Neil Saxon thank you for joining me today on acquiring minds thanks for having me will Neil you and your wife in 2012 acquired a mental health group practice it was a small practice at the time about 10 or 12 clinicians but over the subsequent eight years you grew the practice really quite a bit and it wasn't without some serious challenges which we'll get into but ultimately I think you'd agree it was it was quite a success so we're gonna hear that whole story today why don't you kick us off Neil with two or three minutes just on you and your background and what it was that led you to want to go out and buy a business sure thanks will so I guess to start I'll tell you where I'm at now and then we'll sort of walk backwards right so as of today I've been a retired um person for for about a year and I'm I consider myself an investor so I spend all day you know analyzing my investments everything from stock market rental real estate portfolio of syndication real estate as well and then just starting to get into Angel Investing so that's all the fun glamorous stuff you get to do when you have money but it was certainly not always like that there was there was a lot of before um you know going back I was out of high school I joined the military and I ended up staying in the military for about 10 years and I was an officer in the Navy and my wife was as well we actually got married in college or out after college star and we both joined the military and we had like that leadership background um and when we got out it was time obviously joined the world let's see where we're at it was 2007. we were just on the brink of the financial collapse I was interviewing at Banks of all places so that was interesting I ended up not selecting a bank and I went medical device sales I worked for our company people may have heard of called Johnson and Johnson sir did that for about six years and but really the whole time I was like a secret kind of closeted entrepreneur like I really wanted to get out and do something the timing just didn't quite work out um so took the corporate job did that for a while and eventually got the nerve up in 2012 and we saw this listing for sale which we can get into and uh I went into acquisition business buying and we bought the practice So when you say you saw this business for sale I assume you were looking for businesses for sale so so what what had gotten you interested in in doing that and separately if you were interested in buying a business and becoming an entrepreneur that way had you decided against building something from scratch I had not decided really against anything it was a lot of it had to do with funding and kind of what I could take on at the moment so when I first came out of the military you know I did a brief stint um you know before I took those interviews uh you know let's look at franchises like franchising that's how everybody gets Rich that's what I thought at the time you know and uh did a couple of those Discovery days you do and somehow I just kept getting like into food I don't know why but I just kept going to like these restaurants it just seemed easy to understand and I quickly realized that was not me I mean it was that looked rough the spoilage dealing with all that so you know put it off but still had had those inklings of of wanting to do it so in the time I was working at Johnson Johnson you know I was always I wouldn't say always kind of that last 18 months I heard about a site called Biz Buy sell right and I know it gets a lot of flack these days um but I got to tell you I love buying things that are for sale it's just a lot easier you know read some books and it's talking about sending out flyers and you know basically all this cold calling I had none of those skills I was whoops I was uh I was ready to look for something that was for sale and I came across when we were on Thanksgiving dinner um I came across a mental health practice now the whole time my wife is a psychologist she had nothing to do with this wanting to go into business at the time but I happened to find something mental health practice we had just been talking about her job and how you know for the amount of Education she's got we didn't feel like it was enough income so you know I woke her up from her nap let her let her know Thanksgiving turkey's wearing off I said hey we got this business for sale and uh kind of gave you the nod okay sure I sent off uh and she was still still drowsy from the turkey I guess she had no idea what I was talking about and I filled out the NDA the broker got back to me pretty quick which I learned is actually rare but but I had a unique experience like this person was on it even on Thanksgiving holiday and so you know that's obviously the end of November and by Christmas you know we had we were closing we were coming in on closing like a January close and we were we were business owners and was this a something that you guys were going to dive into full time or was this something you're going to be able to have on the side it would get and also what was the listing price give us some of the parameters of this of this business sure I guess that's important because you know people need to realize what's possible for me I was searching um up to 150 000. because I didn't know how this was going to go down um this business was for sale for a hundred thousand at the time and so we like you know we liked what we saw it was a hundred thousand the clinician it was a clinician that owned it was running it and she was you know claiming to make about 120 000. so the idea is all right well we'll go in it's sort of like a buying the job at worst case scenario yeah it was new we'd figured out and grow it but it was the worst case scenario that you'll go kind of have this job you'll make 120 Grand all right sweet let's go for it made our offer and of course we suddenly had a competitive offer and we went back and forth sort of like on real estate and we ended up paying more we did this uh we didn't have more money but we made this this offer I thought was unique at the time we said we'll pay you 120 but we need seller financing even though the other people's offered they told us it was like 105. but I just thought let's go above and beyond let's make one let's go 120 but let's get this financing so we did and we ended up having to put 50 Grand into the business through cash just from what I'd save bonus checks you know getting ready for this and then we did another the other 70 left over through seller financing and we paid that over three years oh great so you only put 50 down and then and then the rep so that's whatever that is like 60 seller financing great and so the idea was that you worst case scenario you're buying a job or you guys were gonna you guys were gonna get in and start working in the business from day one or only if you absolutely had to and you're