Matthew sasin welcome to acquiring mins pleasure to be here Matthew you bought a towing business in North Carolina at the end of last year we're going to get a little tutorial on the towing business today which I'm excited about uh but also you acquir this towing business which is a was a larger business is a larger business for a self-funded Searcher and immediately put in an operator you are not the owner operator and this is a fantasy of men people uh and yet discouraged by many others don't think they say that you can buy a small business 10% down SBA loan and just put it in operator and not be the operator yourself at least not initially right you are doing it though and are even maintaining your day job your W2 so we're going to spend a good amount of time on this structure how you pulled this off how you would address the naysayers but first Matthew let's have some background on you please Yeah Yeah by all means um so you know as you mentioned with the business is in North Carolina so I live in North Carolina I'm in the the Durham North Carolina area been here about 10 years or so was in New York City for most of the time before that um by way of background I come out of the technology industry um so my my my degree is in computer science although I've never used that uh practically a day in my life um but have spent my most of my career in the technology industry mostly in um technical sales sales leadership uh General management and executive roles been at large Global Enterprise service providers um have run startups and done a little bit of everything in between um and that's that's what I do today as well I I I look after uh go to market operations for a a large technology company um separate from that about 15 years ago uh my wife and I started investing in real estate um as a let's call it a solo GP right our our money our investments um we did what I think many people do which is bought a Triplex using an FHA mortgage as our sort of first home plus investment um so you know started out the gate with uh fairly minimal down on that the FHA program is a fantastic way to get into real estate investing um had a couple of couple of tenants uh pay the entire mortgage and then some and this is this is when we were living in New York City um and over time we just kept investing in real estate uh uh buying you know larger and larger properties so went from a Triplex to you know some larger stuff a couple of couple of 10 unit properties um 20 some odd unit apartment building um all in the kind of value ad class class C housing space um and you know we've been doing that kind of on the side for the past 15 years have always had Professional Property Management so sort of used to the used to the concept of having others involved in a lot of the day-to-day operations of the thing we were putting our money into um took advantage over the past several years of the uh runup in asset prices during covid to to sell almost all those so we're now at a place where kind of the only real estate we own is the the house we live in and a piece of land that we're building a new house house on um and then we ended up being you know mid last year left with uh left with a bunch of profits from some of these real estate sales going okay what's next like where where are we going to put the money um the real estate market for for various reasons just not not a place we were looking to put a ton of money and at that point um and you know given given my experience kind of running companies and running startups and and some things we had talked about um you know we we had considered you know is it worth buying an operating company and that could have taken a number of different directions right if it was something that was um that was truly large enough I'd be happy to step into that dayto day um if it was something that was let's say a little bit smaller but still relatively big and we could talk about what that means um you know which was the ideal Target one that's big enough that uh has the cash flow to support debt service support reinvestment into the business and most importantly support bringing in uh an operator a true executive level leader to run the business dayto day um and we also sort of geographically box the search to be relatively local to us and the the goal there was as an absolute fallback plan if things went completely sideways I'd have the ability to step into the business full-time my wife would have the ability to step in and help with things um so that's always the contingency plan uh you know we're we're three and a half months in knock on wood we things are looking extraordinarily positive and we'll we'll talk more about that um so suffice to say took the money um spent about 6 months in total looking at businesses the end of the day I probably probably reviewed 40 or 50 Sims ended up talking to maybe 10 or 12 sellers um ended up issuing a single Loi for the one for this one business that I thought kind of was the right one after you know several meetings with the sellers probably spent six8 hours in total with the sellers uh before we even got to issuing an Loi and then you know progressed to close and as you mentioned um we closed the beginning of December and kind of jumped right into it great that was a a great background thank you um going back to your real estate just just for some color I'm interested so all of your how many doors did you have at the end there by the way uh at Peak like 50 something um and it kind of ebbed and flowed over time with there were a few um few things we sort of opportunistically sold when the right offer came along and had had been rolling those forward with 103 ons with a few exceptions and then the end decided to just get rid of the last handful of properties and that first Triplex that you bought where was that where in New York uh that was in in Bushwick so in Brooklyn um pre let's say pre- Bushwick getting getting cleaned up so so for us it was just my wife and I at the time uh we we did not have kids when we were in New York um and for us the the tossup was essentially well for about the same amount of money we can we can either purchase kind of a a condo in Park Slope or we can purchase this triplex in Bushwick and have a have a kind of different life but start a path that's that that reinvests money and we um you know hindsight being 2020 made the right decision well it's it it sure set a precedent because you you know you built this whole big portfolio and then have parlayed that into small business ownership and so you're now it's it's you know your thing you guys are building serious wealth on the side um that's great and so all 50 of those doors were in New York proper in Brooklyn no we had no we had properties uh in New York City um down here outside the Raleigh area we had a building in Chicago um so so our goal was really about um really investing in markets that we that we knew right either that we had lived in we'd spent a bunch of time in so we were able to sort of understand some of the the the inner workings of the very specific areas we were putting money into um so that that's sort of what led us to a handful of different markets at a certain point it stopped making sense to invest in New York City at a certain point it stopped making sense to invest in the kind of surrounds of of Raleigh um and that's where we landed okay let's go back to your search now so first of all how are you searching were you just reaching out to cold Outreach to Brokers or BS by sell go ahead yeah so an entirely broker deal so we we did not do any proprietary Outreach and go and start calling sellers or potential sellers um so a mixture of uh some Outreach to local brokers who I saw were doing volume um and then deals that were sort of broadly published right things that were on bis byell and others um and that that's sort of what led to the you know 50 or so at the at the top of funnel so to speak mhm and the Brokers that you you outreached to that you saw were doing volume did you infer that they were doing volume simply because of their activity on bis byell uh so combination of that things that got listed on their own sites that weren't on bis byell um some discussions I had with some some other folks who were searching um sort of led to led to led to where we are um and I knew from the beginning kind of the things that didn't interest us so so there's certain industries we had we had no interest in buying a business in right being in a a pure retail business um Food Services industry sort of the traditional home services businesses that everyone's buying um those weren't of huge interest for a variety of different reasons um and then as I mentioned we had sort of the geographical box of wanting to be within the General Raleigh Durham area um and then a size box right there's sort of a minimum footprint and obviously that changes based on interest rate and those sorts of things but um based on the eity you were looking to put in the deal there was kind of a minimum minimum Eva or cash flow needed to support buy the business debt service putting a leader in place and then still having money to to to reinvest yeah typically it's there's kind of the the three things that a Searcher is looking for in terms of EV but The Debt Service themselves and reinvesting in the business but you had that fourth which was the operator because it wasn't it wasn't a be right and I was also you know by virtue of you know I have a W2 I'm I'm well paid I I really enjoy what I what I do day today um so you know was able to sort of minimize the amount of money I'm I'm paying myself um basically to whatever you know to what our accountants felt was a a reasonable amount to maintain es Corp status and be able to get the benefits from there um so you know paying myself sort of the minimum amount the accountants are happy with um we're not taking any distributions now nor do we foresee taking distributions out of the business for the you know let's call it the next 3 to five years um it's truly uh truly in reinvestment mode okay so actually the the the the EA the profits from the business didn't need to pay for that much more than a typical Searcher would because the typical are just going to pay themselves as own operator and you were just going to pay an operator and pay yourself just kind of a token amount that to to keep within IRS requirements of an esort exactly um although you probably had to pay that operator or are paying that operator much more than many Searchers pay themselves they're often willing to pay themselves less early on because they're also in reinvestment mode correct yeah so we've got um a fairly I'll say a fairly healthy cash plan for um for the the person I've got leading the business um he's got some upside on an annual basis and then um we also put together sort of a phantom Equity program so you know he's sort of in it for the long term we've got a multi-year vesting period and you know he'll he'll own a reasonable or he'll own the equivalent of a reasonable portion of the business over the next several years so that you know sort of we're we're um we're tied together in terms of the long-term success um he knows the direction we're looking ahead with the business we're sort of we're we're in mutual agreement there and working towards the same goal mhm well we're going to get into that some more detail here in a few minutes um and Matthew you you have referred now a couple times to your to your Geographic box just for for people to understand um what what was your limit I assume it was kind of a number of minutes drive time no traffic radius and what was that exactly yeah so we were generally