Ben Rizo welcome to acquiring minds thanks Phil great to be here Ben a number of interesting aspects to your story you bought an elevator servicing business which will be fun to learn about it was a business in distress so you essentially acquired a turn around as a firsttime business buyer and you succeeded in turning it around and exited a couple years later so and then the journey continues with another acquisition under your belt and then maybe another so we're going to get into a lot of it all of it we got a lot of ground to cover let's hear some background from you first to get us going Ben absolutely so I I started off as a chemical engineer I did oil and gas engineering uh for a few years and and the key experience that I had in that time was being out in the field working with the men and women who were turning wrenches and understanding the difference of what was going on in the office versus what was actually going on in the field and different motivations and what people saw and we're trying to work towards there had a great experience in the middle of nowhere uh Pennsylvania Texas Texas okoklahoma and a little bit offshore as well went back to business school learned about the search model was very interested in you know small business and that type of stuff um ended up moving to Pittsburgh which where uh my wife is from was very excited to to live here I had worked here previously for shell and decided that I was going to try and find something to to get into myself and you know Pittsburg is where I wanted to be and where I am currently thankfully and it was uh a steady trickle of deal flow because I was so geographically restricted and so I knew I had to kind of broaden my horizons of I gotta find something so I looked at some growth Equity type things traditional search Investments and eventually found uh as it was opposed to me a company where something needed to happen uh through uh a friend of a friend of a lawyer um I was introduced to a business called Hatfield elevator which is elevator service maintenance and repair here in Pittsburgh and also in Harrisburg and they were on the brink of bankruptcy for in my mind all the right reasons it was mismanaged uh unfortunately the guys uh Ben Ben let me stop you because we're we're gonna slow down your story here a little bit okay so when you discovered search in your while in business school what grabbed you uh you know I always always interested in entrepreneurship but I never had any great ideas myself and the opportunity to do entreprene through or you know acquisition and Entrepreneurship together was an ability for me to jump into something you know during business school I started a football helmet company that was a cool idea yeah that was a cool idea that one of my my friends had and we you know had some traction there but it was really frustrating being nominally the business guy running the company working on a technical problem that you know the engineering team was working towards but we weren't weren't making progress so I really just wanted something that I could dig my teeth into and so entrepreneurship through acquisition uh you know stuck out in my head as hey I just get into something and then you're going and that's that's you know when I moved back to Pittsburgh um that's what I set out to do I didn't know exactly what it was going to look like I said I want to get into something and then be able to be entrepreneurial and were were you plugged into the ETA classes or cohorts at your business school yep yes so I took a couple couple of the classes you know learned uh about some of the success stories went to some of the conferences and and just saw people out there doing their thing in the similar way that you see at some of the entrepreneurship conferences you know people have an idea and they go do something um ETA was similarly you find something and then you bring ideas to it and go do something with it great and then what shape was your shirts going to take you've already told us that you wanted to be in Pittsburgh so it was geographically constrained regular listeners know that that probably means one type of search but give us more yeah so it was you know self-funded or wife funded or unfunded any combination of the above all or true and uh you know I I wanted to do the traditional search of go find a million dooll IA business buy it for four times you know that was the ideal thing that I was looking for but I also realized very quickly because of the geographic constraint that I had to broaden my horizons to in any sense of timeliness find something good or reasonable to to get and go with that there were only so many of those in the area that I wanted to be and so I branded myself to the marketplace as a generalist investor of you I'm looking for an opportunity to get into uh and so I ended up uh at some VC type pitches some um later stage startup type things that we're going to tradition switch over to more of a private Equity model anything and everything just to find deal flow and just understand who in the market that I was looking at would had access to Deals and um the deal that I eventually bought the the the tree that got me there was uh I met a guy whose dad does fractional CFO work involved in a lot of different small companies I met his dad his dad said oh you're a guy looking to do something something he invited me to an investment pitch for a startup I went I had no interest in this startup I forget I forget it was like audio processing or something I'm sure they did very well um but I just networked the room and I met uh a wealth manager I said I'm guy looking to buy a business if you know anyone and I met the patent lawyer for this Tech startup and I said I'm a guy looking to buy a business and he said I don't do that but let me introduce you to the guy at my firm who does and a week or two later we went to lunch and I said I'm a guy looking to buy a business and the guy looked at me said huh you know there's a business that I work with where something needs to happen let me see if they want to talk to you and that wasfi elevator I I I love this Ben because you were you were putting yourself out there I don't know if you Ed the word Searcher or any of the kind of language that we're used to you know our inside baseball language yeah um but it feels like you were more just like I just want to I want to get in I want to get in a business I want to buy a business get in and I'm just looking I'm just looking to do you're looking to do something is your phrase it's pretty open-ended but but it seems to have worked for you the closest thing the other deal that I was looking that was a um uh you know kind of call it a tech company that was a startup but not not big VC startup you know small startup that had raised some money that needed needed a new new life blood and you know they had some some installations of their product and they thought it could go to the next level and the guys just didn't the guy running it was ready to be done and there's something there so th those are the types of opportunities that I looked at like there's only so much in the area that I'm looking um I I want to find something to do yeah but it was always going to be some sort of you become owner some version of you becoming owner that was you know I would talk to anyone about oh they want to bring me in to do this or whatever but you know the goal was go like I said the goal was traditional you know search fund model go find something buy it own it run it uh I just recognized that those levers may have had to looked slightly different and the lever I ended up pulling was I got to buy something I got to go run it it was not a traditional million dollar evit to search business yeah yeah and we're going to hear about that in just a sec but the um you know one of one of the elements of your story that you just shared was how it was basically a lawyer who introduced you to Hadfield yeah and and you know one of the things you'll hear in in the tactics about search is network with your local accountants and lawyers yes and and I always I'm not sure I'm probably wrong here but I'm not sure I've actually had a guest do that and have it be what what ends up delivering the lead and so I I've developed a bit of a skepticism around the efficacy of that but it sure seems like it worked in your case do anything more to say about that tactic I uh I promote it aggressively I invest in search broadly uh I think uh I've done 17 or something search Investments across the country in the UK I see deals get done one in the location where the Searcher is usually uh and then two with people in Market I think some of that is changing postco in that smaller investment banks are blasting deals to larger groups and private Equity firms are looking at literally anything but I will tell you of the you know the elevator business the business I just bought and the business that I'm about to buy all of them came through local intermediaries Allah accountants lawyers type people and E even even even two of them to um not not the elevator business but the other two connections to the representative of the business right these are you know banked or broker processes but even getting into those processes came through uh in one case an accountant in one case a lawyer M and th this um this tactic that you are now a big proponent of did you consciously kind of work the networks of accountants and lawyers or just in your broad you were talking to everybody going to everything in Pittsburgh you just it happened to be that an accountant and a lawyer deliver leads to you no the the thesis generally is if a business bus that I wanted to transact with is going to sell someone is going to be involved some sort of an intermediary so obviously hit up the business brokers the bankers those groups um but that was my the thought is hey there's all sorts of these other intermediaries lawyers Accountants wealth managers that many of them I found do some deals you know it's it's not um it's not rare to find an accounting firm that you know they sell some deals for their customers you know there's a couple of them here in Pittsburgh and and I think the other thing that I do caution people and I'm giving them that advice is it depends on what Market you're in uh a city like Pittsburgh is pretty manageable to be honest right it doesn't take long to get to know you know the 15 to 20 firms in town that do Middle Market m&a in the type of thing that I'm in May maybe it's more than that but it doesn't take long to find out who's kind of moving and shaking around if you're in New York or Dallas or San Francisco there are probably thousands of them and the principles at those firms have less time to answer every Searcher call they get MH uh and so that that goes both ways right of it's hard to meet them if you just randomly call them but it's it's easier to stand out if you meet them in person and you know I'm a big proponent of ACG and TMT you know those are Association for corporate growth and turnament turnaround management something uh those are groups where the intermediaries quite frankly gather and you can just show up you you you buy a ticket to the lunch and you sit down and and have the the lunch with you know it's usually retail Bankers commercial bankers lawyers accountants all the people