going to keep your day jobs no she was definitely I mean I think from the get-go obviously she's going to go hardcore try to run this and grow it um it was sort of the fallback was all right well it makes you know it makes 120 Grand that's still better than what you're currently being paid for me unknown I still had this job um it wasn't enough to support you know me leaving at the time it was a you know six figure job but it was depending on how it go you could make 150 a year you can make 225 a year just based on how commissions were yeah so we weren't I wasn't quite ready to leave that but definitely jumping in with all of my energy I mean being a married couple we discussed it at night it's on the weekends for anybody that's thinking about going into entrepreneurship I wouldn't say you have to love it it's not always a love thing but you definitely have to be into it enough to want to discuss it right so it's going to be on your plate a lot um yeah so that's where we were we thought we'd buy the job you know you're making 120 it's going to be great everything's going to be exactly what the seller said yeah so what'd you find well we did that first meeting you know we were anxious we we did the typical new business owner parade where you tell everybody you're not going to change anything they're all amazing it's running great we're going to keep it going and we did that we did that speech and really quick really quickly we learned that this business doesn't make 120 000. this business doesn't make a dollar like this is bad like it was bad it was it was really bad um payrolls were coming up and you know you're having to fund at that time I think payrolls were like maybe like 15 000 every two weeks and it's like you know you fast forward three months into this it's like every single payroll I'm depositing you know two grand 2200 1400 just down to the wire trying to make it out of your own pocket you mean out of wrong pocket yeah and it was uh I'll say one thing if you get into a business like this that's sort of I'll call it on the ropes it's nice to have the superpower of being able to do one of the tasks so my wife is a clinician yeah she could just turn the notch she can go see patients she knows how to grind she can work 10 hours a day so you know we didn't have any kids at the time that's what we did she she she did the grind to make up the difference yeah um yeah you could do it if you're a great salesperson you know depending on the industry what the job is but you know you got to be able to do something more than just accounting and strategy yeah something that's Revenue generating is you know it really it really saved us um what had the business misrepresented or or kind of mischaracterized to claim 120 in profit and really not be profiting at all so I I think you're an echo in my head because that's what I was saying to myself like every month we're like we're asking that exact same question and you just could not figure it out and over time you know we learned I mean there were some some things going on there was some people not reporting all of their um Revenue um there was yeah there was there was stuff that needed to change we needed a culture change and we needed it fast okay mainly it was the margins were just off so typically you know you get into this this world and it could be similar to the chiropractors or dentists you know but in our world it's like a split the time of 1089s so it's like a 60 40 split it's a 70 30 split you know depends where you go when we were there it was you know we took it over at 70 30. when the clinician takes 70. the business takes 30. but then there was another clinician that had a sweetheart deal that was getting 80. and there was another one that was getting 90. you know and these were these these turned out to be the highest producing clinicians so we had our highest producing Revenue at our lowest margin yeah so once that map and that was that was unavailable to US during due diligence you know going back if I looked at it now I would have looked at quality of earnings I would have I would have nailed it I would have figured it out I've gone through this enough times at the time I didn't you know we sort of leaped in it's amazing to look back and think oh wow it took like 20 days of due diligence we must have really wanted us yeah we were really confident so uh which is crazy now but you know it is I guess sort of that analysis paralysis very glad we did it over time not so much in the moment and did you did you confront the seller when it looked like there that they were off by 120 000 in profit so I would start the emails uh you know in preparation for this podcast I went back and searched like my emails with the broker you know and there's this one and I'm like going to the broker it's like it's like month six and I'm saying I can't I can't get a hold of this person they're off the reservation like this person is not responding to emails they're not responding to phone calls the whole time I'm still saying please and thank you when I send my my check you know this eight thousand dollars every quarter whatever it was um and it's just like baffling me why is this person not getting back but I I didn't want to create a lot of friction because I just I I kind of need we needed her help and it just eventually was not available so I started getting you know a little angry and my phone call was to my lawyer to say which I didn't really have a lawyer at that point it's like you got to find somebody right so I found somebody and yeah my new lawyer this is my guy get ready um he's actually really good I still use them but we you know he just this guy's like very blunt he listened to my whole story he's constantly cutting me off and then he's just like all right what do you want to do you want to you want to go after her you want to go after and make her take the business back and I was like no what do you want to do as I said well I don't want to do that but I just want to get something you see he's like either you go all the way take her to court try to get your money back and give her this business back or we have nothing to talk about because oh okay well right he was very blind in the end you know to us it was everything we had and so it was like almost all of our networks I mean we had a house and stuff but uh we were all in you know it doesn't sound like a lot of money but we were all in so for me to go and Sue and just like in the dreams like nah man we're not quitters like we're gonna we're gonna keep going we're gonna figure this out um and I just want her to call me back I just want the zone to call me back that's what I want yeah I'm just trying to say hey what's going on you said it this person brought a mess and like where's it at yeah um so anyway we we looked and like I said this this is you know it's been a long time but I'll say around