george vallone thank you for joining me today on acquiring minds thanks for having me real excited to be here last january almost exactly a year ago you acquired nuveldi's cleaning services of nashville you were in new york city when you did your search and actually moved to nashville to take ownership of new melodies so we're going to hear that story today and how things have gone in this year since you bought the business start us off george by telling us about yourself and what led you to want to go out and buy a business yeah sure so you know i spent the last probably 10 years since graduating college in the software industry so tech startups and a variety of different sales roles and i remember in 2008 but during the financial crisis i was in college i was a sophomore in college and i remember seeing that there was a lot of people lost a lot of money lost everything you know my heart goes out to them but i remember hearing these isolated incidents of people that made a ton of money during that downturn and so i kind of just put a mental you know bookmark in my mind that you know something like this could happen again and if it does happen again i want to be on the winning side of this you know drastic shift that happens and you know fast forward to 2020 during the pandemic i kind of started to think that this might be an opportunity to take advantage of another dramatic shift that was happening in our society so i started poking around peeking around and um i had heard from a couple other entrepreneurs about you know buy then build which is the book that you actually recommended to me last time we spoke and you know i decided to look into that and take that very seriously so i started a search put together a strategy a framework for how i was going to approach it and then was off to the races and really interesting that you had kind of had this uh bookmark in your mind since 2008 so were you kind of biding your time and waiting for some sort of disruption in the world to occur at which point you would kind of pounce were you were you kind of really paying close attention or was it just like when kovit came along you were like oh yeah i remember how i felt in 2008 this is this is you know that time when i should act upon that inkling that i had back then yeah i think it was you know in in the software startup world it's i gotta absorb the mentality that you know anything is possible and it's uh you know a great time period for founders to create new technologies and so i always had sort of a an eye towards starting something and you know starting something especially in tech you're competing with a lot of very very smart people um so i was always sort of coming up with ideas for startups and then i'm sure you and many other entrepreneurs can uh can can relate to this but it was like well that that idea already exists there are too many competitors in the market or you know there's you know some other smart guide mit just you know started a fun to to do that uh that business so it was kind of a combination of me feeling like i was ready in my career to start something and do something big and then when the pandemic hit i started to think you know they're probably going to be a decent amount of struggling small businesses why don't i scoop one of those up okay so you had kind of already decided you probably weren't going to do a tech startup you were looking for some other way to become an entrepreneur yeah i think that's i think that's correct i mean i wouldn't say never um but certainly this felt like a more feasible option for me than starting something from scratch so you read buy then build and you get really structured around about a search so tell me about i was i was really impressed with how you did that so tell us about this infrastructure this personal infrastructure you put in place and how you conducted your search well coming from b2b software sales i really i fell in love with the b2b recurring revenue sas model like that i think that's a great way to build a business i think it's one of the reasons why the valuations on b2b sas companies are so high because you get a customer you keep that customer for years and then you just keep kind of stacking those customers and building a really predictable revenue stream so when i first started the search i was like okay my criteria were basically b2b recurring revenue models that were simple didn't have to be sexy uh and you know pref by simple i mean not really necessarily like technology based something that was like a services business like back to the basics type thing nothing too fancy so i started exploring different industries so you know i think the first thing that i did was okay what sector matches those criteria for me so i looked at roofing i looked at a couple other things i looked at powder coating like a bunch of different sectors and i was sort of analyzing them through that framework that lens and you know a friend of mine who was investing in properties upstate you know i was talking to him and up sorry upstate new york i'm from new jersey so upstate means upstate new york to me um he was investing in properties up there and you know i said well maybe i should start getting into real estate should i look at that he said you know what would actually be great would be all of these new airbnb properties that are being built and renovated upstate they're all going to need cleaning services and so that was sort of my aha moment that cleaning services kind of match my criteria so i started looking at the cleaning sector it was also sort of topical because we were going through this pandemic and i was sort of thinking well germs and things like you know that's going to be more important and top of mind to people these days so that might be important it didn't turn out to be quite as compelling of a concept as i thought at the time but um but but airbnb usage spiked didn't it as people fled the cities and went to the wherever their airbnb is in the hinterlands right certainly yeah definitely there are definitely a ton of just yeah changes like that that were happening because of the pandemic so um so i decided on cleaning started looking into cleaning and then i built a list of about 400 companies that were cleaning businesses i used a virtual assistant to help me build a just basically an excel spreadsheet of of cleaning businesses i also wanted to focus on southern markets i i was reading a lot about people leaving major cities in the northeast and going down since everybody can work from home why not go live in a state that has no income tax so that was like a thing that was happening so i was like okay if there's going to be a flock from these northern cities to southern states or states without income tax um that would be good for a cleaning business because you know more people more more things to clean i focused uh my list i had a virtual assistant build a list of cleaning businesses and contact information and a couple of key cities that i was interested in with no income tax in in the south and southeast primarily and then yeah i just went to work i used my skills that i'd acquired from being in sales cold calling drip campaigns with emails um you know just getting on the phone and having an open conversation open transparent honest conversation with these business owners and so i built this funnel started out with 400 had probably you know 75 good 75 to 100 good conversations over the course of a few months whittled that down to uh maybe 20 20 serious conversations whittled that down to you know 10 companies that were open to selling got the financials whittled that down after seeing the financials