looking in kind of let's call it 30 to 45 minutes in the Raleigh Durham area um like I said I I live in Durham so I'm a little bit I'm sort of northwest of Raleigh uh but what you end up with in North Carolina sort of R Durham Chapel Hill and some of the outline towns form kind of the Research Triangle right that form this nice geographic area um so we're really looking in those those cities plus the surrounding towns um and and that's where we are but you you were going to allow yourself to buy a business that was up to let's say 45 minutes away would you have gone an hour away it's Inc everything's valuable right yeah yeah yeah a good enough opportunity exactly right if it was the right thing in the the the home office so to speak was an hour away cool if it was the right thing and in this case kind of our our current home office home office head office whatever is uh 32 minutes from my house without traffic um so you know it works for the for for when I need to run down there um and you know when I need to you know I I've gone down on weekends I still um work out of that facility sometimes during uh during the day if only because the um you know it was a family run family held business before most the employees I don't think are are uh are yet at a place where kind of an absentee owner or a financial owner call it what you will is something they really understand so um you know I've been making sure from day one that I spend time I get to know everybody that I'm I'm still a visible part of the business despite all the day-to-day decision making being handled by um by incidentally by by a guy named Matt who's who's who's the operational leader and so what does that mean exactly how many times a week are you in there or time every two weeks um yeah no so so we sort of timed the clothes right to where um you know we we sort of had vacation and the holiday and all that so I was able to spend kind of the first three weeks fully dedicated to to being there to helping get things up to speed getting you know while while Matt's been handling a lot of the day-to-day Ops you know I spent a whole lot of time getting backend systems up and running making sure we were good to go from you know the bank and all the finance systems and got our accountants up to speed and and and all of that moving forward um from that point forward you know I've I've been working out of that office doing my other stuff a couple of days a week generally um and we've done you know it's a 247 business which we we'll get into um you know so I've had the ability on nights and some weekends to go out to a large accident scenes and sort of participate with the team and make sure they understand that kind of I'm a visible sort of a visible force and part of the business um similarly we've been sort of ramping up internal training uh for our drivers and we've been doing those on weekends and I'm I'm you know making sure sure I participate in all of those again to be visible but also because quite frankly it's it's it's cool like these are this is cool equipment to get to play with to learn how to operate yeah yeah super cool okay so for those first three weeks you were in there kind of daily and now you're in there a couple times a week but you might you might actually just be doing like your other work but your face is at least there and and and then you'll also kind of go to these trainings you might go out into the field every now and then to actually see the work happen and kind of special occasions so just looking for opportunities to to to to learn yourself but also to show folks that you're there yeah very much so yeah yeah and then how do you envision that kind of declining because I assume this is your this is kind of like an early burst uh for people to see you and for you to learn and that it'll decline a little bit over time do you do you do you have kind of a a steady state that you envision at month six or month 12 of how often you'll be in the business yeah absolutely so so um over sort of the longer term the the intent is once we hit probably in the month 6 to month n range I'll probably ratchet that down to maybe once a week there and and by the time we hit you know middle of year two I I I wouldn't intend to be spending a ton of time there um Additionally you know for for for now we've been you know I've been making sure that when um Matt my your rgm is is unavailable um that that I've been there just again so there's someone who's present um we've now after you know three and a half months in I think we've got we've got the right managers in in place and we we'll talk more about that um and sort of the right people understand that they are allowed um and empowered to make certain decisions on their own so I'm less worried that something's going to happen and someone physically has to be there to make a decision because we've we've like I said we've got the right people they know now that they are empowered to make decisions around certain things so um you know overall that's that's how we're moving along I want to go back to your search and and get through that and then and really really get into post search but you had said that you don't like Home Services which is as you mentioned a hot area of Searcher activity today why did you decide that you don't want a home service business yeah um I think part of it was dealing with part of it is just the valuations have gotten crazy um the other part is dealing with some of the uh dealing with some of the lure and and things like that um and then the third which may just be sort of local to this area um there are a handful you know you look at HVAC businesses for example um we have a handful of extraordinarily large well-run you know fully digital HVAC Services businesses in this area I've I've called them before I've used them I've been a customer of theirs um so there's not a ton of sort of differentiated Advantage I could bring to those because there are several here that have already followed the Playbook that um that most Searchers who were requiring say HVAC or Plumbing businesses would follow so um not not not much opportunity to grow them here okay and you didn't want uh retail and you didn't want food service um any others that would kind of be interesting to people that were are conventional choices that you chose against nothing that comes to mind I look just just by nature of my background I looked at a couple of small small technology businesses a couple you know some some agencies and things like that yeah those just I don't know maybe it's because I'm used to working in more scaled technology businesses or or or software startups as opposed to you know a $5 million software business is very very different than A5 million doll agency in that you don't really get a ton of operating leverage in in an agency Professional Services model you do in software so it it's sort of all the worst parts of a Services business and being subscale um so there are a handful of those in the market I talked to the sellers look through them and they just didn't they didn't do it for me but they're less attractive to you than a traditional Services business where there's also doesn't have the the operational leverage of software yeah and I think the difference there is a sort of a traditional Services business and we could consider towing a a Services business because it really is right we don't we don't gain any we don't gain any leverage from anything really propr di AR um is sort of much like the HVAC Playbook these are these are businesses that are so far behind on the on the everything curve right so we can we can call it technology but it's the the use of marketing the how you go out and acquire customers regardless of what facet of the business you're doing that there's still the ability to to Really gain gain something over time whereas there are so many technology Services businesses um that you know if you're a $5 million one there's not much you can do you're not you're not you know the cash flow available or the person power to reinvest into some proprietary systems to actually gain any leverage so it's really just like a it's a labor Arbitrage um game at the end of the day and actually I want to Circle back to that point but first did you look at software businesses like like uh like on micro chire I mean somebody like you did you go out and look for or or e-commerce where I mean there is more opportunities for leverage than just an agency I did not um Ecom as a whole just doesn't isn't particular attractive to me don't know why it just isn't um and smaller software companies there's just um at given what valuations people are looking for um there there's a lot of garbage businesses out there that are both not making money and sellers have unreasonable expectations of what they're worth so nothing you know I I perused my girl choire a little bit I see some deals there every so often but nothing nothing just jumped out at me as like oh my oh my this is this is the thing um and also I think in a smaller scale software business like you really like I said my back my degree is in computer science but I I am not a developer or engineer by by any stretch of the imagination and I think with a lot of the smaller software businesses unless sort of unless you're the one who can go in and actually not just diligence code base but be able to start making changes and driving improvements um you're you're you're truly at the mercy of of whoever sort of whoever you can hire okay uh and then Matthew I also just want you to to talk a little bit about your this might be jumping the gun a little bit but you have a lot of experience managing people as you said at the top in your in your background you've um you know managed very large teams within larger businesses you've been involved in smaller startups and everything in between how in these first three and a half months is that serving you and um also speak to people who might not have the same U the same amount of management experience that you do and what you would tell them yeah abely absolutely so it's it it it is definitely serving me well and it's sort of funny you bring it up cuz I was um before we started recording I'd mentioned I I met with another Searcher who just recently acquired incidentally a towing business here in Raleigh um uh was met him over the weekend for uh for for dinner and one of the things that I I think couldn't quite articulate when I when we first started talking but now he's about two weeks post close and it's hit him is kind of for us the first month plus was um was truly an exercise in sort of in EQ and people management right you got a lot of people and in our case it was a it was a closely held sort of family run business the um the the founder of the business had had um unexpectedly passed away several years ago but his his wife and some of her family members stepped in to to take over um so you know there were a lot of really really close personal relationships within the business and I think you know a handful of the employees maybe felt a bit of a betrayal that all of a sudden this link to the founder who many of them knew was gone um so yeah the first month just having the ability to to go in and sit down talk to people um kind of understand what their concerns are what their fears are what they're looking to do was was absolutely invaluable like month one quite frankly we really didn't look at much operationally like one of the the former GM who was a minority owner stayed on with us for several months in a consultative basis and we we let him continue to run the day-to-day show for the first 30 days so you know first 30 days