month five month six um you know I talked to my wife she's she's the professional she's in the industry what do we have here that's valuable and what we have that's valuable is the contracts with the insurance companies so when you're in this space you can either go cash right you can have a bunch of clinicians that go out and Market they get on Yelp and they maybe some flyers or however they acquire their customer and then they take cash and then you have another side where they take insurance and the way it works in medicine if you ever try to go to your doctor your dentist like there's always a weight they can very rarely get you at the next day this is maybe a month out maybe three weeks right so what we had was those insurance contracts would allow which allowed you to sort of turn the dial on um you know demand so that was your demand dial and so the insurance companies just you were in like like when I go looking for a healthcare provider for my on my insurance company's website you know I look in my local zip code I find somebody with good reviews and I call them up and so you're kind of being public um marketed to the end consumer of the insurance companies and so they're they're just finding you that way so you don't really have to do any proactive marketing no and we did some marketing we learned over time it's much more efficient just to go where the need is you know partner with Blue Cross Blue Shield Kaiser whoever it is and just figure out what neighborhoods they need you in and just hired and Supply them that way yeah so that's we had that was that was the power here and I say the power because you know I'm sure someone could read a book and they can go out in a single clinician they can get a contract that's not hard but to get a group contract is actually fairly difficult in this market because it's so saturated you know we're talking Los Angeles um so that that was the value it was you know taking that and then figuring it out and expanding it so we knew we knew we had to do but those were big words that's big talk in the meantime I need two thousand dollars so I can go deposit it and make payroll so that's where we were Neil you're you're you're feeling like you've got some value in the business and you're feeling like if you can grow it it can become profitable but you're still at a point even with this value these these insurance contracts and relationships it's still not very profitable or profitable at all so you're banking on being able to grow it to make it profitable well we had we had a margin problem so you know we could we we were not profitable on our own but you had this driver of the bus being my wife they could see clinicians so she was able to keep it you know sort of keep it breathing keep it alive that way but we had a margin problem so the issue was well let's go let's go let's grow whoa wait a minute growing's not gonna help it's just gonna instead of two thousand dollars payroll we're gonna need three thousand dollars so we have to fix the margins and what does that mean in this world it means we have to change the pay that's our lever we had one location so you had rent and the fixed expenses there you know you're not going to save your way to Greatness there's only so many things you can turn off um so you need to kind of grow to Greatness but you don't just want to grow if the margins aren't right so you got to fix you know call this the base you got to fix that first but we had just gone in and give that given a speech or we're not going to change anything so it's like oh man what do you do well you had to make the hard decision that's what we're gonna have to do is make a change so we had spreadsheets going on well what if we go you know remember they're they're generally everyone's at 70. it's a few higher but everyone's at 70 so we said okay what if we go to 68 but what if we go to 65 and ultimately we said we have to rip the Mandate off we have to go to 60 like this is where it needs to be or this is just you know we're just going to half half week you know execute the plan here if we only go to 65. yeah so we had that mandatory meeting it was on a Saturday called everybody yeah and it was tough it was tough but we um you know we went in we gathered everybody and within you know 10 seconds we told them we should have got some some possibly disturbing news for you but then we're going to tell you you know where we're going to go from here so as of right now the pay plan that you're currently on is no longer available you know I mean it was like that direct we had to do it you saw the faces drop I mean it was all the emotions the the chatter was going on and then and you know just some of these people are going from 70 to 60 but some people are like that one or two high volume therapist or clinician are going from 80 to 60. so they're seeing yes so we knew we were probably you know we're probably going to lose some people yeah and ultimately we did we lost um you know it was a full cultural flush out I mean I want to say like 90 left and amazingly the ones that stayed are like they're still there today it's great it's great eight years later so it's back to that you know I don't I don't want to put it all on them like if you were to find them today they might really have some disagreements like whoa I was just working there what do you mean but um you know anybody who gets their pay cut by a new owner is just going to feel like it's not fair it's just human nature yeah so it was the right thing let them go we're not angry about it we get it go somewhere else Thrive do your thing hopefully it works out so we didn't hold any regrets it's just a decision we had to make so we did it and you know you immediately saw the change immediately saw the change you could immediately make payroll yeah so that worked out so you lose some of the some of the people but uh you understand no harm no foul nor no hard feelings I should say and now you you know you fix your margin problem and you're what at what like eight eight clinicians left seven or eight clinicians this is six years but they didn't leave immediately right so this is another thing you know I think we think as you know entrepreneurs we're so scared of all the employees leaving and when you acquire a business especially if you make a change but the reality is these people need the paycheck they they're not most of them are not independently wealthy they can't make a change immediately we did lose uh one or two pretty quickly like within a month but the rest took I mean some of them they stayed over a year you know they eventually funneled out but they you know they had their own process they had to come to it it wasn't just like that day they left so it did take a while um and we threw all of ranch you know for us we we it wasn't just hey we're gonna lower this so that we can make money and all get richer