Neil finneran welcome to acquiring minds thanks for having me a long time listener great great to have you here Neil you were a hedge fund guy then you were a CFO but you're sitting here before me now because most recently you acquired a mosquito spraying business and I love stories like yours Neil because buying a business represents such a big career pivot there's just a lot to learn from that so we're going to spend the next hour ish hearing about the why and the how behind your pivot please start us off as always Neil with some background on you yeah so um background on me you know I'm from the Northeast both you and I went to Brown that's right same time yeah classical one uh didn't know each other nope uh coming out of college uh I did not know what I wanted to do I think I followed a lot of the other athletes into finances because that's what you're supposed to do when I was a I went into um what they call the sell side for a few years which uh you know is basically trying to get investors to buy or sell stock um through you so it's more of a sales role I did not love that role um but it got me in the door and it got me interested in finance um and over the after a few years I was able to uh move into the hedge fund space as an analyst uh and a Trader in uh 06 um and you know that was a great experience uh it was uh you know at a value-based distress hedge fund um for those you know who know what that is um it was a spin-off of some larger funds so it worked with very smart people uh analyzing very a ton of businesses all up and down the capital structure and looking for ways to make money so as a younger guy clearly very fun profitable business and it did very well for years certainly through the financial crisis um ironically those are the best years for a business like that which is much more in the distressed event driven dislocation side so that you know that was really fun interesting work over time um I think the days of a few guys a few bloombergs and a few hundred million dollars um kind of faded away it got a little more institutionalized I think money rightfully so went to lower fee places um just too many Smart Guys chasing too few ideas and a lot of those uh value funds kind of Fade Away along with ours our performance wasn't horrible but wasn't enough to justify those High fees especially in the world of um zero interest rates so I made a move around 2018 to leave um I felt like it was time I felt like I wasn't adding a whole lot of value to the world being there um it did do a stop at an appraisal firm uh where I where I analyzed a valued assets for lenders for for a year or so um I didn't love that I wasn't really in the game there it was more of kind of a side player um so around covet time 20 late 2019 early 2020 I actually had a friend who launched he had a Distillery for about 10 years but he launched one of those canned cocktail drinks saying Kai noon type um what's the other one white claw that type of stuff yeah yeah and it turns out um it was a small sleepy distillery in Rhode Island but that that business did pretty well and you know got up close to 10 million sales for that product so he was one guy making the product with you know like 35 40 hourly employees and he just need another you just need help I thought oh that's cool let's go do it um it was that weird kova time we didn't know if the world was going to end but it turned out people just drank a lot more uh so I just did well and I think um in hindsight I think the timing was right we thought that brand uh it was big in New England but to grow it would be hard to go to additional States we thought it would be great if we could sell it to a big player um and move on uh good and bad in that space the big players really dominate um and they have the relationships with the Distributors they have is is really nice so they can pay they're not paying SMB small business multiples they pay high multiples because they can buy High multiple and shoot it out to all the Distributors and make it a low multiple so um we sold that business uh that brand um into mid 2021 um so after that I hung around for a year helping them out but the sales that was the majority of the sale so I didn't really need me um I kind of helped him downsize cattle leases kind of reduce liabilities for a little while um and then I was looking for the next thing um I wasn't necessarily looking to buy a business it just kind of it came to me um I was actually looking for a little bit looking at businesses on the side people would call franchise as we call I would check this by sell because just as a curious guy I mean I have read all the books um you know specifically I like the HBS sorry hbr book I had that in my back my mind so I was more doing that for fun just like looking at businesses as a former investor but at the same time I was looking for um you know CFO jobs or family office type jobs and I haven't wasn't having a ton of luck the CFO judge I think because I worked at a CFO a small business 10 million in Revenue so usually um those are more controller types that small company and then the bigger ones I didn't have the bigger experience I definitely talked to a ton of private Equity guys and they love the investing in operation experience just didn't know where to place me um which makes sense um so yeah so out of the blue someone called me um I don't know if I didn't think about it enough but they said hey this Pest Control franchise it's like five years old is for sale in your neighborhood um you want to take a look I was like yeah sure um so you know I took a look it's it's you know we could talk about the numbers but um I took a look and I thought it had enough upside um with not a ton of downside you know we can talk about you know buying Big versus buying small what's riskier and I see both sides but I thought um I could make it work have some upside maybe it's buying a job but I think I was buying a job with some upside um and it's a pretty good business once you get it to scale as far as cash flow um hard business but good business uh competitive but still good and so yeah we did some due diligence went through with it here I am six months later Neil Neil you skipped to the end yeah yeah exactly we're gonna we're gonna spend a little bit more time on your analysis there uh but I do want to I want to call out something in in your career it seems like you time these Nash International crises pretty well and you're in the right businesses that benefit from them just distressed in 2008 to yes a booze business during covet yes uh well played Neil when you say you got this call from I guess like a franchise consultant why did you get that call oh one of these franchise Consultants was calling me for like a year with just showing me franchises franchises and franchises uh and I mean it's very persistent I kept on looking at someone but you know most most part um they wasn't interested in any of them and then this one popped up as a just somehow he got in the flow of uh this resale um which I like the the I like the fact that um it was a little you get a pay for it right a little more I guess not sure if it costs more of a you know given it has some built-in cash flow but I just liked the thought of it you know already had a pretty good territory pretty good brand name um and is that was at that specific point that that caused you to pay attention to this one where before when he'd call you you'd kind of dismissed it was it like oh this one actually has cash flow so I'll get another look at this yeah and a lot of the other ones were more like um a long build out a long payback period uh unproven um business um a bad territory just everything else seemed like I could you know or just wasn't interested so um there's always