Sam Rosati welcome to acquiring minds thanks will Sam your name comes up a lot among my guests whether it's because of the boot camp that you run or hosting SM bash or your investor list or just generally being a connector in the world of buying small businesses many self-funded Searchers make contact with Sam Rosati at some point in their search now Sam You've Got Your Own Story a business acquisition but that's actually not what we're going to talk about today though hopefully maybe we will at a later date what we are going to talk about is the fact that from your perch you see a ton of Searchers and you see some of the mistakes that are made over and over and you recently tweeted that the number one reason that finding a small business to buy can take so long is because Searchers lack a clear big three and second two criteria so this big three in second two are what we're going to get into but first Sam by way of introducing yourself what are three or four things you want people to know about you and what you're up to right now in 2023 sure well I would be remiss if I didn't say I'm a dad and a husband we just had a baby right before SM Bash so oh yeah congrats number three and final man yeah so that's been fun and it's an adventure right like everything in life is truly an adventure when you're an entrepreneur and that's really how I look at what I am and what I do it's pretty simple I first and foremost I have a hold Co it's not pursuing with capital it's pursuant Holdings is technically the name and it has interests in nearly two dozen small companies every one of those companies has partners different Industries different operations different ownership percentages and structures but at its core it's a whole Co and so that is what I spend my day-to-day overseeing and then secondarily I spend a lot of time supporting Searchers because I love it but selfishly it's a great opportunity as well to invest and for me it's a source of operating Talent it's a source of deal flow and frankly it's a fulfilling place to spend your career and I'm thankful to have found it cool that's great Sam thank you yes and do give us a quick picture of the of the boot camp actually because that is kind of a formal way that you make contact with Searchers and it's come up on the Pod before what does that look like the boot camp is a three-day crash course on how to find small companies how to get them signed up diligenced and closed and importantly how to connect Searchers who have never done this before with the people they need to be the quarterback of their own deal so they need a deal team they need SBA lender lawyer Q of the accountant insurance agent tax accountant I think it just as importantly they also need people that have gone before them other Searcher CEOs to show them how they did it and to show them it's possible so that that's our boot camp it's it's three days it's pretty intense it right now is in person uh we've got three more uh boot camps for the rest of 2023 but a little bit of a preview we are going to put it online and it's a bit of a challenge to try and create that Dynamic on the internet but we're spending some time on it so I'll uh I'll leave that as a teaser yeah that is that's quite a teaser and and so but currently in the in-person version you've got three more just in 2023 so what does that mean you're doing them every two or three months yeah I would say that I'd like to put a month in between each one but they're going to be stacked into the fall and winter because frankly summer is I would like to slow down I think we're putting a little energy into putting boot camp online as well so right now we're gonna we're gonna kick to the fall to get started with live again okay okay all right Sam well let's get into this tweet of yours which I I found really interesting I think it was actually the second time you tweeted about it and it caught my attention the first time and then the second time again and I said let's let's do an episode about this because it because I you know it really kind of represents this distillation of what you've seen across probably dozens and dozens of Searchers about why it takes so long and and you know it's funny because the whole our whole category this whole thing is called search it's not called SMB owner it's not called operator it's called search because we so identify with the pain of the part that just is getting our hands on a business to own so true and so and so here you are kind of like here's the reasons why the the this part of the puzzle the search is can be so brutal and here's how to fix it so you have your big three in your second two yep let's go let's go through them what is number one of the big three so let's back up and make sure that we're defining what it is we're talking about when I talk about big three second two I'm talking about it using the lens of a self-funded Searcher so to the extent you're a traditional Searcher you've raised search Capital you have an investor base that truly dictates the Strategic focus of your search I don't think this applies this is in line with all of my personal and pursuing activities it uses the self-funded lens you the Searcher are going out to become an owner operator an entrepreneur really what we think about when we leave our our jobs and go out to find a small company and so if you're self-funded I think big three little two take on a secondary meaning let's start with number one which is geography great well I'll ask you will in the search phone world do you think it's okay for there to be a regional or even state or even City specific searches is that okay right not not in a traditional search fund of course that's one that's one of the big in the in the ongoing debate that's one of the big knocks against traditional search fund is you're you're generally going to have to go to where you find a deal now that's the that's the official line but you will find traditional search funders who say yeah but actually most people do kind of go local or at least Regional but that's not that's not what is that