that was not the talk it's like we want to grow we want to create more opportunities for people and we want to have a better facility so one of the things we did I mean immediately like within the next few weeks is it's a small thing but it was a gesture it's you know we gutted um the waiting room and redec you know we had an interior designer we redecorated we painted new blinds you know just to show them like going forward this is going to be a different organization yeah yeah it's going to be high quality yeah Neil so are we past the point where you guys think about reselling the business we talked about your lawyer saying do you want to give the business back or force her to take it back the seller to take it back but you you had also told me that there were moments where your eye on Craigslist and like should we just put this thing on Craigslist sell it sell it to the world so I'll have to go back a little bit on that that was around the pay the pay change which was incredibly you know here we are six months after ownership you know our family you know just because the way they romanticize about everybody thinks like oh they're rich now and they've got all this money and you know Meanwhile we're like we're we're like failing here like this is hard and uh at one point yeah we're all back in the we have this like detached garage because we had family over so it was like we have to we have to go talk we need to go discuss this and it was around payroll things it's just like we can't do this again and uh and yeah then it came like what if we just let's just put on Craigslist let's put on Craigslist 50 Grand be done with it and that was that I think that was part of that healing process of getting to where nope we're gonna move forward we're gonna go and you know that moment I don't know if that was the exact moment but me and my wife have for years learned um from that event especially working together as entrepreneurs um if one of us gets low the other one has to stay up we can't go into that mindset together and then it's going to flip the other one's going to go down and then the other one has to stay up like you just have to bring each other back up it's sort of that you know like you're running a race and somebody starts walking and oh I'll walk with you no no I'm gonna help you we're gonna push you we're gonna keep going so we did that um no planning to do it but we just did and that was that you know I call it the Craigslist moment that's no we're not going to sell it we're going to go in there we're gonna make the change we're just gonna do it so that was cool that was I think where you heard about me because I put that on a tweet and uh yeah but it's cool it's like when you when you face kind of giving up for lack of a better phrase yeah and you choose not to give up if something shifts in your mind where you're like not only if I'm not giving up I'm going to give this 110 I'm going to make this work and it's like you came out of that flirtation with giving up way way more committed to the business yeah absolutely and you know we still didn't have all the answers done yeah but we knew we're going to find him and this is one step we're going to take it's gonna be the pay it's not going to solve everything we're gonna do this now and then we're gonna check again and then we're gonna check it again and then you know that brought us to where no we prefer plug the hole so we're sustaining still not thriving but sustaining so now we get into you know what I'll call chapter two which is growth mode um and for us so again big step we have six we have uh six office facility so we're gonna go grow and um that first location we did we expanded by four rooms so now we went like clear across town four roads yeah yeah we're big we're hardcore right and and we did it we scaled very quickly I mean like two months everybody's full it's like wow okay that was good revenues are going up you know it's that kind of Revenue is is Vanity Vanity profits or sanity um the profits still weren't high they were just like just making it just barely making it but that's when I got into my my mode of you know forecasting I'm looking at the budget out the next 12 months and I can see like this thing is so close like we're gonna get there we're gonna get there we're you know 1.2 million 1.4 million oh we're so close and then finally we grew it to 2 million two million dollars uh in annual revenue what year are we in now Neil you started in 2012 what year is it that you get to 2 million yeah so we're at 2 million year six that's how long this took us and what was Revenue when you acquired it I know with the plain price yeah a day once uh when we acquired it was based on 615 000 in Revenue okay okay yeah and then and then that went down we were in the low fives and that was our only loss wow as far as Revenue was that first year where we went down 50 and then since then you know as we go to the end of the story here we grew 20 plus percent every single year some years as high as 56 percent and this was when you were including those years where you were just growing by you know acquire incrementally with the additional four unit office and you know the small offices were you also seeing that really good growth or was that big growth only unlocked once you the unlocked growth came after the 2 million so it was the first two took us six years small offices save up for the down payment save up for the furniture you know do some of the painting and the legwork ourselves just that that grind and then that was a two million but it still wasn't enough it still wasn't like we need to take a risk here and you know I was a little more cautious at the time uh let's get a small unit four units is enough and you know my wife was a little more she wanted to push it no let's get eight units let's let's get seven units so then our next location we went uh seven units and so we thought we were big then right and same thing we drew it really fast she grew it um probably within six months she had everybody full and now we're growing so we go up from two to you know whatever was next um actually 2.8 million is what we eventually hit and then we really started unlocking the growth and I'll give you the recipe that we did we I was uh I saw a commercial one day and it was for a it was a tenant-only uh brokerage so they represented people going into office spaces and negotiating leases and it's called Hughes Marina so I called these folks up we did a meeting and it was you know very similar with the commercial set there was a huge firm all throughout the United States and they were on the side of us of the tenants um so we decided all right let's give them a shot and right away these guys performed I mean they're getting us we did a location the first one it was a 400 000 build out uh 10 months of free rent and all of us you know on the landlord and