Chad Hilder Brandt welcome to acquiring minds thanks for having me on I appreciate it Chad I love having guests who have written down their thoughts on their process of buying a business uh it shows that they're a reflective person which almost all of my guests are anyway uh but this assures that a guest is self-reflective and they've kind of pre-structured their thoughts and you know done my work for me and you Chad did that in Spades you sent me this wonderful page or two uh here of notes that I get to work from as we talk now there is so much here thank you for so much prep Chad it is a fascinating and fun story fun for we the listeners maybe less so in parts for you the protagonist but let let's get into it Chad hilderbrandt who are you please and how did you come to buy a small small business uh in its simplest forms I'm a I'm a Candle Maker uh this this all uh somehow you know in short my journey was from a a journalism major in undergrad to you know banking Wall Street to candle making and I think uh throughout that process I think uh I'm I'm 40 now um and throughout that process I think I've always just been kind of been feeling my way through life and I'm never certain what I want to do next but kind of open-minded and so there's uh obviously a journey and a story behind all that and so you while you maor majored in journalism you spent many years in finance I mean you've had a whole career in finance te tell us about that and how that evolved into eventually wanting to buy a small business yeah um you know I I enjoyed I had a you know I probably switched from major a couple times in college and then landed on journalism I was pretty happy with that and I think uh i' I've took away from it a tremendous appreciation for writing and print journalism in particular and one of the most important takeaways I learned from measuring in journalism is that it doesn't pay student loans very well uh so I um and and even worse now than 20 years ago or whenever it was you were an undergrad yeah and and I I graduated with a a uniquely high amount of undergrad student debt I'm still not sure how that happened but um I just I realized very quickly I'm like okay I got to make money and I had a friend who I played rugby with who worked at a bank and he was an intern probably one step above the mail room and uh I'm like I'd like to do that that that sounds neat and so um literally started out making photo copies at a bank uh you you know a smaller Bank uh called Standard Chartered it's a little bigger now you'll see him on the cover of Liverpool uh as a sponsor um and so focus in Asia and probably a year later after kind of working grinding and and introducing people and asking opportunities I got a opportunity and management training program and I got chipped off to Asia for a little while um to do training and and to do some work out there uh and then uh found my spot within the organization um in an area called transaction banking you know I'd say in short uh working with treasury teams within large corporates Fortune 500 Fortune 1,000 companies on um you know financing imports and exports um okay I you know I did that for a little while I think in my training program I had I had done opportunities in I I had on uh sales and trading and um strategy I actually came out of the program during uh the crisis so 08 uh so when I had when I account a training program you got to find a job within the bank it's during the crisis all these opportunities evaporated both internally and externally and I think having gone through that crisis financial crisis early in my career I I think there's ele to that that still shape how I think today of just seeing going from if I got fired today I would have a better job tomorrow and and how kind of flush with opportunity Wall Street has and then almost seemingly immediately everything evaporating just just people I thought had amazing jobs and have lives were set were suddenly jobless and had no opportunity and you just suddenly hold on to everything you have and then just um I I kept my job I had an opportunity I was very fortunate but but I think that that shapes you when you go through uh kind of cause a crisis like that it really stick build scar tissue in you and seeing kind of the Despair and a lot of other people and again I was fortunate um went to HSBC uh then Deutsche Bank and and and really dug my heels and I think broadly again kind of uh in a quasi loan structuring group uh uh trade Finance was was my specialty so financing imports and exports um I did have an opportunity towards the end of my career to work work with uh family offices So within our sitting between our private bank and our um our investment Bank uh we did family office coverage so family offices especially ones that focused on uh private equity and that was kind of my first intro into kind of lower Middle Market Acquisitions and seeing how they think about these things and talking with them and that was really interesting and a lot of a lot of took away from that and um most recent my last job before I quit was with a pretty notable um private Equity Firm working with a group within there um on their working capital strategy um I think I had a tremendous opportunity in my career a lot of great experiences I think ultimately I always knew I was never happy in the corporate world I loved clients I love working on Solutions I think most people I talk to don't love that they work for a big company but you you find a way to make it work for youh and but but I always hated it I I'm not a particularly you know structured person and and you you mentioned you I came to you with all these notes of how things should work of of kind of I came to you with a lot of structure and but that kind of came off the back of me looking at conversation we had and saying oh good oh goodness there's not a lot there's not a ton of structure that I need to add in so it's like this this this compensation because you're actually such an unstructured person exactly exactly um and so um but but I think ultimately the higher I climbed I I realized several things in my career the higher I climbed you know the more money opportunity I got I it I wasn't happier um I became more disillusioned with you know working for big Banks and finance and I always wanted I owning my own business something I always wanted to do um I never knew how to do it on the side for the past 10 years I had been buying multif family real estate so I developed this Playbook I'm like okay if I continue my career on the side I keep managing real estate um this I think this is a home run I should work out really well and I'm very confident that would have worked out unfortunately I just wasn't happy it was brutal you know working a lot of hours during the week and then managing real estate on the side on the weekend myself um so I had several properties multif Family Properties um uh can Define that for us what what exactly was your portfolio so I had uh I had a a four family uh low income Section 8 I had a three family that was kind of towards the the higher end of the spectrum of of tenant base uh and then I had a I have a um a vacation rental as well that that a short-term rental that we rent out and then I was about to close on my largest property which would have been a you know a an eight family with a eight apartments with a mixed use retail on the base and going through negotiate make that work the negotiation of that and I just I think I just at the end of it I just pulled the plug and I'm like I don't want to do this anymore this is this is brutal I'm I'm just inundating myself and again on paper was such a clear path to success and it but it was kind of one of those things where I kept thinking okay when I'm mid-50s I'm set I'm done and then being like yeah but between now and then it's going to be a rough ride um and I think especially now there's a lot of emphasis you know see on Twitter online of of you know own real estate it's a great investment do this it's it's passive and it's just anyone I've ever met who owns real estate and is really it's a meaningful part of lives it is incredibly stressful in ways that are not talked about um I don't the hours I worked in real estate overall were actually pretty minimal but they were brutal you know you you don't get calls for a um you know a broken water heater on you know a Saturday afternoon when nothing's going on you get it at 4:00 a.m. in the you get it on a Christmas Eve or you get calls on the busiest work day on a Monday and you're about to travel and someone calls you at 4:00 a.m. and says there's water coming through my ceiling what's going on and it's it's brutal and then you know I'd spend I'd say like 30 days of the month I'd be like this is the easiest job I just collect the paycheck I clict the rent checks and then like one or two days a month you're like this is awful I want out and you just got to ride days I guess it's quiet it's like it's like being a fire person it's quiet quiet quiet quiet then crisis then quiet quiet quiet so so if there's ever any work it's always crisis mode there's never kind of you know in between just managing things like you know people prefer so it's nothing or crisis yeah and then I I thought I hit my Niche and dealing with low income and and uh I I I appreciated that you know and I almost part of my problem was I probably interacted and probably did too much for tenants with the properties and took a lot of pride in what I did but um you know it's it's a lot more work you know um in in that space so it's um but but I enjoyed it it was great um but but uh and it was a great experience but I got to a point I just liquidate everything I'm like I'm out I got to a point where I said okay I'm going to leave my job in a year um with or without an opportunity I'm but I'm done I'm out I want to do something different um in the most serendipitous way without full knowledge just coordinated exactly with me paying up paying my last student loan payment oh which is like the the weirdest IR already of all I so as I made this decision I looked and I was like oh my student loans are done and you're like that's great this this times out perfectly not that that that had long not been a thing holding me back or keeping in me in with what I did in my 20s it certainly was but at the same time it's not to say that you you know you were felt totally unburdened and free and clear because you got a family you got three kids that's right I I I have I have three kids my wife my wonderful wife works as well um so we are you know I think as a family we we are an action-packed family there's there's not a dull moment um but you there're the reasons you do it all um but uh so how did you how did so when okay so you've decided enough is enough after 17 years of I assume is a successful career and also building this real estate portfolio on the side which also has been uh has been rewarding for you financially but you're also done with that um so so so then so then what what what do you consider what do you look at and how do you discover the concept of buying a business so from spending a lot of time on Twitter there's obviously there's a big real estate community and people talking about real estate and that kind of there was an overlap with SMB small business Twitter with a lot of people buying businesses and you know you you follow those people you see what they have to say and you're like oh wow and I can just go on Bisby cell.com and look at a business and I did that and I I I I don't remember the moment where I was like oh I should just look at that and do that but I did it I you know I might have spoken to someone and then I just I just dug in you went full in on on podcasts and um and Twitter and reading what people have to say and looking at businesses and just sifting through I uh I actually didn't there's a lot of things looking back on it I I don't want to say did wrong I mean obviously there always when you're during a new process always things you do wrong but it didn't occur to me that there was a ton of deal flow and volume outside of you what's Post online public online I'm just like here's the opportunities and obviously as you know the public opportunities you have to you uh you have to sift through a lot more you know a lot of restaurants a lot of uh a lot of things I just had no interest in and I knew I did know I had parameters I said to myself you know I didn't know what I wanted I didn't know what business