stands for, but it's ROBS and it's essentially your >> rollover for business startups I think is what >> That's it. Rollover for business startups. It's the ability to tap your 401k for the equity in a business acquisition and even in the most vanilla circumstances it's it's pretty complicated and in fact there are service providers who will do it for you. It's so complicated which is pretty much the path everybody goes down. Um but you discovered that it can't be done with a preferred equity type structure which is the standard structure in self-funded search land. So I don't know if there are cases where of people who've done ROBS and still were able to have investors and not because if they didn't do a preferred equity structure. So, I I So, I may So, listeners can correct me, but I I think it's fair to say based on what you discovered that it's basically all but impossible to raise money from the kind of self-funded search investors that we're talking about with their expectations and to marry that with Rob's. >> That's correct. That That was basically what I found that it was just a non-starter. >> This is a franchise business. How did you think about that? >> Yeah, so I never would have thought that I would have bought a franchise. I just um the idea that I would be um you know, I'm a really creative thinker. I like to think of myself that way anyway. And so, the idea that like I have this constriction I have to work within in terms of branding and the um you know, just the rules that are set up within a franchise system just didn't sound like a good fit for me. Um so, and I wasn't really actively looking at franchises. Um but, you know, as my search went along um and I wasn't seeing that much deal flow um you know, you you start to weigh like what are the trade-offs? And when I found a great business that was a franchise, I had to think about like, well, can I live with these trade-offs? And so, um you know, the fact that I found something that was of the size I was looking for in my geography with this mission and purpose >> >> um that all outweighed the fact that it was part of a franchise system. And then, you know, um then you can you have to look at like there are positives to being in a franchise system. You know, there are all these other franchise owners in the same system who are running similar businesses that are a source of community and support and learning. So, that's a great asset. You have the franchisor who is also providing you with support and resources. So, you know, that's a benefit. Um so, when I weighed all the trade-offs, I just felt like, well, any business is going to have issues. And uh I felt like these were issues that I could live with. >> One of the appealing features of the franchise path, as you just said, is that there are all these other owners. And so, for the acquisitive minded franchise owner, which everybody listening to this podcast who comes on this podcast is, cuz they got it themselves into the franchise by buying the their way in, um can be pretty interesting, because you can programmatically acquire. You have a a list of all the owners in the franchise system. Um you can say, "I'm a seasoned executive. I'm already the owner of one of the largest territories in this system." Um so, you know, you'll get calls back. Does that Is that uh part of the potential program here? It's probably too early. You'll have to see. >> I mean, it's something I'm definitely open to. Um right now, I'm just focused on running the business I bought and growing it um organically. Uh but, I am definitely open to uh more acquisitions, whether be other um businesses in the franchise system or, you know, other home health and hospice businesses that I could acquire and bring under the umbrella. So, I'm definitely open to acquisitions as part of the long-term growth strategy and in fact very interested in it, but, you know, um so, yeah, it is a benefit of being in the franchise system. >> You closed when, Alan? >> In March. >> In March? Here we are in May. >> Yeah. So, it's been about 2 months. >> Okay. Well, let's close out with uh how it's going. First impressions. It's 2 months. >> Yeah, so, um well, one thing we didn't really talk about was how um there were a lot of ups and downs in my deal. It was quite a roller coaster and it was a very stressful deal. Um and um you know, it almost fell apart multiple times right up until the very end. And um to be honest with you, it's been a lot less stressful since I closed than it was before. >> Can we have some of the highlights of the the how the tumultuous things that happened as you went toward close? >> Yeah, so, um there were several things. One was um well, first of all, you know, when we did the QOV, um and the the results came back that the adjusted EBITDA wasn't as high as they were saying. It wasn't like a lot lower, but it was somewhat lower and since, you know, you're you're playing uh paying a multiple of EBITDA, um that required relooking at the price and the of the deal. Um and then on top of that, as I alluded to earlier in the fourth quarter last year, business really softened. Um and so, the combination of those two things really um led to some hard discussions about price and structure of the deal. Um there was also, early in the process, we talked about being part of a franchise system. Uh the franchisor um wanted me to sign a new um franchise agreement. Um and they wanted higher royalties than what the current sellers were paying, which would have reduced the EBITDA also. Um it turned out that legally, I didn't have to sign a new franchise agreement. I could just um that the the sellers were able to assign their existing franchise over to me. But that required a whole I ended up having to get a a specific franchise attorney and really um um go through a process with the franchisor, which was a really a good kind of lesson and eye-opening heading into being part of a franchise, which is you know, your interests with the franchisor are aligned in some ways, but not always. And you have the ability to fight for your rights with the franchisor, and I got to learn about that as part of the process. Um one of the things that led to the results being lower in Q4 was that one of the biggest insurers in the state of Minnesota ended up going bankrupt at