something you know I could knock off and you know I wasn't really interested in franchises like it wasn't like a goal but he just happened to call on this um this one that was for sale yeah check some boxes that was a resale yeah okay and so you hit you said it was a a good business but hard what did you what was it what was good about it I think you know um what's good about it is um it's very high margin you know um like a lot of those these uh these type of home services businesses they're hard and the management Labor's hard but the caught the pure cost of the service relative to the cost of the material and the labor um is it builds in a lot of margin um uh so I like that just it's pretty high cash flow if you get the customer yeah and did you can you give us a sense what high margin means to you well yeah I mean I think let's say we treat somebody's yard for for 100 bucks I'm just throwing out the numbers um you know you got to pay somebody uh not really sour salary um maybe it takes them 15-20 minutes to treat that property um you gotta rent a van and and buy some equipment um but and the the actual materials you know probably I don't know five to ten bucks so to do all that um you know I mean you do that 15 times a day um it's pretty good once you get ramped up it gets some pretty tight routes and a lot of customers it's hard to your customers and there's a lot of marketing expense but if you can get them and keep them um it's it can be a pretty good return well I want to spend some time a little bit later on what is hard about this business because I think what's hard about it is our elements that many people listening will not need to be prepared to experience or may are already be experiencing in their businesses but I I before we kind of get off here I want to also just understand a little bit about your kind of like emotional um decision to do this because sure this this franchise consultant had been calling you a lot um but you'd almost basically always said no or not really been interested and then this time you're kind of interested and then you do it and and as I said at the top this is a pretty big pivot from being a CFO uh what your what your most recent thing and before that you know kind of High Finance hedge fund world so so how did you think about that did and did you have to sell it to anybody in your family I know you got a family I mean luckily and I think this is probably a common theme in your podcast um it's good to have a supportive wife so she's like almost two supporters like yeah go for it go for it I believe in you but that that's super important and I recommend to all the guys and girls out there if you don't have that I'm sure it becomes very hard um so she's always super supportive um so you know so that so and my kids are you know um they don't get a saying they don't get us they don't they don't get to say totally um how many kids do you have I have two yeah so uh 15 and 12. okay and you know there's you know buying a small business when you're 30 and and single is different than buying one when you're yeah our age with a family and and mouse to feed yeah so there's a there's kind of a your I assume your risk um tolerance is probably lower even though you did it is lower than other people listening who are 30. yes uh so how did you think about that there's a bit of a leading question because I'm also kind of trying to get at the fact that I think you have a bit of a cushion like you have some savings yeah um yeah so so talk us through that if you can share what you can there yeah so I mean um that's totally true I mean I think there's something to be said for like I think you had someone on recently who actually had a similar background to me but he was younger sleeping on couches and for him a personal guarantee is different than you know personal guarantee and me funding you know any losses or expenses um given the you know obviously the responsibility you have when you're when you're older um so yeah I mean that's that's uh that's definitely something to think about and you know sometimes it keeps you up at night um you know I think the good thing about having a little bit of cushion as you're older if you saved up you know some you know I could go for a while and not you know go for years and not even you know pay myself and still like make it out to the other side and that you know that adds it adds some comfort it also allows you to um make better long-term decisions so um if you don't have that cushion you might be more apt to cut muscle and you can see how a few decisions decisions could could be a spiral not not having a cushion so you know there's both I mean I think if you're 30 yeah I should go for it if you have a cushion and responsibility it does it does allow you some Advantage as well so I don't know if those are right or wrong um I think buying a little small um for me they're both kind of if it increased the risk or decrease the risk I think the super downside is decreased um like you know if you bought a business 10 times as much everything was 10 times you'd have a lot more cash flow ability but if it went wrong you're really screwed um whereas this goes wrong I feel still feels like a bump an annoying bump but manageable um you're not going to be ruined by it I'm not going to be ruined so it's you know you know probably ideally you'd buy that enduringly profitable business that has a niche and you pay three times and you know and maybe that's the way to do it but who knows you know um what it's hard to find those and Neil I don't think you said can you give us put some numbers around this business that that you've said that was buying small yeah so um it was approximately a little less you know less than a million in Revenue in 2022 uh like a little less than 700 um I'll probably grow it like less than I hoped but I'll probably grow like 10 um even now it should probably get to 20 margins before Debt Service so it's not a lot of cash flow um but good margins and that's something and so tying this now to the previous question about your cushion and where you are in life you're not paying yourself right you're reinvesting I haven't uh paid myself in reinvesting yeah I mean I could probably be reinvesting all the dollars back into the business yeah yeah so I just want to build up some cash to get through the off season because it is seasonal um put a lot in uh you know marketing and then I did borrow some SBA debt so I'm actually not only taking some out but even like a few hours ago I just paid down some SBA debt with some savings because the loan rates are so high and um I think that's something people definitely have to if they're they're thinking they buy lever up and buy with SBA Loans so the floating rates prime plus a couple hundred basis points it's uh it's a lot of cash flow so um yeah so you bought some of that debt down just yes an hour ago I was like this is crazy I can't be paid double digit interest rates um we'll have this money over here in the stock market like I feel like I'd rather you know I own anyways and you did that with money from the business or from your own money yeah yeah yeah okay so yeah that I think that's going to change a lot of like the I mean interesting how that plays out over the next year or so the impact of the interest rates um on businesses and and yeah Acquisitions and um because it is are you bearish I mean do you think that we're going to see more kind of Carnage than than we have and I think you probably will still see some cards and very interest rate sensitive assets like real estate probably still have time to play out um I'm trying not to get too macri on bearish bullish but I do think uh it's definitely something to think about for your listeners and really think about the