I want to buy I was pretty minded but I knew I didn't want anything to do with food and I didn't want uh anything retail really um I had actually even even franchises I had poo pooed in the beginning looking back on it I think I think franchise is actually a very interesting opportunity but that at the time I had I had taken that out so you know I had looked at like a bread red truck route I had looked at um you know there were some clothing wholesalers like I looked at some far and wide out I was just my Approach was I just look at a whole bunch of stuff I don't know what what it is I'm looking for when I see it I like it and you I'll know or at least I'll know I don't want to do that thing or I'll understand that and and at this point have you what are your kind of financial parameters in where are you searching I assume it's a geograph I I know from a pre-call a GE geographically constrained search you've got three kids you're not going to be uprooting your whole family so where are you searching and what are your financial parameters yeah so I I said uh I live I live in Jersey City just outside New York uh so I wanted to be within an hour of where I lived I I didn't because my wife worked she's got a great job I wanted her to you we didn't want to uproot that um we're we're happy with where we are so within an hour um I wanted a business that I could understand you know I think you there's a lot of emphasis now here on like you know buying an HVAC company or Plumbing business and to me that's crazy if you if you don't understand that business and you have to jump into it um that's that's scary and you're not going to build that knowledge it takes a lot about that knowledge no people do that and they're successful by all means but um it wasn't there wasn't that wasn't the the type of hair I was comfortable with uh and so I think for size you know um I I was pretty open minded but I think I was probably in the you know it's funny is I I I knew I at least wanted 500 SD um I I knew that um I did have people I could raise money from if I needed to but I think I knew early on I didn't want to raise money I wanted to be self-funded I think you know one of the biggest takeaways I had from my career is My Success had always been beholden to other people's strategies and when you work for a company certainly have your ability to articulate a strategy or how you want to implement it but you're still beholding to a broader strategy both the companies and let's say your bosses or your teams um and I think historically I've been beholden to ineffective strategies and I think I I I I had been burnt out from that and I I just said I don't I don't want to answer to anyone I want to be able to do whatever I want when I want and not have to answer anyone um which is both both the reasons for wanting to own my own business but also just not wanting to have to deal with investors uh yeah and obviously you can get good supportive investors but if I can just not have to deal with that and and if I need advice I'm happy to go outside and do that but again not be beholden to that and certainly not want to make you know quarterly or annually reports to people and have to explain myself so uh 500 SE and and you had liquidated this real estate portfolio at this point so you had more more liquid than probably you know the average person listening to this right what was what's your was your balance sheet looking like um I I had a decent amount I had what and what works out too is we we never owned our house or apartment so we always rent it so we had always put our money into Pro other properties um so we we were pretty liquid at that point Beyond yet um it's funny because for a certain point when when I did find this business I I for reasons we we get into I didn't have the full cash needed to close so I was looking for a a partner to partner up with me and it was funny because I went to a number of friends who I think are more successful than me or certainly have higher paying jobs and they weren't as liquid as I was because they're just like wait how do you have that I'm like because it's everything I have it's it's every dollar I am just I don't own any Investments or assets right now it's all just sitting in cash um and so yeah it probably made me look more successful than I was I remember a couple of my friends been like you have how much again I'm not it wasn't certainly not enough to retire off of but but more than um it was just I had a lot sitting in cash because i' liquidated everything I had and okay um so uh but but with I I I didn't fully understand the the SBA element I I knew I could get an SBA loan and and and I could put down only 10% and I knew that but I hadn't I hadn't dug into that fully the financing element until I found the asset I was looking for now my recommendation to people yes fully understand the the financing element what what you have in your capabilities and and and you can model out hypotheticals I didn't I didn't even think to do that at the time I kind of was just full seam ahead like I need to make this happen okay but what what do you mean are did you then when you learned about SBA financing it didn't end up working I I feel like there's something in there where where you were naive and learned something later what is this learning well I never I I I think just as natural part of your search you know you if you understand you know the mechanics SB financing both both going into what the timing is and what you what what what it takes to get that financing as well as what's available what the rates are you know how much leverage you can get all of that that's going to help make your decision as far as the type of asset how big of an asset you can get for instance um and I I didn't go that path and for the most I never needed to um a big reason being is the the business I ultimately bought was not financeable for a number of reasons and uh it it wasn't traditionally financeable someone had someone previously had tried to get financing it didn't work out I think uh the the books were just a complete mess um you you could have spent a lot of time trying to clean it up and make it make sense and and ultimately was too tricky um now that ended up working in my favor because I because I was a little more liquid I could work with him and just say okay these people who need 90% financing to make this work they're out you're not going to you're not no one can do that the amount of people that can write a larger Equity check um you know that that narrows the field a little bit so I was in I was in a situation where I I I was in a competitive situation um but you a funny story is the business um you know it was let's say you know I think initially including property you know for sale you know a little over three million um and the seller was unwilling to write a big seller note but you couldn't get financing so they wanted somebody who was just going to give them millions of dollars of cash for the business and I I knew that that was highly unlikely in retrospect that was impossible it was never going to happen the time I was like oh that's highly unlikely it's probably you're probably not going to find someone um so I you know and we can get into details but long story short it took almost a year of negotiating to get from where we started to the my initial lii to the deal we closed on and the deal we closed on would have never happened if if I took that exact deal closed on and gave it to him day one he would have never taken it I I think he needed to go through the motions of understanding what was feasable what was reasonable um because you can imagine if you're a business owner you're looking to sell your business and Brokers are vying for that business to sell that for you yeah they're off they're going to sell you the world they're going to say your business is worth this much and you can do all these things and um and they don't know and understandably um you know they wouldn't know that market so uh managing the expectations of the seller and and one of the things I learned too is um you have a lot of lawyers and accountants in this process that I I think they understand the a very tight niche of the realm but but they're advising Sellers and frankly in my experience usually pretty poorly well I I want to um spend some time on on the transaction but just before we get there Chad so so so wrap us up on kind of how you found this business you're you're looking in Jersey City a radius of an hour uh and 500 SD you're looking at bis Buy sell are you who else are you how else are you searching or is that it um take us from that point to finding this business yeah so it was I had three opportunities I said I I found this business pretty quickly and business by sell I immediately liked it you know again it's it was it's what we are you know the company is a candle Co we are a private label candle manufacturer we manufacture candles for other brands hotels uh resellers Boutique shops um across the country um and but the idea of you there's a team of people we've got 10 employees um the idea that okay I can understand how candles are made that's not something you need to go to school for for instance as I've learned there's an incredible amount of details and nuance and even science that goes into it I would have never thought but um but nonetheless you know you could it's it's attainable for sure um and so manufacturing certainly was high on my list of things that were appealing um I would say this is manufacturing light because it's not like we have you know a ton of Automation and heavy equipment but you want you liked a manufacturing business you liked the concept of buying manufacturing because a lot of people an aversion to manufacturing it's it's it's in that pile alongside whatever retail and convenience stores and and restaurants that they won't touch um but you liked it I I loved it I I think you it's kind of one of those you getting your hands dirty type things and you know I think you know it's very process oriented um you know and I don't have a lot of other businesses that I've looked at to compare to it's What I know right now obviously what I eat drink and breathe but um it's it's it's it's I love it it's great um and so I think with regard to manufacturing you're just looking at systems and processes all day and how do we make this better and obviously how do we how do we sell our product and and create a superior product well and there's also I guess one thing to like about manufacturing uh without uh speaking above my pay grade is but my impression always is that there's a very much a recurring component to it you establish relationships and then you're taking orders basically uh so you know the phone rings and you you got a new order to go out and um so so we all love recurring and and Manufacturing has that in spad do you think that's a fair characterization I think that's right you know I think obviously when you look when you count other businesses let's say Project based revenues where it's one off like you know extreme example would be construction where you know uh you have much less reoccurring revenue and and it's you're working going out project to project um I think this this is this was you know High reoccurring Revenue um and and that made a lot of sense to me you know obviously a low concentration customers broad customer base I think the business did hit a lot of those things that people tend to look for um you I thought there's a lot of opportunity understandable business broad customer base reoccurring Revenue um I think those are things people like to see uh and it certainly made a lot of sense to me yeah but actually it is reoccurring Revenue repeat business it's not it's not it's not actually pure Rec recurring where you are shipping whatever 5,000 units a month month in month out on you know digging the credit card or invoicing automatically to a customer it's you are taking orders and only and only you know delivering your service or delivering your product once an order is received that's kind of what it looks like okay that's right that's right and and so you know customers will come in and and there there's no there's no fixed contracts for saying we're going to buy this amount per quarter it's as needed but but repeat customers so you find this on bis byell it has a lot of the features that you like that we like uh as Searchers and so so take us into the to the process now of of what this