the end of last year. And they were one of the biggest payers of the business. And so and that created a bunch of disruption in the healthcare marketplace here in Minnesota. So you know, as people had to like migrate from one insurer to the other and it wasn't really clear how that was all going to pay out. Um play out and so that led to some ups and downs during the deal. And then um late in the process we encountered a bunch of issues related to the SBA. Um which led to some uncertainty toward the end of the process about whether I was going to be able to get the deal closed. And so all those things were pretty stressful in their own ways and it just felt like a pretty long up and down roller coaster. >> That SBA bit related to the Medicaid scandals that were coming out of your home city that everybody where everybody was for about a week was seeing in the headlines, right? >> Well no, so there were two so that was another thing. So you know, all of this was happening amidst the backdrop of um you know, this fraud scandal that's been going on in the state of Minnesota and um and um people scrutinizing you know, Medicaid. Now our business is almost entirely Medicare not Medicaid. So I felt like it wasn't really going to directly impact our business, but it was certainly in the background with the banks asking about it and you know, um it wasn't like there was no cause for concern. The SBA issue was different. The SBA issue had to do with, um um, um, so, the when we went to, you know, go into the closing elements the deal, um, you have to provide information to the SBA about all the investors in the deal. And then that include all the investors of the funds that invested in my deal. And um, the SBA recently made some changes to the, um, this e-tran system that they used to communicate with the banks. And they started flagging some of the minority investors of our fund in in the funds as, um, >> >> you know, if they if anyone had been involved in any SBA deal that had encountered any kind of like default or even late payment, they were flagging those people as not being able to participate in the deal. Now, this was a new thing that the bank hadn't encountered before and my investors hadn't encountered before. And so, it led to a lot of delays toward the end of the process and and there were times when it felt like the deal might not go through because of it. >> This you're the I think the first guest I've had who has who encountered this and and for for whom this affected their deal. Um, but there have I've been hearing offline just tons of grief about this. Because what it means is that if you invested five grand in your buddy's SBA deal 10 years ago and that deal went south, you as little $5,000 check in some deal 10 years ago now have a scarlet letter on your on your name vis-a-vis SBA lending. And and the reason this has all started to happen is because of the green the new green card and or citizen requirement that SBA funds should only be made available to citizens, not even green card card holders. So what that means now is that everybody on a on a cap table in an SBA deal is being put through I guess it's called the E-Tran system. That so there's just there's this a new layer of of tracking and tracing that's going on. And it's, you know, quote unquote exposing people who've been in involved in other past deals, but that's the wrong word because it sounds like they've done something wrong. They haven't. They were just on a on they just happened to invest some money in a deal that didn't go wrong. Why should they be punished? Um Now the good news is I actually met with some people or met some people of the of at the SBA last week. My sense is that this is going to be fixed because this is too onerous even by an SBA that seems to be kind of not very searcher friendly. I think there's a recognition that this is just entirely too onerous um and punitive for just people who put you know, investors essentially. Um so interesting to hear a first-hand account of how disruptive this was. And and but in fact you were able to get through. So it didn't it didn't tank your deal, but it almost did. >> Yes. So um so my understanding of the situation is is this kind of like one strike and you're out kind of rule. It wasn't even entirely clear if the SBA meant to do it that way or not. Like how intentional it was. >> Right. >> Um and the latest so uh Grant Hensel, one of my investors, has been posting about this a little bit on his LinkedIn page. And I think just last week he had an update that he said that uh I don't know if it was the same meeting that you were involved in, but um that he had met with some people with the SBA and some other investors and he was really encouraged that the SBA understood um the negative implications of this rule. >> Yeah. >> And he felt he felt like there was uh a very good chance that they were going to change this in a more positive way. >> Yeah. >> But um my deal was one of the first deals that this surfaced on, um at least for the people involved. And um I mean, honestly, literally up until just a couple of hours before it closed, I thought there was a risk that the deal might fall apart. And it was really stressful. I mean, I was you know, hundreds of thousands of dollars in deal fees into this deal and the idea that it could have fallen apart at the last minute because of this issue was uh dismaying and disturbing, honestly, because um there was no communication about it beforehand. You know, so I didn't know about it going into this. My investors didn't know about it going into it. The bank didn't know about it going into it. And the fact that it could have killed killed the deal um at the last minute was was really scary. >> >> Yeah. >> Um and in fact, you know, the I think the only reason the deal really went through was because well, one was um so Huntington Bank was my lender. And Huntington had a had does tons of SBA deals and they have a they had a strong relationship with the SBA. And I think that really helped um, kind of ease the way through cuz even when we hit this friction because Huntington had a good relationship with the SBA, I think they were able to kind of talk through it. >> >> Mhm. >> Um, but I think they basically going granted me an exemption. Um, which, you know, it just