to about five and made an offer on three and uh wound up buying uh this business here in nashville tennessee man perfect like what i love that just numbers game funnel thinking uh that that you you had developed as a b2b sales guy i want to drill into this search this is so interesting so let's go uh rewind a minute so you targeted particular cities how many cities and can you rattle them off if you don't remember them exactly but give us a sense so nashville and what else yeah i was looking at nashville i was looking at austin i was looking at raleigh i was looking at tampa miami and i'm trying to think if there are any those are the primary ones that i was focused on okay and you were doing all of this from from new york city or jersey where where where are you doing this from yeah i was in jersey city um just across the hudson river from manhattan and so what about just the the personal decision to move to one of these places were you was that ever did that ever give you hesitation or did you think it would be an adventure or you were just willing just just willing to do it because you had this this uh business thesis that you were going to pursue no matter what well first of all i i real i was in sort of a privileged privileged situation that i realized that not a lot of not all of your listeners are going to be in this type of situation but i was single at the time um you know no kids so i wasn't anchored to any particular city and yeah i love traveling i love adventures i love new cities um and i think you know it enabled me to find the right company for me that i was able to you know and willing to relocate so if i was only able to look in a 500 mile radius of where i wanted to live that really limits the opportunities that i was able to find but if it was more of a you know national search or semi-national search i was like that would enable me to really locate a perfect business to buy so i think it just widened the parameters of my search and for that i was willing to you know pick up and leave and go on this crazy adventure down here in honky tonk town it's really cool you know in traditional search funds there where you're actually you know you raise the money and then you actually have compensation or salary while you do your search there is the expectation from your investors that it's going to be a nationwide search and you're just going to basically have to go pretty much anywhere where the opportunity presents itself maybe not anywhere but you know similar similar philosophy to what you just described you have to to find the best opportunities you have to take out the variable of location and just be willing to go anywhere um but one one of the other things that traditional searches typically have is is a team of interns doing this outreach and doing this industry research you did it all on your own with with the help of this upwork contractor um so that's uh that's that's pretty cool um that you were able to to you know basically not have to build out a team of interns to do this for you and and speaks to your ability to to build a funnel um so the this list of 400 let's let's just get into that a little bit because this is kind of yeah i mean it's basically bootstrap just you know uh what would otherwise often be like an intern search you how long did it take your intern your excuse me your contractor to put together this list of 400 and tell us like a little bit more about the instructions that you gave this contractor you you gave them the cities obviously how did you tell that did you say just go scrape yelp for the you know the cleaning companies that had good reviews or what talk talk me through that a little bit you know i didn't tell them how to do their job i just told them what i was looking for and i worked with probably two or three virtual assistants before i found one that i felt was doing a good job for me and by the way that that list of 400 it wasn't a complete list of 400 the first time i hired a virtual assistant it was um like i said two or three virtual assistants putting together a list of 50 to 100 okay so i essentially just gave them the criteria that i was looking for um and i told them that i was looking for contact information of the owner or the manager or the president or what have you um and i was actually i was pretty impressed i think i think the way that they do it is um they have access to a bunch of databases and so you know they they'll pull things from the databases i think they also use web scraping there were a couple instances where they said uh hey this looks like the right type of company for you but we don't have contact information but here's the main office phone number so for a decent amount of the 400 i was just cold calling the main line and trying to get through you know and that's something that i did in my job you know out of college i was you know smiling dialing uh for about a year so so i was comfortable doing that um but you know i was i was actually i was really pleased with the work that they did and it was super affordable i think the whole kind of list building exercise cost me maybe 150 bucks 200 bucks wow that yeah and and how quickly did they turn it around i mean how quickly did you go from zero to a list of 400 i think within a matter of weeks it was two to three weeks and i had that list and so you really just give them their give them your criteria and they are they're the the the experts at list building and so you just however they do it you just you don't tell them how to do it they know how to do it you just give them the criteria pretty much yeah i mean this is a you know a plug for upwork but i use upwork.com and upwork's really good at matching you with the right people with the right skill set that you're looking for and then you know people are pretty hungry on there like they'll they really want your business so people who are willing to you know do whatever it takes to earn your business and if you know how to kind of massage that process a little bit you can wind up with some really good virtual assistants and the your criteria was it just any cleaning company or were you more specific than that i mean you would as you had said earlier your friend turned you onto this opportunity of kind of airbnb cleaning companies was it just that that you were looking for or any any sort of cleaning company residential airbnb office to tell us tell us what you were what you told your contractors to look for i asked them to filter out residential cleaning so i was looking for commercial cleaning specifically and that was something that i had talked to somebody who had been in the cleaning industry as i was going through this brainstorming process and they said they recommended that i stay away from residential which i totally agree with now that i've been in the industry for about a year but residential cleaning can be pretty meticulous and it's people's personal property and you know they can have lots of different issues come up um yeah i just told them commercial cleaning i also told them i was looking for uh this this one might be a little bit hard i think for them to have access to but i threw it out there just in case but i told them under five million in revenue between i was looking for between one and five million in revenue and if they had access to ebitda which i'm sure they didn't i was looking for at least 250k in ebitda and you said you don't think they had access to the to the data the ebitda data almost certainly not like you said but do did they have access to the revenue data or did you also mean that they probably didn't have access to that either i i think it's less like