we just thought this is amazing how is this possible like we've been negotiating ourselves getting one month and one time I got three months I thought I was you know hardcore negotiator and now so so what what were they doing yeah was there a secret to it or were they just better negotiators because that's all they did all day long I think it's also notify or looking at who owns the building I mean going deeper right so we were looking we were trapped in this world of small buildings so it was kind of a mom and pop owner so you had a guy that maybe owned the building 15 years you're going in he's not trying to do anything he's not trying to spend a hundred thousand dollars on a build out Jesus he'll give you a decent amount for the for the lease and it's on you but when you get into these bigger class A buildings you know these eight plus story buildings downtown buildings these are owned by large real estate you know syndication investors so they're coming in they're essentially they're doing like a value ad where they uh lease up the entire building improve it and then look at that five year timeline then they're gonna flip it they're gonna sell it so for them to spend because because I had to do this research I was the same way why would they do this so for them that's why they would spend the 400 Grand they're okay with it because they're going to make it up with the increased noi and then they're going to be able to sell their building for a lot more in the end so they're just incentivized to fill the building as quickly as possible because they really unlock their value when they can flip a full building a fully rented building yeah and in fact uh not only that they knew but giving us this build out they were going to get above their current market rent so as to say if it was like I don't remember the numbers but if it was 225 a square foot per month suddenly we come in we're getting this Immaculate build out and you know they can push the rent they can go to 75 because that's the new market rate so that was beneficial to them because the way commercial leases work there's an escalator on it so if you sign a six seven year lease I mean it's a lot higher um towards the end and this was this was a bit this was a big step I I skipped this part but we went from leases that were four thousand five thousand six thousand and this one was suddenly twenty thousand twenty thousand a month um so getting 10 months of free rent was pretty pretty exceptional and uh and then there's another component to that we can hit which is you know whenever you get a six thousand okay great it's free free rent but now it's 6 000 square feet that's a lot of furniture that's a lot of computers yes it is so then we found this little magic thing called um the equipment lease so there's companies out there Balboa uh I mean there's a ton of infused type in equipment lease for business okay and they will they will come in and basically find your purchase of for us it was the furniture and it was the computer so we weren't we were no longer buying cheap furniture my wife was going to West Elm I mean this was this is a lot this is like an 80 000 Furniture expense which sounds crazy even as I say it today but I mean these are therapist offices you know they're like little living rooms yeah right there's no there's no 15 of these in a space and then the 13 little living rooms that you have to make catalog worthy oh we gotta have the lamp like do we have to have another like they have blacks no they had to have the lamp so uh so we did we did that with the equipment leases and that was a big move I mean that's the equipment lease work you know just real quick yeah so you so the simplest is we go to Apple um we're business fire at Apple so they you negotiate what you're gonna buy let's call it uh seventy thousand dollars of computers because you're buying 20 MacBooks or whatever that is and then but we don't pay for it we you know we sort of like send all that off to the um equipment lease company that we've already pre-negotiated us and they wire the money to Apple so they wire as many Apple Apple hands us the stuff or delivers us the stuff and then we start getting a monthly bill so it's like 800 a month 800 a month 800 a month and it's you know you could do four years five years whatever it is we like to match computers we did less but uh Furniture we like to match it to the lease term so it was a seven year lease do a seven year operating lease and uh you know they tack on an interest rate uh six seven eight percent which you know this is allowing you to get into business it's almost like the interest rate is irrelevant even if it was 12 you know if I can cash flow way above that without spending that money on capex you know I'm gonna use the financing so between the certain leases and the Tenant or the landlord assistance then we realize we've unlocked a secret here yeah we can expand faster at the same time right so then we did a second 15 unit place then a third 15 unit place and now we're now we're at I wrote it down so now we went from the 2 million so again six years two million and suddenly we hit 2.8 4.4 the next year was 2.8 the year after that was 4.4 three years after the 2 million is six point yes six six ish and that's one week that's when we exited nice when you exit so Neil you're so just so we understand this basic structure of the business it was essentially um you know the clinicians and a margin on top of the clinicians so paying the clinicians obviously and then the rent and then the Furnishing the the build out and the Furnishing of of the locations those are kind of the big chunks of the business and for those first six years growing a two million you would there was kind of you weren't doing any real financing of the build out and the Furnishing uh and you were all the rent that you were going to pay you needed to be able to cash flow that rent immediately or have enough in reserves to be able to pay for a new location even though the therapy the clinicians didn't have enough you know weren't full yet all right but you needed to pay for it and so once you kind of flip that and you could Finance all that that was just a dramatic change because you could basically open a new location and be cash flowing going I mean you just needed to fill the clinicians a little bit like some smaller percentage of what you needed to do before and you were cash flowing that new location you were cash flow positive absolutely so you give you give up a little bit of you know maybe a point or so on in the fixed um cost but you didn't have you know I didn't have 300 000 to spend on furniture computers I I didn't have it so yeah the financing enabled it so I mean if I was super liquid maybe the thing is like oh no it's a better move always be cash and do it yourself okay great but the financing is what really propelled it I mean