somebody's whim basically allowed the deal to go through. >> Yeah. Yeah. >> So anyway, but it's going back to what you were saying earlier, given how stressful the deal process was uh there for months, um, the early days of um owning the company have been really smooth and by comparison. >> >> The benefits of a bad deal process is that maybe the transition is less stressful. >> Yeah, but I mean it's really more a testament to the fact that I bought a great business. I have a strong team. And uh >> Can you say more about that team? >> Yeah, so um So like I said, you know, one of the benefits one of the things I was searching for in buying a bigger business was that there would be a leadership team in uh in place. Um, so this business has a really strong team. There was a CEO in place. There's a COO and a bunch of uh and a and a team of managers who lead the clinical side of the business. And every and uh a controller Um, and so that whole management team has stayed in place. And um, you know, they're they've kept things moving steadily while I've been able to step in and learn the business. >> And so there's a CEO that is there is still there. >> Yes. >> And is your will you be CEO at some point or what does that look like? >> Well, she's agreed to stay on for for the time being and so my plan longer term is to operate the business myself, but I wanted her we have a really strong relationship and I want her to stay on and continue leading the business while I'm learning it and then we'll kind of cross that bridge down the road. >> Yep. Yep. Well, just a just another example of or a great example of buying how buying a larger business gets you this management layer, this management infrastructure so that on day one you're not breathlessly just trying to figure everything out. You can be a student of the business learning at the CEO and COO's knees. >> >> Um and and the business will continue operating and and you can almost you know, um you know, and also at the reality of working on rather than in the business is much is much going to be much sooner for you than it is for a much smaller business. So >> Well, all good things. >> Yeah, I'd say a couple of things really set me up for things to be smooth in the start. One is um putting that extra cash on the balance sheet. I have not had to like spend my first couple months worried about making payroll. >> >> Um and then you know, having having the management team in place and being able to feel like um, I could just step in you know, I'm new to healthcare. So, there's it there's a lot for me to learn. Like I am I have a lot of humility about how much I have to learn in this space. And so, I've been able to focus my time on I've been going out on visits with nurses to go visit patients. I've been going out with sales people out in the field. And I've been able to focus my time on really learning and stay while the CEO is running the day-to-day. And that's been a real comfort and has really made you know, these early days feel not as stressful as perhaps they would under different circumstances. >> Yeah. Alan, close us out with reflections on doing this at the age of 57. The good, the bad. >> Yeah, you know, so like everything there's trade-offs. Um, I think um, there are real benefits to starting your ETA journey when you're younger. Um, cuz I think you can get more bites at the apple. I think the benefits really compound over time. Um, and you know, if I were to go back and do my career over, I would probably have started way my journey way earlier. Um, so um, you know, and like as as uh, as much as I feel like I bought a great business, you know, you never know what's going to happen. And so, I'm really realistically getting one swing at this. Um, and so, um, you know, those are that's one way to look at it. But, you know, my path is my path. And it it took me longer to to get here than than a lot of other people, but I think there are real benefits to that. One is I mean, the biggest one is I have more career experience and more life experience than if I was uh 30 or even 40, frankly. I'm just more ready for this opportunity. And I feel like um all the things I've learned from my my different stages in my career and my life make me a better manager and better positioned to to be successful um than if I was younger and less experienced. And I think that really matters. And I think it's one of the things that my investors liked about me as an investor. >> Absolutely. Absolutely. >> So, you know, I to me this was about what am I going to do with this last stage of my career that I'm really going to enjoy where I'm going to have agency and feel in control of my destiny and um sure, it's later in my career, but you know, I've got 10 15 years left and um you know, I feel like I found a great fit that's really going to uh make the rest of my career enjoyable. And yeah, you know, just to return to that idea of of being a mission-oriented business, to be able to spend this last stage of my career um uh making a positive impact on people's lives. I mean, I can't imagine a better a better outcome. I feel so fortunate about the way my search turned out. Um you know, I I wasn't what I planned going in. I I didn't have this vision from day one. >> >> But, the way it worked out has been really just um I feel super lucky and fortunate. >> Let's end it there on that lovely note. Alan, congratulations on a search that you feel so good about. A great business that just feels like the business buyer fit here is spot-on. Um and that you've got 10 and 15 years uh to look forward to of something that motivates you um spiritually almost, uh but that will also be probably a great business and and your investors uh think so. So, it's just a great story all around. Thank you for sharing it with us. >> It's been my pleasure, and thank you for all that you do. >> Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds Newsletter. We send an email for every episode with an introduction to the interview, a link to the video version on YouTube, and soon key takeaways, numbers, and more essentials from the interview for those of you who don't have time to listen or watch it. Subscribe at acquiringminds.co. You'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars. 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