i don't think i don't think it's very likely that they had access to revenue data but i think some of their databases can estimate uh revenue for some of the small businesses but you know not obviously they can't get exact numbers but i think they have some way of estimating that you so you have this list of 400 and you actually get on the phone with you i think you said 75 to 100 people is that right or you got responses so remind me what that number was yeah i i probably got responses from about 75 to 100 and i had maybe 50 good conversations and were these people who tell me about the nature of those conversations were they surprised to get this cold email of somebody interested in buying their business do they get emails like this a lot how did you find like you know there's there's the argument that you're at a bit of a disadvantage when you approach somebody looking asking to buy their business or expressing interest in buying their business versus going on a biz buy sell or brokered brokered listings where the seller has already decided that they want to sell so just kind of give me give me a flavor of these conversations so yeah this might be useful for anybody who's going through this process right now but the messaging that i used effectively was i'm an investor looking to purchase small businesses um have you considered the valuation of your business and are you open to a conversation around that valuation and i would say you know the vast majority of people that responded to me seemed like you know they didn't even know that their business was worth anything or could be bought like they didn't know this was a thing um keep in mind these are mainly you know blue collar people that have built this business from the ground up a lot of them were cleaners themselves for their entire career and kind of just brought in friends and family and people you know to quote unquote scale their business a little bit um for the most part they were not and i mean this with all due respect this is more so a kind of subjective thing but they didn't seem to be very sophisticated about the process and so um some of the reactions were like whoa i didn't even know i could sell my business what's evaluation like let's talk you know and then i get on the phone talking them through how the process works try i try to be very honest and transparent like it's not my intention to screw anyone over um but a lot of people including um some of the ones that i got to the final stages with were were very excited that somebody was interested in buying their business um another thing that i found amongst a lot of the business owners was you know this was this was their baby that they put blood sweat and tears into and if they were thinking about retiring they wanted to make sure that somebody was there to take care of their baby and honor the legacy that they had built with that business um so i tried to insure them and reassure them that you know i was the right guy and i had the skill set uh to not drive their their precious business into the ground afterwards the people that you had no idea that their businesses were even saleable and you kind of walk them through the process and i assume you explain what a multiple is and what a standard multiple is of you know call it three were they surprised at what they what the business might be worth according to you know three times cash flow or you know were people disappointed or pleasantly surprised at what they might be able to sell their business for i don't know if i could tell you that there was a consensus or a trend on that question i remember having conversations at both ends of the spectrum i think once i had the valuation conversation like that initial conversation with a lot of uh the people that i talked to um i think they started to you know talk to brokers or consultants and you know not paid consultants but other people that they you know respected um and they started to see dollar signs um but i i i don't recall that anybody being overly greedy about you know i want way more than a three or four x valuations business it seemed to be like my god i would love to be handled handed a pile of cash to not have to go to the office every single day and you know maybe buy some property and you know drink martinis somewhere and just let's hear it again uh george your your line that you settled on that seemed to be really effective i'm i'm i'm an investor in small businesses i'm a buyer investor of small businesses have you considered what the valuation of yours might be was that what it is yeah yeah that's pretty much it that was my sort of opening opening line and you know i like that because it's not like hey i want to buy your business it's like have a conversation about how much your business is worth and so let's have that conversation and then i'll decide if i want to buy it or not so it's not like it's not very predatory i think it's and they're also getting some value out of that conversation as well so you know i'm i'm an investor let's talk about your valuation if i don't like it at least now you know sort of what your valuation is from somebody who could buy your business and maybe why i'm walking away or or why i want to move forward totally and did you have to iterate i assume a number of times on your on your messaging before you arrived at that like that's that is pretty good did you just come up with that or did you have to get there over a bunch of a bunch of conversations that didn't happen because your messaging was was less good i used the email automation software that i was able to do some a b testing with for my drip campaign so i was a b testing some subject lines and opening lines and things like that and that one had a slightly higher conversion rate but um i did get that i got that concept of that messaging from a course that i took with a guy named moran pobare at acquisitions.com and that was a couple week course for a few thousand dollars and he laid out some of the things that him and his students have found to be helpful and useful in in the past in acquiring small businesses and that was one of the uh the takeaways that i got from that course was that messaging cool yeah that's it seems really valuable okay so you have these oh and then one more question so are your emailing primarily or calling i know you're emailing you just talked about your drip sequences but what was the split between a call and an email did you call and email everybody or what what did your what did your um your sequence look like yeah i called an email to everybody so if i heard back from them over email then obviously you know set up a phone call at that point or remove them from my list if it was a negative response but everybody got a phone call i was spacing the emails out i think one a week for like a month and a half and i was calling a couple times a week to try to get in touch with somebody so the books and financials that you're getting back from these folks especially the ones who are a little less sophisticated are they a mess or or what you know that's one of the one of the supposed um value adds of a broker is that they you know they put together a package so that it's more digestible to you the buyer what were you getting from these folks i think i only got financials from five or five or so companies um but in the other conversations i would just ask very top-line questions revenue what'd you pay yourself and and i could kind of piece it together you know what was your cost of goods sold things like that so i could start to put a mental model and qualify or disqualify them from just those few high level questions and then if i