Peter debaptiste welcome to acquiring minds thanks for having me will excited to be here Peter you bought a plumbing business in South Florida your home let's start off with some background on you Peter what was the path that led to you buying a plumbing business so I'm happy to get into that and excited to be here this this podcast really helped me in my search so I used to uh I used to run a lot and I would listen to back-to-back episodes when it first came out so fantastic excited to be here cool really cool all right background so I grew up in South Florida um born and raised down here lived some other places over the years uh started my career in banking as a uh as a lower Middle Market lender um so I was making loans from 1 to 15 million to um you know mostly family-owned businesses down here um not SBA but kind of similar size type stuff um um to the search world and uh after that I worked for a company called Delivery Dudes for seven years uh we were kind of a high-end Uber Eats uh South Florida based um and I started on the finance side of that business uh ended up as president kind of running the corporate team so we grew the business from you know probably 20 something employees to 125 uh had a thousand driver contractors um you know like Uber drivers or independent contractors um learned a lot of lessons we implemented EOS we you know had a a ton of challenges growing that business and you know fighting off competition with a thousand times our budget uh ultimately we um we cleaned the business up we made it profitable we really transition from a high growth cash burning business to a kind of more stable profitable business and we exited in 2021 uh to a small publicly traded competitor and uh after that kind of began my search great and when you said you duked it out with competitors that had thou a thousand times the budget we're talking Uber and I guess Lyft does Lyft even do delivery is L even around I was never a lift user of course they are my wife us yeah I don't think they got into the food delivery space so we were up yeah Uber GrubHub um oh of course yeah the other a lot of dollars we were kind of the smaller you know we were all South Florida um you know kind of the small guys we were early entrance to the market um but never raised enough capital and you know did great in the beginning and then when the when the big wave of competitors came in really had to fight him off and the growth you know that was once free or cheap uh kind of fell away way so you know we found ourselves in a position of you know burning millions of dollars a year with not a lot in the bank and basically transitioned that from you know losing money to making money um we had a pseudo franchise business uh not a pseudo franchise business we had a franchise business that was from the early days of the business and really held us back from exiting so we had to ultimately go and acquire back a bunch of these franchise markets um so kind got a taste of you know transaction stuff from that um we rolled in all these old franchises kind of packaged up the business so it was finally in a place to you know to be sellable um and we exited the the numbers public it was it was 23 million so it was a nice exit um you know my outcome wasn't life-changing it was more of a you know transaction bonus size outcome um but allowed me to you know pursue the the self-funded search Journey thank you for for that for that additional color good for you guys for staring down Uber and like you said GrubHub and um door Dash those are some fearsome competitors I mean I mean I feel like there's no better example of huge quantities of venture capital leading to bloodbath than in the restaurant delivery space yeah it was uh it was a wild ride so we were we were definitely the little guys we were the inexperienced guys you know we had a young a young team and we kind of slogged our way through it and came out okay at the other end really really cool okay well you have this exit and or you're you you and the team exit having kind kind of survived this this tribulation with these really fearsome competitors what you do next it could have been any number of things Peter so searching for a small business to buy was not OB obvious connect the dots for us so I uh probably a year before we exited um I had a close friend who's on the podcast shortly before me here um Morgan and he moved back from California um with his soon Tobe wife and you know was kind of settling down here and he introduced me to this whole concept of search fund he was interested in a tradition search and had kind of gotten you know a few months of networking and exploring ahead of of me and he introduced me to this concept and I kind of said man that's that sounds awesome that sounds like a perfect fit for my background with some lending exper you know I didn't neither of us were kind of traditional NBA type Searchers but you know I had the I had the lending background I had some operating experience um and I had a pretty good Network down here and so he and I ended up kind of uh pursuing a partnered search this was probably 2020 and uh we started exploring a partnered search and we were kind of getting along the ways I have a feeling we would have ended up doing self-funded anyway um because we were both kind of geographically focused down here so I don't know if we ever would have executed on that partner search but right around that time um as we were getting more serious covid came around Co obviously had a huge impact on the food delivery space um so Delivery Dudes all of the sudden went from a very challenging um Journey where you know the exit prospects were limited we had had a a failed exit oper or failed exit effort a couple years before um and all of a sudden we said well this you know business is picking up this is our opportunity and so I you know met with him and I said listen I got to I got to stick you know stick with this see this through so I basically spent another year at Delivery Dudes tidying everything up running the exit process he went and searched he acquired a home health care business down here and I got a you know kind of got to tag along and learn about his process and see it from the outside and all the while I was you know I kind of knew that was my next chapter um so once we sold the business I think that was I don't know March of 21 something like that um I was working for the company that acquired us for 6 months and you know kind of doing a little networking drumming up a little bit of deal flow knowing that hey at some point I'm going to break away in search I didn't know if it was coming soon or not and uh and you know thankfully I had that head start because the company that bought us fired all the founders after six months and there was uh there was my kick in the rear to go start searching and just so we understand so so Morgan mcau is is the friend and he will have aired a few weeks prior to when people are listening to this and Morgan introduces you to the concept of search and you just just I always I'm always curious even though it's it's almost always the same answer I'm always curious to ask what attracts people to it what did you like so much about it especially given that you were in a zero to1 startup you hadn't been one of the founders but you were there you got to see a you know pure 0 to1 startup up close and that you know that it that it could be successful so you so if anything I would imagine your takeaway from that experience was mostly positive about working in pure startups so anyway what what what do you how do you respond uh I think for me it's a little bit of you know personality fit um I was in that business I was the president um next to you know the what I would call like the Visionary CEO so I was always more of the execution guy you know I was the day-to-day so I you know I never felt like I was going to come up with some brilliant idea or go build a software business from scratch um I I was attracted to the idea of taking over something existing I liked boring businesses that was my whole banking career um you know so I just it it was attractive from I think the skipping the zero to one part was attractive the financial opportunity is attractive the post search opportunities to do it again or you know become an investor or what you kind of have your you know your options open to you um so I think it it's just a I don't know it felt it felt like the right thing to do say more about the fact that you liked quote boring businesses given your exposure to them as a lender into the SMB ecosystem and maybe tell us a little bit more about about that you said it wasn't SBA but it was similar although not for acquisition more for I guess growth Equity or capex just talk to us about that experience and how it have formed your attraction to boring businesses yeah so I uh I was a I was a lower Middle Market lender for a bank called coer they're uh they're they're a big bank but they're not necessarily a household name um and we focus on mostly familyowned businesses we did some you know kind of private Equity backed leverage buyout type deals but I would say the the bulk of our Client List was kind of um established boring Mom and Pops a lot of them were're on second third generation um a lot of Manufacturers distribution companies not really search type companies um you know they were companies that needed Capital right so by definition they don't make enough money to pay off their debt and they are in Perpetual need of borrowing money from a bank if they're a banking client so kind of lousy search candidates but I always found the coolest part was just seeing the inner workings of all these funky businesses you know I had like a a drill bit manufacturer I had a you know a frozen shrimp importer I had uh the guy who sold the you know in Walgreens around the holidays where they would sell DVDs for like $3.99 each like I had that guy as a client right so there's it's just like all these cool businesses and I was always just it was just so interesting like there's all these different ways to make money um I felt that most of these operators were you know kind of like my peers if you will like they were people in the community that didn't you know it wasn't like you're meeting uh Jeff Bezos or something right it's just like the guy who sells DVDs and Walgreens and the guy makes a boatload of money and has a good lifestyle and I always just found it just seemed approachable um and the uh seeing businesses transition or fail to transition from generation to generation I just kind of had this gut feel and it wasn't like I had this Grand Vision from you know when I was fresh out of college working for the bank for four years but I just noticed that like a lot of businesses the second generation wasn't there or wasn't interested or whatever and the general theme was that these aging owners had not really great exit paths and it just it just kind of sat with me as something that kind of stuck in the back of my head as as an opportunity I just didn't know I didn't really understand what it meant yeah or what the opportunity was yes so that's so that that a lot of elements of that are not search uh but a lot are I mean that that kind of falling in love with all of the the weird and wonderful corners of the economy where these where these businesses hide and Thrive is definitely a feature of of search um and and and the other stuff you said the lack of succession and the approachability of it all um so so you are really primed