that are private Equity type service providers and most of them like won't give you the time of day as a Searcher U because they do bigger deals or you know they don't work for that type of stuff but that's those are the typ of firms that will have oh we've we've got this million dollar e business that we don't know no don't know what to do about um we've got this opportunity where we don't want to run a full process but you're in town you're here why don't you meet the owner that type of stuff and I think those are those are really good highquality interactions much more so than sending out an email blast to 10,000 people around the country because you know with the technology now other searchers also doing that and private Equity firms are too right like like I mentioned you any sort of a processed deal right now you are likely competing against multiple private Equity firms so you have to stand out in some different way either buy something that they're unwilling to buy or give on some term that they're unwilling to give uh or you be someone that they're not and Searchers can do all those things it just depends on what the right mix of those are in for an individual seller and one of the other great points that you made to me offline was About Accountants and lawyers is that their the their surface area of connections to companies is much broader than than a broker I mean brokers's got the deals that they're working and then they of course they've got a pipeline but you know accountants and and lawyers presumably have dozens and hundreds of clients so you know only some small fraction of those might be for sale or contemplating sale but it's still like the the the you know if you think of an accountant as a node in a network m like they have many more connections coming out of them than absolutely absolutely and their motivations are different right bankers and Brokers are looking to sell businesses for the highest price and so they look at a private equ and say you're probably going to pay the highest price and you'll probably buy multiple businesses from me lawyers and accountants look at things differently because they they may be it may be a client of theirs and they want to keep the business and if that business gets sold to some private Equity Firm in New York they're probably not going to keep the business mhm if you local guy buys the business probably going to keep the business I certainly try and do that with the inter intermediaries around here right if you find me a deal yeah I'm going to keep your services now let's carry on with the story so you are introduced to Hadfield yeah tell us about tell us about this business so elevator service maintenance and repair business covering both Pittsburgh and Harrisburg uh a longtime family business that had run into financial troubles for a couple of reasons one the family was fourth generation family was great at fixing elevators not great at running a business and they kind of had the mindset of if we just do great work everything else will be fine and that worked for a while but not forever the other big cataclysmic issue that they had was they got involved in a very large development where the real estate developer very publicly um you know kind of had some issues and a lot of people did not get paid they ran into a huge financial difficulties around that because you know it was one of the situation hey this is great this is our biggest project ever you know we'll do whatever it takes to keep this person happy you know they went beyond where they should have did not properly protect themselves as things were going wrong and as a result of that they were in you know seven figures of debt to the bank the insurance company the union you know they had just piled on everything to try and make this thing work and so when the rug got pulled out from under them they were in a terrible situ situation financially and yet you firsttimer uh think that you can maybe quote do something here yeah so what I saw in the business was one a great industry right elevator service maintenance repair elevators aren't going anywhere they have to be serviced there's code restrictions that that was really exciting the other aspect was the gold standard in search contractual recurring Revenue every month elevators have to be maintained buildings pay pay these companies to come in every month make sure everything's fine do some adjustments so there was a base of um monthly maintenance Revenue as they call it and that was the thing that got me really excited was hey there's something here at the core that even if everything else is is terrible those contracts are worth something and that was the kind of insight that I was able to one research and verify in the market Market Place talking to you know industry specific contacts Brokers private Equity firms hey how do you value these companies some of some of these companies are valued on Eva some of them are valued on monthly maintenance Revenue so that in my head I could do the calculation hey this I think this company is worth more than the debt load even though the debt load is significant um and worst case scenario where I can if I get in there and I can't you know start making money turn this thing around I can sell the contracts and you know retain solvency uh you know I would obviously have sold the business at that point but then you know not being on the dotted line for all the things that I'm signing off for from the family that was how the deal got done was they had signed personally for all of those debts and they didn't know what to do they were you th those groups were coming after them saying hey you got to pay us um and that was my deal is okay I'll sign on the do line I will take all of those liabilities from personally I will sign for them and I'll take all the debts and that was essentially the deal and I wrote them a small check um with the the thought in my mind of we can try and make this thing and then I think that's why the family you know those the family members who stayed why they picked me was certainly they could have liquidated the business they could have you know given up sold the business sold the contracts off to one of the major players you who would have then liquidated the business fired everyone um so I'm sure the back of their minds they knew that was a possibility with me but I was the the option that gave them an opportunity to continue right and this is a fourth as you said a fourth generation family bus so I assume there was kind of a sense of legacy and and responsibility to the forbearers to keep keep the brand alive yeah the employees right there was um 20 to 30 employees when I took over that you know that were around they would have all lost their jobs had they liquidated that business um and and and right you and the principal the family members would have lost the opportunity to continue right it would have been yeah wipe out wipe out these debts and wipe out the company you know versus you know I came in convinced those creditors to give us some terms renegotiated brought some uh a new line of credit in to take out the existing one um and had the opportunity to keep going and that's what we we went to work on well and and so just to reiterate your own calculus the the arithmetic is the you went out into the market and talked to people in the know what bank Bankers private Equity shops that are in the elevator servicing space all of the above yeah and said what are these you know contracts wor what are what are contracts worth because at at root that's this kind of asset that an elevator servicing business has uh and so you got a you got a you got some some data from the market and came up with your own kind of valuation of what the assets of this business were worth in terms of these contracts Y and then looked at the debt load and said if it all goes to hell the the value of these contracts is still more than the debt load so you know I can I I can still get out get out of this financially if if if if absolute worst case scenario pretty much yeah and I you know I applied some margin of safety there it wasn't huge but I you know the contracts were not bulletproof but they were pretty good and you know I talked to enough people that I knew there was Private Equity interest in the space the ma major players Otis Tian Schindler conad of the world are acquisitive so like there's buyers for this company uh one way or the another and they're buyers for the contracts of this company because they're you know they've been around a long time they' got a lot of loyal customers that was it great and and so before we return to how you set about fixing things tell us a little bit more about Bob the current owner the fourth generation owner this this relationship is important to story yeah super important so Bob Hadfield the fourth generation owner was in his mid-30s at the time and he had taken over uh for his family running the business probably about five or 10 years before I showed up and had gone into growth mode and you know he was the one who had really built the business up and was really excited about the big projects and and in my customer calls you know doing trying to understand hey there was this big project that went wrong was this the company that I'm buying was that this unique to to them was it something that happens frequently and the answer was no and no the other customers loved this company that I bought and a lot of very reputable people lost money in the bad situation so I like okay those things are this is a really unique event and the the calls that I got about Bob were this guy's great no matter when I call him he answers his phone and he immediately comes and fixes my elevator the back so he's a technician himself yeah he was and that was the issue right he was so focused on delivering great great service to his customers he wasn't paying attention to overall running the business and that's how he got himself into trouble and he recognized that and and you know he wanted to go to work fixing it and and did with me uh but that that was the key relationship for me because I certainly needed him he needed me to get out of the situation but I needed him to fix the elevators you know we had obviously many many techs um but he was the key guy of he's going to keep go grinding and so I you know gave him an very Rich uh incentive employment agreement because he didn't get anything for the sale of you're a key employee let's go go to work and really getting to know him of believing all of this story as a firsttime buyer having no experience yet in the elevator industry oh yeah we can fix this uh and that just looked like me hanging out with Bob and some late nights with drinks of who are you who am I is this going to work and and I appreciate one of the things that he did uh from from the that first meeting was he said look I'm going to be honest with you about everything it's not pretty but it's better than you'd probably hear secondhand and I know that if I try and gloss over something or don't tell you the truth about something that you're never going to trust me because he had been through a lot uh and it was a very messy situation and to give him credit he said that's that's how it's got to be and that's how it was um to this day here's here's the situation here's what happened