acquisition this 11 or 12 months look like yeah so I think identified it pretty early um you it say something we've talked about is there's something I've learned in my career previously in Bank that I think the most interesting deals we ever worked on were the ones that had a lot of hair on them were the ones that everyone a lot of other places had passed on or looked a little hairy at first and and we dug in and we said actually there's a lot there's something really interesting here um and that's not to say you know most deals certainly passed on most deals because they're too hairy and they weren't for us but when you when you can find the right hair and you can find something interesting um and you can find hair that you're actually comfortable with or you feel you can mitigate appropriately um then that creates an opportunity for you where it's less competitive and and you can you can you've got much more pricing leverage and it's so well said in such a great Insight carry on please yeah and then so that that's always that's always made sense to me it's always been super important you know those deals that are straight down the Fairway you know both both in in in lending or or even in SMB where oh it's you know it it takes all the right boxes and everything's perfect um usually you're going to pay for that you know I I do hear these stories off hand of this perfect business someone got to the perfect price um but but usually when either a when I talk to people off the Record it's not quite that or when you dig in there's a little bit more to the story um so but I've always just because of that his background of mind I've always had this inclination to gravitate towards things that people kind of steered away from and just said okay is there a way I can make this work for myself um and in this case you know we went into the I went into the business they they had said you know it's not financeable so um initially they wanted a big check I as I was looking for a partner the owner said actually I'll stay on you can buy half the business uh and I'll buy the other half and then over time I can buy him out and so we spent a lot of time making that work and negotiating that in retrospect that was doomed to fail and the blank stairs got from people as I described that structure to them were probably well founded you can see that moment well why it does strike me something about that doesn't feel quite right but please articulate why why does everyone give you blank stairs why was that such an obviously bad idea that was a horrible idea um but but but I needed to do that to get to where I needed to go I think sure I think that um listen I think with any cell you you have someone who has an existing business um they've been is this previous person had been here for 20 years um and he was selling cuz he was burnt out uh understandably he he had a tremendous amount of success during coid um but it kind of like that also crushed him like he the business was booming it was great and he had to work so hard to make it work on top of that supply chain was brutal so orders are getting way backed up you're getting yelled at All Day in 2020 and 2021 because Glass isn't coming in on time and there's nothing you can do about it yeah and so I think and and when I and I saw that and I know there's normally a concern with sellers when they're selling too young you know you want someone selling at 65 70 they wanted to stay in the business but um but they're they're time to retire and when they're younger let's say 50 there's a concern okay am I catching a falling knife is there a reason he's selling I don't know about but I was able to visit so he was so he was that more that age yeah he he was 50 he um you know visiting him the factor and talking to him I I could see it it was pretty evident why and what had happened and the stress that had come with it um but in trying to make this work and trying to sell the business he's like okay you know I can I can stick on I've got a partner but but I think ultimately you know you and and in probably one of your more recent podcast someone was saying is you don't you don't buy a business you buy a business with the intention of changing it you know you don't buy a business to keep it the exact same you want to put your mark on it and yeah you can't do that with the old seller there um and that's not that's not a specific comments against my seller I think it's any seller if they've run the business for 20 years they have an idea of what works how they want to work and coming in and trying to do that it is tough and even during the transition after I'd bought the business and he stayed on for a couple months I'm starting like Tinker with things and I I could I could see him twitching U you sometimes understandably um but you know even the mistakes I made there are mistakes I had to make to understand myself well it's it's uh related to this theme of as buyers you are you really think that you want the seller to be around for a long time as a resource because this is the this is going to be your your Mentor in the business this is the person who's going to teach you everything and so much information is locked up in their head so you really you you really just want to kind of have the instinct to cling to them as a as a resource and then so often you get into the business and you know after not that a lot less than you would have predicted you're ready for the seller to be on their way and like get out of your way and you've kind of maybe you haven't downloaded everything from their brain but it's it's enough and and you just you you're getting that kind of too many cooks in the kitchen feeling 100 so people people people it seems like buyers often overestimate how long they'll want the seller around yeah want uh so it's funny cuz this whole process is all these things that happened that I thought were unique to me and I'm just like oh I got to deal with this is that and then every time I talk to somebody I am absolutely Blown Away by how similar all our stories are and stuff like that about having the seller you know we had um uh you know we've talked about this one of the most important things in my journey as far as finding a business you know go negotiating it and closing and then operating is I developed a group of people actually met on Twitter that are also SNB Searchers one of which was on your podcast Jesse in the past um coming back on again here in a couple weeks yep oh that's fantastic uh great guy so so him and a couple we we've we've got him we've got another guy who bought a boat manufacturer another guy who bought a pool company a pool Services Company a we got a water filtration company um and so just a lot of different people all over the place and we all kind of for the most part came through this together we all closed within a year of each other um so there's a point where we're all searching and hey is this happening this is this crazy or is this normal and having that was one of the most important things I can recommend to people is having a team of people that are going through it with you um and and and and sharing that because there's a lot of experiences that that a lot of people can't relate to and they think they can and you talk to them about it and and people will be practical and helpful about it but but it's not the same as having someone saying I'm going through the exact thing right now here's how I'm here's how I'm handling it rightly or wrongly well that that's a great a great piece of advice for the audience so it was just a kind of a text chain you guys were all on kind of a text group together or Whatsapp group or something yeah we WhatsApp group there's six of us right now I think and I've met people otherwise that I chat with you know quite quite a bit uh but we we had met up in person a couple times uh since then a couple of guys after they closed they moved away to different states for their businesses so I wasn't able so we aren't able to meet in person as much uh but but it's been I've been in that chat for almost probably a year and and a half almost two years now and I'd say we talk every day um and if nothing else just a vent it's it's a therapy session if you will which is um incredibly important well speaking of venting as you go through your search take us back now too uh so the so so you decide not to do this thing where you're going 5050 with the existing with the seller with the existing owner so how does it evolve next yeah so we we were working on an agreement the contract to make that work um and you know one of each person's legal councel is is obviously in a position to protect their client and put up guard rails and so when you have two people coming into the business something as simple as one of the lawyers having 5050 is actually really tricky because you don't have a tiebreaker so how do how do you integrate that so they're like someone should be 5149 and and my lawyer is telling me you're going to buy the business this is going to be yours like you're you're coming in you're paying for it you should be 51 hisler is like you're crazy you know you need to we need to be 51 and just hitting a wall like that and remember there one one of the moments I realized this wasn't going to work is his lawyer had told him um if he's 51 he can come in and fire all your candle makers and bring in his own people and remember thinking like I I just came from Wall Street like I don't have a team of combat candle makers to bring in uh you know um you know I wouldn't do that but that's I think that tends to be the nature of how lawyers think about these things sometimes um and it just examples like that we just kept hitting roadblocks it just was not working uh and then through that process I think the seller had realized okay the only way this is going to work is if I sell him the whole thing he doesn't have enough money I have to write a much bigger seller note um and so he's I think through that warmed up much more to saying okay if I want to sell this business I have to be willing to write a much bigger seller note um and you know I I probably ended up writing a a 40% Equity check which is which is more than I wanted to write in most of my liquidity uh but the upside to that being I actually you know cash flow is super simple um I I really don't have to worry about that neg to degree anyone else has to worry about so so it it gave me because your loan is is less so your interest payments are less and L burden some every month exactly exactly so versus you you come in now you can pay less equity and and then just keep a cushion in the background um that that works as well too cash Reserve but um I think paying a lot down not having the pay that interest and just it it does actually it did give me quite a bit of Peace of Mind especially during you know slow seasons in the summer for instance yeah so you had to bring 40% equity and then what did what was the remaining 60% with was that all seller node or% that that that was all seller Noe the 60% wow yeah that's huge it's a huge seller and I thought I was incredible I thought I was a genius for working that out and I met someone who got 100% sell note and I you they took the cake and obviously as you can imagine there's there's there they have their own set of hair on their deal um but I think well and returning to the the hair Chad I mean I I love this point that you made earlier so just to be crystal clear with the audience about what the hair of this deal was it was the fact that it was unfin uh correct because the books were not in any recognizable order I think when I came in he just when I looked at the business he gave me three his financials on the back of a manila envelope he like back not even in a man like it was scribble it's like this is what I think the business is and I'm like okay let's let's get started um wow and and and and Chad I think when this concept this idea of um hair and and being you know the buyer who's willing to deal with certain hair but what that also means is that there's something about the hair that you can overcome that other people can't that there's kind of a you know it's it's less daunting to you because maybe you have a special skill or a special way to overcome this hair so in so in this case like why did that hair why why was that not enough to scare you off was it because you had 17 years of experience in finance and kind of and having non-existent practically non-existent books was