for us were meeting the people allaying concerns kind of becoming becoming members of the team um making sure they all understood what the goals were which is quite frankly not to change a lot but to make it better in a couple of discreet ways um and then getting the back office stuff moving right like making sure the bookkeepers were lined up and that uh payroll was working the way it should and all those sorts of things so to bring it back I think having having experience managing kind of widely distributed and larger teams was was absolutely helpful um the flip side of that would be you know if you're a Searcher coming out of a maybe coming out of a background where you don't have a ton of direct management experience I don't necessarily think that's a problem um like I said for us the first 30 days was probably a little less about I've had experience managing you know teams of hundreds of people and more just having that EQ right having the ability to empathize and sit down and talk with people who realistically come from a very different background than you do that than I do that most Searchers come from um and truly kind of understanding what are what are they looking to do why are they here what motivates them what are their fears about everything that's going on um so take that for what it's worth yeah that's great and and going back or on this point about the EQ so do you think that your misstep might have just been kind of not showing empathy not appreciating how disruptive this might be and how threatening this might be to to to the to the staff's uh professional lives like what how What would um an a less ideal um transition look like yeah um I think it's not a like it it I want to be careful because I don't think it's a misstep I think it is uh I certainly I didn't fully appreciate going in just just how kind of EQ heavy the first day and then the first week and then the first month would be um right I think a less than ideal transition would have result in resulted in you know people uh people rage quitting and walking out the door um so that that would be the Les the less than ideal scenario um luckily for us I sort of knew going in and was able to witness it firsthand like there were several employees who were who were really upset week one um just super emotional especially the ones who had been with us for say 10 plus years that were very close to the original owner and founder who had passed away um because this was right truly the end of his family running this company um but sort of I knew going in we had long tenure across a number of employees um we pay pretty well not top of Market but pretty well um we offer substantially better benefits than our competitors in the surrounding area um and you know we're we're generally it's a good place to be our customers like us they're they're happy with us um it's not a super stressful environment so you know some of the people it was really about just kind of giving them space to breae in process and then making sure we can engage them others were kind of gung-ho from the beginning to just start start getting to know each other and and get moving and talk a little bit about how this theme of you know you coming from a techy white very white collar background and interfacing with people who has a very different very blue collar background um did you um yeah anything you want to want to say about that other than the obvious just culturally it feels very different yeah know I think there's sort of two things that were extraordinarily helpful um one is and I guess this probably speaks a little bit to to buyer business fit as as many will call um while I know relatively little about the or I knew relatively little about the towing industry uh I've at least I've had cars towed of mine I I've sort of my my fallback career I always joke as being a mechanic I've always worked on my own cars I always have several project cars ongoing so at least I know my way around a vehicle I'm able to talk sort of talk that talk and understand what's going on so I think that kind of bought a a bit of credibility in the beginning like while I don't know how to operate a a tow truck of various sizes I at least can speak fluently about vehicle goals and what's going on in the shop and understand that whole piece of the puzzle so I think that helped a great deal um Additionally you know we didn't C get to this yet but um Matt my my my GM uh is a 20-year Navy vet um exited uh exited as a captain so you know he he's run Crews of you know several hundred plus Sailors um he's run you know steam Steam Plant Crews of 80 80 or 90 and listed uh enlisted sailor so he he personally has much more experience dealing with that let's call it a blue coll background cuz that's sort of fundamentally what most of the most of the Navy enlisted ranks are um so I think those two things combined from us really helped to sort of get us um uh get us tied in with the team and and kind of get everybody on our side thank you Matthew and then so where did you ultimately find this business was it bis byell or was it one of the brokers who came to you uh yes so this was listed on on bis byell and so give us some of the the specs of the business how big how old um and uh profitability what you paid for it kind of all the numbers that you can share yeah so business was 25 year or is 25 years old um past 3 four years have been in the you know let's call it 5 million-ish range in Revenue there was obviously a drop at the beginning of covid there was a bit of recovery the year after um business has been running kind of historically at about 15 to 20% eitaa margins um end of the day uh end of the day this was a a $4.1 million purchase price um as you could probably imagine it's an extraordinarily asset heavy business so of that 4.1 million purchase price 3.2 3.3 million of it was allocated to to stuff mostly to the trucks like there's there's probably $100,000 of stuff in our shop and then 3 something million dollars in in in trucks and trailers about 35 um 35 trucks and trailers of of various sizes and shapes and and values um so asset heavy business um generally on a on a good track so the business um and I think this scared a lot of people who looked at it in fact I I talked to one Searcher several months before we went under Loi who actually had looked at this business and was scared off by the fact that there was a prior bankrupcy in the corporate history um as you can imagine following the death of a prior owner and some confusion that followed thereafter um things did not go particularly well so the business filed bankruptcy in 2016 if I recall um purely through kind of the resultant chaos of of a of of a leader um of a leader passing away unexpectedly and just not being able to recover quickly uh that said you know credit to um to this seller and and her uh minority partner who's also in the family um they did a phenomenal job recovering from it uh put together a really well structured payout plan they exited from bankruptcy protection I think about 18 months ago somewhere in that vicinity um and they really did a good job taking this business from being clearly unprofitable to kind of a well-run if not growing fast um a well-run consistently profitable business uh so you know I I'll I'll say we locked out for lack of better term on on having something that was that was truly structurally sound to begin with like there's a ton of spot area for improvement and that's what we're focused on but the the the bones were good so to speak why did it scare the other Searcher then and and and didn't scare you just kind of prejudice like if a business that had like a bankruptcy that's really it I couldn't get a clear answer other than know it's a bankruptcy and to my view I'm I'm thinking well number one I'm I'm I'm not it's not a stock sale so I'm not worried about any kind of residual things from that any residual claims rearing their head years from now um and you know what like things happen right it's it's not the end of the world that the business went through bankruptcy I you know I spent several hours with the sellers discussing it and kind of understanding the nitty-gritty details and everything you could get Beyond just looking up right Bankruptcy Court proceedings um and it was a it was a a perfectly kind of a perfectly human story as to what happened um you know the so so it didn't it didn't kind of suggest any fragility in the business no no not in the not at all they they grew they grew too they tried to grow too quickly and then someone passed away and it and and Chaos ensued it's it could really be be summed up that way great Matthew so let's talk about your your intention to put in an operator in fact your your your requirement that to put in an operator from day one so talk us through the whole how you thought about that you've already touched on the fact that you you were comfortable kind of having with your your real estate portfolio you'd always Outsource management but give us the whole kind of your thinking there and then how you approached it and I'll jump in with questions yeah absolutely so um something that obviously we we talked about offline um the thing that always struck me and and I said this having been in a leadership role at a PE backed software company is right the PE model fundamentally is one of buying a company and putting an operator in place maybe that's leaving the operator from the company that was acquired maybe that's taking someone that's a you know an executive and residence and sitting on the bench or an operating partner maybe that's hiring someone cold and and again I i' I've sat in those roles so I'm sort of used to it or I've experienced it firsthand um so I I didn't think maybe it's a bit of naive but I didn't think that was an unreason able approach even at sort of the smaller scale and to be clear like $5 million in revenue is not it's not a particularly small business and in this industry in general we can get more into it like we're we're a sizable business in the towing and recovery industry um so you know I went into it just sort of knowing from the beginning the goal with this was to put an operator in place the the other side of that of course was while we're working through the LOI while we're working through the deal I'm busy looking to you know searching for an operator for the business um and knowing that those two things have to coincide right we we weren't going to close until we had an operator in place who could be in with me day one and realistically uh at the end of the day he was on the books of The Entity about a week beforehand so that we could kind of get get the playbook in place and get ready to kind of get ready toit the ground running day one um so maybe it's not e maybe it's just that's my view of the world but uh that that was the plan from the beginning like as I said I I I have a W2 job I really enjoy it I I like the industry I work in like the people I work with company I work for all that stuff um so this was sort of primary investment first and first and foremost um yeah you know I'm interested you it seems like from from your real estate days to now your SB days you really are you do think about things more as an investor than an entrepreneur not to say that you're not entrepreneurial but kind of a capital allocator I mean you guys you guys sell rather than kind of holding on to your real estate portfolio indefinitely forever and just kind of being owners and doing more and more real estate investment you time the market so you see that the prices are out of control and you decide to sell and then you look around and you say how are we going to allocate