liked what i heard from that then it would be like okay send over some financials so i was getting things from um you know tax returns very few of them use quickbooks honestly i was getting a lot of excel spreadsheets and i would have to be doing some kind of forensics to to figure things out um but it was a really nice exercise and i think that exercise actually and the whole buying exercise really is has you know it prepared me to run this business so you know i could see um you know what the cost of goods sold was across a couple of different ins uh people companies that i that i looked at so now i have a good sense of maybe what my cost of goods sold should be for this business um yeah and so that that process was really helpful cool okay so you you um get more and more serious fewer and fewer companies and then eventually you buy new valdes so tell us about new velodis what did you like about it um yeah let's start there and then we'll get into some of the numbers so nouvelde is uh funny enough even after all of the you know efforts with the funnel that i built it's funny to say this but new valdez came from a broker so that's what it is you know it came from a broker um so new values had you know because they were working with a broker um they had all you know they're very organized with their financials and everything like that um what i liked about them was first of all i really liked the owners they were really good people they built the company from the ground up very friendly very open transparent and i said that these would be good people to transition this business with so in any acquisition the owner usually stays on for a set period of time that's all negotiable and i said i think that they would be great partners to do the handoff so that was the first thing that i liked about them the second thing i liked about them was that they were in nashville nashville was putting up some great numbers in terms of people moving here and population growth and also the growth before the pandemic was was huge they were investing 10 billion on average a year for the past 10 years and new construction in the city so nashville has been on an incredible growth trajectory so i really liked the city itself and then i liked the numbers they were i'm looking for a reasonable price they i understood their reasoning for wanting to leave the business they want they were exhausted after um they found they were found in 2008 so they've been doing it for a minute and they wanted to retire and go do real estate it was a husband and wife they were the owners and they were owner operators so the husband was you know in the on the properties every single day doing some of the work and the the wife was doing a lot of the kind of back-end stuff the invoicing and customer service and stuff like that and they were sort of just at their wit's end and now this pandemic came and they were like well we didn't really know where to go from here we kind of maxed out how far we think we can take this scaling wise before the pandemic and now this pandemic is here and it's kind of scary we don't know what to do we don't know if it's going to destroy our business or not so let's wash our hands clean take the money and go and get into real estate and so i said okay well did they did they say that only after they closed on the business with you or were they transparent up like you know when when having pre-closed conversations with you yeah kovit might destroy this business that was i think inferred a little bit i think i just picked up on that i don't think they directly told me that but a great question to ask when you're acquiring a business and going through the negotiations you have to understand why the seller wants to sell and that goes really far in terms of helping your negotiating position because now you understand what they want if it's just a cash play then that's one thing but if it's a lifestyle change well that's there's a little bit more i don't want to say desperation but there's a little bit more motivation uh to get through the transaction um and so i think that was all sort of inferred um but there i could tell that they were you know kind of done with it and you know they were betting that the pandemic was going to negatively affect their business and i was i was not only betting that it was going to positively affect their business but i was also betting that there was going to actually be a spike in business because my theory at the time which was validated afterwards after i took over the business was the pandemic had caused a lot of people to stay in place um nobody's really moving if they can to a new apartment or a new house during the pandemic and i said well if there's this huge backlog of people that need to move then once the pandemic is over or we open up a little bit then there's going to be a huge surge in people moving and when people move into new apartments that's good for my business um so that that was sort of my my mentality when i was going through the the negotiation process with them and and this is the appropriate moment to tell people exactly what new velodis did right right so new valdez is a cleaning service that focuses on apartment complexes so before i took over they primarily did cleaning a little bit of painting and when i got there i quickly realized that um there was an opportunity to rebrand the company as a turnover service so a turnover an apartment turnover is when one tenant moves out of the unit and and the property needs to get it turned over and ready for the next tenant to move in and it's an incredibly important part of the life cycle of a property because a it's your first impression for your new quote unquote customer right so if the apartment's a mess and they're not happy when they get in there that's going to affect your renewal rates when it comes time to renew your lease and then two if if that turnover period is delayed well that's uh every day that it's delayed is another day that the property is not monetizing that unit or collecting rent so they're all about doing you know really making a really great first impression on their tenants and and getting that unit turned over and ready as quickly as possible so that they can start collecting rent on that unit so i rebranded and restructured it into an apartment turnover service which means that we're not just a cleaning company we're now offering cleaning painting uh carpet cleaning which is just steam clean we have an industrial steam cleaning machine that does the carpets and also punchless services which is essentially a trained kind of handyman or technician goes into the unit and checks the light fixtures checks the faucets the plumbing the um appliances and all that stuff and um tells the property manager what needs to be repaired before the the next tenant moves in but when you were looking at buying this business apartment turnovers was part of was a big part of the business but they weren't doing as they weren't like solely devoted to that am i am i right about that yeah that's that's correct so they were doing they were doing residential and a few other types of uh cleanings like airbnb cleanings for example and when i took over the business i politely fired any non-apartment complex customers and said let's just focus on our niche here this is our niche it's apartment complexes and let's be the best in the business at doing these turnovers that was a big strategic decision on your part walk me through it a little bit so so um lay out exactly the the different customer sets that you had and why you didn't like each one and why you did like apartment turnovers and why you doubled