you were really primed to fall in love with search when when Morgan Morgan brought it to you um and just for our kind of General business edification the the something that you said that I I feel like I can learn from about you were lending into businesses manufacturers uh distribution companies that needed loans to keep going can you just say more about that so we can learn what that means yeah so and so when I started searching I pulled out my old files and I started going oh well what about all these businesses that I know you know are these good acquisition opportunities and I pulled out all my old loan files um which I probably shouldn't have but I started I started looking around and what I realized was just by simple virtue of the fact that these businesses were customers of the bank for 20 years they were kind of not great businesses these manufacturers and Distributors some of them are good businesses some of them make money but a lot of them were like they were sitting on a $5 million line of credit that they were never able to pay off and they made a couple hundred grand a year after paying off all this stuff and just never paid off the debt and so some we had plenty of businesses that really you know printed money and did well but for the most part you know when I looked back at oh maybe I should go after some of you know some of these guys I know um from the old banking days I I realized they were asset heavy um you know slim margin and carried a lot of debt so it was just kind of like not really your search Target stuff um you know manufacturing distribution as a as a general thing right you have um in manufacturing you have a ton of equipment um and a distribution you have a ton of inventory a ton of AR and slim margins right so just by nature of that kind of like a couple of things that you don't like in search yeah and this concept of them carrying debt so what they would do is they would just refinance the debt when it came due kind of a Perpetual refinancing cycle I mean if you're carrying a huge debt doesn't it eventually gobble you up or no can you just kind of refinance in perpetuity as long as you're making interest payments well there yeah there's two there's two major kinds of debt right there's a there's a Term Loan that you pay off which is you you know kind of like your acquisition loan um that we're familiar with and then there's like a working capital line of credit so yeah a lot of these businesses had you know working capital lines of credit then there's nothing wrong with it but you can have that in perpetuity it's backed by collateral it's used to finance your you know your AR and inventory as you're waiting to get paid by customers but that that can sit there forever and a lot of them had you know had other loans that would just kind of refy or they would buy something new and they would need money for it so yeah gotcha gotcha great thank you for that Peter that's great this is uh great prep so so so Delivery Dudes exits you uh are have been watching Morgan for the last year go through his search Journey you now have the time to turn your own sites on it what does your search look like so my search was probably so I think everybody got fired in September 21 um it was like three days before the birth of my child which was just a real a real nice real nice thing um and so I had kind of like I said I had a little bit of deal flow I had kind of done some networking um but basically you know had my kid and kind of continued the uh you know continued keeping that spin going you know once you get the deal flow going you've really got to just put in a certain amount of effort every day and every week to keep it going so you know didn't really take any breaks um I you know I wasn't like cold call searching right so I didn't I didn't need to work crazy hours but you know I had my kid and just did your kind of traditional self-funded search I started off with a pretty big range you know I kind of said I'm looking for you know two to 20 million of Enterprise Value and you know industry agnostic as long as it's in South Florida or can be run from South Florida so I kind of set a wide range of of size and I set a wide range of Industry um I started looking at some e-commerce businesses some you know some stuff that you know was a little bit less search typical stuff and ultimately kind of after the first few months kind of wound my way back into traditional self-funded land which is more of like the you know two to seven million of Enterprise Value and you know uh industry lot of trade businesses lot of I don't know so kind of talked myself out of e-commerce in short and software businesses and stuff like that um ended up back in traditional self-funded search land um the economics when you go larger just seemed to kind of not as attractive um it kind of felt like the outcome is maximized when you have like a you know a business that maxes out the SBA loan is when your Peak economics are and then if you buy bigger and bigger and bigger your economics don't really go up as much so I kind of just I kind of crossed off the higher end of my range crossed off some of the industries and really started getting a little bit narrower into what I would call like guys and trucks businesses uh where kind like my sweet spot Target um Peter let me stop you there because I have a couple important follow-ups this is great first of all so so your initial range was was broad 2 to 20 industry you know looking a lot of different Industries but that 20 number jumps out at me $20 million of Enterprise Value uh you were even contemplating that so I guess and so as listeners will know the you know SBA loan maxes out at 5 million um and as you just put it like so typical range for self-funded Searcher is going to be 2 to 7 million in Enterprise Value you were you were open to buying something three times that size that's that's that's pretty big uh for us and um so obviously you would have had you would have raised Equity a considerable amount of equity from how would you pull that off how did you even Envision pulling that off even though you didn't go that path just like what how does somebody doing this for the first time even contemplate that well there I mean there is a a it's not quite as well trodden as the SBA path but there's a very well troden path of acquiring businesses in that size it's a little bit of a like a a valley where there's less uh less Capital opportunity than the smaller or the bigger size of that but there's there's plenty of uh people who lend in that space right so like you know when we did Leverage buyouts at the bank like we were in in that in that zone um so I just you know I did I did a little bit of networking through the search community and just kind of had enough I felt like I had enough Network where if I found a good deal that was 20 million I would have been able to pull it off um you know the financing looks different you got to raise you know you got to raise um either Traditional Bank debt you know with like a Mez debt or you find like uh there's some funds that do blend with everything um and then you know you probably on a little bit more institutional size uh check for Equity so that basically the nature of putting together a deal like that I just what I saw was that it it shrank your your ownership shrank your control and didn't seem like it was much better of an outcome well that was the other profound thing I wanted you to elaborate on so please do I mean and let me just um frame in in for the audience I mean I haven't stress tested this or modeled this myself but what you said a few minutes ago that looking at it purely kind of for the financial outcome for the Searcher that you know the looking as a self-funded Searcher of $2 to7 million Enterprise Value using an SBA loan has if you go up and you find a bigger B business to take down you know the terms will change the equity the whole cap tap will change you'll have less Equity certainly and the final outcome but when you when it all when the story is over and you've let's say exited the business the final outcome to you is not necessarily not necessarily that much more compelling if at all than just buying the smaller business to begin with I think that's a really important Insight because I think we just assume that the bigger the business you buy the more likely you'll have a bigger outcome you Searcher so that I just wanted to to double click on that and you were about to readdress it so please do what what more can you say to it well so that was kind of what what I had learned by talking to people what I had learned and seen in my banking days and what I had been able to model you've had I think uh what's the guy is it Robert Graham that does SG yeah the guy who's like the absolute self-funded search um yeah what hold he's he's holding the torch and and Charing trying to make selfed search the the dominant form of search which I love um but he's you know he's had a lot of a lot of stories of outcomes where Searchers are acquiring $20 million deals and owning 80% of the business um I'm sure those outcomes are possible I just found that the deal quantity one was really Slim I was Geographic focused South Florida so you know very slim population of deals of that size um the multiples and the process was really competitive so mhm you know it's just it's it's a harder thing right it's the smaller a lot of guys go for Ultra small deals and they'll say oh just go buy something that does like 300,000 of SD get in the game and you can have really high confidence that you'll be able to succeed um or that you'll be able to survive because you know you're paying a tiny multiple and you're in the dayto day and you can you can have confidence that you're not going to screw it up versus if you're buying something that's like a $20 million business you're paying a high multiple you're leveraged to the gills you got Bank covenants you got you know multiple institutional equity and debt partners that are going to be breathing down your neck if you screw something up um and you've got a management challenge that you know I felt like I was um you know had a had a little bit of experience that I could that I could handle something of that scale um but I think the management challenges you know are real if you if you don't have a management background you try to go buy a business with you know 00 employees in it um you know it's it's a different it's a different beast and when you're starting at a high multiple you have to grow in order to hit your outcomes versus if you buy something a little bit smaller all you have to do is maintain yeah yeah another fantastic point you kind of narrow your aperture after a while let go of entertaining Ecom let go of looking being open to a really big deal like the 20 million we're talking about it kind of Narrows to I think you said two to seven million pick us up from there so from there I uh I got under Loi on a mulch blowing business um mulch blowing mulch blowing um how is that how is that service if anyone's looking for like a really good Niche roll up play or even just I don't even know if you need to roll it up but it's not a business that was going to you know be a a huge business but man it was it was a good business um this I'm glad I didn't close it um learned some you know some stuff about the seller close to the finish line that I didn't really love um just some character issues got exposed but anyway I was under Loi in this muling business for 3 months took it almost