that's not the official line that's the kind of the whisper right I think the stats proved that out in traditional world that people on the average do end up buying a business relatively close to where they're searching from so in self-funded we say that actually Regional or Geographic Focus searches are completely acceptable and even encouraged and it just makes think about what a Searcher is you're out there you're young you probably are not differentiated you don't check a lot of the boxes that Brokers and business owners want you to check so one of the advantages you have is being in person you can show off your personality your hustle your all of the things that make you unique that you can't show on the Internet or on an email so we actually encourage Geographic searches and and I'll kind of for instance each of these when I went out to search for the first business our Focus was 90 miles from Tampa International Airport and in hindsight that was crazy but now that I've seen hundreds of Searchers self-funded go through the process I think that works really well and and in Florida 90 miles doesn't get you anywhere it gets you to Orlando barely um in DC it gets you into four different states I think in New York Metro that can get you into it's got to be more than that so you know and to back up a little bit our take is of the big three big three are geography size and Industry what we try to teach is that you need to be pretty specific on two of those three but you can't be specific on all three your deal flow won't be won't be deep enough and and on the flip side the reason search takes so long is a lot of times people are not specific on two out of the three they're specific on one so their pipeline is too big so now to confuse everybody but our philosophy on this is the reason search takes so long is because people go out and search and they don't really know what is a good fit for them in terms of size geography and Industry and they're figuring it out as they go and so they end up crafting their big three over six or 12 months but that's just too long when you're a self-funded Searcher you're bleeding through your savings you're paying for diligence costs you've got to be laser focused and time is your enter is your enemy so we again sort of walk through these big three little two to make sure people go into this knowing what is a truly actionable deal for them and let's tighten their criteria up and focus only on those deals yeah that's that's great Sam and before we get to the next one of the big three on geography let me ask a follow-up why did you in retrospect decide 90 miles from the Tampa International Airport had been crazy yeah well I was I thought it was crazy or I think it's crazy now because when you think about how broad Surfers search today you know they're willing to typically move across state lines they'll they'll kind of go anywhere for the right deal you read the hbr guide and and you read about these home run outcomes and dreamed deals and opportunities and they oftentimes happen far away from where the Searcher is and so looking back limiting our search to 90 miles cut out 99.9 percent of the opportunities out there in the country and it made us go super narrow into greater Tampa Bay kind of seems crazy but it worked but but it worked and so then do you have a best practice for somebody who wants to stay where they are as to what the what the radius should be yeah I don't have a uh a sort of rule of thumb on how how wide the radius should be would I have a rule of thumb for is picking two out of the three of these big three criteria and be focused on two out of the three and and so let me just give you a for instance if you're going to be a hyper local Searcher like I was 90 miles from Tampa International Airport by definition you're cut cutting out nearly 100 of the deals out there in the world what is it you should probably do with respect to deal size and deal industry in order to make sure your pipeline is deep enough you open them up you gotta loosen those criteria right so this is a smaller size exactly and on industry broaden it out like what you'll take you'll take anything exactly look at it you'll look at anything yeah and at the end of the day this is all to get a volume of deals into your pipeline because we all know in search in order to buy one business you probably have to go under Loi on two or three businesses right so let's work our way so we're up the pipeline if you want to buy one and you need to go under Loi and probably two or three you probably need to submit a dozen in order a dozen Lois to go under Loi on two to three so that means you're submitting at least one Loi a month well to submit one Loi a month you probably need to be visiting uh at least two three four businesses a month and if you're gonna visit that many you're going to need to see how many Sims you know 20 30 40 a month to be able to get that many site visits to get that many letters of intent out the door and so this all goes back to managing criteria so you're seeing enough deals come into your pipeline but not too many because as a Searcher that's what you are you are a pipeline manager I haven't put her to put that way but that's great okay and so let's hear the second of the big three size so everybody when they search tends to be too broad in terms of size on the upper end so everybody when I'm talking you know spoke on Twitter a little bit about there's this sweet spot in terms of ebitda ebitda is just a proxy for cash profit annual cash profit at the business that you're looking at and also by definition if you're a self-funded Searcher you need to be using the lens of the SBA right so a five million dollar SBA loan cap whilst these days a lot of the SBA lenders and in our ETA Community are doing Perry pursue Junior loans long story short if your purchase price is much more than 10 million bucks you're gonna struggle to get that done with an SBA loan you're going to struggle to get it done in a way where you're the majority owner of the business with control and feel like