here's what I know here's what I don't know here's what I think and was there anything do you think in in his mind that yes they're they're interested the family in seeing the family name continue on in Pittsburgh as as an ongoing concern but they're still losing ownership yeah and so was there any do you think that there was any emotional tension there for him of abely letting go of the business got his name on it I think he that was part of the reason right that he wanted the chance to keep going with me rather than selling to somebody who's going to take apart the business but certainly then when we decided to sell the business later and we'll get to that that was an emotional decision of well as well hey this is you know it's not just Ben anymore it's somebody else that's not here and you know he he was excited they were going to keep the name and keep building the business and but it's it's a big letting go once taking that step of hey this is this is the first step in the transition of a new new life for this business and it doesn't doesn't invol all me being the owner yeah returning to the key person risk so uh it sounds like you really you really addressed it in two ways first of all you had so so Bob is the kind of the best technician on the team or the head technician on the team um so there are others but he's really the leader of the bunch and he's your liaison between the techs I guess and and your relative ignorance of how all this stuff works um you got the you kind of dealt with the uh the mechanical piece of keeping him in with this this generous incentive package compensation package and then you dealt with the kind of trust piece of just getting to know him you guys got to know each other broke bread drank beers and and so you felt you felt like pretty good going in that you weren't going to lose your key person and his name's on the business so you you know that there's this deep as we keep returning to this deep seated incentive on his part to to see things be successful in your hands yeah and again right even if he you know we signed on the line on our transaction then he said see you Ben jokes on you I would have said okay and tried to make it work and if I couldn't I still had the contracts right the contracts were in the name of the business not the name of the individual um and then I you know we had a guy uh Rick in Harrisburg who was running that office got to know him as well um that office was less tumultuous because it hadn't been involved in the projects uh and so they were they were excited as well to have some new support and and growing the business as well well Ben you certainly are making a good case for why a firsttimer can have you might you know have the hutzpah to go out to buy a business in distress uh you know it it Sur it sure seems like there's ingredients here of of a lasting business so now turn us to how you actually imagine solving what you know these enormous problems yeah well so one was get getting rid of the bad C customers right that was a a big issue of hey they were involved with people who said a lot of great things but never paid them those people are gone uh and then the other thing was right they got them into into that those issues by having horrible bidding processes of just thinking any revenue is good Revenue you know if there's money coming in there's enough for payroll you know who cares about profit margins well I do and you know Bob learned you very quickly and so understanding just doing a relatively basic analysis what are our costs per hour to deploy a guy with a truck and insurance and all that stuff versus what are we making on these various maintenance contracts or big bigger modernization construction type jobs um you know in instilling discip of hey you can't just bid something low to get the work that doesn't usually make sense sometimes it can make sense if you've already got a crew there you know it's it's additional Revenue you you're not chasing revenue or chasing profits um so instilling that and then you know CH understanding okay once you have good processes to put your guys set up set themselves up for Success are you dealing with customers that are going to pay you you the real estate world is filled with people who you know take the money take the money and then you know won't give you the money um it's it's just you know that's that's the aspect of the real estate world of you they are levered to their eyeballs usually on these buildings they have tenants that are paying them and their their game is to hold on to money as as long as possible and and elevators are a huge expense I get that right like it's Baseline of do the elevators work or not they break okay we have to fix it it's just an expense uh and so we are a pain to deal with from the real estate owner point of view of they're just throwing money at this thing to keep it alive and working usually especially in older buildings just cost center just like a c a huge cost center um and it's very expensive right like that's what the aspects of it was an attractive business for me of elevators are expensive to fix they have to be fixed their code around them um makes it good business for us makes it a you know an annoyance for building owners yeah well but Ben this piece about you know in the world of real estate there's there's chain reactions of people not paying and and everybody on terms and there's a lot of Leverage you know floating around what did you elaborate on that how did that impact your playbook yeah so so one it was reviewing our contracts to making sure our terms were correct so the first thing I relatively quickly I did was I got a real estate lawyer to draft a two-page terms and conditions sheet that we attached to all new contracts going out the door of yeah here's what we're going to do here's what you're going to do for us and you know that was like here's the price here's what we cover here are the terms and conditions just be prepared I signed n number um confession and judgment pieces where there were there were customers that owed us a lot of money they kept calling us okay man you want us to keep showing up sign on the dotted line this you know paper that if you don't pay us we're going to lean your building uh that was the language that those guys uh knew to speak and when they saw that we were organized some of them backed away and some of them said yep we're going to pay you and yes we'll sign that and generally they because they knew I was going to lean their building if they didn't pay me and that was you know worst case scenario for them so understanding kind of the the engagements that we had with our different customer bases of who was an A+ customer both in terms of did a lot of work with us and treated us well and paid us versus who pretended like they were a great Customer because they gave us all this work but then never actually paid us excuse me uh and we're always a pain you need you honestly you needed some of both uh I mean you'd love to have all these great customers but you want you learn to deal with the customers that are um more stingy by you know treating them appropriately and having reasonable business relationships with them like I get it right they they don't want to spend money there on things that they don't want to and they're going to hold their money and they're going to go by what the the terms are so you give them the terms and you know you learn to play by them and did the business at all suffer from you tightening up the the collections and tightening up expectations and basically to put it kind of very bluntly you were delivering less service for the same price or actually higher price than they were used to because Bob had basically been overd delivering so when you deliver less service for a higher price maybe they maybe they start shopping you or you know looking elsewhere did you experience any of that we absolutely lost some customers um but those customers were generally ones that I was happy to lose because I knew that even if we were you being more stingy uh we were way better than the Alternatives right what we wanted to be was pay us a reasonable price and you'll get really good service that was the other thing that I forgot to mention was as I looked at the elevator industry the the reference calls that I did to building owners and managers everyone hated their elevator company absolutely hated because it's a it's a cost center and it's a big cost center and because you're under contract with his elevator company it's not like you can just call somebody else you know you you'll get the the legal book thrown at you very quickly if you try and break contract because then you know nobody wants the liability of we have that elevator under contract and you brought somebody else in to work on it like I don't know if it's safe what if God forbid what if something happens so learning that everyone hated their elevator company it was a game of can I be the least hated elevator company I was like oh yeah we can do that um and right so but we wanted to be the goal was kind of where we found a good opportunity in the market was to be high quality service because that's what wasn't be done and we obviously had to be paid for that um and we were you know being an independent we were usually pretty price competitive but we found a lot of customers that wanted to pay for good Service Industrial customers were a huge growth area for us because if you've got a you know going back to the kind of macro search dynamics that you look for okay random Residential Building the elevator is a high cost for them if you're a manufacturing plant the elevator and a manufacturing plant is not a high cost for them and it is a very high value thing for them if it goes wrong we did a we we you know built up a huge business in industrial manufacturing type businesses where they just wanted us to show up quickly they didn't care what it cost you know I had a Fortune 50 company call my my cell phone one day said hey are you you with an elevator company I'm like yeah like oh this other gigantic company across the street said you actually show up we can't get anybody to show up um what does it take to get you over here and we went through you know many days of talking about things they didn't ask about price they didn't care they just wanted us to like how can we get you quickly approved through our you know huge vendor program like get you in here to take care of this thing that is costing us huge downtime in this production plan and so that was that was the other shift in the customer base that we had a lot of residential commercial buildings um that were reasonable customers but understanding who really wanted to pay for good service and a premium for that was another aspect of growth for us well Ben one one follow up on that you know when I we'll hear a lot in in our world about you know it's straightforward to make a business like this successful because so often your competitors aren't picking up the phone sort of thing bad service everywhere just to deliver good service and I'm a little skeptical of how kind of Pat that explanation is because I just I just assume I you know I I give the benefit of the doubt to any service provider and if they're if they're Pro they're delivering uh bad service particularly if it it appears to be