to the Finish Line had all the dead deal costs that you can imagine and um you know the guy just went just went ghost at the end we had a couple bumps in the road and I think honestly what happened is he had a lot of debt on the business he had um he had large bonuses promised to his employees at Exit he had the broker fees and he was going to have to pay taxes and and he had to like recoup you know he had to pay taxes on all his assets that he had already written off so I think he did the homework at the end and and said wait a minute why would I sell for whatever if I'm making this much a year by the time I pay off my taxes my debt my broker my employee bonuses he was going to earn like what he makes in a year and a half half maybe so I I think that's what happened but there was some other stuff along the way we don't really need to get into that side of it but the business was you know it's a really interesting business I would encourage Searchers to if you live in a community where there is that stuff um you know like Florida California's got plenty I talked to some mulch blowing companies in California for diligence um it's a cool business so you basically have these large trucks they're like the size of garbage trucks um they're expensive I think they're like 3400 Grand and you load up this truck filled with Mulch and then you have like a you know like a 4in hose coming off the back of it and you blast in mulch at HOAs at golf courses for playgrounds at schools and this business um had a lot of contractual Revenue so municipalities have all these playgrounds all these parks and properties to maintain so they have to blow and mulch every year um schools do as well and so you have a lot of recurring Revenue a lot of contractual revenue and little bit of barrier to entry right it's hard for a little guy to buy a $400,000 truck and it's like if you're it's a small line item for everybody so if you're running a school like when are you going to analyze the cost of your playground mulch never so it was just a really it was a it was a cool business for those reasons yeah that sounds great and Peter why is I when I think of mulch not having a green thumb barely ever even pushing a lawnmower in my life uh not I'm not proud to say but I think of spreading mulch that's the verb I usually attached to mulch not blowing mulch so I guess when you're when you have much more square footage you need to cover it you you you the volume needs to be bigger you got to use a truck you you don't just have the landscaper spread mulch over the playground yeah exactly so picture a playground's a good example but a country club is probably a better example think about how much mulch is around a country club and if you're going to go and unpack bags of mulch and have you know a team of guys out there with wheelbarrows and rakes if you do it with one of these big trucks it just has this hose that's blowing out you know yeah air powerered mulch and you just spray it and uh you know so there's a there's a higher equipment cost but the install cost is much lower so it was a cool business there's you know there were like three companies doing it in all of South Florida and all three of the guys were like 68 years old and so I was just it it was a it was a cool one um not mulch blowing everybody yeah mulch blowing get into it you're welcome for the idea okay so that doesn't work out at the last minute in retrospect you're glad it didn't then what y so that one doesn't work out um I always like when people give like real data points here so I took that one almost to the Finish Line we were probably um I don't know we were like about to sign the APA and probably would have closed two weeks after that um my dead deal cost were probably 35,000 so for anyone who's looking for a reference point yeah that's take a deal close to the Finish Line that's uh I think that's in a normal range of where you end up um that's that's real pain yeah so that hurt so you're 35,000 in 35,000 in and by the way so are you feeling discouraged what's what's your heads space like $35,000 poorer um yeah it's not great you know first kid we had moved into and expensive house you know a year before and you know down to you know wife's on maternity leave which is only partially paid and you know so the line is uh the line is pointed down right the airplane is flying in the sky and there are trees at the bottom and you're flying down towards the trees so you really you know there's an end in sight and you just made it a lot sooner you know by by erasing that 35 Grand so so that was that was aough tough one but but no I you know I I knew it was a possibility I knew it was more than a possibility I knew it was likely um but I think the more likely outcome is you kill them early in diligence when your deal costs are like 5 10 15 grand um not so close to the end so that hurt well and just to to say another little tip to the audience there which is may be obvious but um also push out once you got a A a deal you're working on push out as long as you can spending money and assembling that deal team there's kind of a sweet spot because obviously a lot of stuff on the deal you you're going to need third party service providers to do for you but kind of go as long as you can without starting to spend that money um and then if the deal looks bad cut it as soon as you can so that you're not continuing to spend money so yep exactly and I did all the right things on that too I did exactly what you described but it just died at the end yeah yeah thank you for sharing the number carry on uh all right so mulch blowing deal died I was still in the market but I wasn't you know full bore searching um you know everybody says you got to keep your deal flow alive you got to keep your deal flow alive but you know you say that after spending 75 days of working on getting a deal across the Finish Line you start to see the end and you just you know your first weeks under you're still you're still druming up deal deal flow but the closer and closer you get you're like ah well you know this one seems pretty likely sure so the deal flow slowed down a little bit um but you know picks back up there's kind of like a probably like a two week or a month lag from when you start to pick it back up to when you really get stuff going um looked at a bunch of other stuff and ended up on a call with a broker with a fencing company and you you know he was kind of playing the quarterback and pushing me away and then I think I impressed him on the call and afterwards he goes oh well I you know I got this Plumbing business coming up you know but you're really you know you're really not going to be a fit for it um you know for X Y and Z reasons you don't have your license and blah blah blah and I said come on let me let me take a look so got to got to take a look uh took the seller out to dinner um after a phone call or two you know after we had our kind of management call um took the guy out to dinner hit it off um and you know and just to kind of tie it back to like the whole Searcher pitch like what I said to him is what I said to a lot of people is it's like listen like the reason I want to do this is because I want I want the lifestyle that you had for your family like I took this guy out to dinner he's talking about how he sent his kids to a good school and you know got to take his boat to the Bahamas which is you know a Florida thing and I was like listen like that's that's my goal like I'm looking for a business that will allow me to send my kids to a good school and teach them how to go fishing in the Bahamas and that I think is you know maybe that was you know the piece that the uh you know you're not hearing from the the Stanford NBA who's moving out to akan Ohio to go buy Bob's HVAC shop um but that was real and for that reason I think the seller really liked me um you know so I made an offer I was you know I think I was I was tied for highest um you know so I didn't it's not like I got him to take 10% less money for me but I also had some structure on it um which we can we can talk about so I think I got away with some extra structure if you will because I was me um I didn't find out till after closing my first day with him he pulled up his Outlook he goes you see all these folders on my inbox go yeah and he pulls up there's like 22 folders goes every one of these people made me an offer wow so that you know that was a it was you know it was a competitive competitive deal I didn't even hear about how competitive it was um but I think a lot of them were like the uh you know a lot of them were the people who looked at the Sim and fired off an II and he basically said listen you're the only one who took me to dinner you're the only one who wasn't going to fire all my employees you're the only one who I felt like would keep my kids working in the business you know and and you know we had the relationship so that was it's a big thing the whole the whole pitch that comes with search I think is real um you know you got to be able to connect with the seller and uh and that that happened and and Peter just the thing that you said to him about what your vision was for the lifestyle that buying his business could afford you what do you think resonated why why did that resonate so much with him as opposed to as you said like a fancy MBA coming in and saying something different I don't know I think everybody I don't know nobody wants to sell to a guy that they don't know right you if you think about somebody who's from your community who shares your hobbies who you know it's it's somebody who's in your network like relatability yeah you know I don't I don't know if we knew the same people or not but like yeah it's somebody in your network who you can trust because they're in your community and I think that's just a big piece of it right other the other people were you know private Equity backed rollups from out of state or I think there were a couple local companies but they were all going to basically press delete on his office and uh and so that you know that message played out and and yeah yeah the the the it's kind of it's the trust of somebody who's local in the community so there's there's kind of a trust element there or implied trust element there and also a continuity element you you you he saw in you a guy who's going to carry his business forward because this this guy Peter has said to him that like what you have sir is what I want yeah exactly and that was I mean that was part of like part of the diligence process always looking at a business it was always a really quick um yes or no for me to just figure out what kind of life does the seller live like does the guy live in a nice house like does the guy have a cool boat does the guy have a bunch of debt and I looked at some businesses that were on paper like making all this money and you look up the owner and the owner's got like you know Tiny net worth he's got like a car loan a boat loan loan a mortgage and you know I'm like I'm like how's this guy making you know whatever in earnings and doesn't have anything so anyway that was that was like a nice little diligence piece is that this guy had you know kids went to private school paid the kids college had a you know Midnight Express boat had a second condo in the you know in North Carolina just you know so you get some of those data points and you go okay whatever the numbers are you know there's something here um and there's a lot of deals where the numbers show one thing and the sell