an owner operator so back our way down again 10 million dollar purchase price probably means that if the business has more than 2 million of ebitda it's going to be Out Of Reach so if you put 2 million of Evita on the high end what's the low end in terms of size and and I find that actually it's the low end where there's more disagreement right there's a lot of talk about if you buy a business for with 250 000 of sde and starts feeling like you're buying a job and not an Enterprise and that's true and you can talk to Nick hashka about that because there's a lot of Pros about buying a business that small um the the issue back to pipeline again is where do the volume of deals exist on the size Spectrum all of the deals are small if you were to compare of a hundred deals out there that you find in a given geography how many are sub 500 sde how many are 500 to 750 sde 750 to 1 5 of ebitda the volume of deals occurs on the small end so when we talk about size if you're not willing to buy something small whatever you mean by that maybe five or six hundred of sde and Below you're cutting out most of the deal volume so again back to Geo size and Industry if you're only searching within 90 miles of Tampa International Airport and you're cutting out everything else you better be prepared to buy something small otherwise you're not going to see nearly enough deals coming into your pipeline to hit anything close to submitting one Loi a month and just going back to the to the upper range the two million dollars in ebitdon and above I mean the thing is is even if you a self-funded Searcher actually wanted that the chances that they're even going to find such a deal anyway are very slim so it's it can it can be a little bit moot because I mean you're it's gonna be hard to find that deal anyway or to have access to it so and on the so on this buying small going back now to the to the bottom end of the of the of the range to your target range yes this debate buying small in fact I mean it's it's been coming back up on this podcast a lot as recently as today's episode and Thursdays episode one both of whom bought small one it went really well it's been going well for the last four years the other he felt on day three The Perils of going small because one of the proprietary machines that he used kicked out within a month a truck kicked out one of his employees left and so and so the argument about about buying small is that you just have no tolerance for anything happening there's just no cushion um it's not it's uh and so even if you're willing to like buy a job or get in there and be the operator and get your hands dirty there's still a pretty good argument that like yeah but just the finances are such that if you're you know you're one crisis away sort of thing when when people bring that point up uh to you Sam how do you respond look I can't be in the business of telling people what they need to do we all have to make our own decisions but it comes down to when you buy a small company you're likely going to do two things hopefully buy it for a lower multiple and hopefully you're going to buy it sooner right there's more of them they tend to transact in an easier fashion and so you're making in my opinion and I'm I think I'm stealing this from hashka you're making a big bet on growing that small business so if you buy small you're probably buying a job there's not going to be a general manager who operates the business independent of the owner you're going to be Capital constrained and after you account for Debt Service there's not going to be a lot left over so when you buy that small sub 500 sde Business you're making a huge bet on you the new operator growing that business fast enough to outrace the lack of capital and profit to reinvest you're going to outrace the fact that you probably aren't getting paid enough to do that job after that service so I think that that pickle that you're describing is a higher risk bet and you hear a lot of these home run outcomes where somebody buys a 450k sde HVAC contractor and quadruples ebitda in three years and sells it for eight times to a private Equity backed consolidator there are there are lots of those stories and those are great but I think there are just as many of the other side of that coin you get into that business you the new operator you know are replacing an owner who's lived their life in that industry you you have to transition that knowledge in those contacts your Capital constraints so that when that 80 85 000 F-150 breaks down and you have to go write a check for a new one where does that check come from and if two-thirds of your annual cash profit are going to Debt Service on a small company you are you're Finance so tight you have no breathing room and so it in my opinion is a higher risk bet when you buy small uh on the flip side you can probably make a higher upside home run outcome if you buy small as well yeah you have to grow it we've touched on it already but talk to us about industry preference which is the third leg of the stool of the big three here so in self-funded search the thing we see the most often and I think it's the right approach is to be fairly industry agnostic and going back to our search day one 90 miles from Tampa we ended up doing every anything from 500k of sde to 2 million of Evita that's probably broader than I would advise but because our geography was so narrow we had to be broad on size and then the last thing was again we couldn't be narrow on industry so we said from an industry perspective we'll look at everything that isn't and then we inserted the industries that we wouldn't look at so we wouldn't look at true construction in terms of general contracting prime contractor construction we wouldn't look at health care providers so we weren't going to buy them Healthcare dental practice Chiropractic Clinic and we probably wouldn't buy retail we certainly weren't going to buy like franchise restaurant retail but generally we weren't going to look at anything B to C retail everything else was on the table because if we were