pandemic across the industry that it's there's an economic reason for it that maybe you know these your comp your competitors the other elevator service companies weren't delivering good service because it's just not economically viable for them to do so and so so it's it's not so it's not like there's this it's not always like I'm skeptical that there's just like oh there's this giant opening just do a better job than the competitors well maybe the competitors aren't doing a good job for some good underlying economic reason that's going to be intrinsic to your business as well yeah and I I think part of it is um in a tight labor market uh it's hard to get I guess I guess elevator guys are very expensive regardless regardless of the labor market and the other aspect is that you know they're running around devoting their time to multiple things so where the big companies kind of make their money is they spread one guy over a bunch of things and that's where you the service levels drop because you can add add units to a route where where we found and I guess the good the good customers for the big companies that get good service have a devoted guy so if you've got a a big skyscraper there's probably an elevator guy there full-time H and so you're paying a lot for that but you're getting good service cuz the guy's there hopefully uh I've heard many stories where the guy is not actually there but you're paying for a guy there I think where we found success was the specific Market segment of pretty big customers that wanted good service but weren't big enough to have a full-time technician and so they you know in the bigger company's mind where they're playing the game of hey we're going to take a a one elevator guy and give him a bunch of units to service on a route way more than they're actually going to hit in a month and we did some of that too of how much right how much can we load up a guy and provide reasonable service um there's the other segment of hey we're going to take a lot of your time but it's not going to be the full-time job for any individual it's going to be hey we need repairs and we need somebody here now get somebody there quickly and I think that's where there's maybe a um this Market has the the niche of uh pretty big customers with high willingness to pay where it makes sense for us to provide good service to them random commercial building or Residential Building who's screaming about good service you know we had the same incentives as the big companies because we wanted to spread our guys uh you know to as many sites as possible such that we could provide enough service but the economics were the same of the more the more work we gave to the individual guy the better our our economics were and then I think that's where the the tradeoffs are okay Ben well actually one thing we haven't uh asked which I need to before to my next big question about how you dealt with this burdensome debt is get give us more about the business you said it's 20 to 30 employees of course fourth generation we talked about how that that it's a legacy multigenerational business but in healthier times what does revenue and margin look like uh so Revenue was you know upper seven figures of Revenue and uh actually don't know what industry standard margins were because I don't think I ever achieved them uh you know when I bought it it was not profitable they were losing money uh but I think you know like a good service business shooting for 20 to 30% margins was pretty reasonable okay because you're talking about how expensive your services are but I guess your own cost and and hiring people you're also you're also pay a premium to our services exactly our services are expensive partially because you know the the industry is very unionized the guys are skilled technicians like you want someone who knows what they're doing servicing your elevator they T have taken a lot of that value so our costs are also very high and so upper seven figures so it's SI you know sizable business um the you said it was not profitable now it was not profitable because of these onerous debts or it wouldn't have been profitable even without those debts uh I it wasn't profitable but it's hard to know exactly what the combination of things why that it was losing money um but they were you know they had lost money for you know a while and they were kind of running on shoe strings they had never achieved industry standard margins as far as I could see um partially because you know they were in growth mode of taking on whatever they could and then there was the aspect of they had this huge project that blew up on them and it was so big it was hard to parse out exactly how much of that blame should be put on that versus oh the everything else is just not being run well either but you saw looking at the industry in the you know if you squinted there was the there was the possibility here of a business that did call it $89 million 20 to 30% margins yep so so that's what's my math there uh about you know 1.6 1.8 million in iita maybe at some that's was kind of my calculus if in a good world this looks like a good search bu business of a couple million Nea uh you know a nice size where I can get my head around it you know if I can if I can make it become that it will be very valuable to all these people that are out buying these things it's big enough yeah um but it was just not quite that yet okay now let's turn to we talked about how you optimized money coming in these all these debts and in the money going out how did you address all of that make the business profitable and be able to service debts uh so I think you know having uh cutting down costs immediately right we they had before I showed up they had gone through some layoffs of just rightsizing the amount of manpower to service the existing business and then uh getting rid of customers that weren't paying we started being able to be a cash flow positive business within about three months of me showing up um and it took some FineLine to get some terms on uh well I guess separate from Debt Service you know getting in there and getting the guys you know used to not just doing everything getting them used to turning in their time sheets so we could allocate costs to different customers and do the analysis of who's a good customer um you know making sure that they were billing their time correctly so that then we could build their time correctly that was a huge missed opportunity for you that they were currently doing of just writing down hours and not billing them out to customers so you some some things are covered during a maintenance visit some things are not how much you can bill for is part of the the you kind of strategy and the game you play with your customers of you've got a contract there are things that are outside your contract that we're going to bill you for what does that look like because they're always going to say everything's covered and we're gonna say nothing's covered that gake and was the was the business meeting its debt obligations before you got in there there weren it was not term debt it was just uh you know they owed money to the insurance company the bank uh and the union and there were not exact you we I essentially came in and negotiated payment plans you we I brought I brought I signed personally for a new line of credit you know I didn't do an SBA loan because there were no earnings I signed personally for a line of credit that you was able to take out the other line of credit and give us a little bit of working capital and then I negotiated payment plans with uh the union and the insurance company and so but th those new payment plans means that there's talk about a J curve that means that there's new costs when Ben gets in there because I guess before they had these giant debt these big debts that they owed but they just weren't paying them down but now that they start paying them down there's you know there's three new expense lines yeah one one Debt Service to each of these three entities that you you owe debt to so um but that was covered by the the the the income and revenue optimizations you were making yeah I put in everything I could from you the the new working capital line um to give us some buffer and then um yeah we started started making money pretty quickly um not a lot but some it was funny because you know I bought this business at the end of 2019 I got in there and things were okay and suddenly Co Hits and The World Turns Upside Down um and that brought a a new set of opportunities and challenges um because we had a lot of real estate that suddenly didn't want to pay their bills because they weren't getting paid and we had you know everything that everyone can imagine going through Co with a real estate services business good and bad it all happened um but that's when you really the industrial client base said oh we we got to go you and that that was where we saw a lot of success there pretty quickly well I I I do want to give a minute or two to co directly let's put a pin in that just the I wonder if there's a framework to think about debt here because you you didn't take an SBA loan as you as we know so so just to for the audience recall the terms were basically the ass you kind of personally assuming all this debt a little bit you know you know you stroked a small check MH and that was it I I I wrote another check of my personal savings into the business so I did put some some working capital into the business can you share how much you were all in for your own cash uh six figures plus okay okay low six figures or high six figures uh it grew okay okay uh every you know essentially I wasn't taking earnings out of the business while I owned it uh I was reinvesting everything into working capital so certainly you know as throughout the ownership of the business uh you know it was you know probably even high high six figures in seven and high six figures in seven meaning cash you put into the business and your own not paying yourself return return of earnings right like the business was profitable but I wasn't taking that money out I was yeah plowing that money back into working capital cuz we you know there was no working capital when I bought the business okay okay good point clarification but this this thing about the loan so you don't have an SBA loan but you do assume all these debts so in some ways you know I I don't know if I'm I'm probably doing an apples to oranges comparison here but it's kind of like you know you you got this company you know with all this loan on top of it and most of my listeners will get a business with all this loan on top of it but it's an SBA loan in your case it was just loans to so I wonder if there's any to any I don't know any way anything to say about that or or the loan Maybe here's the question the loans that the business owed that you were personally assuming MH do you feel do you have a sense of those were those bigger or smaller than 90% of the Enterprise value of the business which is kind of to correlated to an SBA loan right um you know I guess it depends it was essentially the value of our business per the transaction was the assumed debts in my calculus uh of what I thought I could Salvage the business for yeah best case scenario it was probably in the 70% range but there was maybe some haircut on what