real cost don't just assume it's free money but really run the numbers um is important as far as the impact in the economy yeah I don't know I I don't know um it's interesting for every you know bar that's awesome savers so if you have extra money you can earn five percent do nothing which is also not bad so yeah um yeah okay well let's uh let's dive into the business a little more so it's basically doing about a little under 700 so let's just call it 700 a thousand a year in 2022 right did I get that right yeah last year yep and so that translates to how many people how many employees uh I have one office manager who answers the phone and does some you know uh administrative work and then I have the the technicians that spray and that's uh that's right now I'm I have I've had between five and seven all year uh cut come in and come out a few of them but I have a kind of five right now as we get towards the end of the year now one of the aspects of buying small particularly particularly in a blue collar business like this although perhaps in really any business is there's less cushion to use that word again but in this case we mean Manpower so you're probably working very much in the business or what what what what was your expectation and what has the reality been I mean my expectation was uh to be working in the business for a while until yeah I would guess I'd have to get sales up at least twice as much to probably get some more out of the business I think um so yeah I'm in it and uh you know you gotta yeah when it's this small you gotta be willing to roll up your sleeves a guy calls out like obviously there's days where I'm outside you know from a hedge fund outside for spring for mosquitoes in a few years so I mean humble enough to do that um enroll with the punches and that's that's not unexpected yeah okay so you were you were um that was something you signed up for because I've had guests on who bought a little smaller a business like this not necessarily pest control or mosquito spraying and when they find themselves being in a pinch having to do the work itself you know it's it's a rude awakening but you were you were totally on board and it's part of your plan really even yeah I mean I thought yeah I gotta fill in um probably build some Goodwill with the employees that they see me going out there sometimes too so um it's not ideal uh but uh you kind of you know try to keep your word when you tell customers you're gonna show up I I don't you know I would rather if I can maneuver it may show up then then kind of canceling and say you know making up some excuse so yeah it's the right thing to do yeah and aside from from that being able to like know that you're going to service customers and uh and not leave anybody hanging have has it been beneficial in your learning about the business uh and the other thing that you mentioned where it's kind of earned you some cred with your with your team yeah those two to take those separately yeah I think both uh it helps for The credibility um uh for knowing the business for being able to kind of you know I get a lot of the complaints too we have you know 1100 customers you know you're gonna get I don't know four or five calls a week at least of this and that I got bit by a mosquito so just kind of knowing you know kind of know what the process is and how to do a good job um it helps for management it helps for respect from the employees um and it helps for when I I train new employees um I know what I'm talking about yeah yeah I think when you said that you get a call if somebody gets bit by a mosquito I thought you were being metaphorical but you probably literally do get a call if one of your customers gets bitten by a mosquito yeah they're like this isn't supposed to happen anymore what's the deal um okay you mentioned you got to be humble uh from from hedge funds to Mosquito spraying talk about that a little bit yeah I mean yeah I think it's just it's just I I'm fine with it but I think there probably is a perception of like going from Bloomberg's and serving credit you know creditors committees that going through restructurings and not working for a billion dollar hedge fund to you know um spraying for mosquitoes I I don't really think about it but um I can see how that you know um could be you know hard and if you take a step back you're like what the hell how'd this how did I end up here um but you know it is what it is you kind of I didn't have a plan to go hedge fund to CFO to mosquito Joe but it's kind of how it rolled out um and uh yeah it's just it's just the way things are and uh just doing the best I can with um with it well I think one of the questions um that feeds into this the the the ego question is also what your what your plans are so if if you're only gonna kind of keep the business at a small level then maybe that's um you know there's more for your ego to accommodate there than if you're intending to you know build a a pest control Empire and when your ego gets the better of you you can say to yourself well no this is just step one yeah of a of a master plan of world domination so which is it for you I think I have a loose plan you know sometimes you get into these the the franchises have a lot of you know positives and negatives but I think I do have a now that I'm in there is a in my in my head I feel like there might be some opportunity um especially you know maybe some of the other surrounding franchisees are older or I could probably hopefully roll up a little more at more reasonable multiples in the first one without adding a lot of big fixed costs um uh and just kind of buying incremental Revenue at a reasonable price I think there maybe some opportunity for that over time whether it's an Empire I don't know um but could it be several million in Revenue yeah and that that'd probably be enough you know for me um so that is that is in my head as uh being a a finance guy I think that might be even lower risk than just trying to you know do as much as I can with the hand i'm given one of the I think really compelling things about this world speaking purely from you know money perspective is that there is a pretty clear path to earn a million bucks a year if you you know if we'll just assume as as very kind of napkin math generalization that that many of these kind of Home Services businesses are operating at 20 margins you can get to if you can get to five million dollars in Revenue which is a big one a bigger one of these businesses it's not a huge uh it's kind of a medium size yeah um you're at a million dollars a year which is really a pretty Elite place to to be not to mention comfortable but not to mention fat and happy um so it's pretty you know it's pretty interesting and I and I've had more than one guest say you know they bought someone in particular comes to mining he bought small and he's kind of five year plan was to to uh build and or acquire his way up to five million dollars in Revenue to hit a million dollars and take home every year and yeah um at that point he just Crews or who knows what but yeah if you really get a million dollars in cash a year you've got a lot of options yeah I could definitely it definitely will de-risk I mean I I think um having a plan like that and even getting 50 75 there that's something you pretty sure you can execute on I think it uh it's it's in some ways it's less risky than not doing it um if you can manage it well and you know um yeah that definitely uh I put I'm definitely putting feelers out and we'll see what happens it might you know take some time um so be patient feelers to to what to acquire well I just meant yeah just mention it to the franchisor and say hey just a heads up if something makes sense that I can fold in reasonably with a you know uh ideally