down and expanded that so when i took over the business they had a few residential customers um maybe five percent of the business was residential i would say 10 or 15 percent were airbnb and then the rest was various apartment complexes across davidson county which is where nashville is the uh the residential customers like i said earlier on um it's a huge it's a huge pain because it's it's their house right it's so they're you know we were getting accused of stealing things and nothing's ever good enough so it was just like the amount of kind of callbacks was what we call in the industry the amount of callbacks that we were getting is it made them not really profitable um and you know my my workers weren't happy they're never happy to have to go back because that's gas that's time so though that was extremely problematic and quite obvious to me um that that wasn't a really great uh customer segment to go after um well it sounds like even before you bought the business you already had a bias against doing residential so you were already pretty much like decided you want you wanted out of that business exactly um it's also you know it's also it's a luxury service for the most part which i don't think is very like recession proof so if we were going to go through a crazy recession because of the pandemic less people are going to use res use cleaning for the residencies whereas apartments you know that's apartments are going to always do great especially in a pandemic less people are going to be buying houses more people are going to be living in apartments um so that was another thing that was quite obvious to me at the time airbnbs um they're usually run by management companies and they're very specific about how they want the apartment to to look and be set up so we were not just being asked to clean um we were being asked to stack the silverware in a certain manner put the cups in the cabinets in a certain manner arrange the pillows on the bed in a certain manner it was just too too many details to to be able to manage versus a vacant apartment which is you go in and you clean it it's pretty straight forward or you go and you paint it you don't have to worry about you know if you're painting you have to worry about getting paint on the furniture or putting a drop cloth over the couch or anything like that so i was like the the vacant apartment units are are the easiest and uh they're the the recession proof um and we get we don't get as many callbacks for those so let's let's just cut the difficult customer segments and focus on a niche that's profitable and less cumbersome great now what about the fact on the airbnb ones the that your your whole initial kind of what piqued your interest about cleaning was that friend of yours who said look at airbnbs and so that that was yeah that was your kind of entree into this whole world of cleaning but what you found is that it's actually not that great or at least turns is doing apartments is even better yeah yeah that's right and i think i also want to make it easier for my workers to do a good job like i think that's one of one of my jobs as the leader of this business is to do as many things as i can to make it easier for my contract my workers to do a good job with their jobs so airbnbs if you think about them they're um they're not going to be the same they're not going to be consistent across all non-standard everyone is different it's not standardized exactly but with apartment complexes we know that every unit is generally going to be the same we know the property manager there and the workers really get to know what's expected and what the standards are for that property and you know what the layout of the the units are and things like that um so that that was another reason why airbnb's just didn't seem feasible uh to me what do gross margins look like in this business so what do you what what can you charge to turn uh to clean a unit that's turning over and then what do you have to you know pay your people and what does it cost to actually do the work so i heard on a podcast at some point um that was focused on cleaning uh businesses that the the general kind of ratio should be um 50 cost of goods sold so if i'm charging like i i'll charge um about 125 for a one bedroom unit um and then my cost of goods sold which is what i'm paying my cleaners is about 60 that's what i pay some of the better cleaners sorry i'm getting i can start this over well yeah i'm getting vibrated here yeah it's weirdly loud so we'll cut this okay just put this over here so that doesn't happen again um yeah do you want to maybe just repeat that question sure so what are your what do gross margins look like in in the apartment turnover business so so what what can what do you typically charge for say a one bedroom unit and then what are your costs yeah i heard on a podcast at some point um that the general ratio should be about fifty percent uh cost of goods sold 30 overhead and 20 profit so that's generally the framework that i try to use it's not always perfect but on average that's what i try to look at in aggregate for to come up with my pricing and how much i charge i pay my my workers so like a one bedroom unit for example if we were to clean that um i would charge somewhere around 125 dollars i'm paying my cleaners about 60 dollars i try to keep that uh pretty consistent as well with with the painters um but some some of my services um for example like if i was gonna do an amenity painting like i was going to paint hallways and things like that i can't do 50 because that would jack the price through the roof so um so that's going to be that's going to throw my ratio off a little bit so i try to add in like for the 125 that i did a one bedroom unit that five dollars you know that that'll add up over time and hopefully rebalance me more towards the 50 so i always try to go a little bit higher than 50 cost of goods sold when it's when it comes to pricing okay and so what does growth for your business look like um obviously it's great to be in a in a town where there's new development because there's you know the pie is expanding there's new apartment buildings to service um is this is this a niche that that other competitors of yours have have also put a stake in the ground to um you know be the apartment turnover services in nashville tell me tell me what your plan is to to build to grow sales yeah part of the rebranding and restructuring process to become a turnover service rather than a cleaning service was because i knew that was something that would be extremely valuable to the property managers who are my primary decision makers and customers um the reason for that is because if they were to if in order to turn a unit over you usually need cleaning painting if you have carpets carpet cleaning and sometimes punch list and without offering all of those services the property manager would have to go to a different company for each of those services which means that they're managing three or four different vendors they're managing scheduling if one of they have to happen in a certain sequence too so if one of the vendors cancels or reschedules now that affects the other vendors and so they're playing all of this crazy communication across those vendors so i think it's an extreme value add that they have kind of one throat to choke is which is what we said in software um they have one vendor to call for for the entire process and so uh no one else in nashville is doing that right now um and and i've been told that um i've been told that we're the only one doing that so so that that's to me that's that's great for our business great for our