that value was and it may have been 100% um yeah and then you know I guess the difference in the mechanics of payment was you know I I fronted as much cash as I could personally plus my new line of credit to give us wiggle room on as us get getting going and then just kept kept money in the business um and you know I like I you know I was in a fortunate position that I had money to invest and have that back stop of oh we didn't have enough money to make some Deb okay I'm going to write that extra check into the business and you sign personally for the line of credit to get the wiggle room uh and I think that's you you got to be prepared with what your dry powder looks like in these situations just with any search business of you going in and you know working capital is great but how liquid is are the receivables that you're coming with the business for you know you buy a business payrolls still du if the receivables may have not come in yet you may have gotten a million dollars of working capital but that might be all receivables that you're don't have cash to pay pay real payables for and for the listener B who say might not have might not have dry powder do you think that you if you didn't have your own kind of your own balance sheet to lean on do you feel like you could have raised a little money once you were in there as the new owner operator from to to have given yourself some this working capital business the working capital yeah I think given the Dynamics of the market this was a really attractive Target because of right like I said it had some reasonable size it the contracts were substantial and so there was some real value there um you know I was fortunate like I said to put the the extra working capital in myself which ended up being significant uh but given the kind of the Market of what the business was going to be worth yeah you know I think you could find some type of a search investor it wasn't going to be a traditional search raise but you could find some investor that would have signed up for that as well absolutely so much more to go Ben this this is great though I mean this is just such a what a story okay so you've you've hit on a few minutes ago how you know you you got in there and you were like you know tighten up bidding tighten up you know the hours all the kind recording and the hours that are charged under the contract versus not and and how a lot of this was communicating to the existing team you know that we're going to do things differently and so in a turnaround the you know the Stark among many Stark differences is differences between a turnaround and not is you need to change things quickly whereas in a in a you know for for many Searchers it's don't change anything for six months don't touch anything just be a student of the business blah blah blah um so you're but you came in there and you need you needed to manage change real quick what what did you learn from that and and maybe tie this into your kind of uh chemistry that you have with kind of a bluecollar Workforce that you that you going all the way back to your first jobs so tie all of that together did did you get were people was the team receptive to the new sheriff or and the new rules or what yeah I I would say the team was excited that there was something that had happened yeah that I here that the business was going to continue and you know they didn't know that I you know had some personable F funds behind me but nothing else of like I was um you know it wasn't like there was a private Equity Firm with de pocket suddenly it was you know I was going to put everything I had in it but uh you know I was maxed out pretty quickly and they were excited to know that there was going to be some more support for them because like I said the the customers main complaint was you know the back back office is kind of a mess stemming from you know the owner being all over the place so we had a great uh crew in the back office that suddenly had me like you said as the sheriff to say no Bob this is how it's going to happen and let the people in the back office do their thing and be organized which they were very quickly and and they were throughout um and and the team I think responded to that as well of hey there's some structure here there's some nominal rules and for us to follow the rules rather than being constantly overruled by the guy who says no the customer is always right the customer is always right which is you know I appreciate and respect that mindset but it not to the point that it's going to drive you out of business um there's got to be some some balance there and and so the team in that aspect was very happy to have me around that I was there every day trying to figure out okay what what are the problems how are we going to make this work you know who's the pain in the ass how can I help you deal with them you know who are we going to together say that we're done with who are we going to go go make it work with and I think that aspect of it was exciting to them I don't know how terrified they were right because again it was just me uh of what they thought was going to happen certainly some of them thought that the company was going to go under um but enough of them stuck with it and uh made it work that we ended up being very successful great bringing order to to chaos a w a welcome order I guess yeah and just trying to be transparent of hey guys like these are our baselines of why we need to do different things such that we stay in business such that we get paid for the work that you do so that we can pay you for the work that you do um that that message was pretty clear and and that you know I think is pretty Universal in these small businesses of the individual workers generally want stability and support and some incentive and if you can give them that you know you'll find a generally a a good worker will stick around and be pretty happy because that's you know a good environment for them if you're going to give them you know no incentives and unclear assignments and and you move them around all the place like that's just not an environment that's going to attract anyone well I I I guess also change management is easier when it's clear the company's on the brink and like if we don't change something now they're like nobody's going to have a job or you know yeah and I think that it was different in the oil field because I was asking people to do things differently so I had to really I had to explain like this is why we want you to do this and how we can make better decisions blah in in a turnaround you know it's this business is on the brink of bankruptcy we have to do this diff differently if we want to survive yeah and everyone I mean everyone knew that things were not going well so it was pretty you know it was not a shock to them you know I don't know who knew how close things were to what but it was very obvious of oh yeah like we we want to do things differently that is everyone is on board for things being different well uh when thinking about motivations I I always love the framework of carrot and stick and stick is people losing their job because the business goes out of goes out of business carrot is incentives incentivizing people you know having them run towards something rather than run away from something and you've mentioned that word now a number of times but I don't think we've given it it's due what how did you re or or or Institute new incentives because because I know this is now part of your you knowy for for the elevator business it was pretty straightforward it was much more stick because it was it was like we gotta make this thing work of like I want this business to survive and and have this be a good place to work and treating people well and uh you know eventually we got into some Financial incentives but the large majority of that story is around we want you to we like finding good people and we've got a good community and a good thing going here let's keep it keep it alive in a the things that I'm doing now with a solid small business that things are good it's much so more so how do you attract and retain talent and that becomes incentive programs where what are you what can you control what are the metrics that we're giving you that we're going to judge you on and go do a good job and and finding good Crews that way and and I see that in best in-class small businesses let's uh start getting toward the end of of your adventure with Hadfield give us give us a minute on on Co what happened during Co you've sry said some of it but round yeah so Co you know like I said we kind of got in there and uh had stabilized the business I remember we had that first quarter I was like we have money is coming in it's gonna be okay and and how long did that take from your ownership when you took ownership it was about a quarter of that that first quarter of you know maxing out the new credit line me personally putting in everything I could of like what the first couple weeks especially like oh my God what did I buy and what did I get myself into and then you know the cash started coming in from the receivables and you know new billing procedures took place and we got rid of some just customers that were bleeding us dry and then you co hit and like okay what is what is going on and and it really bated sorry let me interrupt you just before you get to co I just want to understand how effectively this did or didn't happen how long did it only took you a single quarter to stabilize the business yeah wow good show maybe in retrospect it wasn't that good but what I mean again that that first quarter of putting every money we could into the business to stabilize thing helped and maybe you know we could have maybe dragged that on on longer um getting rid of bad customers right you know the business was already right size when I took over so we didn't have to really fire anyone um Institute new building practice is and you we knew there was money coming in every month from these maintenance contracts so that that that that was the great thing that I did not have to deal with in terms of this being a turnaround Revenue was coming in yeah and I saw that and you can see that in the cat Revenue was coming in the costs were out of control the big blowup had already happened with the bad customer that was over that was all written off there were no the ongoing costs of that were the debt that you know we kind of refinanced and so that was the aspect of you know the turnaround that um was able to happen relatively quickly was the revenue was coming in stop doing stupid things that are burning money and you know make sure we're billing for everything that we can those were changes that you can make relatively quickly and it doesn't take that long to see the results from so take us then so You' you've stabilized in in a quarter uh pretty pretty dramatic uh then but then of course uh our friend Co hit so what happens during Co yeah so first of all it was a question of is this going to be how terrible is this going to be for the business because we had customers left and right saying don't come some of them said don't come we're not going to pay you for your don't come service our elevator exactly don't come service um but most people said like oh you still got to come and they understood that uh even if that was a little