this is what this is what any you know Company on Wall Street does I mean you they're using that debt to accelerate growth and it sure when you kind of unlock that as a small business owner it can be very powerful I mean this isn't just in our space you can if you own a HVAC company or Plumbing you know it's a big Endeavor hey we're gonna how are we gonna get four vans and all these tools well I would encourage you to take a look at the financing options because you could do it for a lot less than you think and now you're up and running you got four four trucks four texts and your go and the other side of the equation Neil of course is is demand which we touched on that those insurance contracts were a good source of demand but it sounds like the demand was just off the charts like you turn on a new location and I think you said at some point like within six months your wife had filled everybody's calendar filled everybody's um I don't know what the you know the calendar I guess okay I don't know what the word is in this space Phil devoree's calendar so there was just that was never an issue you just had you could basically get as much business as you guys could support yeah in the beginning it was an issue when we thought we had to Market and we had to you know send out a flyer and hire hire a marketer to go door-to-door and those things were helpful and I would still say yeah do that do that Outreach but to do it faster is to find out where the insurance companies have need so you know we were able to call one of our providers that had a lot of need again this is Los Angeles mental health demand it's very strong um so we call where do you guys need us oh we you know we really need something in the north part of LA oh really like Pasadena you know so you just sort of keep that relationship open and then we're looking at leases and then you call them one more time it's a little bit of uh trust you call one more time hey what about what about this street is this you think this will be good and they said yeah good we can fill you right away boom silent lease let's go so there was nothing official that like a guarantee that anyone was going to send us this business yeah but we we sort of learned that that was our recipe I'm sure there's many others but you know for us that worked and it is unique that to have a business where the demand lever you can just turn it because that's not you know I realize you can't do that everywhere you can't just Home Improvement oh let's just go that doesn't always work but uh we found that it was working so we wanted to exploit that as much as possible and you know there's a lot of people getting help now through our company and we're proud of that yeah and you know mental health demand is strong now I mean there's big pushes you see commercials commercial Sports so we're improving as far as that goes Neil you you just touched on the fact that you exited um so we're gonna we're gonna hear about that in a second but before we do um could you have continued like if you hadn't exited and you taken the offer to to sell could you have continued to grow at this like new really really accelerated rate yeah we could have so this is why it was tough um you know and once we got I don't know how they figured out but once we got to about 4 million in Revenue we started getting the calls you start getting calls from the search funds from the private equity research I think from Individual uh search funders oh yeah yeah family buyers family family uh funds I guess yeah they've got a CEO ready to go none of that was really appealing and but we learned like the parameters we got to learn this language of what the business owners are looking for you know they start talking about how strong they need even uh we're looking for 700 000 and we're looking for four million in Revenue so you sort of get the windows and even when we start taking these calls we were nowhere near that so you know we're on a phone call and somebody's like well our minimum is 750 oh yeah yeah 750 yeah no problem you know but but it was good it was educational I encourage anybody that's growing their business when you get those calls take them just take the calls you might see on the other end one day and it might change your life you know when you finally learn what they need so and you know you know before you go keep going with the story what were your margins like what of the overall net margin of the business when you were at you know 600 and then 1.4 and 7 and yes so um it was roughly depending on the year between eight and twelve percent let's say net okay um which I've done some Consulting around the country and you could definitely get higher you know you're not paying 20 000 in rent in Idaho so so that was you know rent was a rental thing for me because it was like it was about eight percent of you know if you measure it to revenue it was about eight percent of the cost I always knew like let's keep it eight or below one facility could be nine one could be seven but uh yeah so the margins were depending on the year eight to twelve percent so you can sort of do the math on that it started getting pretty good and and rapidly good too I mean it was you know suddenly you went from not making much money to now it's you know 20 000 a month like in your bank account and that you're writing attractive and it's 40. that's 50 then it's 60 and it's 70. you know so it was getting it was getting fun as far as that goes we felt proud like we're really building something here that's in demand yeah um so yeah so that's the part where we started taking the calls you know we got an offer we didn't like it very backward looking right this is what Searchers want to do they want to look at the last three years sure well I just told you the story the last three years are not remarkable it's the next man it's the future so I want you to see the future you want to look past we got to get somewhere in between so yeah we ended up we ended up just got talking again to another firm a year later and we agreed on that let's look for let's not look back let's pay me on a forward multiple not a backward multiple and that made all the difference you know we definitely sold too early I'll tell you that um even though you were able to finagle something sort of forward-looking multiple just as a philosophy I mean every every rich guy sold too early I mean that's sort of the thing like yes if we stuck there we could have made more and this was an internal struggle um with my wife you know she's put in all this work and she was the the driver of this and wait we're going to do so much more we're gonna do so much more and could we have gotten more absolutely we could have gotten more but there comes a point where we decided we need to take some risk off the table that's it doesn't mean we're done I mean I'm 45 years old like we can we're going