you know almost like that I think Walmart was very let's you know when the local market grow from there if it's close enough where it can it's incremental yeah not like buying in a different State we're kind of starting from scratch but yeah you get some synergies um is is a reasonable Playbook if it works you know if yeah the situation comes up and you have a reasonable seller foreign quick plug uh somebody that you know uh Jesse sundquist who has been on the podcast before about a year ago have he'd been searching for a year and he came on kind of having written this essay on search funder about what it's like being a year into the search without having bought a business well yeah uh shortly thereafter he did buy a business and I'll be interviewing him shortly and what did he buy but he also bought a mosquito Joe uh territory or two one and I think maybe he's about another one okay two okay I talked to Jesse quite a bit yeah so that's that's great so so speaking of multiple territories and franchisees why did this territory come up for sale and the Very franchisees that you're now interested in potentially buying out why didn't they buy it before it hit the open market that's a good question and and was that a red flag yeah red flag um it was okay yeah I mean I think it's definitely red flag especially uh in the franchise World um but I knew the area pretty well I grew up in Andover Mass which is you know what the towns in my territory so I thought the territory is pretty good um I talked about that the seller was mid-60s I think he um was very in the business I mean he and I'm out in the I'm out there spraying for bugs once a while he's probably out there at least twice as much as me um and so I think it took a lot out of him but you know why didn't the um other franchisees buy it I think they kicked the tires um but you know they they just didn't they just didn't want they were very comfortable um where they were um the two closest ones actually run by the wife of well you know even the wives run it and the husband's work other jobs um and they're doing already doing at least twice as much as Revenue has made maybe two to three times so it seemed like they were pretty comfortable with where they're at in the cash flow and they thought God it'll be such a headache to grow this I'm doing fine well that's also nice because you know I don't know it may not be Apples to Apples maybe their territory is larger but if you see that a neighboring territory is doing a lot more than the one that you're contemplating buying yeah maybe that tells you that the ceiling is a lot higher than than the than the one you're considering buying is at that's right that was a big part of my thought process um I thought hey I'm buying it you know at this but it has a potential to do more just if I can get even you know close to where they are and so it's the multiple you know really X or is it half of X right so um you have to get there I think checking the house and I knew this buying it I mean it's been so many weird years that I don't know if you can get the same growth you had definitely at home services like these covered years were probably such a pull forward so I think it's gonna be harder to get there so I don't think it's be like snap of the fingers um but I think over time with good service um improved marketing um uh uh there's definitely room to get more market share you had mentioned when just a minute ago when we were talking about uh accumulating more and you know getting to a higher larger business higher aggregate Revenue uh and you said as a finance guy you're kind of thinking along those lines um so that that's kind of a tease up this question which is do you do you think that your history in kind of deeply in finance hedge funds than being a CFO and really kind of understanding Finance at a probably much deeper level than many small small business owners does that give you any advantage here I was yeah I was thinking about the other day um I think knowing the numbers uh helps you make um good decisions you know what a customer is worth so do you place this marketing bid over here what the chances are because you know the payback I think knowing those really feeling the numbers I think if if you want to like you know as a value game I'm always looking at downside I'm sure a lot of your listeners and you know um former guests stressed out a little they're probably up you know and I do the same thing like I'm six months in so I'm at that like three in the morning looking at the ceiling um I think having that Finance background looking at the numbers uh helps to calm some of those fears because you can say okay if revelry does this I cut this I cut that I can do this um and so I think knowing the numbers gives you some comfort as far as investing and also as far as contingency analysis um as well uh yeah that's helpful you know knowing those um yeah it's kind of like it would allow it allows you to do surgery on on the business if you need to I mean you know what pulling this string or cutting this out yeah you know you kind of you can maybe do that in all analysis you're quite comfortable in that that analysis it's also you know the thing about being a small business owner is that um you're you're an operator first but you are you know we think about Investors as kind of a different mindset you know they're Capital allocators they think about the best you know best place to place X number of dollars yeah but really small business owners making all those same choices or should be thinking about things that way because a dollar put in to X is is removing that dollar from being put into y so you're always you should always be evaluating your choices of X Y and Z and doing that analysis financially is a big part of it maybe there are other considerations strategic considerations people considerations but certainly Financial it should be part of it um and if you're already at home with that mindset because you've spent a career in it that it comes to you naturally yeah yeah I mean I just got to make sure I don't get too up in the spreadsheets and and uh you know make sure you know you manage the guys and you know make sure they do a good job but um yeah this is positive negatives to it um but you know absolutely you're definitely 100 right I remember from our pre-call you you telling a little story about um your previous seller and how he wouldn't give a freebie or if somebody said you know got bitten by mosquito he would ask that you come back to the yard to the person's yard and respray yeah previous owner would say hell no you say what and what what's the you know what kind of or I say yeah hell yes you keep them happy if they smell a mosquito I'm going out there and it doesn't make the guys as happy and you know I try to explain it to him that the value everybody explain it to us what what's the explanation there well I think you know when you think about like we said earlier the cost of doing a service versus the lifetime value of a customer if you keep them happy and you can keep them coming back um I think we had you know 80 to 90 85 retention the lifetime value of that customer is really high if you're going out there a bunch of times a year and so to um risk that over 15 20 bucks um is it doesn't make sense and then when you think about uh you know the cost to acquire a customer God I mean marketing relative to new customers is hundreds and it's over 200 I think this year um so um we spread the marketing over new customers so uh to spend that 10 15 bucks is this a no-brainer I keep them as happy as possible and so just give us a sense what is your the lifetime value of a customer guess if he's doing I'm doing gross margin with all the incremental margin credit card fees and