bit touch you uh well we're not going to pay you cuz no one's paying rent um and then we had some customers right like unfortunately that wasn't too bad and we were able to you know just not incur the costs of going somewhere if if we were able to work something out and then we had some customers that said this is great there's no one in the building this is the best time to work on the elevator uh and you know that took a while to get there and but you know we certainly dealt with the restrictions of you everybody wanted to have everyone six feet away can't do that in Elevator Shaft uh okay so some places we couldn't work um some customers were completely closed the the doors were just locked no communication for a while um but then the segment of our business that did start going well was the Industrial client base was they were still working you they we made it work with Co in terms of whatever restrictions they had around us and and and they needed to keep things running and so that was that was the segment of growth um that first started to go through Co you know after a couple months that things stabilized a little bit we had a lot of guys off work for a couple months um and you know giving them the support that we could but eventually the that the industrial client base started started um getting getting involved and uh the state government we won a couple big state government contracts and student housing was an area of development as well that I think there was just some bottlenecks that broke through pretty quickly and so we ended up growing by by the end of Co which is the you know kind of the end of when we decided to sell the business we were growing aggressively and that kind of leads into the reason that I decided to sell the business is I had seen the guy before me grow too big and go bankrupt and so as we had all this pent up demand coming out of covid we started growing rapidly and me not being a lifelong elevator guy nor a GC we started you know having big negotiations with big sophisticated customers where the team was excited about doing the work uh and I was going to run out of ability to really fund the business and I knew that the margin for error was large uh you know my margin was slow because the op there could be a lot of things that could go wrong on these big projects that's where people lose you know the fixed price contract that's where they had gotten screwed before uh and I didn't want the same thing to happen to me and and fortunately you know the guys uh Bob and Rick understood that they said hey we've done well um they were happy to have you know what ended up being a private Equity platform come in that was able to support them on you know far beyond anything that I was able to give to them in terms of go get any work you want and we're here to support it um and so that that was kind of the calculus of Co sucked and then you know we were got support from all the various you know programs kept kept eventually you were're able to keep most of the people working um bottleneck of business breaks and there's a big backlog it comes to you how much can we handle where does this team want to go this business is going to go beyond me I'll take my check and be happy and go on to the next thing and how much had you grown it we had doubled the size of the business in you know we were on a run rate to double the size of the business in two years doubling the side of the of the business so it was upper seven figures to remind the audience in Revenue I let's call that 8 million that's my number you're neither confirming nor denying and so you know you get to you get to whatever call it 15 16 17 million or you're on track to get there pretty quickly yeah we were we were run rating towards you know uh kind of the middle of that range uh uh and I was like oh this is great you know we and and by the way stabilized and you're actually now a real profitable grow profitably again that it's stabilized but uh working capital is sucking everything it's not like I'm you the business is doing well it's not like I'm printing money for myself at that point um so I have everything that I you know have tied up in this business I'm like we can have a lifechanging outcome let's take it yeah and on this point about you know the opportunity to do big construction jobs so one thing I haven't asked is because I I kind of saw Hadfield as a elevator servicing business but it's also got this big construction component I mean that was the big the big issue that it got into that started the story yeah how how give us a minute on elevator businesses and how is it is it what the split is like on construction and maintenance yeah so yeah talk to that talk to us about that service maintenance and repair was about half the business and then modernization construction was the other half small Independence kind of stay away from new construction that's where the big oems go in really low to get the installation with a big service contract on the back end where they make their money that's how the industry develops the Dynamics that it does of you know we'll give you give you the equipment at a very low price and then we're going to make it up on service which results in everyone hating their elevator company because they're just taking advantage of them on the service and how we can be lower cost because we don't have to make up the money from giving them the new construction package right we the leader of new construction exactly uh and so we typically don't do you wouldn't compete on new construction occasionally where we would compete is hey you've got a 50-year-old building with a 50-year-old elevator we're going to rip out the elevator and put a new one in it's not as cookie cutter as new construction that's called modernization and those end up being big Dollar jobs and so that's where we were being very competitive coming out of Co is you know real estate people that were putting money into real estate um there was a lot of that and so those numbers ended up going up and up and up but that's where you get into you know we're part of um you know tens or hundreds of million dollar construction jobs and we've got you know a great elevator contract to do you know big rehab but you're starting to talk about liquidated damages of thousands of dollars a day uh if something goes wrong and in people that are you know you're waiting on the other trades it gets a a lot more complic at and a lot more pressure you can make a lot of money doing that but you can also lose a lot of money doing that and I certainly had the team that was excited about doing the work and doing a good job with the work uh I wasn't overly particularly confident going into negotiating with the billion doll GC that you know we needed our money and we needed it now when they said no you did this wrong this here's throw the book at you we dealt with generally good um you know good C parties but that was the for me the big eye opener of hey this I see where Bob got himself in trouble mhm I don't want to do that I'm gonna take a win and Ben could you have made a strategic decision to not go after not only not new construction what was the other one you called modernization modernization just leave all of those on the table and like I'm thinking of like pool service you can either start building new pools or you can just say I'm never going to build a pool I'm only going to be in the pool servicing business could you have only been the elevator servicing business you need you need to do the modernizations to be a relevant player because in your portfolio of Maintenance there's going to that's going to spit off some major projects each year and if you don't do that someone else is going to take the maintenance so you need the capabilities uh inhouse to be a kind of full service player to have any sort of business growth uh and so that was you know that's how you and that's another way to grow your business as you take new modernizations you get the maintenance contracts Associated for you years and so that it was a key part of the business that you can't you could not be a pure maintenance player and be relevant and to close us out on actually I should ask one other question um anything anything to share with the audience about working with a union shop or working with a union and in a union shop it was I was very concerned about it uh you know going in it generally not something that's done what I got comfortable with was again the entire indust industry for the large part was unionized so the union was much more concerned with the larger players the Otis and Shindler K of the world more so than the small players and in fact they were supportive of the small players because we in some senses kept the large companies honest in terms of providing service and providing you know not overworking the guys and that was the key Dynamic that got me comfortable with the the union labor force was that the union itself was generally supportive of my business existing in the face of the bigger problems that they had to deal with elsewhere we generally had an okay relationship with the Union it wasn't perfect but you know they were supportive uh and we were a reasonable player for them other Industries do not have that Dynamic and um I would be very wey of getting into a union situation where the Union's only concern is my business I do not want that situation so good to be in an industry where the Union's attention is going to be on some some really big players yeah and you're going to get less of their attention and you can even serve as a kind of a counterweight to some of the bad practices of the big boys exactly absolutely and that and that that was the dynamic of they wanted us to exist they wanted us to do well because that kept pressure on the much bigger people in the industry how did Bob react you you already touched on it but give us more about how he reacted when you decided to sell to private equity uh he was nervous but he understood you know he was able to he was going to make some money as well which he had not before um and you know for me it was important to find a private Equity Firm and a platform that was going to be supportive of the team that I was going to leave behind and and certainly found that in Burkshire Partners in three phase you they their thesis was finding these independent companies and building up a larger independent it's very hard to do but you know I know they've they've been working on it for a couple years now and put together a good group of companies and and you know supporting management and and leaving them in place as much as possible um where where appropriate you B Bob and Rick are still very involved in the the offices in Pittsburgh and Harrisburg and and three phas has been a great partner to them of like go you know you want to you want to grow more like we're here for you they have more expertise than I could have ever offered um you know of course it's never all butterflies and rainbow is selling to a private Equity platform but that was the key Dynamic that uh has largely played out as true was I found a platform that wanted the offices that we had to remain Standalone and be supportive of them and be supportive of the teams in place to close us out on the Hadfield uh part of your story would you recommend Ben that to