to bounce into something else it's just like let's pull these chips off now sort of rest dwell for a moment and then accelerate and do something else so that's ultimately what we did and you know she still works there that's part of the deal typically when a private Equity Firm buys you um so she still works there she's going at a hardcore and yeah of course of course she sees the growth like they did exactly what they're going to do they're going to come and play Private Equity money and growing even faster so they're doing you know we're okay with it all the the years your wife was working in the business was she working just as a clinician alongside everybody else or was she more a manager role in a manager role oh yeah great question so you know there became those moments in the beginning like I said that was sort of the superpower you go out and earn that saves a lot of uh um the law basically losses you plug the losses because you're seeing permissions but eventually we were getting so big that her seeing patients was no longer worth it from removing the focus on the business and growing it and onboarding new people and you've got three people coming in this week and two people starting next week she needed her Focus there so she still you know she is not an entrepreneur at heart she is a clinician at heart so she still sees patience but I would say you know I don't know the number maybe eight or ten a week she's not seeing 30 35 a week um so she focused on the business and then because she wanted to still saw patience but yeah it was it was a lot of her sort of getting out of the way and letting other people see it and Neil just how was running a bit how is running a business with your wife um I thought we were a great team I mean there's definitely no breaks from it so it wasn't like it came home and it was off off our heads we we discussed it a lot but I think we both got energy from it I can't ever remember a conversation um you know in the entire eight years where you know we said I don't want to talk about like we just didn't say that it didn't consume Our Lives we obviously got to a place where we were we were comfortable but it was good we we like to talk about the business so we were we were into it um you know if I was running a plumbing business on the side maybe she's not so into that but this one we were if anything you know she was a little bit um more by herself than this than maybe I'm portraying because you know I'm out here on the outside I'm focusing more on the CFO stuff strategy obviously all our discussions at night I know everything's going on in the company but very few people knew who I was ah yeah especially as we went into this growth mode it just wasn't important they didn't need to see me so you know I was fine backing out of that and you know in the meantime I had my own thing that I was doing so Neil I'm not sure what you said did you say when you stopped working your job and devoted full-time to this no I didn't so I ended up you know she went full time right away um for me because there wasn't enough money we had to wait but then eventually um sort of uh it was like another discussion but then I started another business um a solar installation business which I later sold quickly after about five years okay so that was we you know I shouldn't minimize it because that was incredibly stressful having two businesses at once um for me that one worked out great I was able to exit that one a lot you know earlier nowhere near no it wasn't like this one um but it was enough to pay off all the debt and you know make me comfortable for a little while but uh ultimately it just wasn't the space I wanted to wanted to stay in so wanted to help her and do a lot more time we're we're just about a time meal but I want to ask you two more questions so um we've talked about we've talked around the exit but can you can you give me any more color uh on on this exit to the private Equity company and what that structure was like if you can share any numbers any ranges that'd be awesome yeah I can just give you a range I'll say it's the you know all in we're talking compensation plus stock right this is all pre-ipo stuff you know low low eight figures I'll just sort of leave it at that but it was nice figures from a business that you almost dumped on Craigslist a few years earlier yes it sounds a lot better it sounds a lot better now but yeah there was a lot of a lot of stressful moments but ultimately yeah I'm proud to have done that and that's sort of why I wanted to come on here today I mean you reached out to me sort of a weird thing I don't have anything to sell and I'm a newsletter you know you can follow me on Twitter you know you can see me rumbling on about Tesla and small business and that stuff but uh ultimately I just like you know I'm not shy about it in the sense I think it's it can be inspirational I definitely did not grow up with money and did not grow up with privilege and neither did my wife so I think it's hopeful that people can hear these stories and see that they actually can go and Achieve something with you know basically the American dream yeah yeah no it's a very inspirational story meal and do you think that the what you guys did could be kind of for lack of a better word copied or or like that made a playbook out of what you guys did especially those two the the big two keys to unlocking growth the furniture financing or equipment financing and then the the rent financing essentially or rent negotiation um and then could you know could somebody repeat what you've done and even which by itself is already very impressive but even in a less amount of time less amount of time so there's two issues there at the time and the equipment leases so the time absolutely if we were to go do this today I mean we would basically skip to your sex we wouldn't take six years I figured out we've already we've figured out the code so yeah I think we could do this a lot faster um there's no reason to wait to six years as far as the equipment leasing that's something I've recommended you know doing the Consulting work I'll do occasionally I mean it's a wait online just unlock growth there's you can Finance it right away instead of giving away your precious capital I mean even if you do have money things happen we're in a pandemic still I believe so you know anything can happen cash is nice to have in those times and the marginal rates you're going to pay on the interest even if it's as high as 10 percent is really going to be unnoticeable from the growth that you can get so I would say you know really any business that involves growth not all businesses are growth but the ones that involve physical expansion equipment leases are key and getting a strong um broker that can negotiate these leases with these big doll outs I think that's available throughout the country it's not going