you know not really not really doing so hot I love that pet I mean I've I've had a guest or two say that but it's not something that comes up often at all and it's such a good it is such a good kind of proxy to examine because fundamentally the lifestyle of the seller owner founder is the final is kind of the final final final indicator of how healthy this business is uh and you know take kind of stripping away all the financials and and whatever the numbers say and the tax returns and kind of that morass that we all try to untangle like net it all out what what kind of lifestyle has this has this founder been able to afford him or herself with with this business so it's a great it's a great kind of qualitative uh um assessment I think so thank you for mentioning so tell us so the name of the business is uh Joe Cole Plumbing and it's Joe himself that you're taking to dinner yes yep so Joe is the founder Joe had another partner um so there were two there were two sellers um which we'll talk about in a minute adds a little adds a little layer of complexity when doing the transition when you have two sellers to replace versus One MH um but yeah so was Joe he had uh he had his two sons in the business they're still there they still they still do great so they're kind of they're kind of the leadership team now with me um and I think that was a big selling point for him was they're they're a little bit younger than me not too far behind but I think experience-wise and maybe you know Capital wise he kind of said you know hey this guy is going to they're going to be in a a learning environment with you know with this guy so I think he looked and said hey these he wants them to stick around in the business I'm talking about me being he soet Peter wants my kids to stick around in the business um they're going to learn a lot from Peter and you know it's the best way to you know move move this thing forward and that's a common it's a common thing I would say it was at least 50% of the businesses I looked at had a kid in the business and it was always a question like why isn't your kid buying this yep um so they had to have a they had to have a convincing answer um but yeah that was that was the business and can you give us some more data points on the business itself numbers yep um so business was right now we have 35 employees I think we're a little bit less than that at closing um we are a I would call kind of a higher end plumbing contractor uh uh so size range just you know in terms of uh in terms of self-funded search I will say self-funded search typically focuses on 500,000 to 1.5 million of eitaa um and we are in that range so you got that you got the employee count and business model basically we're high in plumbing shop um we do a bunch of different stuff but probably our two biggest lines of business are we do Ultra high-end residential construction so Miami Beach Custom Homes on the water 10 million and up um we do the construction for those so that starts with you know underground piping up the walls and installing the you know the high-end fixtures and crazy showers and stuff um years later so kind of large long-term projects um and then we also do a ton of commercial Service uh for National retailers and grocery stores so the business was um you know had a construction component which most buyers dislike um I think that chased off some of the buyers and I think it kind of pushed down the multiple um into you know self-funded search range um I was able to get comfortable with it although like right before closing was when the headlines were just it was I closed June of 202 and literally like May 15th 2022 was like the beginning of a 3-week roll right before I close and every headline was interest rates are going through the roof construction's going to dry up we're about to enter a recession so I had a real a real Soul search to do but yeah so the business um you know does service and construction and it does Service as well yep yeah so we're about 50/50 um and our service like I said is a little bit more we do Residential but it's a little bit more commercial focused um so customers like Whole Foods Marshals Lululemon um you know kind of national retailers and grocery stores is is kind of our bread and butter on the service side and then we also do you know we do plenty of other stuff as well um you know we do Residential Service we do commercial construction we do all all the categories no okay and is that common for a uh Plumbing business to do all the categories by all the categories you you basically can think about it in terms of as you said construction versus service that's the one we often think about but then also residential versus commercial so there's kind of four categories there residential service residential construction commercial service commercial construction um is it common for a uh plumbing shop to do all four or or is it typically focused in one or two of those buckets I've noticed I think it's more common to do you know two of the buckets rather than four um the business was definitely you know I would call it it's Diversified right and it's a good thing in that revenue is stable you don't have to worry as much about residential construction drying up because you know no line of business no line of business is 90% of our business like I think that you know you know the residential constructions like 30 something or 30 35% of the business right so like if we enter a recession and residential construction dries up one we're we're in this like Ultra high-end billionaire clientele so it's kind of a little recession resistant but two even if that falls off you're still only you know affecting a quarter of the business or a third of the business right so that's a that's a good side to it the downside to it is in order to make things scalable and fix processes and and make things a little bit more organized you know you work you work on a project to make something uh more streamlined or make a part of the business better you're not really impacting all the business you're only impacting a little piece of it and each one of these four categories has some different elements to it um so kind of pros and cons for many businesses Under One Roof yeah um so pros and cons to it um I think like kind of your what I would call like the post poer child um acquisition Target for a lot of folks is a residential service only Plumbing business or an HVAC business or an electrical business that's kind of what you know the the target looks like is all service and residential is a little bit more favored than commercial for the most part but you know again every deal is going to have some good and some bad in terms of your acquisition criteria and so I just you know I looked at this and said listen it's got construction can I get comfortable with it can I get a bank comfortable with it um I was able to do that and you know I think it brought it into I think without the construction component it wouldn't have been in self-funded search Zone there would have been some you know some strategic buyer who was going to pay a crazy multiple for it well uh so two things there first on your point about diversification and how they're kind of poster child of of the plumbing or HVAC or electrical business bus is is going to be a consumer focused or Home Services business and how those have been really hot and really appealing for the last couple of years but I have a couple of interviews coming up with people in those very those very categories Home Services Plumbing um and it's it's having a really hard time all of a sudden I mean it was the hottest thing for the last few years and now it's it's it's getting really really tight and they don't you know if they're only in residential and only in residential service um it's actually they're not able to kind of divers diversify away this challenging moment they're just meaning it head on um so this is kind of like your kind of thesis if you will is playing out in real time here um and then the other point you made about the the multiple like it if it had it been all Home Services uh which is been so hot and appealing it probably would have commanded a much higher multiple um can you share what the multiple was that you are the range of multiples that that you got your business for was yeah so I I'll do the range again but you know most of the deals in this category or in our you know kind of self-funded Zone trade for 3 to 5x um I was in that range MH and I think that if you're looking at you know a larger more established like a you know a plumbing company with 35 employees that was 100% service um you're definitely going over 5X um or at least you were in 2021 or 22 whatever I I don't have my dates 22 um so you know definitely was you know I I looked at I looked at a an HVAC deal of similar size but they were 100% service it was represented by an investment Bank rather than a broker and I called the guy and I was like oh you know explain my whole search story and he was like listen he's like I'm expecting to get eight or NX for this are you gonna play in that range and I said no so wow so there's definitely you know if you're looking in that space I think a lot of people are you know you're looking for one you're looking for something with a little bit of hair you're not you're not going to find something that's got you know a you know a million ebah already on service Titan with a management team established and 100% service and all these processes in place you're just not going to find it you're either going to find something with some hair on it um or you're going to find something like I did with a construction component or you're going to buy smaller um or you get lucky and you find you know you find the diamond in the rough where you know Bob and Bob and Sue really like you and don't put their business out to Market but I think uh you know it's that Home Services space is a super competitive I found that you know it was if you went into the the really hot category that checked all the boxes you know it just it priced you out as as a Searcher and again you could put together a deal and buy something at a premium multiple but again it's then you're forced to grow um in order to justify that multiple and it just makes life a little bit harder I think what can you tell us about the structure of your deal to buy this we we we keep talking about what larger deals could look like versus our end so what what did this particular deal look like so I did a fairly common structure um but I did take advantage of the the full standby seller note um thing where you can reduce your Equity check so I basically uh I was 85% SBA loan uh 5% seller note that was being paid over time and then a 5% seller note that was on full standby for the life of the loan so no payments just AC crewing interest for 10 years that gets counted as SBA or gets counted as Equity by the SBA and then the remaining five or a little bit more than 5% was Equity so bought the business with I think it was like 6% Equity um I was you know I was networked and kind of had a a group warmed up to raise Equity but because I was able to get this full standby seller note uh I only need a little bit I was able to raise it from my dad um but you know went to him by choice not because I had to uh he had a he spent his career in real estate um institutional grade multif family real estate brokerage um so like you know he knows every property management company in South Florida right so for buying a business