this Capital now and you considered your options and you landed on SMB um for a variety of I assume kind of logical reasons more than necessarily some big Affinity to go in and operate a small business so so you you you really seem like more more investor minded that's um would for would you agree am I am I right about that yeah I think that's I think that's a fair statement and and I think to go a step further what we've done with real estate and what we're doing with with this business um our our goal doing it as opposed to say just just being an LP in others deals because that's obviously something could do as well um is a bit of is a bit of selfishness and wanting to capture most of the upside for ourselves as well so maybe that's just sort of my my my risk level I'm willing to take but um you know for us the thought has always been we're we're willing to risk a little bit more to make sure that we capture the full upside as opposed to you know as opposed to just being an LP in someone's deals and making 10 or 12 or 18% or whatever whatever it happens to be tied to the investment yeah and on that point about risk so you do seem like risk-takers on the other hand you keep your W2 you've said that your W2 is you keep it more just because you really you really enjoy your work you're compensated well and and so on um but you know other people in our world uh would certainly be thinking about just making this their full-time thing if if not not to be a towing company operator forever but for long enough to then acquire a second SMB and build a hold Co and kind of take that path as far as it will go as a full but giving their full efforts their fulltime to it uh how do you react to that um I I think it's perfectly reasonable and I and I I I'd be willing to bet that's a place we end up with at some point in the future um you know I'm still relatively I'm 38 uh so I got I got I got plenty of Runway um yeah I would I think it's entirely reasonable and we could talk more about this I'm happy to to that that we're in a place where you know over the next let's call it 10 years I think um where where I don't have a W2 anymore and and the the focus is purely on sort of our portfolio and either a much larger version of this company or to the point potentially several companies with some adjacencies to one another um so yeah that's I I don't think that's an unreasonable place to be it's not it's not where I want to be right now but um love to get there yeah well you know to that to that eventuality in in some sense you're you you are jumping ahead though it might not seem like that because you're not diving in and operating yourself like to make any holding Co company model work you basically have to be able to buy a business and put on an operator and so that's actually in some ways that's kind of like a more advanced level of play going in and being the Operator Operator yourself so if you can figure out how to do this well once with your towing business and maybe a second time um you've actually unlocked a lot more scale more quickly than your conventional Searcher does who kind of gets in there and operates for two or four years themselves and you know doesn't trust themselves to put on an operator until they've done the operations themselves sort of sure yeah which is probably where I am to be honest yeah no and this one I think you know part of part of the diligence process was truly vetting out like this business to be very clear nothing was documented right so it's not like we walked in and there was an operation Playbook or anything like that um but generally people had a good understanding of what they were supposed to be doing and how it happened so so it's been more a me more about sort of unlocking what's stored inside a couple of people's heads and starting to get it on paper and systematize it um as opposed to just walking into something that was complete and utter chaos and step one was trying to piece together what the process even is like we had people who clearly know what they are supposed to be doing and execute it well um so it's about capturing that and then making sure we can kind of push it Forward another advantage of buying a a business on a on the larger side is is that 100% right right I mean this is one to be very clear the the prior owners um one was the day-to-day operations leader um and there were some downfalls to that which we can get into um and one was purely doing back office administrative tasks right U managing the books and so forth and okay like that's you know we knew day one that the books were going to get outsourced and okay cool we we just eliminated 90% of the job of one of one one of the prior owners right so so um yeah that we sort of knew going in that that there was some low hanging fruit like that that would not be uh not be a scary or hard thing to to to make more sort of systematized and let it just run um and I I want to actually Circle back on something but related but before we do that just to be clear so $5 million in Revenue with 15 to 20% eitas so we're looking at 700 800 to a million in SD y yeah okay um okay going so so this loow hanging fruit uh always the the phrase of choice in our world you talked about like with agencies how you how agencies are already very Tech forward they work in Tech and so there probably isn't a lot of loow hanging fruit in agency land the a it's fiercely competitive it's just pure labor AR Arbitrage whereas you i' I'd never heard this one before I liked it a lot you said about this business that it was behind on what was it on the everything curve it was behind yeah on okay on the everything curve it was behind I and that is a kind of traditional way to view small business land that there's just so many ways to optimize um but I've also heard sometimes counter uh points that it's like these businesses look unsophisticated and and inefficient from the outside but in fact they're they're maybe not as inefficient as they see and maybe you know putting in Cloud software isn't going to be the win uh that you think getting rid of the machine will be and and and actually my my interview from a week ago Monday the 13th was with um uh Michael aretta who who has bu is building a holding company he's acquired three businesses and kind of went through that progression where he thought initially it was going to be putting in Tech that was those were going to be the big levers and he still does that but only when there's a screaming need for new tech it's not it's not like his go-to and in fact what his go-to is is better culture and I thought this was a really interesting Insight that that maybe the the opportunity in a lot of these businesses isn't getting rid of the fact machine it's improve it's it's it's attacking the culture with intention and with tenderness whatever um and anyway so so answer all of that please Matthew no no so and I think when I say sort of behind on the everything curve um it it truly does mean everything right so uh when you look at technology as an example um not a particularly technology heavy industry uh where we have there are there are basically two SAS platforms out there in use by the towing industry for doing dispatch and Fleet Tracking and impound management and things like that um they were already on one of the two uh it works well enough I have my own qualms with kind of the reporting capabilities and the platform we have are are are pretty terrible um and that's fine like we'll get over that hurdle we'll talk with the vendor we'll figure out what we need to do but but by and large it it works well similarly you know they already they were using email and using chat to be able to communicate with the drivers when they're parked and things like that so you know it was simply about professionalizing that taking it from being you know truck 102 ECT gmail.com and bringing everything over to you know name at east coast towing.com and and kind of cleaning up the brand a little bit similarly you know we had a web presence and a social presence that hadn't been touched in years later five plus years um so you know we just got finished updating the website and and starting to pay some attention to sort of organic reach because a fair bit of our business is what we call a cash call like people who truly break down on the side of the highway search for towing company near me And if we pop up they call us um beyond that you know there there's just this Litany of little things that just um weren't addressed by the prior owners for any of a number of different reasons they're all super small wins um so when I talked about there being kind of inefficiencies to one person being the operations person who was not interested in hearing feedback or suggestions from any of the other employees so they all got kind of beaten down into a thing of not asking right everybody just kind of did their thing and went about their way and and carried on um so you know we took a bunch of very small actions month one to make sure everybody understood if there's a problem with something small as it may be bring it up and we can address it right things that are hundred bucks to fix super easy the dispatch office like they had a vacuum that hadn't worked in a year and a half cool I could literally drive to the Walmart that's a minute from the office spend 50 bucks voila you got a new vacuum everybody's happy um you know making sure the office was just generally cleaner right getting a cleaning crew in getting exterminators in like little stuff like that bought a ton of Goodwill and also started to get people ATT tuned to the culture of we can fix problems I can't guarantee that we can fix everything but when you bring things up it will be listened to addressed we may ask you as the person asking to do some homework and help us fix it but then we'll spend the money and fix it or we'll change XYZ and get it done um so you know a lot of the effort as I mentioned has been into that sort of building the culture getting people um to a place where they want to spend their time and energy invested in the company because they know that they're going to be listened to and they all have great ideas they've been doing this a boatload longer than I have or that than than Matt has um so getting feedback there um and then you know working on sort of the marketing side of things right we put a ton of effort over the past three months into uh into adding to our Google review base you know we've business was at I don't know 380 380 reviews and 4.6 Stars when we took it over we're at 520 something reviews and just ticked up to 4.7 Stars you know we we get almost exclusively five-star reviews so our customers really like us and we've seen that um that velocity of adding reviews has resulted in more cash calls and more customers calling us um and it's also become a source of Pride for the employees right we put in place some you know $50 cash bonus for whoever guesses the date when we hit 450 reviews 500 reviews 550 reviews um so you know it's got our dispatchers now who are the the interface to customers right when you call in you talk to our dispatch office you know they're they're talking about and checking the Google reviews on a daily basis and um you know it's really cool to see that to see everyone starting to take some some more pride in in the business itself and in our reputation in the industry and in the in the area that's a a really clever contest uh Matthew because it it um you're just incentivizing a trivial thing like anybody can say oh this date but it just it it trains everybody's attention on the reviews but indirectly sort of in a a selfish way like am i g to am