branding and uh it's actually spread through word of mouth that's been my my main source of inbound leads is word of mouth um the the property management industry it's a small little tight-knit community in nashville and they're always talking to each other um and recommending different solutions and different vendors for different things so um as far as my growth is concerned i'm actually not quite i'm not really focused too much on marketing i'm really focused on quality i'm doing a good job to maintain that inbound stream of referrals i think that that's sort of how i look at growth if we're doing a really good job and delivering high quality services to our customers then word is going to spread especially it's a small town and we're the only game in town that's really offering all four of these services so i joined a greater national apartment association i show up to the meetings there it's honestly from a sales guy perspective i don't want to sound you know crass or anything like that but my mouth waters every single time i go there because it's just a concentrated group of property managers in a room and i show up with my new valdez shirt on my new velodys hat on and i'm giving out business cards and each time i go to one of those you know meetups i'll get one or two new customers and you know of course they they validate i i that that we do a good job by talking to some of my other customers and um so my my marketing strategy is to do a really good job for my customers so that when they get that phone call from a new prospective customer that i get positive reviews and they bring me on board and so far that's been working and is apartment turnovers currently a pain point for many of them or i guess i guess one of the pain points you did identify is that for for many of them there is no all-in-one solution like yours so they're having to project manage the turnover and and you come in and you say i'll do it all for you you don't have to think about it um so i guess there's that but is there anything else like is this is this something where you know it's it's really hard for them to find good people to help them turn over a unit and so everybody's kind of thirsty for a really professionalized solution it seems to me it seems to be that a lot of my competitors across those different services are their their mom and pop shops that um reliability and quality seem to be the pain points of customers that are looking to replace their current vendors so reliability meaning do they pick up the phone when we call them do they get us on the schedule immediately or are they not showing up sometimes things like that quality are they doing a good job does the apartment look great is it sparkling after going there and so i try to deliver on both of those on both of those things reliability you know i'm spending a good amount of my overhead on um i have two great full-time employees um one of them is in charge of scheduling and customer service and in the next few weeks i'm actually bringing on a virtual assistant to help her with scheduling because we're getting so busy so i'm going to have a whole kind of new way of scheduling that's going to really relieve her so that she can focus on the customers a little bit more and deliver even better customer service but she picks up the phone she'll get right back to she's doing a great job and then the on the quality side of things i'm investing heavily in that as well i have a full-time quality assurance manager we just hired an assistant for him and their whole gig is that they go in behind the workers and do an inspection of the job that they just did and if it's something trivial they'll fix it on the spot if it's something a little bit more involved they'll actually call the contractor go to go back and then i've kind of uh managed him to um provide training for the uh the workers on what the common mistakes are that necessitate him to fix those issues or call them back so we're constantly trying to learn from mistakes and improve the quality of work um yeah i would say george that that all sounds well and good but that it's expensive to hire a full-time quality assurance person so um i guess since you've done it the business can afford it but my question is you know can the business afford it like you know i'm sure your competition would also like to have a quality assurance person so there's enough meat on the bone here that you can have a full-time quality assurance person and then it's keeping track of that's going in behind every cleaning and then it's noting where the problem areas are and retraining retraining your crews to improve the next time i mean that that all sounds awesome but expensive yeah well you know just like i talked about in the beginning about selecting a an industry with recurring revenue recurring revenue customers that's pinnacle to my business model is making sure that once i win a customer they stick with us so that's my insurance policy to make sure that once i win a customer they're going to be a customer for life or for years and years and so uh it it also enables me to focus on what i do best which is sales and getting new customers um and so i am paying for the insurance of being able to win a customer and keep it and then also to be able to win a customer throw it into our business machine and not really have to worry about that afterwards so your right does cut into my margins but the market is so big here there's so many apartment complexes that could could use us that i would rather just buy that assurance and focus on winning new customers like it's it's a vol for me still it's a volume game right so i just need to even though my margins are a little bit smaller because i'm paying for the quality assurance i am focused on making up for that by adding more and more customers and and being confident that we can actually service those customers in a quality manner well it's like you said i mean if your if your marketing strategy is essentially word of mouth and word of mouth is going to be driven by quality it's almost like that quality assurance cost center in your business is almost like kind of you could see it as a marketing cost also this is going to kind of like sas models but um you know if it increases your ltv you know the lifetime value of these customers like more than the cost the additional cost of the quality assurance manager then then it's actually roi positive if you keep if you keep a customer for you know four years instead of two years then it you know it it's not even a cost center it's actually roi positive to do it so very interesting um we actually we haven't gotten into the numbers george the the juiciest part so tell us what you you you know tell us what the business looked like size wise when you bought it um you know uh multiples what you bought it for anything that you can share would be great sure yeah as you know i was a little hesitant to offer these numbers but you know just because i like to keep things close to vest in general but i figured this would be really helpful information to have for your listeners and i certainly wish that i heard more of this when i was going through the process so happy to share appreciate that yeah so i bought the business for 590 000 and that was uh 350 thousand dollars worth of a sba loan and the remaining 240 000 was a was seller financed over seven years with the first year deferred and anybody that is doing seller financing as a component of their acquisition i would highly highly recommend negotiating deferring the first year's payments um what that will do is give you just a little bit of breathing room to not have to make those