to constrain it any more than that I we probably would have seen two deals a week and we'd still be searching six years later now Sam with these so these three again size of business Geographic Focus industry preferences we think you need to be very specific and thoughtful about two out of the three if you're going to be like a lot of us self-funded Searchers and you're going to really want to buy a business in your home state or within a few hours of where you live that's fine that works a ton of Searchers do that and give great examples but you probably need to do two things you need to be willing to buy a smaller than is ideal in your mind and you probably need to be pretty wide in terms of Industry and and so when people are looking at this list of three and deciding you know which one which ones they they need to be more flexible on does it usually does the answer usually just emerge from their own criteria like it's very clear it's like I ain't moving so therefore it's got to be size and Industry preference yeah so we spend a lot of time on this during boot camp and after making sure people are very clear about what is a fit for them because a big part of the reason cell phone detergent ulcers takes too long is they're figuring their criteria out as they're seeing deal flow as they're seeing deal flow that just falls into their inbox for no specific reason and um I know that we've hammered a lot on a local or a geographic search but the following works just as well which is you can be an industry focused searcher right you can say hey I want to go acquire Dental practices I want to set up that friendly PC MSO structure that allows Searcher to not be a licensed clinician but to own the economics of that business that works but you may need to plan to do that somewhere other than where you live and so if you're going to be hyper industry specific we kind of say the exact opposite in terms of Geo you need to open that GL up we worked with a Searcher and he's he's still searching that the only business he wanted to buy initially was insurance agencies and insurance agencies are enormously competitive right now from an m a perspective because private Equity is realized that recurring revenue is glorious so they're bidding them up and they're very unaffordable for Searchers so I think we did two things I've tried to suggest he needs to search Nationwide absolutely and and secondarily maybe consider other Industries if you know that competitive insurance agency dynamic is the only one that interests them mm-hmm Sam actually you're reminding me of something which is I I feel like it's a uh kind of qualitative difference not an official one between traditional search funds and self-funded sure and that is the idea of an industry thesis so I I think that in the traditional search fund space a lot of those folks those Searchers are have have done research and developed a thesis not always uh at all um but definitely more I would say than on the self-funded side where I think you've already said that on the self self-funded searches in general are much more industry agnostic um do you have any first of all do you think that that's accurate and then secondly do you have any thoughts on industry thesis is that is that something you incur at all have people do and like the guy wanting to buy dental practices I assume the people who have industry Theses that you meet kind of come to the table with them they've had some vision from industry experience or something and they're like I'm gonna do X whereas everybody else is just like they don't have them anyway so just respond to all that please yeah sure so I I fundamentally believe in having an industry thesis if it fits the criteria that needs to fit your life which first and foremost means I don't think you can have a specific industry thesis if you need to stay in a local market to buy a business yeah however I've set out personally I had an industry thesis on a fencing business that we bought a few years ago and we went out I went out with a partner specifically to look for commercial fence installation contractors and it's it's been a lot of fun it's fun because it's been successful and worked I think when we set out we had a preference for something that we could drive to but it wasn't a necessity and if it was I wouldn't have suggested to do it because when you you know in the deal flow you need to transact on one there are just not enough deals in a local market when you have a specific thesis like commercial fence installation now maybe we pivot a bit and if we said all right Dental practices well there have got to be you know 50 times more Dental practices in every single Market than commercial fence installation contractors so it always depends I think the one I would prefer people describe is what's the nature of the revenue that they're looking to acquire everybody I think rightly wants the predictability of recurring or repeating Revenue and I don't think that they use that criteria enough I think they care more about like industry is easy to understand and to conceptualize I'm going to be the owner of a software as a service business a SAS business but they don't think quite as much about what are the other industries that have repeat or recurring Revenue dynamics that kind of mimics SAS and maybe there's less m a price pressure on those Industries so things like oh man this is a tough example but um we were involved in a a business that resembled pest control and while the revenue repeated it wasn't contractually reoccurring in a 12-month annual contracts they were terminable at will contracts customer could decide to terminate us anytime for any reason but every first of the month we Auto invoiced all of our customers and that repeating Revenue was the basis upon which we could build the other half of that business which was entirely a project-based quasi-construction business there are a couple Searchers in Texas that re I spoke to recently and they exited a commercial landscaping business that over time built up its recurring monthly Lawn Care