I going to win the prize yeah and and so far we're not we're not doing Price Right rules so so far the the prize keeps ticking up because no one's hit the exact date we we just had someone miss it uh Miss 500 reviews by about six hours or so if a review came in you know six hours later it would have been the next day and they would have got won you know 100 bucks so everyone's focused down on 150 bucks for the next Target that's awesome cool um all right all right we still haven't really talked about Matt finding Matt um so so how did you let yeah let's talk about how you found Matt and then let's talk about the structure of the deal that you have with him perfect so um generally I went out and looked in two places um put a job post out on out on search funer to to find what was what I posted out there as an operations leader so you know think a COO or similar um and then put some job posts on LinkedIn as well um the candidate quality from LinkedIn was not particularly good and I think that's because kind of the listing something as a general manager ends up getting you a lot of kind of true general managers so people who have you know retail or Hospitality or Food Service GM experience which which is perfectly fine I think any of them would make suitable purely operations managers someone to go in and make sure the ship goes in a straight line but I was truly looking for someone who could do that and also be a strategic partner in the growth of the business because the intent is we grow it and we can put additional additional managers in needed as things expand in various ways um so that was LinkedIn on search funer ended up having let's call it six or so kind of really high quality candidates come across um they generally fit into two buckets um there was a bucket of of folks who were younger had predominantly PE experience maybe a little bit of operations experience um and were very clear that you know their their goal was kind of save money build capital gain experience and go out and launch their own search three four five years down the road which to me is perfectly fine especially I'm I'm happy to happy to help someone gain some experience um if I see someone successfully operate for 3 four five years I know where I potentially want to place them money in the future um the flip side to those candidates is I knew it would take a sort of heavier load of of mentoring and guidance from me for someone who did not have a sort of a deep managerial bench to to to come from um the other pool of candidates were uh more later career uh folks who had a variety of different corporate experience a lot of them had sort of executive experience at similar size companies let's call it$ 5 to $1 million in Revenue um weren't you know were on search funer I don't know why but you know weren't looking to go and run their own business or buy their own business but sort of liked being in the SNB world and liked running smbs um so went through an interview process at the end kind of narrowed it down to two or three really serious candidates we started talking numbers and things like that um and at the end of the day uh the decision I made and I think it it cost me a bit more cost the business a bit more money but I'm I'm totally okay with that was that kind of based on the depth of expertise and experience that Matt brought to the table from his time in the Navy his time in some SMB incubators over the past five six years um post Navy career um was sort of going to be the the right person um and that's that's where we landed SMB incubator yeah so he post post Navy he has been doing some Consulting work with a a handful of um handful of University SNB incubator program so think you know there's I I can't remember which school one of the University down in Florida has a um has a program to help I guess to help graduates who either are launching or have launched small businesses some technology related some not um but he's he sort of worked as a let's call it an entrepreneur in residence or consultant in residence for them um he's in a COO role at kind of a tech startup kind of a physical Logistics business um so had had a good bit of um I don't want to say real world cuz that sounds like a pejorative um of non Navy experience MH coupled with you know coupled with 20 plus years of of progressive um Progressive officer experience in the Navy so uh those two things worked really well together and then obviously key key thing also is just we had along really well right like you know this is someone who I'm entrusting to do quite a lot um and I'm spending a lot of time with uh and you know want to make sure that we uh we get along with one another and have the same goal in mind really interesting to hear um about the buckets of candidates that you got from search funer and in the second bucket that Matt Matt fell into so I guess there so there are some sort of mid career executive experience um executive level type people who have a cultural affinity for SMB so rather than getting a gig in corporate they want to working in small businesses or and not in startups and non in Silicon Valley exactly this is a cohort of of okay and and they're and they're but they're beyond general managers they're not people who ran the local whatever X exact right food service business okay interesting okay um can you tell us more so well just um punchline here Matt doesn't live in North Carolina or Matt's family doesn't live in North Carolina right so that's an interesting angle to this tell me more about that that is correct and that was um I'll say it was a big sticking point for me at first because I wasn't quite sure how that was going to work um but we spent a whole lot of time talking about it I'm assuming this is a byproduct of his Navy career and both being away from family and family moving around all over the place um but works really well for him so sort of generally how we're structuring it is you know he's he's here in North Carolina full-time has an apartment is living here um you know does a handful of long weekends either back home or or meeting his family elsewhere they're you know traveling for um you know some of his daughters uh uh sporting events things like that um once we hit kind of 6 months or so the place we've landed at is he'll probably end up taking sort of an extended you know long weekend maybe it's going to be a Thursday through Sunday or something um once a month and or twice a month and heading heading back home um and that works for them that works for them I mean I'm not I'm not one to judge or comment I spent I spent almost a decade in corporate traveling 50% of the time so it's it's not it's not that dissimilar I suppose and you and he his family is based where did you say uh in Colorado col so Colorado to North Carolina okay okay um and and just going back to the timing so did you have I guess I mean were you just kind of marching forward in in finding a mat and marching forward with the LOI process the offer process the due diligence of the business and just kind of hoping that they would that that that they would align that they would intersect on the timing uh I mean yeah I suppose hope is a word um you know I was what would you have done I mean hiring an operator that's great is it like like you got really lucky with Matt but it it could have been very likely that you just never had found a Matt I was confident enough that I could find the right person um and again maybe there's some naivity there like I I've I've hired a whole lot of people in my career I've hired a whole lot of Fairly senior leaders in my career um I know they're out there maybe I had a bit of a Feeling Just just um based on the search fund and SMB ecosystem that there is this pool of people out there who who want to work and run small businesses but but don't want to work in Tech and don't want to work for a startup um and sort of my own my own my own search for a for an operator out there proves that there are these pools of people out there unquestionably and you know I it was it was not hard to find a a reasonable enough pool of candidates that I could then get to pretty quickly a handful of really really solid ones and get pretty far down the process so um for for those who are maybe hesitant or don't think it's possible I think it's entirely possible there's there's a there's a ton of these people out there um I'd say even more so in that first bucket of I eventually want to start a search fund or buy my own business but I don't have the experience Capital whatever to begin with and I need you know I need five years of Runway to kind of build that up um so if that's in particular right especially um fast forward five or 10 years right if if if if I'm able to spend more time on something and maybe we're just running Investments that's absolutely the type of operator that I'd be happy to sort of invest more time in um again for the selfish reasons of gives me the ability to see what someone's doing firsthand gives me the gives me some time mentoring people which I I love doing I love being able to help others um and tells me where I could potentially invest money in the future as well fascinating and and um give us a little bit more Matthew on what you'd said about Matt where like what differentiated him from you know the the the many many GMS that are out there that have run you know a local restaurant or hotel or something what was that that that that extra that you were looking for and that Matt had yeah absolutely so um I would say it comes down to a couple things one the for this in particular and I think that applies to most bluecolor businesses I think the the Navy experience and in particular being a you know being an officer and and at the end of the end of his career running a boat um was tremendously exper uh tremendously helpful he's he's run large Crews of people he's operated in a you 247 environment which this business is um he's run sort of as I said the equivalent of bluecollar workforces before um and then equally as important he's done something outside of the Navy um so you know it was able to see that there's both the ability to create structure and rigor and create and follow a process while also being able to think strategically and I I've not personally had enough experience with kind of senior Military Officers to know whether this is the case across all all of them but he he definitely has an ability to to sort of think strategically and view the three to fiveyear plan um be able to provide super meaningful feedback and and and input into what that plan is and how it how it's going to change over time um so it was really a great balance of of deep operations experience um and the ability sort of a proven ability to to think strategically if Matt hadn't worked out you did find from you said there were six candidates that that were all kind of strongish from search funer you you do feel like if Matt hadn't worked out there were some second and third choices that were yeah were decent so more than decent yeah so going back to your confidence that there is a pool of people out there it's not just you got super lucky with Matt there's actually a pool of people out there who are who who are good candidates you don't have to strike at Rich you don't have to get Super Lucky 100% yeah there was um of the I don't know of the second place so to speak I think that I had um there was one that I would have had no qualms whatsoever about hiring and there were two that I would have happily hired knowing that it would have taken a greater investment of my time um especially in the first probably 6 to 12 months in kind of keeping on top of them helping