payments every month and it really helped me with my cash flow because cash flow was probably the biggest challenge that i faced when i took over the business george in our pre-call you had mentioned to me that when you in your first month or two or three in the business you actually suffered a cash flow crunch because there was something that you kind of it overlooked or not fully understood um and you wanted to make a point that you know others learn from your your momentary pain there so walk me through yeah i hope anybody uh who's listening takes this very seriously because it was certainly a scary couple of months but essentially when i was you know modeling out the finances of this business meaning what are my projected what's my projected income and what are my projected expenses month by month for the future i had not taken into account certain things that would be affecting my cash flow so for example what's required in this industry to be paid is you have to go through insurance credentialing process with the property you have to register your ein and tax id with with the property and several other things and until you do those things the customer will not pay you so when i took over the business like i said i had 16 properties i didn't know any of that so i thought oh beautiful i'll immediately start receiving payments and that's going to work right into my model which predicted that i would immediately start receiving payments well that wasn't the case then i had to go through about four to six week process with those 16 properties to get my insurance and everything uh to a place where they could start paying me which is four to six weeks where i'm not collecting any money and then i didn't take into account that hey some businesses don't pay some businesses take really long to pay and so i had to uh cope with both of those things which really put me in a cash flow pinch in the beginning few months of taking over the business so i obviously figured it out i got the insurance registered and went through compliance and then another thing that i had to do was instead of waiting to be paid by mail by these customers which usually takes 30 to 60 days i switched a lot of them over to ach payments which takes about two weeks and so after a little while it started to alleviate but i was um that was scary for the first couple months there so i just hope that anybody listening when you take over a new business really understand how the cash is going to flow into your business don't do your projections on an accrual basis do them on a cash flow basis because you really need to understand when that cash is actually going to hit your bank account and is that something that you overlooked in due diligence like that that information was there for you to discover in their financial materials or in asking the sellers like i guess um yeah is there is there some sort of standardized um way that people can get this get this addressed for themselves when they're doing their diligence yeah i mean i think i did overlook it unfortunately i think the question to ask is mr mrs seller can you walk me through exactly step by step all of the things that need to take place in order for that cash to hit my bank account you know are there are there licenses are there credentialing processes um you know how do your how do your customers pay you typically by mail by check by credit card by ach how long does that take that's a big one how long does each of those methodologies take what are your current process how how are your current customers paying you today are are they all paying by credit card are they all paying by ach and that that way you can start to model out exactly when that cash is going to hit your bank account right um so we bought it for 590 000 the business obviously struggled in 2020 but in 2019 their revenue was 927 000 with about 327 of that being ebitda for the business um so i bought it for just under a uh 2x multiple and that was you know that was great um especially because in the cleaning industry usually you see 3x 4x 5x multiples um well and so how were you able to negotiate that was it did it just come down to you happened to catch this couple who were tired and just really wanted to get out essentially i think so i think it was also because we were in a pandemic so the revenue numbers that i just said were 2019 numbers which is the best year that they'd ever had in their business but the 2020 numbers when i was going through the negotiation they took march april may and a little bit of june entirely off so they wound up only doing about 600 000 at the end of the year in 2020 so um if they were like i said they were betting that that was going to be life as usual from then on um and i was betting that it wouldn't be so that's how i was able to get such a heavy discount on the business but you were yeah you were you were betting i mean you were making a pretty big bet that things were going to come back yep for sure yeah good good for you for not only making a gamble but being right it's the important part yeah exactly um okay and so how have what do the numbers look like now a year later yeah so we just had our one year anniversary january 11th and happy to report that we did 1.1 million in revenue and 286 adjusted ebitda after one year of business congratulations and so so that's 1.1 up from what what had it been in 2019 which was the more representative here 927 927 awesome so and any sense of how 2022 will shape up uh i am it's funny because i was just going over my 2022 plan with one of my mentors and i showed her my uh my goals for the year and she was initially shocked and skeptical about it but i'm going to try to double business this year and that does sound outrageous but if you think about it it's only and if you look at the math it's only adding two new properties that meet a certain criteria per month throughout the entire year which is totally doable for example last year i started with about 16 customers in january and i ended up with 49 customers so this year i'm going to try to get from about 49 customers or properties to 71 properties and that should put me about the 2.1 million dollar revenue number and if my spreadsheet isn't lying to me that would put me around the 487 uh ebitda range and that number is that after paying you yes yep after paying so you're taking a salary of some i assume six six-figure low six-figure salary mm-hmm yep great well congratulations um and and so you had said that the market for your services is so large in nashville alone um so you've just you've got a lot of a lot of hunting to do there in your home market is this something that you could see taking to other cities i know that that would mean all sorts of different infrastructure but how do you envision this long term yeah well you know the beautiful thing about acquisitions is uh your second one if you're doing a roll up your second one is always going to be way more profitable than the first one because you're essentially cutting the fat off of the second one and there's a huge overlap in how you run your business for example like i wouldn't need to hire another uh office manager who does the scheduling my current office manager could do the scheduling for both this existing business as well as the new business so that's an expense that you would remove from the balance sheet of the uh of the new business so um it's totally in my one to two year plan to acquire another business and roll it up into this one whether that's going to be in nashville or a different city it's tvd it's going to depend on what opportunities i find i probably will start actively looking