listeners if they come across an elevator service business is this an industry uh that that a Searcher should get excited about I know that's a simplistic question question but absolutely I think take the industry is really interesting I think you know obviously the the dynamic that I found was hey this is a messy business in a really good industry and I think that that can be very true and of a lot of different things and look a lot of a lot of different ways that you buying a business that was as messy as Hadfield uh you've either got to have you know your personal dry powder or find someone who does to have the stability to some degree and being willing to sign on the dotted line uh and and do the calculus of how much is what's there really worth versus what am I signing for um but knowing that hey there are there are buyers of this business if things don't go well or if things do go well I think that calculus is important and certainly I found that in the elevator industry you know unique nichy business uh ends up being a big industry because it is so expensive and with a lot of great Dynamics for the search search World okay Ben what do you do after this uh after this exit you know and the whole kind of had from searching networking in Pittsburgh to your exit is probably less than three years total yeah yeah yeah I was you know like I said I was very fortunate to find something and have it work out so well relatively quickly I I searched for under and got a deal done in under a year owned the business for two years uh almost exactly and and then I was like oh this is this turnaround thing is great I'm a turnaround artist now ex Watch Out World and the second one went horribly uh no it's it's I I was uh got involved in another business that you know I'm still involved in and uh it was a VC back technology business where they were ready for some new blood and so I came in and invested and and um you things have not gone as well as Hadfield certainly you know still trying to get to a good outcome there cuz we have a great technology but different Dynamics different set of distress this is one where the revenue was not there and we were trying to build it up and it it's been a much much harder slog than a turnaround where there's Revenue there because you can control costs it's harder to control Revenue um and in conjunction with that I've started searching again and uh gone back to traditional hey let's find something normal small business type that is profitable and well-run and and uh am now in a disaster restoration business here in Pittsburgh that I just bought earlier this year and um you know very much bread and butter search search you know profitable business good industry get an SBA loan get a seller note and you know have the equity myself now to write the check and I'm enjoying this so far so and you're sitting in that that business right now disaster restoration business as we as we went back and forth to set up our interview and have our pre- calls that deal was coming together it since we talked before the holiday it has come together yep and um and but it's a healthy business it's not a turnaround yep uh so what you know when I when I think about your your experience with Hadfield and then your experience with this techish company that was a turnaround that didn't go well um you know that techish company doesn't feel like you know there's probably a lot about that business that that was different than you know kind of a blue traditional business right so so I'm I'm not sure that you that you should conclude that you don't know what to do in a turnaround so so I so uh why go for a healthy business and not another like the learning coming out of trying to do the tech business turnaround might have been oh turnarounds only work where there's good Revenue so I should go do a turnaround in a traditional business but not necessarily that I'll never do a turnaround again and my conclusion was not that I would never do a turnaround and I think there are still aspects of the the technology business that will you know can be successful and there is good technology there for the right player that which we're working on um it's just what I found you know I went back to the hey I'm in Pittsburgh I want to stay in Pittsburgh what can I find and I was very fortunate to find hey this is a great great industry disaster restoration you know insurance pays for reconstruction after you know fire or smoke or water damage those types of things good business got to know the seller really well again um you know was it was a local local um adviser that I knew I was like hey you know this similar has some of those Best in Class dynamics that I talked about of they're really organized on a bidding front that's how you make money in this business in in Insurance restoration is is you got to document everything you want to get paid for and then they do a good job with Inc incentives of hey this is how much you're given for a job you know here's here's your incentive to to beat that um and like we talked about you know I've looked at another business here locally that's another Services business different uh industry but has those Dynamics as well that I'm trying to buy and hopefully we'll have um actually maybe by the time this is released but you know very detail oriented on bidding um another good uh Services business where demand I'm very confident is going to stick around and they do a great job giving incentives to every level of employee of here's here's what we can do um if you exceed it you make more money pretty straightforward so so this kind of two-pronged uh these two levers you know bidding really meticulous accurate bidding processes on the one hand and good incentives up in down the organization on the other are kind of the Ben Rizzo you know pillars here of of these types of businesses making I think I think they set up together nicely because you can't give good incentives if you don't have a good cost structure you you you know you don't understand what your own drivers of profitability are um and by if you do understand what your drivers of profitability are then it's pretty easy to on the other end tell people to go do more of them in situations where you know the person doing the work can control some of that which in Services business they usually can control how fast can we do something can we do a good job can we avoid having to come back to you know do it again those types of things are in you know individual laborers control of how hard are they working on you know is it worth the extra 10 minutes to get it done now or do we want to come back tomorrow those types of things that are in their control um you they should make more money to make the dec you want them to make more money when they're making the decisions that make you moneyy and doing the work that makes you more money too Ben back to or the kind of concept of a turnaround distressed business or even maybe not fully distressed as bad as Hadfield was but less lesser of lesser quality you know one of the the Dynamics in our world is that you know there it's it's a growing World more and more attention on ETA more and more Searchers out there so you know more and more competition for good businesses and so there's bound to be some uh first of all we already know there's no such thing is is a perfect business anyway so so the Searcher goes through that Awakening over the course of their search where they lower their standards just in their own kind of in the Micro World of their own search but at a macro level um as there's more competition for deals perhaps quality uh expectations need to be relaxed further and you might your story might be an interesting model for that do you have anything to respond to all that I would say to some degree yes and I think two big Dynamics one the creep of private Equity down Market is a huge um competitive shake to the search world you know everything that I bid on now I'm bidding against private equity and I think years ago that would have not been the case it's just easier to be connected to more private Equity firms and more private Equity firms look at more deals and there're more platforms that they'll go down to a million or half a million dollar even to business sometimes in the right situation so that exists so that that drives multiples up as a search you got to figure out what to do the other aspect is you've got baby boomers that are going to that own a ton of these businesses that are going to have to retire at some point many of them so sure some of them are going to say hey I had my best year ever I'm going to hire an investment maker and I'm going to run this great process uh those are great opportunities um but many of them are in the middle of an okay Year and have some sort of personal issue uh you know a death in the family or personal health issue or a divorce any of those things things that are suddenly a forcing factor of oh I got to buy this I I got to sell this business or something needs to happen I think that's the dynamic of you know broad mechanics around what I did in terms of a turnaround where it was a business where something needed to happen it happened to work for me that I got comfortable with the amount of debt load and what I thought the value was there and I had some personal money that I could put in to give us a little bit of buffer and renegotiated with all the different lovers of I can make that work I think there are going to be tons of businesses where something needs to happen it's going to look different in every case but the businesses are going to need to transact to survive in many cases because you've got an owner who falls ill who's ready to you move to Florida who's something some sort of a forcing Factor as the baby Boomer's age are going to get more drastic and I think that's where being positioned in the networks of accountants lawyers advisers in the know who can suddenly say hey oh you know I'm drafting This legal document for your divorce or or you know you hear kids like you know you your family member passed away and they've got this business what are we going to do with it oh I know someone who might be able to come in in this situation very messy situations and different Dynamics but there are going to be a lot of businesses that are tied up in these because baby boomers many of them are just holding on to businesses um you know the business is good hold on to it why you know why sell I don't know what I do I like I like what I'm doing that's great you got to time the transaction perfectly or be at risk of the situation where there's a force sale and I think that's where Searchers um it's hard to go out with the strategy of oh I'm going to find a turnaround because you don't know what that looks like you don't know what that is in what industry but broadening your horizons as you're talking to advisers in the community of what you're looking to get into um making sure that it doesn't have to be a perfect million dooll e business where it's a sale uh the things that you can deal with can give you an an opportunity again when it's an owner operator you're going to go in and and run the business I think that aspect of what I did should be interesting to a lot of people uh because it is you can replicate it by broadening your search criteria and you're not