that does commercial Service Great you know great person to have on the team mhm gave him basically your standard self-funded search Equity terms which you can hear about from other people and see on search funer but probably gave him more generous terms than I would have had to give another investor but um so that was the that was the structure usually when we use friends and family money Peter we give we give them less generous terms than we would give to professional investor um great now so 5% Equity essentially uh and and bringing bringing in capital from your father for the reasons you just described but this means that you're going to retain a huge piece of the business so is that should I read into that was that kind of a philos philosophy that you had or it just worked out that way no that was um you know that was really a primary goal was I wanted to maintain as much ownership as I could I wanted to maintain as much control as I could in hindsight I don't wish I did it differently but that came with you know its own set of challenges when you do use a lot of Leverage that means you know talking about the airplane flying towards the trees the tree line is pretty high you got to cover those debt payments so your ability to one to withstand shock and the J curve is you know is Tighter and two the ability to invest in lwh hanging fruit that costs you money now but might benefit you later is also a little bit um restricted so you know I solved for the goal of of owning the maximum percent I could um and you know I think that like I wouldn't do it differently I think my I'm fine I'm happy I'm good with it but I think it was something I didn't really think about one how nice it would be to Chase after lwh hanging fruit and have a little bit of a budget to do it you come into these businesses and there's it's just there's opportunity there's a ton of challenges there's a ton of opportunity and when you can't throw money at it because you got to just be you know you want to feel really comfortable in your first you know I'm 18 months in or 19 months in you know you you can't throw money at stuff you can't make a hire that you want to um it's a little bit restrictive and then the other thing when it comes to you know leverage that I didn't really think through is is the personal side I'm I wanted to maximize my ownership so I said oh I can live off of you know minimum salary you know my wife works um and I said oh well we can you know live off a little bit of you know kind of a model the salary that was based on my current lifestyle not really thinking that you know over the next couple years of owning the business here comes two kids and the expenses related to that and then you got a new car and then you got you know kids go to school and you got a nanny that you didn't have before so all of the sudden my salary that I modeled from my pre kid lifestyle was like oh that was a little bit light so anyway um I'm like it's all good like I don't have any issues you know thankfully nothing bad happened and you know there was there was plenty of cushion um but you know I just found that I think I'm in a common spot for you know lifestyle where a lot of Searchers are um kind of with young kids and all that stuff so definitely you know would share some advice of one be open to not maximizing leverage and maximizing ownership um nothing wrong with raising money from outside people it kind of would be nice sometimes to have you know if I had raised money from somebody who had other investments in the space or who had some industry knowledge that'd be nice to have um kind of on your team uh and two you know the whole concept of Lifestyle creep whether it's not really lifestyle creep it's uh it's kid creep um you know the when you're chasing after maximum ownership got to you got to keep those other things in mind so anyway I'm I'm sharing it as a cautionary tale not that anything bad happened to me but my cushion in terms of How deep the J curve could go was you know I thought I had room for ebua to Fall by whatever you know 30% or something but then when you factored in hey my lifestyle got more expensive I need to raise my salary and you know the J curve the J curve has stuff that's out of your control and then the J curve has stuff that that's deliberate you're you know you're making decisions that are cost money now that make you money in the future um so anyway it just kind of uh it you know I would I would advise thinking about that holistically having a little bit lower debt you know could allow you to execute a little bit faster a little bit you know Smarter on stuff yeah no that was that was so important Peter thank you for walking us through that and it is a theme that that comes up um from time to time although not that much and I think for people doing this for the first time including you know yours truly thinking about this like it's just the it's just this reflexive the more Equity I can retain the better and I think that that is um something that you get Beyond uh it's it's maybe a little bit naive um and and it and it you can also kind of distill it to be to to this framework which you hear people use in a lot of different cont text do I want to own 95% or 100% of a smaller pie or 80% of a bigger Pi or 70% of a bigger Pi um and 70 and 80 and and and you know this is also actually can can get into self-funded versus traditional but when you do that when you're looking at that you're you're comparing you know owning 80 90% of a business versus just 25 so there's a big Delta in your ownership so so that let's put that aside in your case or in a self-funded searcher's case we're just talking about 100 versus 90 versus 80 versus 70 you're still going to end we're still talking about you the Searcher ending up with a really big piece of the business 70% maybe 80% um so still means you're basically it's not going to have any impact on your control you are going to have investors so you are going to be responsible for people's Capital so there is that element and that's important and that needs to be taken seriously um but even in your case you do have an investor and your father and so so you do have somebody whose capital you're responsible for um but yeah again just to to kind of distill you know 95 or 100% ownership uh is it worth that versus maybe 80 70% ownership but having an ultimately you know more oxygen more ways to go after that low hanging fruit you know and ultimately maybe a bigger exit that's kind of the the way think about it and I'm not saying that it's wrong to do what you did but you're feeling that you're now you're in it you're feeling that kind of tension between those two choices yeah and I think it's also you know you look at there's kind of this the model is always you buy a business and as long as you maintain it your outcome is still pretty awesome yeah you pay off the debt and then you know hopefully you grow even if you just grow with inflation you have a pretty awesome outcome after you know 5 seven 10 years yeah um but the the other side of it is you're buying a business that you're transitioning from one mindset which is short or not short-term but maximize profitability for an aging owner and you're putting it into a mindset of maximized growth um you know for future potential and that takes spending money and I think that was one of the things that I didn't realize was it would be nice to have a little bit more you know spending room although I don't know if I would have done anything differently right cuz like I didn't I didn't know enough to go out there and be like Oh I'm going to invest in these three strategic areas and build out this team and do whatever I just kind of grab stuff as I went but I do think that's just you know advice for other Searchers is is if you're looking at something and you're saying hey I'm going to change this business I'm going to improve it I'm going to grow it aggressively that's probably going to take money and and you know money doesn't it doesn't pay off now right like you spend money now you don't get the money back tomorrow you get it back in a year and two years three years um so anyway that's a nice that's just a a lesson that I want to share a great lesson thank you let's hear about your transition so how did you said you've been in now a year and a half so how did the first six and 12 months look yep um and I will say deliberately waited to uh to do anything like this cuz I just didn't want to be the guy who was like 6 months in and naive and being like Oh everything's so awesome and you know I didn't want to jinx myself uh so I feel like I'm definitely you know I'm through the honeymoon phase now and I'm you know uh you know I've got some I've got some uh I've got a couple notches on my belt and I've got you know some some feelings of confidence now that I that I will survive um and end of being humbled yeah you know being humbled but also being you know now there's now you know now I kind of know what I'm doing so um transition the uh the announcement day was hilarious or very you know scary as the buyer so we closed um on whatever June something June 8th 7th and then the eth the next day was announcement day so it's a construction component of the business everybody starts work at like 7:00 a.m. at the latest and so everyone shows up to the office all the employees show up to the office all these guys go straight out to the job site so none of these people come into the office on a regular basis it's like a very rare occurrence so everybody's going what's going on everybody's coming into the office at 6:30 and so I'm on the highway at like 5:00 a.m. and I go on an offramp from one highway to the other and just come to a grinding Halt and there was some horrendous accident on the highway and I got stuck couldn't move an inch for like four hours whoa and so the 30s something employees are in the shop for the first time in forever oh no and the sell calling me and going hey so and I was like hold on it's got to clear up soon I'm coming just keep them there and then after 3 hours or whatever he's like listen everybody's kind of wondering I don't know if I made him stay there for 3 hours but I was like no I got to get there I want to be there I got to meet everybody and so he had to do the announcement without me there so everyone sitting there and he's like I sold to this guy he's really great you guys are G to love him he's not here so he's stuck in traffic you guys all made it but man that must have been what you must have just just been slamming your steering wheel I mean that would have been such an incredibly anxiety-inducing moment yeah it was yeah that was that was a stressful moment but you know got to meet everybody over the first you know first few days or whatever and you know I don't I don't think in hindsight that it had as big of an impact as I felt like it was in that moment right in that moment you're like oh my God this is the end day one it's over yeah yeah I screwed up my very first five minutes how did this happen so that was announcement day um transition from there was um it was challenging so I came in there were two sellers um both master plumbers both worked a ton of hours like each of these guys worked 100 hours a week like actually it was insane and both master plumbers both very good at their jobs um and I knew I had to come in and replace guys that I couldn't replace like for like like I couldn't come in and be the plumbing expert on day one now we had enough staff and we had a little bit of a