Revenue business that repeated month after month after month and had huge ebitda margins and we spoke a ton about how they used that Revenue that ebitdata cash flow to support the construction side of the business that was highly Capital intensive was highly working capital intensive and frankly not all that profitable mm-hmm great so so if if people are thinking thesis one other kind of way to think about it is nature of Revenue uh that you that you want to pursue I think so yeah let's move to the to the second two and and how do they fit in overall Sam in terms of you know the first three you you are tight on one a little more flexible on the the other two so how to how to number four and five fit in with the entire kind of Matrix sure so and well let me be clear man all of this comes from being punched in the face on so many Deals Deals that I've bought businesses I've ran voluntarily or not this is just pattern recognition now over having been a part of so many small business Acquisitions as an owner as an operator as an investor and it is truly a roller coaster it's these criteria are just a framework for people to use when they they go out to start because you cannot as a cell phone to search or spend years and years doing this I can tell you my wife wouldn't have allowed that um most people I don't think have the finances to support it and it's just all about being very intentional about what you're going out to buy and making sure that as soon as you find it you know it's real and that all of the businesses you find that aren't a good fit you have conviction to say no to so that you can move on and save your time and energy to finding the ones that do fit so I think big three are easy to understand the second two is all about you as the Searcher are unique you're gonna have to number four the first one of the second two is how are you going to finance it so it pretty much means what kind of debt are you going to use and what kind of equity are you going to raise to make your Equity injection so bootcamp we use the SBA loan framework most people are using that as the primary source of funding for their SMB deal I don't think I need to regurgitate what the rules are of SBA that is primary and we actually walk through a lot of the underwriting criteria of SBA lenders to make sure that Searchers know when they find a deal there are a ton of criteria that the bank is going to use to underwrite and quickly kill deals and it's not just about dscr debt service coverage it's not just about cash flow supporting the loan it's about all sorts of other things like licensure requirements customer concentration all of these other criteria that too many Searchers allow too far down the road and waste a bunch of time on knowing they're never going to close so back to how are you going to finance it SBA loan understanding the SOP understanding how Banks think about underwriting and then I think just as importantly but less well understood is how to raise Equity because most self-funded Searchers let's say they're buying a three million dollar purchase price business are going to use debt SBA and seller debt for I don't know likely 80 85 90 of it and then they need an an equity check of usually something like 10 to 20 percent of the purchase price so in this case three to six hundred thousand bucks and in most cases that Searcher doesn't have three to six hundred thousand bucks and they've probably spent a lot of money on their search so where are they going to go find that Equity investment from we spend a lot of time on that too the framework for what that Equity looks like how to raise it who to call what the rules are and I think it's pretty helpful I'll put a little plug out there we have created a database of every self-funded search investor who wants to be on this list to be contacted about these kind of deals it's free it's on my website like no no holds bar on that yeah Kevin biebelhausen's episode aired recently not the panel at SM bash he came on again just me and him talking about his he's a great story a ton of equity you raise using that list and a bunch of Hustle that's right that's that's you encapsulated it perfectly with a little sprinkling of Sam Rosati your name came up multiple times in that episode um and Sam to tie this this financing piece back so again the whole let's remind the audience The Big Three second two this framework is to accelerate the time it takes to actually close a business and become the Opera owner operator so with financing um so so what what what is the specific prescription do you before people start their search are they supposed to have it all figured out tied up because one of the things that comes out that came up so often at SM bash in a number of conversations was was like um when to talk to investors uh and usually investors will say you know let's cultivate a relationship but really it's like they'll really talk to you want to talk to you when you already have a deal but that starts you know kind of jumping ahead in your search process so what say you want all that yeah will man you asked tough questions but let me see what I can do so on debt I think what you need to know is how the SBA works and you need to know how to kill a deal because the SBA won't allow it to happen you need to know that earn outs are not allowed under the SOP so you know you cannot offer on a deal where the seller says I want two more million dollars in your offering let's Bridge it with an earn out so things like that and then I think just as importantly you need to know who you're going to call because you quickly need to realize after you offer on a business whether or not your SBA lender is going to go for it so obviously we have a deal team at boot camp and we just provide our deal team lender because we think it's important that everybody who comes through has spent time with our lender knows how they look at deals knows their underwriting criteria and philosophy and can make that phone call as fast as they need to and I think that's it I will say that most Searchers make a mistake