fairly soon but in nashville um you know the market the market is is here for me and i can grow organically and be just fine and not do any acquisitions and so that's certainly my main focus but it also is a small it's a small industry like i said i don't have too many serious competitors so there aren't really too many companies for me to buy in nashville um yeah but i'm sure there are a few hidden gems that if i come across them i'm certainly going to try to make them an offer but i am looking at huntsville alabama i'm planning on going down there in the next couple of months that's a booming market that's within like a two-hour driving distance of me um and a couple other cities that i'm interested in just because i'm interested in those cities they seem like they would be fun cities um so i'll probably explore those as well but um you know in terms of making an acquisition in another city i would definitely have to be boots on the ground there for a little while to get things set up and and be face to face with my customers and my workers and things like that so it's a much bigger consideration to go to another city rather than to just buy a business that's already in nashville yeah yeah you just talked about your people and i meant to ask earlier so how many people do you have i have two full-time employees and i have about 30 contractors and the 30 contractors with the cleaning crews and the carpet cleaning and et cetera yep and and one of them is a quality assurance technician yeah and that the quality assurance person is actually also a contractor they're not w2 correct yeah and so you just kind of pay everybody on a per job basis except for your two employees yeah and and keyword per job i think that's the way to go versus an hourly rate it's like it incentivizes them to to work quickly and do a lot of jobs in a day rather than take their time with one job and rack up the hours yeah yep one of the things that i i've had a couple of guests on recently that are doing holding companies and thinking about acquisition their careers as acquisitions and they acquire one company and then another that's not necessarily related to the first and you know they over 10 or 30 years they build a portfolio of businesses that they've acquired but as a holding company not as a roll-up so they're not just buying the same company and expanding a single business via acquisition just curious for somebody who's just a recent acquirer and and things seem to be going well after year one it sounds like you're thinking about things from a roll-up in a kind of a roll-up way this is this is going to be your industry for a while did you think about have you thought about doing a holdco instead where you have this great business in nashville that in new veldi's but then you buy a different company in a different industry and work on that one for a couple years and then do it again and hop from thing to thing but retain ownership in all of them yeah i think eventually for sure um i think that's more of a mid to long term plan i'm not married to this industry by any means but um for the short term i think that i have just learned so much about how to run a good business in this sector that i think it would be foolish to not apply that to growing this through acquisitions yep great two personal questions for you george as we wrap up here uh first is how do you like nashville i guess maybe you can't be honest about that one because if you really don't like nashville you don't want that showing up on the pot what do you think of nashville everybody moved here and rent apartments um yeah right nashville is this is my first time living in the south so there's definitely a little bit of culture i don't want to say shock but cultural differences here the uh on the negative side look i mean i'm sorry but i come from the new york city area the food just doesn't hold a candle to what i'm used to and you know a lot of it's fried food and stuff like that so it's that part's tough i mean i haven't could have had a good bagel or slice of pizza in probably a year um but oh my god that was the most new yorker thing ever to say yeah i'm sorry uh it is what it is um but uh there is there is some good southern cuisine that i've actually started to like there my buddy owns a really good gumbo shop called the gumbo bros which is right downtown so if anybody's visiting make sure you hit that up shout out um and i was lucky enough to actually uh find two really good friends who are both entrepreneurs in nashville they're my neighbors here one owns the gumbo shop the other one runs a business called flicked at me which is essentially an led light that you put on your back windshield that can either wave or flick off the car behind you and so the three of us are small business owners and we live in the same building so it's been great to be able to experience they're new to nashville too so we're kind of getting to know nashville together the it's a really fun city there's a ton of live music on broadway there's probably at any given time you know 80 to 100 live bands playing um some great bars and everybody seems to be down for a really good time so i'm having a good time great yeah last question so you are a guy with b2b tech sales that was what your career was up to this point and now you're doing something very different um how do you like how do you feel about it personally it's quite a change yeah it's quite a change um you know there's positives and negatives i would say on the positive side um you know i would say that i was uh when i was in b2b software i was surrounded by re and competing against really really intelligent people um you know with with impressive backgrounds i think in the industry that i'm in right now that's not so much the case which is a little bit of a competitive advantage for me um yeah i i do miss uh some of the you know just being around smart people i really enjoy that so i i don't really quite get to do that in my sector which is why it's great to have two friends that are also small business owners we're constantly talking about business which is awesome but i think that it's it's been um it's been a fun transition you know i think i will eventually get back to technology i'm even thinking of and designing some software systems that might make sense in this industry so that might be the next play for me now um but you know i think it's i think it's been a really i think it's been an easy transition for me because of the transfer of skill set of that that i'm bringing to the table which is sales that that you know selling is selling whether you're selling tech or selling you know cleaning services there's still some fundamental principles and also there's some fundamental joy that i derive from you know i was an athlete so you know it's almost like there's a scoreboard right so it's like either you don't sell them it's pretty binary and i'm pretty competitive i'm competitive with myself and so that part has certainly transferred and i've been enjoying that and what about 2008 george who wanted to be on the on the winning end of the next crisis do you feel like you are that now i think 2008 george would be proud nice cool george how can people reach you online what's the best what's the best way to reach out um you can if you want to follow along my adventures in nashville you can hit me up on instagram george h fallon you can send me an email to george georgevallone.com or you can give me a follow on linkedin cool and that's valon v-a-l-l-o-n-e yep that's right this has been great george thanks a lot for coming on and and sharing your story and your numbers anytime well thanks for having me