management layer like half of a management layer I would call it um and we had expert plumbers other than the sellers but I knew that I couldn't come in and fill the job right so I had to hire to replace the one seller um and obious VI L you're hiring somebody who doesn't own the business so you're not going to get as good of a person um and then I had to take over um you know the seller's responsibility he was basically you know running the show and then the uh the other seller was in the field so I hired the field guy and then I replaced um Joe so I came in and kind of immediately realized that I'm not going to be able to replace all of this stuff I got got to be able to delegate some of this um won the plumbing expertise I'm not going to be able to catch up you know I'm not going to be able to learn that in 6 months um and two the guy just you know both of these guys worked a 100 hours a week like actually they were on call every weekend 247 emergency service like it was their cell phones and so I I like I think I knew that before closing but I don't think I understood what it meant you know so it was kind of like one of those like I knew they were worked a lot I knew there was this emergency service stuff but I just didn't understand like how much they worked and for me coming in um my commute is about 50 minutes each way so basically like there's two hours in the car per day um so I've got there's 10 hours a week that they didn't you know that they didn't have to worry about and then I've got you know I've got young kids and my wife works so like I got to be home so it was a very quick um realization that I wasn't going to be able to come in and just take over his exact job so I had to very quickly kind of reorganize I had to hire a couple people I had to delegate some stuff um so thankfully I had a great relationship uh with the seller the sellers um they're extremely helpful they worked their asses off through the transition you know I could have seen a very different outcome which I've heard plenty of people talk about on your show where the sellers you know get their check and kind of Coast these guys did not do it they did everything they could to ensure I was successful so that was that was huge um but yeah had to uh had to make some changes quickly um and but just Peter so so basically the answer was you had to hire quickly in more than you thought I mean 100 hours a week from each of these two people that's 200 manh hours to fill to replace and they're high quality manh hours because they're owners and they're expert plumbers so it's really not hour for hour it's probably whatever it's probably add it's to 200 hours divided by 40 is five people but maybe you really need six people to replace what these guys are doing is that is that arithmetic working out so these two gentlemen need to be replaced by about six people you plus five others something like that never thought about it that clearly but yes pretty pretty much um no so I had to I think I budgeted for hiring one person I had to hire two just to kind of scrape by and then I spent quite a bit of time since I've since hired you know several more people that are true kind of like office um you know level people but yeah I def you know I had to hire a person that I wasn't planning on and I had to delegate uh a bunch of stuff to the team so I had a couple people that really needed to level up um and so it went you know it went pretty good um I had a ton of support from the sellers um and I was able to you know have a lifestyle that wasn't going to get me you know divorced and miserable you know so I was able to I was able to make it into I still work you know a lot but you maybe I work 60 hours a week or 55 um I'm including my commute in that right so it's really maybe a little bit less than that but um I was able to transition to a point where I was okay and the business was okay and but it was just you know it was that those are kind of the stories that you hear and I think if I didn't have the support of the sellers um I would have been in a really tough spot and so and so you really it was hard but there was no there this was not a fetal transition there were no fetal position moments no uh the business was handed off in really good shape um the diligence that I was able to do on the construction business was limited based on you know their data and so I took a big leap of faith in him telling me that there was a healthy backlog and there was thankfully um so the business was handed off in good shape um the sellers were super helpful the transition worked fine there were no fetal position moments you know there were plenty moments of fear um but you know I never got I never got close to financial issues I never had to worry about making payroll um and let me and let me ask on that because we we when we were talking about how much Equity you retained and the size of the loan so even with you kind of maxing out what you could in terms of retaining ownership which meant big loan uh big loan payments even with that and with the discovery that you were going to have to hire more than you thought to replace the two owners um so that's the J curve that we have already talked about uh you still felt like you had room like you weren't you never you never worried about missing payroll or whatever yeah I had I had room the deal you know even with you know talking about the The Leverage the deal had plenty of wiggle room um you know I had working capital was included in the deal um and I had a line of credit you know that was kind of the the emergency fund um so yeah financially you know I knew that profit was dipping in the J curve but I didn't never get close to the trees um or at least that close to the trees but I will say there's you know there's been a couple times um you know right now everything's pretty cool but like there was a point where I was like a year in and I looked at the bank account and I was like man I have worked really hard and that's the number that's in the bank account after a year so you know that's uh that's uh you know when when you and I spoke I think I think I said so somebody asked me I was about a year in and they go oh man how's it going and I was like yeah you know I you know you always have kind of a range of how you think things are going to go and I go yeah things you know things have gone like seven out of 10 good and then I paused for a second I was like what the hell am I talking like there's been so many like crazy external challenges or internal challenges whatever just like so much hard stuff and so many things that have not gone my way plenty of stuff went well so like but I I kind of revised it and I was like things have gone five out of 10 good and you know couple of things that we just talked about the seller hours but offset by incredible support from the sellers and you know having to make uh transitions of who's responsible for what very early days you know where I wasn't able to you know execute the same level as the seller you know having to have other people pick up um that stuff you know you kind of lose some quality there right you're transitioning stuff from a seller to an employee you're always going to have a little less performance so you know some of that stuff but I think one of the big things that you know the big negative um that I experienced was turnover and I'll share a little piece of that that I just I didn't grasp and as a good piece of diligence hope you know hopefully for somebody is so I had two sellers to transition so that in itself high level of turnover if you know if you're managing that type of transition what I didn't realize um you know kind of right around when the deal went to Market um they had turn over in two of the office staff now there's like 12 office staff or there were 10 when I bought it or nine or something so they had transitioned two of the office staff they had turned over um and by the time I closed the two new people had been there for six months but I didn't realize until quite a ways in that the two people who left it was like a book keeper and a billing person those two people were just like a rockstar team and they were running this show they had been there for you know one was there for six years one was there for 10 and the sellers replaced them with people who could fill the seat until they sold the business not that they made like a you know disastrous hire but I had two people who were fairly new and I didn't realize they're both you know not here anymore one of them we fired and one of them left on their own but they were just like they had two a players before and those two a players got replaced with like C players and I had no idea you know you come into this business you can only rely on the people around and kind of say hey was this how stuff was going before cuz all you're trying to do is keep things running the same as before yeah but so what I realized down the line was yeah I had to transition the two Sellers and I had to transition these two other people that I didn't even realize counted as turnover because it happened 6 months before I got there but really I lost two really important team members before I ever got there yeah um so that was you know there's four people out of a office staff of call it 10 um then I'll give a little example of a mistake I made right after closing I knew I had to replace the field guy so it was like day one we were like all right guys let's draft this job description we got to get somebody in here um and so put together a job descript descrition with the help of the sellers and the other people there and we posted on indeed and indeed like pushes you to put a salary range and I talked with them I was like oh I don't know and they were like no you should put a salary range it's really high it's really hard to find people of a certain caliber and you need to put a salary range that shows that you're serious right to you know plumbers are hard to hire and hiring like you know salaried supervisor level plumbers is even harder and so they said put a salary range on it put a salary range on it not realizing that the job description was pretty similar to somebody else who worked there and oh no that our lead our lead Foreman who was like kind of our top hourly plumber he had been promised over the last four years that he was going to get this job I didn't know that and so I put up this job posting with this huge salary on it so everybody saw it and the you know the lead Foreman quit on a one- day notice because he was so pissed at the seller who promised him this job I had no idea and then the uh the other supervisor the guy who wasn't the seller um he quit after a year and you know it was just like one of those things that what was I going to do like argue with the seller and be like no I shouldn't put a salary range on it he said listen like it's hard to find it's hard to find plumbers you got to put a salary range so you attract good candidates but little did I know there was all this backstory and by putting the salary range I was going to piss off two other important employees so yeah you know they probably would have left anyway um but just like little you know the little things that you don't know what mistakes you're making while you're in it and so you know there's you know there's another couple employees that turned over in the first year and so that just it really makes things hard the less stability you have because you lose every person that walks out the door you lose tribal knowledge