them out would have involved you know much more spending time together after hours and coaching and guiding um whereas you know I mean I I just uh I was just on vacation for a week um um and didn't not the slightest bit concerned about anything like Matt has he's got more than everything handled and and rolling along fantastic Matthew okay um let can you before we move on from Matt of course the the aligning of incentives the the package the compensation package that you offered him the the Phantom Equity you Ed that phrase earlier um I assume some of this you you won't be able to to go into you know exactly what how many dollars you're paying him but if you can great tell us what you can um cuz this how you structure something like this will be very interesting to people yeah absolutely so I I there are um I won't do it here I have shared privately with others who have reached out to me um more specific details about compensation structure so I guess consider that an open invitation I'm happy to talk through it in more depth with others but sort of broadly um he's got an let's call it an above Market base comp for the job he does dayto day um uh there is a variable cash structure on top of that where we we did 30% on top of it um that's tied to a matrix of Revenue and eitaa growth and actually um full credit for that structure goes to goes to Michael girdley um so borrow borrowed from some of his some of his um writings on on how he structured that and then sort of off to the side we created like I said a sort of phantom Equity agreement um whole host of reasons why it's not true Equity or true you know truly making him a member of the operating company company um but he sort of got a functional equivalent to that so we're doing a four-year sort of a a ramped four-year vest so off the top of my head it's uh 10% 20% 30% then the remainder after year four um and what that basically entitles him to is is two things um both tied to a percent ownership or a behind the scenes percent ownership of the company um one is you know obviously if we if there's some sort of liquidity event right we get to a place where we eventually sell the business um he gets a portion of that of of growth in EV from purchase to disposition um and at a point in time where sort of where I decide that we're going to start taking distributions from the business which would really be if we're not at a place where we've sort of sold or substantially grown the business by you know year five year six that's probably about the time you start taking distributions instead of reinvesting everything um then he's entitled to sort of proportionate distributions of cash uh proportionate to ownership or quasi ownership um and you know we went back and forth on the specific details there but um overall I think everyone agreed it's a it's a really good mutually beneficial way of working towards how do we keep how do we keep someone well paid well compensated for what is a very difficult job now um and also incent towards the long-term growth with both of us knowing the end goal is to grow the business substantially over the next five plus years and either you know either sell it if the right thing comes along or keep it going in perpetuity as a much larger cash flow generating thing and so just on the dividends thing let's just say for sake of argument easy numbers you it cash flows out $100,000 per quarter so when you take out $100,000 in dividends you he will get let's say his Phantom Equity is 20% he'll get $20,000 in dividends and you'll get the 80 great once he's once he's fully invested so after the four or five years um and then going back to the the Enterprise Value so should you exit the business let's Assuming he's fully vested yep he so say say you know you you you bought the business for $4 million and you sell it for let's say $10 million so that's a $6 million profit or you know capital gain um and so he's fully vested let's say let's call his his Phantom Equity 20% so that would entitle him to 20% of 6 million that is correct okay and then and lastly Phantom Equity so what is the point of phantom Equity versus true Equity yeah so and and I am I not a Securities lawyer so don't quote me on any of this but what I what I've been told by by by my attorneys is the act of actually granting Equity over true equity in the business over time would require registering it as a security and and dealing with a whole bunch of additional both paperwork and legal complexity whereas sort of phantom Equity agreement is essentially a a a piece of paper on the side that is a a a contract between the company The Entity and the employee sating the terms of everything we just went through so what the vesting period is what that entitles them to obviously there are some taxable differences right it's no longer it would not be for him treated as capital gains it's pure cash payments so there's some tax disadvantages to to the employee for Phantom Equity versus true Equity but um makes things overall simpler and what about control does it have any any impact or control or not really because that that's all that's all written up in a contract anyway yeah so so um he he has no control um right I I suppose one could structure it such that you eventually phase in to some control or some real ownership over time but again not not a lawyer so don't uh don't quote me on that but either way like it's not because it's Phantom Equity that he does or does not have control because even if it were pure true Equity he also might not have control so really that's correct the okay all right really interesting Matthew I got to say you uh you seem like you've really learned a lot about this world I mean you started this so here we are in March you only started basically midy year last year so nine months ago I mean had you done are you just a quick study or had you had you were you already kind of conversant in this stuff what like I'm just curious how somebody like seems like such a natural at all this in such a little amount of short amount of time Define this stuff this stuff being the business side or the towing industry we haven't gotten even to that no no no we haven't even gotten to the towing industry U no no the the just the mechanics of buying small businesses and all the considerations yeah I mean I think part of it is part of it is I'm a quick study um part of it is I've got a fair bit of experience dealing with VC and PE backed businesses and dealing with sort of the investment side over there I've done some m&a work on on the corporate side of things so I think notionally I understand and have have direct experience with buying businesses and selling businesses um albeit at sort of the lower midm market and larger so kind of 5 million EIT plus um so a lot of those mechanics are similar they're kind of more complex on the larger side and on the smaller end um quite a bit of it is not uh there's more detail to it but it's actually not disimilar to to real estate investing once you get to a slightly larger scale so right buying a a single family home or a a two unit property is an investment is is pretty easy um but once you get to say 10 20 30 unit apartment buildings all of a sudden you do need to worry about like what is the transition process how do we get 20 or 30 leases from tenants moved over how do you introduce a property management company how do you take over over from you know potentially years of deferred maintenance how do you deal with the operational ins and outs of it um so I think there's a lot of similarities there but I I'm also a quick learner well one thing that uh actually I wanted to ask you how how you find this uh investing in small businesses different or similar to investing in real estate you just answered some of that um but you you it doesn't require the same EQ to to invest in property as it does these are all as we all know these are these businesses are comprised of people um so can you elaborate on any of the similarities or differences between your past life as a property investor and your now life as an SMB investor how it feels um different yeah I mean contrast excuse me um yeah I mean so so as right as you mentioned right businesses are people businesses and and um real estate is not like there are people involved you have tenants they are fundamentally your customers um and in our case like Class C up Class C housing is kind of um let's call it housing of Last Resort right tends to be affordable housing or or something close to it you kind of tend to have consistency of tenants who are there maybe not consistency of tenants throughout the life cycle right they might not stay long but there's always people ready to move in um so you know similar in in similar in some regards right in the due diligence lots of lots of procedures and and and process and check boxes to get through to make sure you got everything you need so that day one you or your property manager can kind of hit the ground running um coming into this which is a fairly Capital intensive business that's that's not dissimilar to real estate like there are you know you you always hear the Trope depreciation is a real expense depreciation is a real expense and you get it with buildings um you get it here with you know 30 trucks running running around North Carolina and parts of the Eastern Seaboard um so you know at the end of the day it's still real estate is still running a running a business um if you choose to take it and do it Prof do it professionally and I don't mean that in the sense of you know being a GP having LPS and so forth but if you if you want to treat it in a professional manner not just hey I own a house down the road and I rent it out um it's a real business let's close out uh we're we're we only got a few minutes left but I definitely want to spend some time on the towing business and to Industry itself so let's tell let let's start with where you something you already said which is yours East Coast Towing the name of the business yeah East Coast Towing is a is a L business for the industry so um expand upon that yeah absolutely so the towing industry as a whole is still very much Mom and Pop operated and there's not a ton of great data out there um but sort of from what I've seen anecdotally and some research that I've read uh what little little is out there you're you're a place where kind of 80ish per of the towing companies out there are true mom and pop operations like one person one tow truck maybe they have one or two employees and and that's kind of it um from there you start ratcheting up and you have kind of let's call it the next 15 to 18% being in the five to 10 trucks maybe five to 10 employee vicinity at that scale you're probably doing a million dollars a year in Revenue somewhere in that vicinity um economics as an owner still are not really good um and then you get kind of the few and far between that are that are bigger bigger defined as you know 20 or 30 or more trucks doing three to 5 to 10 plus million dollar in Revenue um again speaking sort of anecdotally in the rley area there are probably there probably 70 or 80 towing companies in the immediate vicinity here um there are only three including us that are sort of of the size we're at um and we're the biggest at least in terms of vehicles and people I can't obviously hard to get a handle on Revenue some of these businesses do other things one of our large competitors in town also um operates as a heavy truck mechanic they've got a you know they do a large diesel repair shop so they clearly have revenue from that that's different from from our streams of Revenue but but the this companies at this size in