by calling their SBA lenders after they look at every single deal and it gets to the point where they almost want the SBA lender to make the acquisition decision for them and that's not the role you just need to know what the rules are and what's actionable I think more importantly on the equity side you probably need to know how much money you as the Searcher can put into your deal personally and then you need to have some kind of comfort around how much you're willing to go out there and raise and I'll just say what we did I don't think there is a right or wrong answer but what we did is we had a when we first went out to search had a small Advisory Board it was informal there was nothing supporting this relationship it was friends and mentors of ours who were nice enough to listen to us when we had questions to sit down with us you know once a quarter and work through some deals and and importantly they're willing to put their mug shot on our website because we were young even though I don't have any hair we needed to have some gray hair on our website and they were willing to serve that function so that when we talked to a broker and an owner they could go to our site and see who some of our investors might be and that gave us a lot of credibility I don't think you need to go spam that investor list we created and tell everybody about yourself before you have actionable deals I don't think that's the right thing to do and most investors on that list I understand through speaking with them and feedback even though they may say they want a relationship like you mentioned it's way easier to build a relationship with an investor when you have an actionable deal to present to them and I think that's where the equity conversation starts okay so if I'm if I'm listening to this now and I'm I just want to make sure I have all my ducks in a row according to this kind of framework on the financing piece it's like have a plan and a picture of exactly what you will do when you find that deal you don't necessarily have to have all of your investors already said saying yes or have talked and cultivated a relationship with 15 different people it's more like but you know that like when there's a deal a live deal that you like that you can quickly action on kind of these steps that you've already defined for yourself exactly go back to three million dollar deal that comes across your desk you know as soon as that deal hits if you like it approximately how much debt you think you're going to get have a sense for whether your deal team lender will go for it and know who to call and then on the equity side know how much of an equity check you're roughly going to need based on how much you can bring to the table and the SOP for what's left over after the SBA loan and then a bunch of emails and folks who you can call to jam up that equity mm-hmm re-listen to the Kevin biebelhausen exactly episode because he talks about exactly the flurry I mean he was a Tasmanian devil a phone call yeah but Kevin he can sell ice to an Eskimo so he's got a lot of skill okay last the second of the of the second two the fifth of of the whole list yeah the last so I think if you wanted to encapsulate this criteria who is going to operate the business it goes back to buy them build by Walker diebel and finding the right fit so obviously if you were to look at our slide it it asks you know who will operate the business that is an obvious answer for 99 SMB deals out of a hundred the answer is the Searcher the Searcher is going to be the CEO what I don't think people do is think hard enough about that what they don't think about is okay Searcher is going to take over the ceoc kind of by definition former CEO former owner is going to exit that seat well what exactly was that seller that CEO doing day to day was it a technical business or they had a technical skill set and for example if the technician out in the field had a question if they called prior to sale the seller to troubleshoot a technical answer out in the field and you Searcher are going to go replace that seller day to day and have no idea about the technical expertise of the business you're making a horrific mistake or you need to have an answer for who that technician is going to call so things like what are the owner's roles in the business day to day prior to close that you're going to need to replace and I think that's the fit that really matters and that Searchers don't think often about so they might go offer on an HVAC contractor for example because they read on Twitter that HVAC is glamorous and it's you know in need of consolidation and private Equity will buy it off you for a high multiple and it's always hot in Florida so you need a bunch of HVAC that's great but if you can't take over that owner's job as lead technician run away and that is what that last criteria is all about is defining for yourself what are you good at what are you comfortable with what are you willing to do and how does that overlap with the vacant roles that the seller is leaving and I will say like there are some tricks here and none of this is magical but if you can find a business where the owner or owners are not involved by definition that's a safer business because that business is running without the roles of the owner and maybe you can jump in as CEO and not really have to stress about the day-to-day operational Logistics of the business John Hubbard sat into that opportunity at express trailers and I think that's one of the best Dynamics a Searcher can possibly get into it's pretty rare we've we've been in a business before we're the general manager was running a business that we participated in and the seller lived in the same city he would come in a few days a week he definitely had his thumb on the pulse but if he went away for a week the business wasn't going to fall apart and you know we like to share some tricks around how to ferret that out because if you've ever read a Sim before it always says you know owner is passive and not involved and we'll be glad to transition his knowledge