forced into anything great note uh Ben and and just to just to reinforce I mean we hit it on a lot of times but really how you know fundamentally you when you looked at this business you were able to come up with kind of a an intrinsic value to it and um and and that that was more than the liabilities against the business and so you know so before we Advocate people going and buy businesses that are not in perfect shape like you you you did a really tight you had a really kind of tight mathematical model underlying your decision with with a lot of data on you yes it was a turnaround it was a business that was you know nominally losing money it had very valuable assets and the the purchase price which it could have been a levered SBA loan whatever it is the purchase price I was fairly certain was less than the value of those assets yeah and I was going to be able to continue to increase the value of those assets by increasing the quality of the contracts and just the paper continuing to increase prices going out that was the key calculation that was very unique and is not true in most turnaround situations where oh business is down that's that's really scary now again the I guess the other aspect of turnarounds in general is purchase price can look like a lot of different things you know when when you've got a messy situation the expectation that you pay three times eida four times eida goes out the window when it's a forced sale and there's very few options it can be a seller note right you could walk into a situation that's messy take a big seller note that's an earnout and if it goes poorly a year later you know you haven't really lost anything you've gotten a year of experience and you're back searching mhm that could interesting um so I think that's that's the other aspect of yeah putting a lot of things at risk a personal guarantee personal assets into a messy situation it do so with a lot of caution but in situations where your personal downside is minimal and the upside is hey things go well you know understand that the probability of that might not be high but that could be a very interesting situation certainly the second turnaround that I attempted and I'm still working on you know I knew what my you know I made an investment I put my time in and you know we're still trying to get to a good outcome and I think we have a good technology but I knew kind of where am I I didn't write a personal guarantee for anything and I knew if it if it went really really well I'd make a ton of money okay that was that calculus was was interesting to me it's still interesting to me in the right situation Ben you you touched on the the business that you're now in and that you are looking also at a second opport mhm that you would buy so if that comes to fruition you'll now be the owner of two small businesses I will be I'm hoping so and so that that starts to smell like a htco yeah uh is this something you set out to do absolutely not uh when I started looking again you know I I started networking around Pittsburgh and said you know I want to go back to a traditional search model where I find something small business that I can go to every day and I just happened to find two where there were really good small businesses there were Services businesses nothing that I had ever done but kind of some similar technician driven businesses that were um you know well organized and bidding get good incentives so I'm going to try and buy these both I don't know if I'm going to get either of them but but you know I think hopefully I'll get one of them and maybe I'll get both uh and I think I can pull it off at various times during the process you know they each went to private Equity firms at different you know for different reasons and then came back and so you know I thought okay this worked out I was going to get one and then I very late in the Pro this process got the call from the other one said hey you're back in but do you want to be back in so well not you know under the right circumstances yes uh and yeah it's it's a different um both businesses were set up for it both businesses have um you know full-time General management so to speak and so it's not something where I'm going to suddenly try and replace a full-time owner operator immediately uh nor am I going to try and run two businesses myself those are the Dynamics that you know led me to say okay one I do want to try and buy both of these and two I think I have the kind of the capacity to do it I've got good you know teams in both that are running the businesses that I support um and and continue to have these things be successful and um so what will your role be I mean just kind of light light touch management or I mean I let me let me rephrase actually let me rephrase but right because you haven't even bought the second one so you don't know but I guess how much capacity do you have here could you could you really do really say like I like this hold code thing I'm going to go buy five more I have no plans to buy more after these two until I see the third one I'm like oh that's a great one so we'll see um yeah I think I'm still getting into obviously the first one and hopefully we'll get into the second one pretty soon of what are the opportunities for this business how good is the team I've been really pleased with the team so far they've been great here at the restoration business of yeah that you know I can be supportive and and help them but you know they don't need me every day um and we'll see what what the situation is with the other one as well but uh yeah I'm not looking to if I add more then I probably have to add you know do I have to hire someone to work for me I think a lot of the hold code people have done some some version of that um but like I said this was not a plan strategy for me it was just a there are two really good small businesses available for prices that I want to pay in the market where I to be I can pull this off and we'll see where it goes with Hadfield you did have to to put in more capital I mean it wasn't just that smallest check at at the moment of close but you plowed your own money into it and then the earnings back into it so there was there was some Capital there but getting the you know you sold after only two years into a market that was eager for such businesses I'm assuming you had basically a life-changing outcome absolutely and yes okay yeah and you and you parlayed some six figure number into some seven fig number I'll assume um do you feel like now you can that seven figure number into an eight fig and nine figure like like how you're basically step you're doing step changes here in your in your personal net worth how do you think about it yeah so you know I'm funding both of these Acquisitions myself or at least attempting to um and I think that you know everyone knows the search model of you know if you build it and keep keep it going you'll do really well and I think hopefully that will be the case with these I don't know the the ability to get to you know nine figures is a whole different ball game because what's my personal capacity to help these businesses grow what are the management team's interests in growing Beyond uh you know doing anything I'm not planning to do buy and builds uh you I I don't that's not the Playbook that I've ever run so you know maybe someday I might do some add-ons but that's not the imminent strategy and that's certainly one of the c um trade-offs that I've realized is thinking about oh I'm going to buy two things that are kind of different all right I'm going to be split more what's the ability to really Drive growth in either of them when I'm not going to be the one that's full-time there driving growth and so I think that's uh you know the Allure of the hold Co is great of you know own these businesses you know don't run any of them but that that comes with the trade-off of you're tied to the team that is really invested in running them and uh at the small business level like sure sure independent sponsors private Equity firms you're plowing a lot more money in hiring a really professional management team that wants to do a buy and build versus for the search hold Co type thing it's really dependent on you know what how much more money you want to plow in and what you want your role to be and who you want to hire and and that type of stuff and I'm still figuring all that out but I think it's you know two good small businesses that if they continue on the trajectory they're on um and I can support them and not screw that up I'll be very happy but but there is an interesting distinction there I think that where you know in your first story with Hadfield there was you were as in the weeds as you could possibly been and it it was a growth it was a growth Story I mean you turning around and like an insolvent business getting it solvent and then growing it further yeah and what that can do for your own balance sheet in and and in your case only two years y it's you're unless you really go into these businesses with that same sort of growth orientation you're probably not going to see as much of a multiplier on the money you have invested I don't have plans to flip either of these businesses I can't say I'll never sell sell but you know as I do my basic model of uh you know I make money by holding them and and having the money return to me over time it's unlike Hadfield where it's you know put in yeah it ended up being into the seven figures of you know how much personal money that I had in there once you take everything out um and then I made money when we sold this is a model where you know these businesses should be cast flowing sure I'll reinvest as as needed to support them and grow um but it's say you know make money on distributions over years rather than build up to some some individual outcome yeah I think that that that's uh it remains to be seen well if can can you give us a sense of what those distributions might be in other words what the revenue and and SD or EA of these two businesses uh are uh they're both great search businesses in the you know two to three million of eitaa range uh and so that's you know if I can pull it off there's some capex involved so you know it would be a great start to a good hold Co I guess yeah I mean so you know two two two to three million e each so and you you're going to do an SBA loan for each yes yeah that's the other thing right the SBA loan rules have changed so different NES code you can do multiple SBA Loans ah okay well if you if you get the second business and then you have two that are combined call it $5 million of cash of earnings a year and you pay down those SBA Loans in 10 years you will have two you know you'll have a a pair of businesses that are generating $5 million a year uh profitably that you'll own outright how do you prefer people reach out to you if uh if they want to ask a question uh my website's easy Heartwood point.com and there's a form there you can fill yeah.com yeah we can throw that in the show notes it's and there's a contact me form there what a story Ben Rizzo congratulations uh on Hadfield and on your most recent acquisition good luck on getting that third one uh thanks a lot for the transparency and for the time appreciate it well great to be with you I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business