this industry are are relatively few and far between um and like one of the last sanity checks before closing on This was um just as it happened in mid November kind of the largest industry Conference was held just up in Baltimore so I took a trip up there U Matt flew out to to meet me there and you know we spent a couple of days in classes a few days wandering the trip show floor um and just talking to people and that that kind of cemented everything we had thought leading into it which is again highly fragmented industry a lot of mom and pop operators lot of um lack of professionalism and how companies are approaching how they run their business how they manage their Fleet how they market and sell and all that all that great stuff and what about the High capex I mean when you what you just described is like okay great ideal like why and so question is when you see a highly fragmented industry like why hasn't PE or Searchers why haven't they gone in there and why isn't there more activity yet and I suspect in in this business's case it's just because there's highcap X which is always a a flag to business buyers we don't we don't like that um any other things to not like about I mean tell us a little bit more about the character of the industry the growth I mean is it growing talk talk to me about it more some of these qualitative features yeah absolutely so I think at from an objective standpoint kind of the only thing to not like is it's intensive mhm um going beyond that the industry overall is growing at I think it's 3 to 4% haager or something like that like you got to think through fundamentally what drives people to need Vehicles towed and there's a few macro things that do that right one is the number of cars on the road which is going up number two is the age of cars on the road right older cars tend to break down more be less reliable so that drives more usage of towing services and by large especially as we you know potentially hit some economic headwinds here uh the age of cars on the road is going to go up as people keep Vehicles longer um another piece of the business which is really on the the heavy Dy Towing side is how much um how much truck Freight is moving along right cuz the same thing as a car right the those box trucks and tractor trailers and all that stuff they break down they need to be serviced they need to be towed and when they need to be towed often times it's a it's a fairly Big Ticket because you're you're taking the TR tractor and trailer to the destination it was going to letting them unload trailer unhook the trailer then bringing the tractor back to wherever it it belongs to be repaired um same thing with bus fleets and things like that so sort of the macro conditions it's it's growing along with the general economy right more people more cars set more cars on the road lead to more accidents that need to be cleaned up stuff stuff like that um and then uh you know what you also sort of face in the industry is whether um and we can we can spend some time with this but kind of who pays the bills and in a lot of cases um a lot of our bills get especially things like accident clean up um get paid for by insurance companies right they're not paid for by the by the actual Customer because they get an accident we tow the vehicle or we tow several Vehicles the insurance company eventually comes to claim it and pay the bill and either scrap the vehicle send it off to get repaired that sort of thing um so you know if I had to quantify probably probably a third of our revenue is paid for by an insurance company at the end of the day um about a third is a customer who pays cash cood right pays cash for us to do a service and about a third are are corporate customers who you know pay us by a on on payment terms um you know think uh think the subcontractors that work for Amazon or you you know grocery stores things like that delivering food um truck rental services right Ryder and Pensky and things like that so that reminds me the the other thing that maybe people wouldn't like about this business is that there's not recurring Revenue um but I assume some of these corporate account I mean I know from your business plan that some of these corporate accounts are contract um so they are there's a recurring nature to them talk to me about and yeah talk to me about that a little bit D dive into those those three buckets the insurance company the Cod the corporate sorry the talk kind of about the recurring or not nature of those where the money comes from and the nature of the money and which of these is the the opportunity for growth which of these buckets if not all yeah absolutely so so there is a there is a reoccurring nature to a lot of our Revenue if not recurring so so generally when you think about maybe take it up a level because I think it's helpful for people to know um the towing industry at the top level you can sort of break off into two categories um there are businesses that do what we do which is essentially Towing broken things and getting things from point A to point B and there are towing companies that do um what is euphemistically for do is parking management but that is non-consensual Towing private property impound um that is the trolling around parking lots finding cars that are parked in the wrong place Towing them and then the customer got to come and or the the unintentional customer has to come and pay the bill to get their car back um and generally those businesses also do repossession work right so going out and finding uh finding cars where the lean holder is trying to reclaim the vehicle um and usually what you find is that those two sides of the industry never cross with one another um different skill set for drivers different way of operating the business different financials um vastly different Insurance concerns uh both on workers comp and liability so generally those are very two different sides of the industry so we we focus on the the side where it's moving broken stuff or moving things from point A to point B um and the way we make our money again falls into a couple of different buckets um with have cash calls so that is customers who break down go and Google for towing company near me call us and we go out and we do the thing um mostly light duty Towing so passenger vehicles although do we do occasionally do some heavy duty cash business could be a a hot shot operator right a person who just owns one tractor and trailer that broke down and needs to go from A to B um another piece of the business is what are called rotation contracts so um you know we have several of those with local cities counties State Highway Patrol things like that where essentially if if you are a towing company in a geographic area and you meet a set of requirements around physical location insurability uh ability to respond in a particular in a specific amount of time you get on that rotation and that's essentially car accidents right so when a when a vehicle gets in an accident or has to be impounded um the police or the highway patrol call whoever is next on the rotation you show up you respond technically the police aren't your customer they're the End customer or really their insurance company is your customer so we take the vehicles we bring it back to our lot we we sit on them and wait uh and they disposition in one of two ways either it sits with us for long enough that we can put a lean on the vehicle in which case we sell it or it sits for us long enough and an insurance company or a customer finally comes to pay and get it released so you know there's a fair bit of money in that storage because storage has no no no incremental cost to us like we pay for our lots and our facilities so it doesn't cost us anything to have a vehicle sitting there um and then third are are those commercial accounts um and that is uh mostly on the medium and Heavy Duty Towing side of things so again that's truck fleets bus fleets things like that where we have contracts which generally are not a committed Revenue but rather here's the parameters by which we're going to operate how we're going to invoice you we'll offer you credit terms here's some preferred pricing that you get and when one of your things breaks down you call us so to the beginning cash calls purely oneoff in nature um I'm actually surprised that the of repeat customers we have maybe just with very unreliable cars but it's fundamentally that is not recurring in nature that is purely a marketing driven exercise um rotation work is I would call it reoccurring in that vehicles are not getting into fewer accidents in the areas that we are in and generally the bar is fairly High to get onto a police rotation so there's not risk of additional old companies starting up and getting on a rotation and therefore diluting our share of that pie so that is reoccurring in nature right cars get in accidents we go and get them um and then the commercial contracts are ones where we can absolutely again are reoccurring in nature most of these are mediumsized fleets right our customers have anywhere between 10 to you know hundreds or in the case of some of the national customers thousands of vehicles on the road um and you know if they're in our area and need service they call us and again those trucks break down on a highly regular basis um truck drivers quit and abandon their trucks wherever they happened to be I I learned that uh I had no idea that actually happened um so so it is reoccurring in nature um and that is one where it's not marketing right that's a sales or bizdev driven growth where we can go out and spend some time with with the fleet managers and operators of these companies to go and you know Drive additional Commercial Business and across those three the cash on delivery the the corporate contracts and the the the rotational with the police where how do they rank in terms of profitability and how do they rank in terms of growth opportunity yeah absolutely so um rotation stuff tends to be the most profitable and the reason for that is um twofold one uh heavy truck accidents so think tractor trailers overturning take a lot of work to clean up and require a lot of specialized equipment and we Bill fairly heavily for those um you know we we we deal with maybe one overturn tractor trailer a month and you can you can think the typical recovery bill for something like that is is going to be5 to $20,000 um Additionally the rotation stuff tends to be the most profitable because uh we ACR storage fees while the owner or the insurance company are figuring out how to disposition a vehicle right are they going to repair it are they going to Total it what have you um and also we tend to in our size business we have we have 30 to 40 Vehicles a month that we put that we've had long enough 120 something days to put a lean on and that we are then able to sell for scrap or Salvage um and that's all basically straight to the bottom line right we we pay our employees right at the beginning when the work gets done and then every day of storage that gets acred it just sort of drops straight down uh straight down to the bottom line um so that's our most profitable um following behind that would be uh the commercial stuff because it is mostly medium Heavy Duty Towing again highly specialized equipment that's where we have uh CDL Drivers driving big trucks um and we bill proportionately for that right we charge substantially more it costs much more to tow a tractor trailer than it does to tow a a Honda Civic um and then cash calls are kind of the least profitable but the um the easiest to control volume and in the near term only because they're they're marketing driven right