to be advertised as available but it is available I mean these are this is just a real estate deal yeah this happens all around the world yeah and Neil talk to me just quickly on just about the the mental health or group practice industry or space um yeah the specifics of it sounds like you weren't really in the business much your wife was doing that but is there anything Pros cons that that you can share there I mean you're helping people so I imagine that would be one of the big pros of the business any anything else yeah I mean you've got people that come into this world you know they're not coming into it necessarily to make money they're coming in to help people right right so that's the people you're attracting which I think is why we found early on this business structure you know the person who sold us she wasn't malicious and what she was doing it's just she basically hired her friends she heard her friends she gave her best friends the best rights and then it grew out of control that she can handle it as far as what we're doing yes it's happening through the United States there's a there's like a boom in mental health I would say or certainly a boom and like private Equity getting involved and you'll see this it happens in different spaces and it doesn't last forever right I remember like about a decade ago you saw private Equity coming in buying HVAC and plumbing companies and they're buying a lot of them and suddenly you know now there's these big firms at 500 trucks rolling around you know in like Minnesota which may you know makes no sense when you hear it and that's sort of dried up and now I think that is happening in mental health I think the runway is long um because there's still a stigma where people will not get therapy yeah so we're not like to me we're at the bottom of the s-curve as far as how big the industry can be once there's normalization of it yeah so yeah I feel strong on the Outlook of Mental Health and um what about buying a business you know so you it sounds like you'd also started one from scratch the solar installation company you started that from scratch yeah so you've now done both you've started from scratch and you've done business acquisition acquisition entrepreneurship any thoughts on acquisition entrepreneurship or for for you and your wife's next ACT if you'll do one or the other yeah so for for me personally I'm no longer into the starting thing I mean if it's like a small thing maybe I'm going to start a Consulting office can I keep it small if that's the focus but for me I would rather acquire you can acquire you know sort of on second base even if you acquired a mediocre business you've got the base it doesn't have to be a home run the home runs probably not going to be for sale but you can get a decent business staffed with employees that has a location a name and a market a proven market and then you can tweak it you can approve it it's just like starting school you don't have all the skills you haven't graduated but you can get in there it's already running so it I mean it's amazing in that way versus starting and grinding and going through all that pain when it's just not necessary it's sort of like a saying well I just want to pay cash for everything I don't want to finance yeah you know the business is like I'm just going to finance there's a little more cost to it but you know I get so far ahead so I'm huge on that and you know wrapping back to the beginning I'm a big fan of buy biscell or just listed businesses there may be a day where that's no longer that no longer does it for me but it's sort of like real estate I like things that are for sale it's just easier yes I might I'd be getting the best deal I don't know I almost feel like I am because I frequently see businesses on business myself that are one to three to four times earnings I mean if someone cold calls me on my profitable business you're not getting it for four times earnings it's not gonna happen ever unless I want out so you know take that for what it's worth something for sale you've got a motivated buyer and a price to start from yeah cool well let's leave it there Neil this was a great it's really a remarkable story um where you guys were so desperate in those first six to 12 months and then you you were tempted to quit you didn't you pushed through you're grinded for about six years at year six you have a couple of epiphanies and then it's just I hate to I hate the phrase but then you kind of Rocket shipped from there for the next few years um and then and then just real quick to say I don't think you said this you sold to this private Equity company and who then went public like six months later 12 months later and you had stock as part of your your deal so you enjoyed the fruits of a public offering as well as you know you get that second bite we call it the second bite of the apple and that's uh you know that's the one you want well cool congratulations Neil thanks for sharing the story with everybody um how could people reach you if they have any questions or need some help some some of your Consulting advice yeah sure will so I mean you could reach me on LinkedIn to search Niels Saxon or on Twitter like I said nothing to sell there on newsletters but I'm at Neil said what if you just want to go back and forth and shoot it and um you know always willing to help good deal thanks a lot Neil all right thanks for having me on well I hope you enjoyed that conversation with Neil Saxon make sure you subscribe to the channel here I'm releasing two new interviews a week with people who have bought businesses so lots more great stories to come stories that will help you along your own path to acquire a business
A husband & wife bought a therapy practice for $120k, almost dumped it, then grew it for 8 years when PE came knocking. ❤️ Enjoy this interview? SUBSCRIBE for more: https://bit.ly/42hLnN0 ❤️ About I’ve been an entrepreneur for most of my career, primarily building online media brands. I sold a few of those businesses, but I’ve never been on the buyer's side of the table. Recently I became curious about buying a business. I found myself browsing the for-sale business marketplaces, imagining the possibilities. And while there were plenty of listings to explore, I couldn’t find much information to guide me through the process of acquiring a business. Unlike start-a-business entrepreneurship, there are not countless channels and podcasts devoted to buy-a-business entrepreneurship. There are still fewer public stories about entrepreneurs who have taken the plunge to buy a business and done well — though I knew such successes are plentiful. Acquiring Minds is a channel to both correct that, and educate me on the journey toward buying a business. Business acquisition is an exciting prospect, and I intend for Acquiring Minds to make the path more accessible to myself and others.