something that you felt that you were specially qualified to overcome um yeah probably the short answer is you know stupidity and navity on my part um but I I think more more broadly uh no I I think I could make that work is is it actually ended up being something that that worked in my favor where a lot of people I spoke to who had seemingly clear book I think very late in the process found out those books were not nearly straightforward is they thought and had to do a lot of work backing into it I wasn't in a situation where I had to take the sellers word on anything I I just said okay give me give me your last three years of bank statements of credit card statements of everything give me all the data and I will just line by line sift through it and I took we had PDFs of all his bank statements I converted all those into self spreadsheets I then uh created I so I had every line by line every Bank transaction through his bank on a spreadsheet and then just started organizing it and obviously the things that are repeating certain customers certain vendors everything I can I can group that into a pile and then one by one all the one-off stuff figuring out what was that and what that related to and you sometimes I'm usually just Googling companies and certainly asking him and talking to him about it um and that was that was an insane amount of work and and part of the reason I did it was that I probably didn't realize what I was signing up for when I started to do that CU in theory I didn't think it was too bad um it was a ton of work I'm glad did it but I understood the business incredibly well I I think what kind of what all those you know line items were and what what made that business tick from that perspective incredibly well because that work yeah well I I love this part of your story Chad so let's make sure we are really clear with the audience what this is you get a manila envelope not filled with with records it's got nothing inside just on the back back of the envelope it just happens to be a manilla envelope giving you three years of financial history and so you say Okay um can you at least give me your bank statements he gives you 36 roughly bank statements one for each month for the last three years in PDF form and you literally go through line by line on these 36 PDFs extract every transaction put it into a spreadsheet and you are recreating his books for the last 36 months from scratch so far so good I would there are programs online where it'll automatically convert the PDF to um to Excel and then I can do some formatting and and you once you get in a group of doing that playing with spreadsheets you know there is some a lot of efficiencies there but but yeah that that's right okay and to be clear the word there were tax returns to this business they just it wasn't straightforward or helpful in a meaningful way and and um yeah okay um yeah okay so you've got this so so you've created this spreadsheet that is for basically the p&l of the last 3 years and that's been a tremendous amount of work how many hours just to get that pnl and Freddy I you're basically doing your own quality of earnings I guess that's right that's right um I don't know 100 hours like 100 hours even with these programs that will slice and dice it was months of work months of work okay now but at the end of it you've got this spreadsheet that's that's that's the p&l of the business you know tied right line by line right to the bank statement so you feel really confident now and you have uh the best picture of this business better than than the seller himself probably has or understands and so I I love how you put it to me that this basically this red flag of the finances being so non-existent uh or or OB fiscated yeah uh turns into this this that you you you Judo whatever Jiu-Jitsu it into this real strength because going through the 100 hours of work though gives you now this document that you have extremely high visibility granular visibility into the business and really really really understand it probably better than many of my listeners understand the businesses that they buy that it in a nutshell I just want to emphasize this process because it's fascinating to me I I I think so right you know I don't want to speak for what everyone else does but again through there there was one there was one guy in my group of friends Searchers who who was working working off QuickBooks and and everything was there and it looked straight forward and there's a couple things that didn't add up and it kind of end up being that thread that once you pull on it you I think it a lot of stuff didn't add up or make sense and not that someone's you know purposely alisca anything but just a lot as as a common topic a lot of these people have you know I think you accountants or just you bookkeepers that are you know it's a part-time job or it's not something they had history in doing or they've been doing it for 30 years and and and uh just had never adapted tactics of ways of doing things over time um and just things miscategorized and and not and and not presented right and so he had discovered like a whole bunch of glaring gaping holes in that process and then having late in the process to start going doing a lot of what I the work I had done as well as the when you have to do that there's that feeling of okay what else is wrong what else do I know about because you know this doesn't get said a lot but like and maybe I'm biased and and I'm sure there's exceptions but I think when you look at a business and you look at their financials and you go like okay this is what it is like you haven't caught it like whatever business you look at there's a bunch of hair there a bunch of ugly things hiding in the closet that um that are there that you either see them or you don't but I promise you they're there obviously to varying degrees of severity for sure uh but um you know I think those things people talk about you know behind closed doors of just like what what are the skeletons and the the closet of your business you found like they're there and they're real um and if you can hit them up front and you can address them I I think you can kind of go into this with a much more clear head not that you know they're always going to be surprises when you on a business um one of one of the more interesting things I learned I found out I was talking to when I was doing my family office coverage I was talking a prominent family office that does lower Middle Market PE and I was asking about the hold period I was like you know are you typical PE fund where you know your average asset is going to be 5 Years or or what have you um and they're like honestly he's like I can say this now he's like the first year you don't know what you own until you bought it you don't know what it is until you own it and you spent the first year figuring it out he's like when you're doing due diligence no one tells you the CFO doesn't work Fridays I get conveniently left out and um and it's true like like you couldn't you couldn't possibly especially if you're going to new industry a new business you can you can research all you want you can do all due diligence but until you're operating you really don't understand what you own and what what the right levers are to pull in that business and um and that and that that that's the reality I think people deal that and the the large scale more than they admit too but like but you can that doesn't mean you can't do good due diligence that doesn't mean you know du diligence is worthless it's very meaningful um it's just you know the sooner you can uncover and address whatever skeletons there are or whatever whatever hair there is um then then you kind of understand your asset better and you're in a better position will be and there will be less surprises the thing is what because we all recognize that these businesses are very to the point that you you really can't know everything you can't diligence away all risk um what we do is we look for proxies or signals um so kind of the classic example is like if the seller has been you discover that the seller has somehow been dishonest uh with you or in some other dealings in their business you don't say to yourself well can I get over this lie you know because you know I can get over it this way this this and this way no you should say well I should you should really kind of extrapolate well if they're lying about this they're probably lying about 10 other things as well and and it you know it it casts much much longer Shadow and so I'm not saying your guy was lying I'm just using that as an example but to to tie it to to your story if there's no books and you have to recreate them from scratch isn't that a signal that there's going to be all sorts of other areas in the business that are similarly undermanaged or or or or or whatever OB fiscated or you know not up to a standard that is acceptable like isn't that a proxy of something thing to a degree you know keep in mind there was nothing there's I'll take a step back when a lot of these businesses when they're started by somebody you know the intention was never to create a company it was I'm creating a job so I can do this thing and and and it kind of it usually builds into something greater than they ever imagined and yeah and you're kind of you're it's almost like you're you're building a ship as you as you're floating away and so a lot of it isn't lying or obfuscating a lot of it is just this is just how we've evolved a lot of it's old practices that made sense a long time ago and changed um I think when you come from when you come from you the big corporate world there's 10 people for you know you don't only in retrospect do I realize how bloated those organizations are and they've got all these M middle managers and people overl overseeing anything you're small business like you don't have time to sit there and sit through everything you know a great example of that is is um I don't I don't really look at my financials right now I I I do my Quickbooks I'm I'm diligent about that but you know I I have certain friends that sit there and go okay what's my p&l this month and I don't have time to do that I don't care to do that I fortunately I don't might because I have a large Equity check and because I've got a very short cash conversion cycle um I don't I I'm privileged to not have to worry about that but even still from a profitability standpoint like I I don't care I as long as I'll feel it if um if if revenue is down a lot I'll feel it and if down a lot I'll feel that too I'll know that intuitively just by being in the business but I can only focus on so many different things I can only focus on so many different processes I am slowly chipping away to everything but but I get it from a small business standpoint of I think every time we get wrong information and every time we uh or something was incorrect or or feels obis often the answer isn't your lied to of the answer is what that that just wasn't something that they paid attention to a lot or or they're answering with their gut which is how half their business was run to begin with I think it's such a good point Chad because and I a recent guest and I were talking about the same thing um from a slightly different angle but it's like as buyers and as people who are trying to be as diligent as we can and and thinking about the financials in a big way and the the margin the SD the EA uh you know how the financing is going to work we're very numbers focused as we should be when dealing with a finan big financial transaction the biggest one of most of our Lives um and then and and then we're mystified that these sellers can't tell us what their margins are or don't know you know exactly what their p&l looks like last month or last year it's like what how do you not know this this is so this is the metric to Define you know how effective your business is if Define a business as something that generates cash and no idea how much money I'm making none yeah and then the these same buyers will get into the business and become owner operators and just like you all of that that those financial metrics just all of a sudden drop in ter on the priority list and maybe completely off the list and there's so many other things competing for their attention that are more pressing more important and frankly actually bigger picture actually bigger picture we think the finances are the big picture but really there are other bigger