so we've seen um tremendous growth even in the past few months in our cash call business simply by putting a focus on revamping a website putting a real real heavy focus on driving POS positive Google reviews and sort of leading ourselves to top of search and how sophisticated are the other um cash call towing companies in terms of their Google positioning I mean is it pretty easy out there out there to jump to the top it is yeah I mean that essentially you can you can go and take a look at at websites for towing companies in any given area and you can see that the majority of them have not been updated in several years to to to many years um the majority but I imagine the Searcher isn't even clicking on to the they're probably just all right and and I'm far from an expert when it comes to SEO but but from everything I've understood keeping websites refresh having relevant meaningful content actually having positive reviews and a velocity of reviews that is adding more reviews over time all starts to contribute to search uh uh position and ranking um and what we're seeing as we as we start to see where people are clicking and we don't quite have the ability to correlate website to call but um we are seeing that right A lot of people are or now at least to find us um we get more views if you will on our profile in Google maps on our business profile then we do people actually searching for us and clicking on the website so I don't know if that's Google directly in there people searching in maps versus searching on google.com um but it's it's so far right knock on wood um so far it's relatively easy to move the needle on that front while we then spend time on the more sort of intensive efforts of going and selling more commercial customers because rotations we can't grow like they just they are what they are the only way we grow rotation business would be we have to open up additional facilities and be eligible for additional rotations in other geographies be they different cities different counties Etc fantastic and just to close us out on the towing business what about uh labor and finding drivers and the challenges there and what what what it's been like and what you predict it's going to be like for the next year or two yeah absolutely so one of the things we heard leading into it and at the at the tow show in Baltimore was sort of nothing Doom and Gloom about finding employees um everyone's having a nightmare of a time finding drivers and we didn't think it could be that hard um again maybe there's some naivity on display there but you know after looking at how most of these companies are hiring which is maybe a post on their Facebook page once a month saying hey we're hiring for drivers and dispatchers maybe it's just relying on walk-in traffic like people who walk in the door and want to complete a job application and we get a couple of those a week generally um but you know there there's a lot of there's a lot to be done about bringing sort of modern hiring practices to this and you know in our case we're going out and trying to identify you know how do we go and find drivers who are happily or maybe not so happily employed elsewhere but are already in the industry and how do we convince them to come over and work um work for us you know generally it's a it's a good job it requires a fair bit of skill we we have a training program to bring new people in the door you know we without getting into too much detail on sort of how the industry pays drivers you know our drivers for the light duty side of things that is guys that don't have a CDL guys and and gals we have a few women we've hired um our non-cdl drivers make anywhere between you know 45,000 and about $80,000 a year um our CDL drivers make anywhere from kind of 70,000 a year up to you know our highest earners make1 110 $120,000 a year so it's a it's a really good job that it especially at the higher end and at the on the CDL side requires a ton of EXP experience and a deep level of technical skill and expertise um people are out there you know I I we have again knock on wood we've had no problem bringing on four or five drivers in the past few months as well as um sending you know we we just had one that we sent to go get his CDL and just passed and he's now driving a heavy truck for us um so the people are out there I don't think it's as as um as Doom and Gloom as others would indicate um going back to the kind of the everything curve hiring and and and and learning development is just one of kind of the million areas that it seems like a lot of companies are just exceedingly far behind here that's encouraging for Searchers out there I wonder I wonder if that extends to other Industries I'm sure it does it does yeah Matthew this has been great is there anything that we didn't talk about that we should have I didn't ask you um hm your business plan so you you had sent me the business plan you put together for the bank as Searchers um often need to um I think yours was a little bit more comprehensive than than the norm it's probably a 20 Page document yeah 20 25 page per document um and it's great I mean it was really I think it's a good template for how to think about doing a business plan as a Searcher but it also is just really interesting if you want to do a deep dive into the towing business so um so you said people could reach out to you for that if or actually that I could that you might have to redact some of the sensitive stuff but that that I could then link to uh Ed version of it um yeah happy to share that great so we'll we'll get that in the show notes um anything else I mean I think the one the one question which I think every employee asked at the beginning and you haven't yet is kind of is why the towing industry like this is kind anall thing yeah yeah so the real quick answer and and and I I it is the truth is um it's not going anywhere like at the end of the day the thesis is at its base extraordinarily simple right there are more cars on the road there is more cargo being transported on the road things are not getting more reliable I had a Tesla for a couple of years I'm probably going to get Flack for this but full self-driving is not it that's not the future that's going to keep people from not having accidents and vehicles not breaking down at least not for the next couple of decades um so the business is not going anywhere um the cost structure is a really interesting one we pay drivers on commissions so we've got a real a real nice lock between revenue we gener and how much we pay in in in person power for most of our employees um the downside of course is is capex heavy but um I think the combination of the business isn't going anywhere and how nent the industry is on that curve of professionalizing um makes it feel a lot like and I've I've sanity checked this with a handful of folks who I I know who have you know bought HVAC and plumbing businesses say 5 to 10 years ago um it sure seems like the way this industry feels now now is much like the HVAC business did say 10 years ago so I think there's a lot of room to run over the next bunch of years in in in bringing a level of professionalism to how you operate and how you how you market and sell and grow these businesses um and you know they're they're they're hyper local in nature like our heavy stuff goes out to multiple States but fundamentally we're we're dealing with North Carolina and really the eastern half of North Carolina and there's a ton of room to grow and you didn't set out to find a towing business you had those that you were not interested in and then with with that in mind you went to Brokers and bis byell and then looked at whatever struck your fancy and UPC came this towing company and then you did a deep yeah I saw this and kind of read through the S and went wow this is not an industry I'd given any consideration to but it's actually really interesting and let's sit down and have a talk with the seller spent a couple hours together the first time and started to go deeper and deeper and deeper down the rabbit hole and uh and here we are here you are well um you talk about a rabbit hole but still it's been you went down that rabbit hole quickly and executed on it because again N9 months ago you were wondering what you were going to do with your money and and here you sit and here you sit owning a uh uh one of and I I don't think you said this explicitly but it's the size of your of East Coast Towing puts it in the top 2% of Towing businesses in the country from what I can tell like there's no hu there's no true source of data there but sort of anecdotally from what I can tell we are we are one of the larger businesses in general um I know I've spoken to operators and know there are companies out there doing say 10 to20 million in Revenue in a handful of other parts of the country um but you know there is not to my knowledge and I'm again I'm happy to be corrected here I know there was one in the past that was a a prior PE rollup that went bankrupt and and fell apart um of you know 50 to $100 million rollup vehicle um but there's none out there that I'm aware of and and like I said again a bit more than anecdotally but most are two or three trucks which kind of equates to3 $400,000 Revenue somewhere in that vicinity mhm and at this Baltimore show nobody's talking about people trying to buy their businesses CU you you'll hear anecdotally from people who at Plumbing business uh at Plumbing industry conferences and HVAC industry conferences that you know they are very these owners these retiring owners are very aware of the Searcher in phenomenon and certainly private Equity because their door is being knocked on constantly and so they talk about it was there any of that it does no there there was not there were um there were a handful of PE analysts that we picked out and were able to talk to that are their firms you know from discussions we had their firms are kind of just starting to put a thesis together um I've personally spoken to again a handful of PE firms that I know are like looking at the industry from an early days standpoint but it's definitely not something that any current owner especially those in the industry a long time sort of view out there as a thing that's happening MH cool well further evidence that yeah it's it's uh nent for for interest from Outsiders exactly so listen listen to that audience very cool Matthew what how do you prefer people reach out to you because I I assume you you will get some Outreach from this do you prefer LinkedIn Twitter email yeah I mean easiest is going to be uh easiest is going to be email uh or or Twitter I I will apologize I'm not super on top of my DMs but I'll I'll I'll pay more attention following this um so you know I you already give information here do you want to post it I'm not sure how you want yeah I I'll post it on in the show notes Here email email and Twitter both work well and you like I said always happy happy to happy to chat and see where I can help people you know if you're if you're looking at the towing industry in particular happy to share what I've been able to learn over the past nine months and if you just want to talk about you know placing an operator again happy to happy to share what I've learned I I I don't think I'm an expert but um have managed have managed well so far yeah yeah well it's it's a fascinating topic and and a really hopeful one because um there's so much Leverage to be gained if if you can crack that nut Matthew thanks so much for the time and in your transparency what a fascinating story well I appreciate it it's been a lot of fun 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