royalties uh uh I would say if they go out there seven or eight times I bet it's like 50 margin so I don't know so they're probably worth a few hundred bucks 400 bucks a year and if they're at 80 percent um retention 80 85 it's probably at least I mean I guess if you do the math the software guys would be able to do the math in their head I bet it's probably at least a few years yeah um of value so it's probably 1500 to 2 000. call it call it fifteen hundred ish I don't know yeah 50 and by the way we're 1500 net 1500 cash yeah right yeah yeah yeah before the like Opera like rent um but yeah pure like gross margin us yeah paying the tech paying royalties paying credit card fees yeah I think it's probably 50 percent so when that when a customer calls and says I got bitten by mosquito can you come back out and your calculation is 15 keep retain 1500 yeah uh spend 20 to retain 1500 that seems pretty yeah and then and then knowing that the cost of a new customer is is yeah exactly it's a couple few hundred um with cost per click being so high right now and so competitive to get a customer it's much better to retain uh you definitely want to retain and grow but you don't want to lose them over um 20 bucks yeah at a pride great deal which is probably a lot of it yeah exactly exactly yeah as I recall the story it was kind of like an angry kind of like no I'm not you know go back out there and it was so it wasn't even yeah it wasn't even uh rational or or um rational if wrong it was just pure emotion I mean I I think yeah he's a great guy I think it's a lot of pride in the work as training and the quality of the work uh so I get I get where that comes from yeah I don't mean to um disparage him because I I haven't worked directly with consumers but being one and seeing the behavior of the general public I you know I know that dealing with people and yeah oh my gosh yeah yeah actually I caught up with Jesse sundquist uh a few weeks ago oh okay ahead of our ahead of our interview and I one thing on this point I'm reminded that he said and I'll just get your reaction is one of the distinct things about a home services business like yours it versus a business so taking just b2c businesses consumer businesses you can either have like a retail restaurant or something where consumers come to you into your environment and it's your controlled environment yep option a option b is a home services Business Like Yours where you're going into the environments of the public you're going into their homes yeah and we are all very protective of our homes in particular about our homes yeah and and Jesse was like you know neither is perfect you know you pick your poison but there is definitely a lot of things that can go wrong when you are sending people you know your cruise into you know there's basically 100 or 150 or 200 points of contact you know put you your people in other people's homes yeah you know every week or so so it's 11 around like yeah imagine just pulling people's driveway and just you know uh miscommunication or step on a flower or let the dog out Jesse coming back for is he coming back for another podcast soon or he he is okay he's coming back very soon in fact I I might Bunch your episodes in the same week and have mosquito Joe week on a choir I love it yeah we'll see you guys go back we go back and forth with some more stories uh with uh the labor and customers so it's fun I do want to ask going back to this this LTV uh lifetime value versus loss of a customer or acquiring a new customer um thing again because it's so fundamental to just recurring Revenue businesses and customer acquisition and the math there yeah the if if you're telling me yes 200 to acquire a customer sounds expensive or maybe even a few hundred dollars but but but if they're worth fifteen hundred sure why is the argument not just pour money into Google ads you know you're you're profitable all the way up to fifteen hundred dollars as long as you're not paying over fifteen hundred dollars to acquire now I know we were doing napkin math so maybe it's not exactly that but the Delta that currently exists between your lifetime value of a customer and what you're paying to acquire them is still there's still a lot of room there for you to just pour money into it and that's true I mean um yeah I think you gotta balance that with cash flow I think if you are uh like a SAS company I had a bunch of investors you probably would I don't know I don't know how much you can push too like I think they're I think there is a trolley diminishing returns um yeah I mean we put we we spend a lot of like that I told you about that money is costing maybe it might have cost 300 customer this year if I'm doing the math but of the few hundred customers I got I would bet at least 100 of them were just referrals so I don't know if the marketing even got them yeah um yeah so I'm not sure if doing more would have done anything I don't know it's a good question um if I knew I could get if I knew I could spend more and get customers at 150 to 200 I probably do it I just don't know I don't know I don't know if you how far you can push that and or whatever the where it sits I mean I think I I think I'd like to be 10 of sales and it's probably a little over that this year I think that's manageable um but if you really could play that game if I if I thought you'd pay more and you could keep it even if 150 to 200 bucks I totally agree with you if you do it I just don't know I don't know if that is linear like that yeah I'm still learning the whole marketing thing I'm uh that's my weak spot I just kind of trust the people well thank you for another segue which is I want to ask about buying a franchise so one of the things so I want to spend some time here but one of the things that franchises franchisors often offer is kind of to do the marketing for you in order you know to send you leads it sounds like in in this case mosquito Joe does not send you guys leads the marketing is in your hands uh they they have some required spend um so they do send out a lot of post you know direct I think they're changing it maybe but they do have some required spend uh per territory that has to go through them but and it comes out via you have some options within it so you can kind of whatever however you want to met that menu um uh are you a direct mail or more like emails or display ads or all that stuff or YouTube I think um but they have some requirements spend which is mostly bothly but you know it's probably both a good thing and a bad thing because you can see people not spending and then probably not good for anybody so maybe some of that four spend is good as long as it's done well yeah and then I spend above that with some you know outside of that it's been a little more okay I have like you know whether it's pay-per-click or putting up a little league sign or something um or some social media spend but yeah okay or yard signs or stuff like that some of the old school stuff works pretty good too and what else about buying uh into a franchise system Neil any what would you share with the audience I mean you're giving up you know you're giving up a lot on the um you know they're taking uh you know in our case eight to ten percent of sales depending on your size uh it scales down as you get you know over a million I think so that's you know it's a lot of money does it get big but um they do provide I think that I really like The Branding I feel like it'd be hard for me to get Niels mosquito control brand I mean I think people know the brand almost nationally uh I think um so that's helpful um I I really like the ownership uh um you know it is part of a bigger company called neighborly which is part of KKR owns um so I mean oh it's a neighborly brand yeah it's a neighborly