picture things and then they and then they and then it's only once they get into the seat do they understand the owner operators and and why the sellers and and why those sellers weren't on top of their you know what what their e ebaa was for the last three years yeah that that's right um it's funny because you like people ask me someone asked me how much money I make or how I'm doing I'm like I don't know yesterday you know $50,000 check came in and I'm like I'm pretty good and two days later I got a $100,000 MX go to pay and the swings on my on my bank account and all I do look at my bank account that's that's a good I've got enough buffer and I don't and I don't look at it and go oh I'm making a lot of money I go I look at and go okay I've got a good buffer so when if stuff hits the fan I'm I'm gonna be I don't have to be as nervous um and because the reality is I can't forecast what my customers are going to be doing next month or this month or um or what product I'm necessarily going to run out of and uh and I've gotten very comfortable with that and that that's fine I know I'm profitable I know what my margins are and and I've developed a a a pretty good model for how I should be pricing everything to make it make sense so on a deal by deal basis I get it but on a macro scale like money's flying in and out and it's net net going up but you know a lot of times up to back one um and uh and I I know directionally it's working out okay and and that's fine all I can do is put my head down and go okay what are the things I need to do to make this a Better Business and if I feel myself performing if and I'll know right away because we're just going to be incredibly busy I know I can start investing in my business a little bit and if we're down a little bit I still know what I need to do if we're down a lot okay I need to start taking dramatic uh steps to to T the bleeding uh but the reality is I feel that it just I'm here it's an aura I know how busy people are I see the orders coming in and I intuitively know right away and that's not something I've held day one but when you do this for six to 12 months I hit I hit a year next month um you do start to feel that well let let and let me actually press on this point that we're both agreeing on and and and maybe and and maybe see if we're actually wrong um because you you're still in the throws basically of trans I mean you're you know year into it you're you're kind of on the other side of your transition but you're still new into this business is there a time maybe at the end of three years or five years or maybe when the business has grown and you have kind of a management where you should actually return to uh real having much tighter Financial visibility and you should know your margins and your ebit and your or your SD and everything have that stuff really dialed in on the tip of your tongue um yeah maybe maybe a uh a more valuable business in a more mature business you can and should have that those numbers at the ready it's just when it's still messy and small and you're in your transition you're not quite there yet well I I would certainly caveat that I I do have friends that have businesses where the where because the cash conversion cycle is much longer and because of um you having you higher higher leverage ratio that cash flow is a much tighter concern and those people should for sure should be on top of that you're going to you're going to get crushed if if you don't um so so again part of this is the privilege of of my circumstances um with that uh I mean maybe to the question of in the future should I pay more attention to stuff maybe but at the end of the day I've got limited time and and if I can spend time making a sales call or making sure orders get up quicker so we can take on more orders or negotiating with a vendor to get you know better pricing um I'm probably going to do those things over staring at a spreadsheet now do over time will I look out a little more yeah sure and and I am diligent about I do my own bookkeeping um it was really tough to set up but once I get used to it actually I don't spend a tremendous amount of time doing um so so I can pull up those reports but like I look at it and I can go oh you know I've spent more on fragrance this month or wax this month the reality is is like there's probably a reason for that and and I can go spend time dig into it and yeah mistakes can happen and there's issues I should be aware of but I I think right now I'm so involved in my business that most of what happens I it it's a little bit more intuitive from me and the managing by spreadsheet thing makes a ton of sense when when you're working for a big company and when you're when you're in it um it's tough very well said Chad thank you I want to get to the transition because there's a lot to say there and and what ownership has felt like and and looked like but just to just to close out the actual acquisition you have here deal fatigue and you've already told us that you know this was a long and evolving process of about you know of many many months to get this thing across the finish line what do you want to say about you know your emotional state during this long SLO of a of a deal it's tough I mean uh you know one important thing in any search's journey is the decision of are you going to quit your job to do this or are you going to do it at the same time you have your job and uh you know there's no right or wrong answer to that it's it's circumstantial everyone what their financial situation is what their work situation is I I was working while I did this so that I did this part-time and in my mind I was like okay Works a little bit light right now and and searching didn't feel like a full-time job the difficulty was that you know you might in theory let's say you know this wasn't the case let's say you've got 12 you're doing 20 hours a week searching and 20 hours a week during your day job you go it's 40 hours that's fine the reality is all those things have a habit of of overlapping you know that that those those important work calls tend to Happ the exact same time you got the important calls with you a seller of a business and it gets really tricky um and that's really stressful um and of course when you quit full-time to and go full-time to look for a business that's stressful because every day you don't have a business is a day you're spending money and not making money and it does feel like a you know sand dripping through the through The Hourglass a little bit so uh and in my group we're split you know half of us were were were searching while working the other half were quit their jobs to do it um and that's his own that in and of itself is his own unique stress um my deal died five times probably we we hit a wall and we just okay let's walk away from this and then couple weeks later it'd be like hey you how about this and again in my career all the great deals those hairy Deals they tend to die and you kind of have to let them die a little bit and if it's a good deal it'll come back to you in a way um yeah and I've seen that happen so many times and if it's a bad deal it'll stay gone um yeah it should be it it'll stay dead you wanted to um but um going through that process you know it's it's stressful um in theory you when you do due diligence you go okay you go to your cell and say okay I want all these items given to me and they're like I'll give you half of this and I'm going to trickle it into you a little bit every week over the next month and that seems to be a common theme is just getting the information the data um much of which you're not going to get because they never had it and pulling it's harder to do than you think um and so you know I I've got I I'll get okay last year's um bank statements cool I'll work on that and then here here's the first three months of two years ago and and then a couple weeks later's the last three months of two years ago and here's a couple from two three years ago by the way I'm still working I'll get back to you and um the old he had a he had a small local bank and they um at a certain point they didn't give PDFs you had to get they would mail you a copy so I literally had to take copies of bank statements scan them convert them to PDF and then convert them into Excel and it was just timec consuming and it was tiring and you forget you get you luckily I wasn't working on uh multiple deals but you you confuse deals really easy and um things you're told that seemed crystal clear and you understood a month ago suddenly you forget you're like wait a minute is are all these expenses from this thing or did this happen this thing I forget why I said there was a spike in payroll this month and how important it is is to keep incredibly detailed notes I think that was one of the things I learned my previous career is having to Sol spreadsheet and and just being overly diligent with everything you write down all the questions you have all the data you got and you still need and the organization of that will make your life incredibly better um in in the process but ultimately it's tiring you know after I said this negotiation for this deal was you know over nine months and um it was brutal you know and it once once you pass you're working on something for six months and you see it die and just like okay everything you did was a waste worthless on to the next one and there's people who will say like yep I'm just I've got the mentality like on the next one I don't believe them like that crushes you you have to um uh you know you you know the people I feel like who are really good at what they do you know tend to be pretty passionate about what they do and pretty into it and and when you give so much of yourself to that process or something and it fails like a little part of you dies in that moment um yeah and again so I had that network of friends to lean on and you know I'll say uh everyone talks about this SMB thing as you know you you make a big financial decision and you put your life savings into it and and it's huge and maybe you can go bankrupt but but the important thing is the the friends you make along the way that's why we really do not really but um but but it helps um yeah okay so so you but you do get it across the finish line and and remind us the size of the business the yeah kind of when I bought rues and yeah sales were you know just under three million um you know what I found out was um you know the business had was booming during coid um you obviously HomeGoods candles you know people were buying and it was a peak for the industry um it's funny because everyone everyone talks about being scared about businesses they like okay how do they do during Co and that's that's a bad sign if they didn't do well to me I was scared of businesses that did really well during coid because if you're doing incredibly well during Co what happens when CO's gone yeah uh so um as on top of the stress this whole deal you know sales are actually going down as as we're negotiating it um and that you you don't know why you know there three things at play um one we're coming out of coid so this would have been like or you thing that Co bump had slowed down we'll say uh across all Industries uh so this would be middle of 2022 um you know combine that with uh the Ukraine war had started ramping up there's a lot of skittishness economically and lastly you know what I I had read and this makes a lot of sense to me is that toward the end sellers kind of take their foot off the gas a little bit you once they see you know the you that Island they're retiring to hypothetically or wherever and you know you you're not as focused on the business so you will see a little bit of pullback so all those things and so you there's a couple bad months in there and you go okay is this a blip on the radar or is this real and and you don't know and that was really tricky um how did you solve it or did did you not you just kind of leap of faith it I I think that was one of the things that allowed me to leverage to get a m to get a higher seller note um and you pretty favorable terms uh on on the seller note uh I wanted seven years he wanted four years um and I said okay I'll pay you in four years but there's a seven-year amortization so I'm paying as if it's a seven-year loan and but and then once you hit year four I have to pay you the remaining balance which which is you much smaller and that was a good happy medium and I talked to a lot of