exactly you lose the history you lose the knowledge of the jobs that were working on the customers so um and and when the whole argument for search for like a the types of a Services business where there's where your asset is the people you know it's not capex it's not whatever um it's the people when people with tribal institutional Knowledge walk out the door it's effectively you're losing some Enterprise Value it's not CU you can't just replace them like for like cuz cuz they had a lot of of the value of the business that you bought was locked up in their heads yep so that was a that was a big challenge um Peter let me let me let let's um try to try to codify a couple of the learnings there I think tell tell me if you agree with this so on the on the one thing where the two office staff that you inherited but didn't realize that they were C players and that this pair of a players had left 6 months prior um maybe the the learning for The Listener is in your diligence ask a seller have there been any have who's exited the business in the last year yeah it was that was a conversation in diligence I just I wouldn't have comprehended that how valuable they were bookkeeper and the person who had worked together for 10 years were just had this like rockar show and they had all this stuff that they did together and the two people who came in after to be fair they probably didn't get the same attention and training that they deserved cuz everybody knew that they were exiting not every the sellers knew that they were exiting yeah um but they just you know and they were hired in a hurry I think yeah um and they just weren't they weren't as good as the team that left and I didn't know who the team that left was I just thought you were replaced your bookkeeper with another bookkeeper yeah I just didn't realize that you know the 10-year bookkeeper was really awesome yeah okay well and then on the other one where you put the salary and the foreman who's been promised this role quits the next day and I I think this is probably more commonly known um is the learning there that you ask the seller hey have any promises been made I mean I know this is something that people talk about doing diligen in do you think that did you do anything like that do you think had you it would have uncovered this problem hey seller Hey Joe has any been anybody any of the employee any of the staff been promised anything that I should that I might run a foul of if I if I'm unaware I knew that he was grooming this guy for this type of role okay I didn't realize that in this guy's eyes he was he was being promised for years that this was coming so whether or not I put the salary range when he saw that job posting and it wasn't him that would have done it Peter one of the things that you said to me in our preall was that um these problems you you you were actually sort of at home fixing these problems I think these problems maybe you were referring to other problems do you recall that and what did you mean I don't know what I meant I think what I meant was was yeah there were all these challenges along the way um also by the way there was an employee who left maybe like a year before I got there and the sellers didn't know but he started another plumbing company and over the course of my first year in business he slowly but surely called on all of our biggest customers and started pulling them away but it was again it's like something that happened a year before I got there how would you you know they wouldn't have even known to answer that question in diligence but so yeah I think what I meant was there's challenges with this um I had the background of s years running a you know running a business um The Delivery Dudes to be clear yep um and so like I'm familiar with with people issues I'm familiar with the constant challenges that there you know in a given day there's 100 issues and you can only fix 60 of them um you know so I none of this stuff was putting me in the fetal position I think was maybe what I meant um yeah yeah and you know it's kind you got to have you got to have the the attitude of taking the good with the bad and plenty of good stuff has happened along the way too um you know like I said I never never had Financial issues you know the business is growing we're doing well but you know you you get punched in the face a lot that's for sure yeah and you and you already had some some Scar Tissue some muscle built up there to just roll with those punches yep but it's different it's different when you got your personal guarantee on the line and you're you're the owner rather than the employee yeah of course well and I wonder if there's any part of your skill set that listeners might not have that they can somehow learn from or or maybe it's there isn't and it's just you were at least with respect to your story in the good position position that you just had SE seven years of relevant experience kind of operational people management experience um just try just trying to figure out where the listener can benefit from the fact that you were able to take this in stride better than somebody who's totally new to you know management I think it helps in many ways it also probably hurts in some ways I came in and I was like I know what this org chart is going to look like in 3 years like I know how this this business is going to grow I've been through this before I've taken a company from you know one layer of management to two um yeah and I came in and kind of said I know the direction we're heading I'm going to start marching in that direction whereas in hindsight maybe the better move would have been I'm going to keep my head down and learn to be the seller I even if I don't feel like I'm the plumbing expert I should spend the next six months or year learning to do exactly what he did and focus on the dayto day and don't be so strategic and don't think that you know you want to march on a three-year plan really interesting couple other things from our preall Peter that I think the audience can benefit from first of all well actually one uh connects to what you just said about about kind of rather than coming in is Mr Mr strategy uh kind of trying to be more like the seller and and be more you know and learn the learn the trade to the extent that you can really learn the business um you had said to me that the technical piece of these businesses is underappreciated what what did you mean like how has it been being in a business that really is so technical particularly as I understanded commercial plumbing versus residential yeah I think um I think if you're buying like a residential HVAC shop I think well I don't know about HVAC if you're buying a residential plumbing shop I think you can learn it pretty quickly the service side of the business is fairly straightforward um you know learnable in a shorter amount of time we do a variety of work um and and I think a lot of companies do but I think the thing that's underappreciated is yeah the the technical component Searchers buy plumbing and HVAC shops all the time the technical component that is most likely worn by the seller um is stuff that you can't learn in six months you know there's examples there's there's customer problems that only surface every 5 years and the seller being able to answer a question and you not being able to answer a question can be a big deal and so that I think is one of the things that you know the popularity of these industries among Searchers is huge um I didn't realize it I thought it was learnable and hirable um and it is uh like things are things are good and I've got a whole lot of answers I probably know more about like technical weird Plumbing you know troubleshooting than I do about like you know how to change the flapper on a toilet um but mhm there's there's definitely there's an element of the technical side that you know you got to be conscious of you're replacing a seller who's got 40 Years of Plumbing experience with some you know 30s something year old kid who doesn't know and that's a big gap in the eyes of your customers and and so what are so so what what's the answer there you're you're obviously learning as much as you can as quickly as you can hiring to fill the Gap as much as you can and is that basically the Playbook and kind of marching forward with a confident face yep it's uh I mean it's all three it's learning yourself it's hiring people to support you and it's having a good relationship with the seller yeah and I still make that call you know when we've got tricky stuff um you know they're there you mentioned earlier license licensing so how did that play out in uh yeah how how did you deal with that what it look like let me rewind I did want to share one thing this guy on Twitter posted it but I can't take credit for it but I just like it resonated with me I didn't it came up recently on Twitter and this kind of ties in the last two things we talked about the the strategy guy and the technical thing this guy I forget who it was I forget what his story was but I think it was a guy who who bought a business and went bankrupt and he posted his story on Twitter I wish I remember the guy's name so I could give him credit but one of the things he said in this mile long you know 100 post thing was I thought I thought that the employees wanted a Clear Vision thought that they wanted leadership and an opportunity to grow in their career and what they really wanted was direct instruction from an expert in the business H and that hit home for me so much and this guy you know this guy obviously landed in a different outcome than I did um I've never heard anyone say it like that but that I think was the absolute biggest lesson I came from an environment of accountability of people with a growth mindset and hungry people who hold themselves accountable and want to achieve and you come into these you know this business that's in a so-called sleepy industry and you you know you kind of go yeah I'm going to be this great leader and we're all going to March forward together and what you don't realize is yes that's a great outcome but it takes a long time to create that that culture shift and when you come in on day one and try to replace a seller who's providing direct instruction with his Decades of Industry expertise and you try to replace it with strategy guy um that's a big big shift um and it's something that I had to kind of dial back um and that that dude's Twitter post really really popped out I'm sure I butchered it in my paraphrasing but I think that was that was one of the big things on those two topics that kind of summarized my learnings that's great great call out what was your question yeah just a more uh in the weeds question how did you deal with the license requirements of being the owner of a plumbing business and not having a license yourself so there were employees who also had their license um I transitioned to it was actually the owner's son who's still an employee um the SBA requirement is and I think it changed recently but the SBA a requirement when I was around was that the seller can work at the business and qualify the business for up to a year and they can't qualify it after that and my lender was like obsessed with the licensing issue and reasonably so um but I had four master plumbers in the business that I could access two were employees two were the sellers um and I trans positioned the license on closing and I had employment contracts you know with incentives to stick around so I had plenty of structure