brand okay so there's some good bad I like the people I think the it's nice having the community probably the best thing is the community of other owners uh as far as best practices and tips on tricks like you know uh how do you guys incentivize your technicians or how do you do this and all that you do have a community of uh I don't know at least 100 100 plus other business owners doing the same thing and so um that's good and as far as all the the technical stuff like you know you have the bug people at mosquito Joe so like I'm not like uh it's not like was passionate about bugs before I started this so it's nice to have like a entomologist to say hey what do you do with this bug what is this how do you treat this um so there's some support there so I didn't have to be an expert in it I have some support so all that you know pluses and minuses well one of the other big pluses of buying into a franchise system is that um it unlocks the potential for what AJ wasserstein the professor at Yale School of Management calls programmatic acquisition so which is basically just buying uh buying up more territories but doing it kind of very systematically yes the plan of doing it just that what we were talking about before an organic acquisition of your of contiguous territories and growing that way yeah um and and franchise franchise systems make that so easy for two big reasons first uh the the integration is Trivial compared to integrating to Independent businesses that's huge because integration is a big part of where acquisition fails and two all of the other owners are known to you I mean you've got the the contacts of all of them so you could email them all tonight and say hey I'm looking to buy more territories yeah contact me if you're interested absolutely which is pretty powerful yeah so have we said everything that you wanted to about buying big but versus buying small was there anything more there to say yeah I just like I go back and forth in in hindsight you know should I have this one really I wasn't like looking hard like maybe Jesse was or some of your other guests would look for a year and that they look at thousands and thousands of businesses it was more just kind of I was mostly looking for a job and this kind of came to me so it you know in hindsight should I have gone bigger and looked a lot harder and find it more Niche you know uh High buried entry business I think that's you know that's a also another way I mean it's hard you know in hindsight but I think I can make this work so I think it's all going to work out um but yeah I think I I've read the arguments big and small and I think both can work I don't think that's the right answer well you you remind me of one other point about buying bacon versus buying small this isn't you know it's not like you can only buy one business in your life right uh your mid-career so if you got this to a point of Revenue where you could put in an operator and it's throwing off a you know significant six digits every year then you can go do another search that's right and uh and be that much richer and wiser when you approach it that's true absolutely uh and and and operationally you know Savvy like you have operated a business yep speaking of which so Mr former hedge fund Mr former CFO what what has it been like to become an operator of a blue collar business you've already talked about a little bit about the ego of uh yeah uh but what about actually the the day-to-day and dealing with angry customers and spraying bugs sometimes and most importantly managing managing your staff management staff's probably the hardest part of all those three um customers usually you know you get them on the phone for the most part you can even turn a negative into a positive just just being nice and and uh adding some extra customer service more so than they used to especially blue collar industries so that hasn't been a huge problem but the labor managing the this blue color labor is is just uh it's hard um it's uh I I mean I like the guys I think actually get along pretty well with them um but you gotta somehow be tough but also roll learn to roll with the punches a little bit with them which can be frustrating um I think there's like a high chance that I have five guys tomorrow there's like I feel like the 50 chance of one of them something I I don't know something for some reason they won't show up um and that's uh that is uh frustrating um but I think it's part of the game and you kind of gotta roll with it I think I think you can get really worked up about it uh but I think it might be just the nature of it yeah yeah and so how do you how do you deal with it if every other day somebody isn't somebody isn't showing up because I mean every other day Neil does the work with that for that works I know are you are you are you over hiring so to kind of you have excess capacity or what yeah I think right now I'm a little tight but early in the year at a little excess I was almost like fine um it wasn't a big deal um I think uh you know I think you try to hire better and you try to get rid of um you know firing a few people this year maybe one or two you try to make maybe that fire decision a little quicker um I think maybe next year um thinking about I don't know I'm going back and forth on weather they do a little bit of incentive bonus just like it weekly if they hit certain production numbers but I might go a little more aggressive on the incentive you get a percent of the revenue you produce plus a little more if you show up every day unless it's like at least a week in advance so I'm trying to think if I as opposed to managing the discipline into them is there a way to incentivize the discipline into them um and the reliability so I'm thinking about that for next year um but it part of it just this stuff happens I think at this level and you got to be able like um roll with it because I think uh uh you know some of these guys I think we pay pretty well well relative to other pest mosquito control companies but they're not making a lot of money so like one emergency in their house and they're in their family it really affects them right so you know they're a few hundred dollars away from a crisis so you know it's it's hard but um I think you just kind of know when to you know roll with it sure Jesse will have some additional comments too uh well well Neil I I let me let's press on this a little bit because it's such a I I uh I I hear yeah that you just gotta roll with it but it does seem like some people can roll with it and some people can't yes and and you know there's this there's um kind of this sense among SMB owners like of the very white collar person coming from a white from a from a finance background like liking the napkin math of buying a small business and getting in way over way over their head because the culture of small business is so foreign and so rough around the edges compared to what they're used to absolutely and sure enough some of those people do get in over their heads really don't like what it's all about right and they hate it and they run away Screaming made it make a huge mistake it's not for them whatever whatever the unhappy outcome looks like yeah um meanwhile you are saying yeah it's hard kind of with a twinkle in your eye and kind of a half smile but yeah there's something about your personality I guess that allows you to tolerate it or maybe even like it a little bit what do you think the right person so for somebody who's listening to this who's W-2 and they're used to a nice controlled corporate environment how do they know if there's somebody like you who can handle it or there's somebody like other folks who really care won't be able to handle it yeah I don't maybe you're gonna have to learn to handle