Searchers who hadn't thought of something like that they get stuck on the whole like I want seven you want four and there's actually a way to split the baby to a degree um and so that's that goes back to kind of my structuring background experience of of thinking about these these things through that that helped a lot and and that I it was one of those things where we both wanted something and there was there's there was a way to get us both what we wanted well another technique to have addressed that seems like a forgivable part of the seller note or you know or some in escrow that you could claw back if if the business didn't perform did you consider any of that stuff sort of business had to perform to a particular historical Norm for him to get all his money two two things I would have done differently I would it's not forgivable I would have put in in a forgivable element I probably could have renegotiated I probably should have tried to renegotiate the price a little bit I think by by the end when I realized like okay there's a 15% pullback um that's really I should be renegotiating I use that as leverage across the board on on on a lot of items but my feeling at the time was the seller was so pegged to this number and anytime it was like a it was like a third rail for him anytime we talked price he was like absolutely not um and I think he would have he he just would have walked been insulted by it um but looking back on it I think there's ways again there's there's ways I'm really happy with I structured I was really proud of myself and thoughtful and there's ways I think I didn't I I don't I think I could have done better and that was one of them is making making the cello forgivable one and two um I think if if I had if if I come to him just say Hey listen listen business makes less money you're getting Less Price I think he would have poo pooed that pretty quickly but I think if if I if I had been creative about how how to help him think through that and and and ways around that we probably could have found out something but the reality is of I'm being 100% honest like you're working on a deal for seven eight months like you're you're I was fried I was fried I was like let's just get this thing done I was still confident it was a good business I I still really liked what I saw I was still getting at a at a at a relatively low multiple uh I just had you know what like let's let's not I don't want to lose a deal again on on something like this where ultimate I'm still happy with the business and so sales were under three million just under three million and SD was approaching a million and he you had said that he the purchase price he wanted was 3 million so you're in a just over 3x multiple it was less than that because what we he originally wanted the real estate included I took out the real estate one one of the things I I I got creative with is I I got a I pretty much have a call option on the real estate so for the next 5 years I can buy it at a fixed price so the price I can buy for today I have that price is still valid for up to five years where most people they negotiate a um a write a first refusal so if the person wants to sell it they get the option to to to overbid who's ever there but I I have a fixed price I I can at any point I can buy for that price no one else can take it from me um so if I if I want to keep it so again going back to little leverage points I did apply with with every with kind of economic condition I I was able to get value out of it for certain yeah and that price for the real estate that you were negotiated what was the price that you negotiated basically the market price of that real estate today yeah pretty much um maybe even honestly I think it was a decent price that may even been below um you know I think uh that that would have been 700k but obviously without seeing the property that means that won't mean anything to anyone um but uh so um the price I'm happy with and if I'm not happy with it then I don't buy it yeah exactly so one of the things one of the huge stresses we have now is we're actually running out of space so as much as I like the place and it's good we you know we we might outgrow it we don't have the ability to expand um so crazy enough what I can do is I can actually I can sell the property before I own it I can find a buyer so using numbers someone someone wants to buy for a million okay oh great at close I do a buy sell I never owned it and I still make that benefit from having owned it when I sell it yeah well I mean exactly so if you have this call option on a piece of real estate for five years not to sound naive but it you know seems realistic that it'll appreciate somewhat in the next five years and so at the end of the five years even if you don't want the real estate if it's it's still available to you an under Market you just essentially flip it um you have basically the the ability to flip it at any any point you want that's right very interesting deal so and the number was about 700 so the purchase price of the business was about 2.3 four 2.4 2.4 great okay well Chad we um are uh I'm just paying attention to time here and we haven't gotten into any of the adventure of running this business we're not going to be able to get to all of it but but there's a lot of important stuff for people to hear about the transition so let's get into it start start us wherever you want what what is something you really want the audience to know about what your transition looked like um I I think it was one thing I didn't mention about my process is I convinced him to let me work in the business for a number of days during the search um and he agreed to it and you know it was kind of one of those audacious asks where um I was just like hey let me can I work there for a day let me just like I I'll literally put me in the assembly line I'll just work and just tell people I'm a guy yeah um and we did that and I ended up doing that for you know probably a total of you know 7even eight days throughout the process just sporadically um and uh obviously people were you know hey who's this guy what's he doing here I think he told him I was a potential investor maybe um you to part of the business or might be joining in a more senior position uh and I actually got to the look and feel and I think most importantly is interact with the employees and I think that was a huge thing cuz I was really happy with the staff and the employees um the one funny thing is after I closed I was talking to somebody I'm like yeah everyone everyone was super quiet when I was there and I'm realizing they're not now and it didn't occur to me that like when I was there I got a different version of everyone everyone's like everyone didn't know if I was a spy or what I was and everyone was really quiet and worked very hard um and uh they they still do to be clear just less quiet um so uh but but really really good people good staff uh for the most part um and so coming into it day one I think probably one of the things that that gets underappreciated is employees have no idea what this means when a business gets sold you know they don't they don't follow any m&a activity they've never been through this they don't know if they're going to get fired or what that means at all and I think a lot of people just assume like I'm coming in and everything's going to be the same and you can say that uh but they might not necessarily believe it so I did spend a lot of time day one saying Hey listen this is walking through my own Journey this is why I'm here this is what I did I bought this business because of you all not because I think I can get better people than you I don't think I can but I need you to help me build this to help me do this uh and and you guys are a big part of the reason I bought this so you help me do this and I think it was very well received and it made a lot of sense and I put a lot of people at ease because people definitely I did get like back in that in the initially once it was originally announced that people thought like okay our job's gone or what does this mean um yeah now you will inherit any problems you know people un happy with salary or people who you know any frictions that took place like they're there when you inherit it I I've talked with a lot of people very common you know for day one but certainly first week you're going to have employees say can I have a race and you need to be prepared for that and I think the best thing to do is you can deflect and just say Hey listen my goal is to take care of everyone I need to figure out this business and what's going on first give me some time and buy yourself some time and figure out what we want to do um but but it does a lot of people are shocked when literally day one you know I someone was met in the parking lot and just said like I need a raise I need you to do this um and you're just you don't realize how beholden you are to employees at this point and you're you don't you don't understand the business you've just bought it you realize that all these playes could walk out right now and I go bankrupt yeah you know and and and you feel it and it's terrifying um so uh be prepared for that uh those tough conversations um I did have that that's what's so interesting about that about the dynamic because we as buyers feel really yeah like you said a bit terrified that you know everybody could just walk out or three key people could quit or what have you and so you feel really uh reliant on the employees and and sometimes to the point that we forget that they also are feeling fear that they're going to be let go or that what what does this mean so there's kind of like Mutual suspicion and and and mutual fear um but at the same time it's it's a healthy fear because you because you really are reliant on these people and there are stories of people um leaving maybe not day one but you know there there are horror stories including guests on this podcast um and and and certainly the raay thing that comes up a lot and so by the way Chad do you would you advise people to say as part of their day one speech no raises I mean you would you would you would you would say it much more delicately than that but I've heard that being a technique like there's going to be no there's going to be no payment change or compensation changes salary changes for six months and just saying that not as not reactively when somebody approaches you for a raise but actually saying it as part of your speech would you would that have gone over well do you think or at least would that have been tolerated as a way to kind of keep people at Bay it would have worked for my method because you I walked in there I just wanted just energy and positivity and part of your message is hey we're going to be awesome so much energy we're g let's let's do some great things and and you don't expect a race like I think that would have totally that would have totally duded the message a little bit or left a sour taste so um okay again for me I I was fortunate that I I wasn't approaching but I've talked to enough people that but it's very common uh oh you were not so nobody came to you asking for a raise I misunderstood not right away people as a business owner people will always come for raises but I was fortunate enough that people didn't come to me but most people I talk to that seemed to be a really common thing um so but just keeping that in mind as you go through it and again that that just goes through the group I had of friends uh talking about what we've all experienced and and and and because I had I had heard that I was I was prepared for that yeah if it were to happen one of the things that you have here Chad is that in retrospect you were so concerned with the wrong things in the first three months post close and you wasted a lot of precious time and effort what were you so concerned about uh to erroneously I think you know um you a big Topic in buying a business is how and when do you make changes to a business y and and uh you in a way you could I always heard this thing like don't make any changes for the first 3 69 12 months um and I think you have to make certain changes because a lot of how a business operates is particular to that owner so that owner maybe did a lot of things that didn't necessarily make sense you know weren't right or wrong but just that was how they thought or how they wanted to go about their day and and maybe there's certain things they like to start a day