on it but the the lender was all over it um Wanted proof of licenses for all the people who weren't you know the qualifier even um and anyway so that was how I did it I've heard of other people doing it with a you know third party qualifier um there are like retirees who will qualif ify you know three businesses and hang their license and earn a little side income depending on your state um there's different rules around it like Florida will let you qualify a few businesses as a license holder but not like 20 um and you have to I think you actually have to go to Tallahassee and like sit in front of the board of it's like the Board of Professional Regulation if you're a guy who's qualifying multiple businesses you have to go explain in person why so anyway there are like third party people who will qualify businesses um I think that's common in in several States um and I think you can get away with having the seller qualify it as long as you have what the bank considers a credible plan to transition it to someone else now once you close what I've heard people say and I don't really know if it's the truth but like you can have the seller qualify the business for up to a year and then once you close like the bank is not going to default you if the seller keeps qualifying your business so I've heard people say that like yeah you can in a practical sense as long as you convince the bank that you're going to switch it to someone else in a practical sense you can just have the seller keep qualifying the business I don't know if that's you know how true that is but I've heard other people say that my experience was just that I had another guy with the license and I transitioned to him you had some working capital uh learnings remember what those were from our preall yeah um and I think like you know in the grand schema thing like spreadsheet pre-closing Peter probably would have thought these were a big deal and post closing it's like yeah it's a factor but like is it you know is that's going to be like affect your odds of success by like a tiny little thing compared to everything else um but I had working capital included in the deal the construction industry I've talked with several Searchers who are looking at businesses that are in the industry or have a construction component um the construction industry has funky working capital requirements um you have one you might get deposits which are hard to analiz because a lot of times sellers just count it as Revenue rather than counting it as a liability um two you have progress Billings so in our case we do these big houses they might take 2 three years to finish and so so you're billing your customer who's a GC and you're billing them and saying hey I'm 40% complete with this job so if you Bill them 50% like are they going to fight you on it probably not because they're getting paid more too as the GC so they're motivated to be over bu um so there's an opportunity for overbilling um and then three there's a there's a thing called retainage which adds even more complexity to it but we don't need to get into the detailed stuff but the progress Billings is really the piece where buyer beware um my my deal like definitely I closed and we were overbuilt and I didn't really know until down the line that basically like you know there wasn't a lot of meat on the bone on some of these projects um not that it was like gross you know it wasn't anything like fraud or it was just like you know natural behavior um and I had some protection loose language in the APA that protected me you know if anything bad happened but basically like as a buyer how in the world are you going to go look at a house that's like halfway built with pipes sticking out of the ground and know if it's 40 or 50% yeah totally like you have no clue so you're at the mercy of the seller you know I didn't even figure out which ones were over build and underbuild until 6 months in I was just looking at you know the revenue in the first two months and I was like man like why why aren't we doing much in sales and it was because we had a couple projects that were build ahead of where they actually were um so that was like a little blip in the radar it wasn't um wasn't a big thing but definitely opportunity for it to be a bigger thing for somebody else um so be aware of construction and your lack of knowledge as a great well let's start wrapping up here Peter this has been this has been just fantastic what um what is your plan here so my plan in the financial model pre- buying the business was um the good case was basically double the business in 5 years and sell it um I still am kind of treating that as plan a um I very well may not sell it um but going through my experience at Delivery Dudes of not being able to sell when you wanted to um was a very real lesson and in my eyes you kind of have to you have to set the business up for exit in order to have the option like I'd hate to get down the line and not have the business be you know I'm sure it'll be sellable at anyway but you know not have it be maximized and then you only have one plan and that plan is to hang on so I'm I'm kind of treating that as plan a even though it will you know very likely could become Plan B um despite all the things that I've talked about the challenges like it is fun it is gratifying it is a very cool thing to do um and if I find a way to dial back my hours a little bit then by all means like I'll hang on to this thing it's a great it's a fun challenge it's cool it's a like it's a it's something different than you get in other jobs and maybe it's Plumbing specific but like every single day you have people that have problems in their life and every single day you are solving problems and you are creating things that have physical like good and value to the world and that I think is something that I didn't really see as tangible in anything else I did like sure Delivery Dudes we were like delivering people food and cool but there is something nice about every day you are solving people's problems for them yeah you are creating you are creating good in the world and something that is visible and Lasting and all that stuff so I love that element of it it's a lot of fun it's a lot of I like I you know you say like you learn something new every day like I learn 10 new things every day it's it's cool there's always a challenge even the guys I've got around that have tons of experience everybody it's just like you know everybody's passionate about it it's it's something you can always keep learning out so I really like the industry love the business I'm treating plan a as grow it and be able to sell it and maybe I will maybe I won't okay Peter anything that we didn't get to we we sure got to a lot but U maybe I overlooked something anything you want to tell the audience I do think like as a whole the opportunity is just I think it's crazy you so you know how when you like go get your first big boy job and you get your own place and you just kind of like oh I can do whatever I want like I can eat ice cream for breakfast like I can drink a beer at 10: a.m. like no one's gon to stop me you can do whatever you want I just for me like I think the search concept is exactly that it's just like if you told me that I could just go buy a 35 employee Plumbing business with mostly other people's money and like no one's going to stop you from doing that or ask questions like why the hell are you doing this and like you can just you can just do it like no one's going to stop you I just think that's like for me it was like that exact moment I think it's just I'm really passionate about the the search space and I just think it's such a it's such a crazy thing like you can just go do that no one's going to stop you and so I don't know I love I'm really happy to you know have done this the podcast with you I just think it's such a cool space I think it's such a cool thing that we're seeing I think it's really like it's going to define the next generation of businesses the way that this this concept is growing um and I just still like some days I wake up I'm like how in the world is this a possibility like I maybe I need to like fly the American flag more but it's just cool you can do whatever you want no that is so well put Peter I I might actually clip that and put it on social media something I never do um I that's probably I I I feel like I've tried to articulate that once or twice where part of my falling in love with this whole concept of buying a business was that it um all of a s it just it just expands the possibilities so much more and I was somebody who came from kind of more zero to one entrepreneurship and for some reason this path of Entrepreneurship makes me feel a sense of possibility more than starting from scratch entrepreneurship which is maybe a bit counterintuitive because you'd think that a blank canvas means more opportunity but um anyway so I I loved how you put that um good great note to end on yeah well and then to bring it back to maybe the more selfish Financial world of that like my joke or half joke with uh with my buddy Morgan who was on your earlier podcast is uh is eight figs or bust because that's that's the next level of doing whatever the hell you want right like you can do whatever you want and buy a business but you know you buy a business and have an eight fig exit then you can really do whatever you want you know you don't even have to work um so that's kind of been the joke and I think that's the you know for all the uh for all the philosophical stuff about search fund like the financial outcome is is a real possibility and you know who knows if I'll hit if I'll hit that maybe it'll you know maybe I'll hang on to the business for 20 years and I'll hit it or maybe I'll get lucky or something but it's uh you know it's it's cool and I think that that's you know there's so many of those outcomes in the space and you know hopefully hopefully I you know land somewhere maybe not in that world but you know land somewhere nice along the way uh with the uh with the growth plan so I think that that's that should be the Mantra of all the uh of all the Searchers how do we feel about eight figer bu being the title of this episode by the way I love that well that's like L every phone call we you know I'll be talking to him on the drive home all the time I'll be like Oh I'm thinking about making this thinking about making this big move I'm going to hire these two people it's going to drop my IA back down to like below where it was at closing but it's going to be this great investment and I'll call him with the same stuff right every time we're like thinking about making some like you know sort of risky investment in the business it's always like well eight figs are bust and it's it's so childish and it is half a joke like that's how it's driving us but it's uh it's funny yeah it is it's great and I uh so I I may well I may well be using that in the in the title that's just great great we'll let everybody think I'm an uh cool how can people get in touch with you here Peter how do you prefer uh oh gosh I don't know I'm I'm a lurker on Twitter I don't think I've ever posted but you could probably find me there I'm on search funer and you can I don't know whatever everywhere LinkedIn Facebook Instagram I'm I'm around all right we'll do LinkedIn if nothing else Peter de Baptist thank you very much for for doing this this has been a great interview thanks will it's been 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