it to some respect I mean um I don't I don't know I think it's definitely like you said it's hard it's definitely hard it's definitely a big factor I probably didn't appreciate it enough I was more like you're like oh the napkin works you know that you know back in the napkin they do hey this per hour they charge this much it's awesome but actually doing it day to day and and managing around that it's like um the full you know it's a lot of my time just managing the logistics of the labor um and the changes and so um I think the answer is um you probably want to pay a buck or two higher per hour than the other guy um any all but you know and you hopefully you get a good Core Group which I think I do have a good Core group and maybe one or two that a little get less reliable and then you gotta learn to to roll with it a little bit even my good Core Group stuff happens um and if you're thinking about getting in this it's a big deal if you're coming from a white collar company where people show up do the job and leave it's not a lot of you know um drama I mean you you know here's here's like you know I can't get the drive you can't get it right in like this happened maybe they lie to you and you kind of know but you let it slide um so yeah I mean I had like one of the guys I got rid of just forget I didn't even think about this he uh he can come in he sent me a picture of his car totals but in the background it was a junkyard of all total cars and I'm like kind of like sarcastic this is a guy didn't work out I think with him but I was like sarcastically like wow it was like a tornado roll through there and then the next day he shows up with the car in perfect condition and I'm like seriously he's like yeah my cousin's really fast at fixing cars I'm like okay I um and that's kind of I mean that I mean obviously that one was so blatant but yeah you just kind of you kind of rolling it I guess um there's ways to make it easier and probably 20 probably one more guy than you need um you gotta give it give where you can if they're do a good job for the customer when they show up like they're not like lying um if they're fairly communicative even if they miss a day every couple two three weeks if they tell you uh they'll just disappear I think you're gonna have to roll with some of those guys um it's probably like a line I think there's a line where like hey if a guy like lied about doing a treatment or you like sprayed water or he like you know just a jerk to a customer it's probably lines you're like okay that's it but if it's like hey you know I might have covered but he's probably really hungover um you might have to roll with that you know it's kind of um in that world but I it's hard you know I like yeah this how you put at this line because basically you come from a white collar environment and there are lines that you don't cross and if you cross you'll expect to get fired or if you see that behavior you know that person's gonna get fired you you can't burst into your boss's office and start screaming at them but as I understand it that might be within the line in Blue Collar yeah a blue collar environment so you have to you have to Define new lines or recalibrate your lines and if you got if you have no experience in SMB you might really just not know what they are yeah what those lines are and and so I guess talking to people like you people who've been in it now have some experiences maybe a good way to kind of gauge like it's because it's just got to be hard to know where that line is if you're new to this yeah what should I let slide yeah shouldn't I yeah exactly and I probably get it wrong a lot yeah you know sometimes I ask the office manager to go oh the prior seller would it what would he have in this situation though um but yeah it's hard to know um uh do you like it I not the bad stuff that we just talked about just overall overall oh my gosh so I'm six months in I feel like this is like it like I'm sure like a lot of guys you talk to depends on the hour or the day um I like I like the fact that I have control it feels like I like almost like you know it was it was you know it was obviously a lot of responsibility you have a wife kids mortgage and and all that but I like the fact that I'm in the game I guess that makes sense yeah and I can play the game against other people and I think over time I'll succeed so that's fun um you know something because sometimes you get into you know I was usually in small corporations but you you kind of don't have that control and you don't know you know you're probably a you know a cog um but here I'm in control um and I think if I show up every day and make good decisions um I think it's gonna work out um man I'm gonna do my best trying maybe maybe it doesn't but um that's fine it's almost like a a sport to me like I guess like a game and so that's fun having that control and being in the game and trying to win and strategize and think and always thinking it does tend to consume you so I mean you might say the hours or whatever eight to seven to six but it's really non-stop um so that's the uh it's hard to shut your mind off when you're running it you even in the size of this small fairly straightforward business um always kind of thinking but to be clear about feeling like you're in the game you feel like you're in the game now and you did not feel that in your corporate past because because you weren't the protagonist yes yes that's right great uh well I want to just hear a minute Neil on um The Pest Control business I like to ask my guests just about um you know the industries that they're in we've already mentioned many elements of it is there anything else to say because because Pest Control is one that you know it's a classic home service and it's got It's it's recurring so that's something to to like about it over some of the other Home Services which are which are you know you only you only go to the person's house when they call you yep um and uh but you know I assume it's pretty competitive uh low barriers to entry like you know classic kind of guy in a truck and you know a spray sprayer and he's in business with you so so what would you tell people who might uh be looking at Pest Control businesses to buy uh yeah I think it's um it's competitive a lot of big players um you know it's a it's a it's a low buried entry like you said I mean you do some licensing and some training but it's not you know insurmountable to be a guy in a truck so it's uh yeah you gotta you gotta compete I I I think you have a lot of guys you know some of the big players like the yeah true greens and Terminix who maybe they don't do as a thorough job but they're the price competitive like you're like you you heard those margins it's expected so um it's not easy but it's a good business and and I think you know you it's it's winnable um but yeah I really know about that except that's that's very competitive um and it's hard work but it also can be very profitable with not a huge um you know not a huge hurdle to get there I mean like you said one two three four five million is not hours for ages within a region and it's a you could probably get yeah which is a few percent Market a few percent of the households that make a lot of money and get there in a region yeah um yeah so also just this I mean we all know how appealing recurring revenue is but if you if you really look at it like so let's say let's call your margins 20 percent I think you should be hired it should be 25 30s across a million that's what my understanding correct yeah so so even better let's say 20 25 just to be conservative yeah so so would I rather have and say I'm interested in Home Services would I rather have a plumbing business that does 20 25 but I have to make the phone ring at