with certain things they like to end a with and I don't like to do that and I want to change that order um or how I like to file things or or whatever and there's a million of those little things that um if you don't make that change it's going to be confusing for you um but when I started I was like okay first thing I want to do is make keyop kops I want key operating procedures I want to write down everything everyone does and we be good that seems really practical um I realized after a week that that wasn't going to happen like it was just getting in the way of me learning it and operating it uh I I think what's really what's burned into me is when I took over the business it was it was September it was the beginning of the holiday season so busiest time of the year for us I'm stepping in the shoes I'm learning out business at the business time of year and trying to make changes um I I just um there's some changes I needed to make but looking back on it um I think focusing on the again the key operating procedures the formalities of it of you know didn't make sense actually um I just needed to learn and understand the business um a lot of micro changes for sure um and truthfully like there's some things that are a blur I remember spending a lot of time on things that uh didn't make sense looking back on it and I don't remember them because the first three months um I loved it it was amazing but I got so burnt out um I was so gung-ho about it you know I was it's funny it's actually almost embarrassing to say this but I was I was probably doing 15 hour days um started coming in the weekends a little bit uh and then realized if I want to maintain my family in one piece I can't do that um but it was so busy there's so much to do and I I was enjoying it loving it but I remember saying to myself um okay if I if I as I get burnt out once I get burnt out I'll pull back uh and in retrospect that's a really bad idea because once you get burnt out it's too late you're already you're already burnt out that's not a switch you just turn off um so by the year end um you know but by the year end I I was toast I I I i' had been I had been working so hard and I thought coming into this that you know hey I I worked in banking I did real estate on the side I'm an active Runner I've got three kids like I know busy better than almost anyone and it's just different like when you're on your feet moving pallets and you're running around and you're worried your business is going to go bankrupt just because anything can happen um and every day you were just making mistakes and learning like it it was it was really tough and really exhausting um it's the hardest thing I've ever done by a long shot it's the one of the things I'm most proud of I love it I wouldn't change it for a second but how hard you actual hard work I I I was shocked I was shocked but it sounds like you're in retrospect you're saying that you didn't need to work that hard it was kind of by choice um that you that you were working that hard so yeah so it was um the re the reason and I saw this I when when I bought one of the reasons I want to buy the business is you you look at things you okay I can optimize that I can make that better one of the things was you know the seller was doing two or three people's jobs and it's like okay great I'll just hire for that did I fully appreciate you know like the friction that causes that that you want to hire you want you want to learn it yourself before you hire someone to do it one two the timing it takes to hire somebody uh and get the right person and then train them and then when you're in the middle of busy season you don't have time to do that I I I got to do that in offseason um so did I need to work as hard no did I need to work incredibly hard yes um I think one thing I learned is one of the biggest takeaways I learned is that you know ideas on how to run this business things we can do I have an infinite list and I'm actually really confident they would all work ideas are easy it's it's timing um and the effort they take so for every idea I've had it's taken four times longer to do and had way less of an impact I'm glad I did them and they needed to be done but just everything is timec consuming and there was no panaceas there's nothing I'm aware of or have been able to do yet that's been like a gamech Cher things have added up to I'm really proud of our business the processes we've done the the small changes but a lot of them were just during change in a bucket and watching it add up over time um and it took a lot of time to do that I think my favorite example as I walked in we have we carry 150 fragrances um on a wall and they're not in alphabetical order you just work here and you know it and you ask somebody where the lavender fragrance is they go they go uh fourth shelf from the bottom fourth from the left and you go okay then you do that and you're like this is crazy I need to organize this and then and it took forever to organize it and and and I got employee push back I'm just like they're like no we know we know where everything is don't mess with that and that was like one thing I didn't appreciate is like no no this makes sense it's alphabetical order I'm confident you guys know the alphabet and then you'll be able to grab it they're like yeah but like every employee could grab one without looking literally they would their hand would go out and they'd grab it and I ruined all of that for them and uh and the reality is I I alphabetized it it a good move it needed to make sense so new people can come in and and and mistakes were happening occasionally from people not looking what they were grabbing but the actual it was better we're a better company for it but actually not as much as it would have thought because now everyone has to think about where they grab it and they kind of get used to it because when we add a new fragrance in it shifts all of them down the line and they and so when they were used to every without looking and grabbing everything everything's moved every time we got a new fragrance cuz that and so actually we slightly that seemingly obvious change we're actually slightly slower because of it um yeah but it needed happen it made sense but I got a ton of push back from employees at first um so that that little example times that by a thousand my first three months of just hey here's a really obvious thing we should do no don't do it please like like trust me give me a shot okay I did it it took forever to do and it worked but actually not nearly as much as I thought it would and that that was that every day for three months it's till today till a year almost a year later yeah well and and that Chad is why they say don't don't make changes because you often don't understand yet the Ripple effects of making those changes and you don't understand that there's often like a method to the madness and so I guess the method to this madness was you know having all the fragrances out of any sort of order was because what the the good news there was when you added a new fragrance it didn't screw screw up the order of the 150 you already had so there was you you know you it sounds like it's probably better in the long term to have alphabetical order but there was some method to the madness and you just couldn't have known that until longer in the business or until making the change and having it bite you in the butt a little bit that's right I I think when you when when when you come into the business you look at certain things and you just see chaos and there's kind of three different types of thosea of those of those reasons those happen one is because that process used to make sense and it no longer does two it actually does make sense you just don't realize it yet because it's maybe it's a bad process but it's the best of all the bad Solutions yeah or or three um that's just a preference of the former owner uh and you have no idea which one it is and you almost won't learn until you mess with it you have to now the timing of when you mess with it and how you mess with it completely different situation but um the I I think I was surprised by a lot of things I looked at from the outside that looked like chaos and didn't make any sense and then when I dug when I dug in and tried to mess with it I realized that okay there's there's a reason for this um yeah yeah Chad I want to H make sure we have time just to learn a little bit about the candle manufacturing industry in business so before we get into that is there anything else just about the journey uh and kind of you know being meta about your whole Adventure here that you want to make sure that we share with the audience yeah listen I I think um it it everything is harder than it looks um I don't think it's for everyone um but for the people it is for you know I I I I wouldn't change this for the world you know I I've I feel so much more in control of my destiny I feel so much more fulfilled with what I do um I'm a lot prouder of what I do uh and owning a business it's it's something I've always felt that um I wanted to do and and I get all the joy I thought I would and it's incredibly difficult and hard and so crushing some days um not still crushing is the wrong word but but um but uh you know we all we still all had bad days but I love it um but just you know build a network talk to people reach out uh and I think uh asking a lot of questions and learning from people's experiences is great and I I I learned a lot from these podcasts for sure um that that I think that's how I learned and for for me that was that was the most valuable thing oh well fantastic Chad I'm thrilled to hear that uh and and let me ask you how does how does your family react to to Dad now as a as a small business owner versus a corporate guy um what do your what do your kids think what does your wife think oh my kids are eight seven and three and so them running around a Candle factory and you getting to play with wax they love it um they make a mess every time they're here and they ride the pallet jack and all all those things so they love uh they see less of me um especially what's weird is during Co you I worked a lot but I was working from home for a lot of it and um now they saw an extreme change that probably would have happened anyway but but nonetheless so you they definitely miss me a lot I miss them a lot more um but uh I think it's I think it's good I think you know setting expectations with your family you know with your wife and and making sure with with your partner uh that they fully understand what you're going through um and and what your intentions are and how this ends up is this impacts your family a lot and and again that's one of the things people don't talk about is um we talk about the stress of going through this process and also the financial risks of going through this process you know how you how you work through that with your partner who's clearly you know um an important part of this is really important and making sure you're on the same page and and did you um anticipate being away from the family as you are now and so was this something that you kind of for lack of a better word pre-negotiated with your partner I had no idea um my wife certainly didn't I had no idea I'd be working as much as I am now to be fair I'm pulling it back I'm not working 15 hour days anymore maybe once or twice a week I I I make an effort to leave early to take my kids to practice once a week for instance and and things like that I am getting better at delegating things to my team so so I'm freeing that up uh but to get to that point was really really difficult um and so um uh but but yeah I didn't know how hard this was going to be or how many hours I was going to work um previous to buy a business I'd spoken to another owner and he told me I asked him how many hours he work and he goes I'm embarrassed to say this and I remember being like why are you embarrassed that you work a lot of hours we certainly work in a culture that you know like brags about the hours we work and that's like you know it's just kind of contested way sometimes but I I felt that shame and embarrassment with how many hours of work because it made me feel like ineffective and hey buddy you bought a business so you can be free and you can do what you want and now you're a slave to that business um so so there is a there's there was a surprising a little bit of Shame working that many hours and feeling like I was doing