over two weeks time you know that's a bunch of baloney and is there any is there any any of those tricks to figure that out that you can that you can share here I don't know will I'm not sure I'm willing to share those with you man I'm kidding so uh here's one a good one go when you do a site visit go right along with the owner for a couple hours get in the truck get in the car drive along make sure they have their cell phone on try to track how often that cell phone rings try to pull them away from the office long enough where undoubtedly if they're needed for something they would have gotten a call and see how often does that thing light up how often is that seller um getting pulled away from your conversation or that dinner or whatever it is to go troubleshoot something back at the office another one would be to ask for a ride along with the seller to go visit some of the vendors or the customers in person and you know make the cut the seller comfortable tell them that you can they the seller can call you something else a consultant you know an apprentice who doesn't matter so the seller's comfortable doing this but if most of the customers you visit or most of the vendors you visit know that seller on a first name basis and are asking that seller about their spouse or their dog or what they had for dinner last Tuesday night it means they're close and they're close enough or there's some risk that that personal relationship is what ties That customer to that Target company and it will give you just a little bit more hesitation when you go to answer the question how important is the seller to that business stuff like that great thank you for that Sam yeah and just a follow-up point to tying this back to sde you know what one of the reasons you know I think actually you tweeted recently like sde is a good kind of first filter but it really doesn't tell you much case tying this to the operator point a 350 000 sde business with two managers is a lot more appealing than a 750 000 sde business with no managers where the seller is the one answering every call and might be doing some of the technical work and so on so sometimes what appears to be lower s or is lower sde and maybe appears like a smaller business just had is less profitable there's it's kicking off less cash because there's actually managers that are doing stuff which is what you want and I would argue that you would take the I would argue strongly that you you really want that the smaller business with less sde but managers in place versus the the alternative I would agree but it's the case that everything in this community of buying small companies is harder than it looks on Twitter it's more complicated than you can read about and you know the hbr guide or buy them build this is a hard entrepreneurial venture and a lot of these devils are in the details yeah yeah and and Case by case I mean every business is so idiosyncratic and just a last question on the operations this this fifth one do you find that Searchers struggle with this that they don't that they underestimate kind of like what the op the current seller is doing or how they're going to fit in is it is this is this a classic mistake that you see a lot yeah I think the classic mistake is not thinking enough prospectively about the skill set you have going in I mean I was a lawyer and a CPA when we bought the dumpster business and in hindsight the thought and the belief that I could manage Blue Collar staff successfully was maybe arrogant at best and stupid at worst so I think it's important that Searchers sit down and you know read there's a saying it's easier to advise somebody else or counsel somebody else than it is to counsel yourself so maybe to think about your personal profile as you know a third party friend and counsel them say hey you know what is it that it's pretty clear you should avoid industry uh industry but you know what's your expertise what is not your expertise what are you good at so people do not think about that enough and then the Tactical analysis of that seller and what their roles are I think it's probably two things one Searchers when they see a deal are so inclined to get hot and bothered by it that they don't question what baloney the broker has put in the Sim so they believe for face value all of the information that's fed to them and I think we tried it instill a bit of confidence that you can ask hard questions there are ways to get hard information that you must have before you go cannonball into a deal and sign a PG and invest all your money and start a new life so yeah Sam this is this has been great thank you for this people are gonna really appreciate it you are easy to find online but uh is there is there anything you want to plug SM bash 2024 the next pursuant you know uh cohort what what what what can you what do you want to plug here look man I'm not going to be hypocrite and try and sell uh so if you want to find it people will find it on the internet Twitter is probably where I try to spend most of the time because it it spreads the word quickly um so just go find me on Twitter but I must say the best part of SN bash this year was realizing how tall you are I would say that goes back to this whole Community forget the different institutions that are getting built to support the community uh if there's something I'm thankful for after you know being in ETA for five or six years now it's the quality of the people in this community were generally all of an entrepreneurial bent and we're generally pretty generous and I'm very thankful for the group of people that's in this community so you're one of them man I appreciate what you do I I appreciate that Sam that means a lot coming from you yeah so so let's leave it there sir thanks a lot for coming on and we will have to get you back to just share the entire Sam Rosati bio and how you got to where you are so we'll we'll do a part two at some point all right thank you cool see you man 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 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