for every single job pretty much I have to make the phone ring like there's there's little to no recurring nature to that Revenue uh and and for many Home Services versus 20 to 25 margins and it's recurring so I know what my revenue is going to be next month and I you know even if the phone doesn't ring I basically know what my revenue is going to be when you kind of compare it that way um all else being equal kind of similar yeah businesses I don't know I only think I wonder is let's say I mean we haven't had a any I think consumers are struggling more than they have but is the plumbing and emergency and the mosquito control nice to have I guess that would be totally that'd probably be the counter point yep that's a good Counterpoint yeah one is one is a nice to have and one is a need to have but I I assume Plumbing is uh I don't know maybe it's because I look at every home service van on the highway now uh the amount of plumbing and HVAC vans on the highway uh yeah is unbelievable I don't know if that's new or it's always been that way but I just maybe I noticed now so it's probably also very competitive yeah yeah I I noticed the same and I find myself looking at every uh truck on the road as well one of the other things actually Neil that you had said to me offline was that you what one of the things you liked about this business was that you really could understand the business and I think by that you meant you could actually do the service delivery yourself yeah versus buying a plumbing business you're never going to be yeah a plumber you're never gonna really understand I mean you can understand you know 30 000 feet kind of understanding but you're really not going to understand how to do what your Crews do yeah and and you and you like you thought it was a strong feature of this that you could understand it in fact do it yourself with yeah you know yeah a few hours of training yeah yeah absolutely yeah I can understand what exactly what what it what it is and what a good job is and exactly um or yeah if we go on those other businesses uh not being able to get to that level does that leave you at that leadership uh operational leadership disadvantage uh relative to your employees right anything I didn't ask Neil that you wanted to make sure we talked about I can't tell uh maybe because I'm listening to these podcasts and his Twitter the uh small business acquisition world is it is it like a bubble or is it booming or is it the same 25 people I see all the time what's your thoughts on how how the space is and then how do you see it changing over the next few years what's your thoughts on the entire space well all of my uh all of what I'll say here is anecdotal so it's just from my my own sense and then interacting with people in my podcast and then reading what I read and then what I'm hearing from other people and I just talk to them and kind of networking events or meet them for lunch um and for example I just had lunch now with somebody who invests in SMB deals and he his deal flow is actually up despite the fact that interest rates are up despite that there are more Searchers um so so so that's just you know one data point from just top of Mind from a couple of hours ago but I I I would guess that basically there's more Searchers all the time if the space is growing year over year there's evidence of that all over the place I mean there's there's more and more people talking about it in content areas like like this podcast but also on Twitter and elsewhere um there are really big kind of content accounts that are pulling more people into the space there's a proliferation of events around this so there was there was you know two or maybe kind of zero events when I uh first started two years ago that weren't hosted by a business school and now there are three or four yeah so so you know all of this tells me that the space is just is growing a lot yeah um or at least you know it's hard to say what the year-over-year percentage growth is but that it's definitely growing now the question is is it is is it a bubble and or is the silver tsunami that we hear so much about real and so on the on the bubble front I I mean I think with anything that gets really really exciting first of all let me preface this by saying it's hard for me to be objective about it because I'm in it so I'm living and breathing SMB acquisition all the time and talking to multiple people about it a week so it's hard for me to kind of have a sense of what the normies Yeah the people who are not in this space how much they're actually seeing it um but it feels like there's just a lot of attention on it things you know they Peak and then they recede a little bit so I have to believe we're kind of on an upward trajectory of this and that there will be some recession at some point of it some it'll recede a little bit I'm not going to be competing against 25 HBS 32 year olds and like that yeah yeah right yeah exactly the happy news to that point I I mean who knows where what the upper limit is of how many Searchers can there can be yeah but I do think that the um this is a hard path that's definitely not for most people yeah so there's a there's like a natural ceiling to people who'd even want to do this yeah and and I think it takes a certain personality type I think it takes a certain you know you got to be entrepreneurial you gotta want to as you what was your the way you put it kind of be in the game feel like you're in the game and that that's not everybody at all so there's just kind of a natural ceiling too sometimes I feel like I don't know if I want to be in it exactly yeah so so there you go uh so I think there's that um but I so there's just a lot of there's a lot of um kind of barriers somebody's got to surmount to actually truly go out there and buys my business I agree and then just the thing on the silver tsunami I I've come to be a little bit skeptical about that I mean there are retiring business owners and and probably a swelling of them now but the idea that there's just going to be I mean you got all you have to do is be in search for five minutes before you realize that this idea that you can go out and pluck a great business off a tree yeah and own it is total nonsense yeah so um so I don't know where we are in the silver tsunami or what but it's not going to be like you throw a rock and hit a great business that you can just buy for 3x snow right um it's not that's just not gonna happen yes I don't think um so um asking me the questions yeah we'll we'll see if I keep this in I realize you know when when I get asked a question you know it helps me empathize with my guests because you gotta you know you gotta think on your feet and organize your thoughts yeah and for somebody who sits behind a mic all day that actually it's it's easier to ask the questions than to answer them so you know I felt I felt a little rambly there like I need to tighten that up and now I know why my guests get nervous yeah exactly cool this is great you know if if anyone wants to reach out how do you prefer they do that linkedin's probably easiest just look me up on LinkedIn very easy to find yeah and we'll link to it in the notes so good deal yeah looking forward to I like networking so be great okay great there's open invitation uh everyone well uh be eager to eager to see where you're at in a year I know and if you're still waking up at 3am uh or if you've you know if you figured out where the line is in terms of managing your your team I know all of these things that are very in process now I'll be eager to see where where you sit in a year you too yeah six months in is interesting time good deal thanks a lot Neil all right thanks a lot it's really fun I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business