it wrong but again talking to a ton of business owners and they a lot of them went through that it was very common was was made me feel a lot better and um the promise to my wife that slowly I'm going to work less and less hours um it works I'm trying to I'm trying to hold to it that's great Chad that's so viable for people out there with with kids in a family who are who are doing this and actually on this point about family you make a you make kind of a a comparison in your notes here um to being a father you say consistency no panaceas like raising a child expecting to do one thing right in neglect in neglecting other areas will not end well and you're referring now to management but comparing it to Parenting can you elaborate on that yeah um you one of the reasons I you know one of the reasons one of the big reasons I wanted to not have any investors or or Partners is because I can I've got no I'm under no timeline of when I can sell this business you people ask me all the time do you want to sell it do you want to you know do you want to step away what do what's your plan you want do this forever answer is I have no idea and I don't need to know I can figure that out but but regardless you know I'd like to hold this for as long as I can and do this and um and if I I can try to do this one big thing that will revolutionize the business and and it probably won't uh I need to be mindful of being able to come in every day and perform and be consistent and that in involves not overdoing it any particular day week month year um obviously listen we're gonna have days we're gonna have to step it up quite a bit but um if you like uh my Q4 last year I I go over where I got burnt out you know January February I was toast and and I wasn't able to perform um I wasn't able to do what I wanted to do where otherwise can again consistency you know of just trying to do um a little bit of everything and be and um every day get a little bit better uh because otherwise if I'm trying to do frontload all of it I'm going to fail and then or even if I'm successful I'm gonna be burnt out and not be able to do anything after that okay Chad well let's close out with just a quick um tutorial on the candle manufacturing business uh I said to you in our preall that um candles seemed like a like it would be a really competitive uh and difficult business because I feel like they making candles is something that a lot of people start as you know as a hobby uh or kind of as a crafty person to do an Etsy store uh and I referred I referred to a old episode of The Office where Michael Scott's girlfriend Jen or Jan um starts starts a candle business um and and so it you know in a business where the barriers to entry are low it attracts people who who are passionate you know always a always a red flag when you're in a business competing with people who are just passionate about it one of the reasons one of the reasons we avoid restaurants um uh and you know I would think this is my naive but I would I would think a a a a product a commoditized product one where it's hard to differentiate for all those reasons it strikes me as is some like a hard business um so tell us react to that and and tell us what you know about the candl making industry yeah I would put candle manufacturers in three buckets you know I think the first bucket is the one you described so like the Etsy at home people making their own candles and and almost everyone starts out to that degree um then you have the high-end uh you the mega producers manufacturers who are making for like the nests and maybe doing some for Yankee or any major candle and they're full automation they've got massive machines and warehouses and you know unless you want 5,000 or 10,000 of a single candle fragrance like they won't take your call and we sit in the in between where um I think we offer the selection uh and and closer to pricing that the high-end guys will do but we still have lower minimum so they're you on the on the lower and the Etsy ones they they're great at customization they can do some really interesting things you know there there's certainly uh you know a certain degree of love in every candle that they're hand making but that's not scalable um the customizability or you know you wouldn't go to any of those people to get you know certainly several dozen prob maybe but over that um once you're get the hundreds certainly thousands they're not going to be uh able to compete with that at all um and certainly not what we offer is we carry you'll see behind me I've got two dozen different candle vessels you know you can come to us we One-Stop shop we have any all the vessels you want we have the wax we have 150 different fragrances Lids boxes and we'll do labels and you can have your entire brand designed here um so we work for a number of notable uh international hotels um some sense you've probably experienced uh we have a number of online retailers resell sellers um and you know boutiques across the board and people just want to start their own candle brand um and even some midsize candle Brands we we' worked with and um and where we stand out is we do have lower minimums than the big guys because those again they won't talk to you 5,000 but we can do more than the the ultra passionate hobby people uh they just don't have the equipment the machine year experience to do what we do um we do have a few competitors but I think where we're unique is our inventory to do all this um it's funny we one of the things the one of the chaos things we talk about that made sense is we are um we're we're if you Google private label candle manufacturer we're one one of the one of the first organic hits we we used to be you know two one or two I think we slipped to three or four but um and our website is completely a little bit of chaos is our web is our website there's a lot going on it's still one of the projects I have to clean it up and fix it up but I didn't realize those two things are linked is because our website's CA a little bit of chaos we've got a lot of pages you have to click on a lot of different spaces you have to bounce around a lot to do that it's one of those things that helps Drive the metrics um that people are on your site for longer and are clicking through your site more and therefore um we we show up higher on the organic when you Google us and it's one of those things that on the surface I would have fixed I would have said like hey um uh you know let's clean up the site let's simplify it I'm still looking to do that but I have to be much more strategic like that because it will impact the Google ratings that being said at this point U people do find Us online uh and we've been getting a lot of inbalance but a lot of his word of mouth I I think what we do is a little more unique than then probably people realize in what we can offer at the scale we can offer at the price we can offer fascinating and Chad since you're a private label manufacturer so these let's call it hotel chains or or or um whomever I I don't know some some other brands want to have their own candles with their names on them uh that they give away or sell or what what have you how do you generate new sales because this seems like like how do you find a new brand that may want to but hasn't yet um decided to release their own line of candles like there's no that's kind of an invisible itch so how do you how do you go finding those folks so you can scratch that is for them do am I making sense perfect um you know I like a lot of other people so I saw the business you know saw and said okay there's no marketing here there's no sales and they're doing quite well now what happens when you add marketing and sales and that's a common thesis I see with a lot of businesses and we all laugh about it now because the reason no one there's no sales or marketings no one thought about it is because you're so buried with your day-to-day it is incredibly hard to do and um and and so I and I have yeah it took me it took me six to nine months to really find time to do any type of marketing of sales whatsoever I I was just reacting um and now I'm able to do it and I think uh you know I I've I've done a lot of direct marketing Outreach myself and I just I'll call up companies and just say why don't why don't you you have candles why aren't you working with us this is what we can do or why don't you have a candle line um and working with people who uh are existing customers and saying why aren't we what more can we do for you we also do diffusers room sprays body sprays as well so there's a number of complimentary products uh we offer um and but but Chad give me an example of of the a type of business that you'd call who doesn't have a candle line and you call them and say you should like who is that just B basically like another hotel uh chain for example I I'd say where we've had the most success our sales were the most success where people already had candles but uh I I think we could we we call and say who's doing your candles um why you know talk me through uh here's what we can do more and a lot of times there's something they dabbled in that maybe they're dealing with this smaller Etsy style uh business that and we have we have Machinery we can produce a lot more of a lot of experience uh and probably more going to be more price competitive um and then that's compelling to them they say okay great you can do you can do even more than our current custom our provider can and you're cheaper um so there's that element uh the other element is a lot of people carry other people's candles so it's people who have candles but it's not their candles they have other brands why don't you know you can have your own brand customized to your own Thor company brand whatever it is and you your margins will be better and it's a product you designed specifically for this space that's really compelling as well Well Chad anything that we haven't said I mean there are things we haven't said because I'm looking at our list here but is there anything is there anything really major that went unset um I I think uh I I I don't I don't probably but uh I think you know you got the gist of my story um I think for for people um yeah ultimately you know I think this is probably important I I I found the business early and I Clos quickly and I moved quickly and I kind of brute forceed make of the close and ultimately it worked out um I think that uh one thing you know we talk about if you want to do this I think it's very easy to get skittish about it about buying a business and doing it and finding excuses not to and looking at every deal you see and seeing okay there there's tear some hair on it here's some problems with it I don't want to do it and I do have a bunch of friend Searchers that have been looking um and they throw out every deal because it's got a little bit of hair on it and it took them till like their 30th deal to be like oh I have to get a deal with a little bit of hair on it and and listen Maybe again I think there are it depends on how you define hair and what's tricky about it but um if you're looking for the perfect deal you might be looking for a real long time if not forever so finding something you can get comfortable with and being willing to pull the trigger yeah well maybe and maybe that is the art and the skill is figuring out what that's what that sweet spot is of just enough hair to deal with or finding the right kind of hair for you right uh and and really maybe that's kind of one of the kind of the names of the game of of being a good business buyer um well th this has been fantastic Chad we could have gone for another hour but I got to let you and the audience go uh how do you prefer people reach out to you if they have questions uh probably LinkedIn Chad hilderbrand you can find um I have a I have a Twitter I don't I I look at but I don't I don't comment on so I'm quiet but I but I I'm a I'm a lurker if you will but so if you reach out to me I'll be there uh I think it's the Chad Aaron uh a a r o n um on Twitter so you'll find me on there um I'm happy to help out anyone who in the process I think the community has been incredible you know everyone's been so helpful and wanting to help out wherever they can and so the ability to return the favor is always great Chad thanks very much for coming on thanks for all of your prep and such a deep and Rich conversation absolutely thank you will I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business