How to Turn $500k into a $38m Holdco (No Investors) | Garrison Snell Interview

Garrison Snell welcome to acquiring minds thanks for having me Garrison you're about five years and five Acquisitions into a career that you're pretty sure will be buying businesses for the next few decades this is the dream career for many listening today and you're young you got started early on this path so let's hear how you're doing it start us off please with some background on you Garrison yeah I guess I technically am still young I turned 30 last July I'll be 31 this July and I don't know you turned 30 and I think everybody suddenly thinks you're an old man I don't I don't know what it is but well tried turning 40 you know most of my friends are in their mid 40s and going on 50 and I just they're like you're you're you're really young dude um yeah yeah I started a small company in the music industry when I was um 20 when I was 20 uh I was at Belmont University and Belmont music music school mostly is a great music business program and I wanted to help artists with their marketing and started a little marketing agency and it did well um there was a gentleman out of New York who was doing a hub and spoke rollup of these agencies and decided um basically that he wanted to buy us and a few other companies I was 24 whenever we closed that I had been married like four months and I was living in a little uh probably I think it was like maybe 600 foot apartment in on 8th Avenue in Nashville um by the way I'm based in Nashville Tennessee that's where our headquarters is and uh my wife and I we come from a Christian background a faith background and we said hey like we want to do some good with the money like we've been I'm the first one of my family to graduate from a four-year University and first from Arkansas originally and uh that transaction gave us the capital to start what we see is a permanent holding company for buying family businesses keeping them forever and loving on the people the employees the community Through the proceeds of the business and the activities of the businesses so yeah like you said we've bought uh five companies since 200 well we started buying we started the company in 18 bought some bought a few different things and then started buying operating companies in 2020 um and have bought five companies since that point four of which are heavy manufacturing as as you know and one of which is in financial services and Trust administr so and so the restaurant was 2020 or was that 2019 yeah I'm sorry the restaurant was actually Christmas of 2019 so okay yeah right there yeah yeah I think we I think we took over January 1st of 2019 and I I don't count the restaurant today because we since have sold the majority to somebody else but technically six six Acquisitions okay great thank you for that and we'll we'll hear a little bit about the restaurant as well and the real estate which came before it sure but uh before we get into all of that Garrison so this say a little bit more you were at Belmont it's a music school as you said in Nashville um you actually went there entertaining the dream fantasy that you'd be a musician yeah my dad's a bass player um I grew up with him in bars uh in music venues helping him with sound equipment and setup and uh it was a drummer so I was I was a a I guess you would call All State Jazz drummer in Arkansas so uh I went to the largest and kind of most well-off high school in Arkansas and had a great music program and I didn't there was I didn't have any interest After High School other than playing music and I was not good enough to have that dream so I got to bell bot very quickly and realized oh this this is hard like there's a lot this was one of those things where you thought you might have been the best drum player you knew give or take in school well not the best that I knew there was a couple who were who were fantastic Beyond me but I thought good enough to make a career out of it and the truth is I didn't have um many interests Beyond it at the time it was just something I connected with my dad on and it was what I did as I guess a primary extracurricular and I know it sounds kind of weird but I didn't have a lot of Ambitions Beyond just trying to do something independently for myself and music gave me that outlet for for many years well the independence uh there's a through line uh actually so but what's the experience of having a dream and really not that you just said not having really any other interests or Ambitions and then frankly the dream shatters early on I guess in your exposure to kind of the big leagues or the or the next level up yeah it was it was such a stark reality of how um how far the competition was ahead of me when I arrived at Belmont that I said I I can't even be upset by this this simply is just a reality uh so what happen I got to got to Belmont in 2011 and I began looking in my peers and realizing oh my gosh these guys are incredible um and then I learned more about what the life looks like on the other end of that um and I wasn't sure it was ultimately something I wanted so I I don't know maybe it was there was some moments of sadness for sure but mostly there was a realization of I don't think this is the life that I want I'm not really sure what it is I want um so I'm just going to begin to help artists uh as a manager and a marketer and just work with students in and around campus and I set up a little company at the time to do that um when I was a freshman at school but it it was sad I I still enjoy playing but it wasn't maybe as devastating as it as it might sound because it was just like so obvious that so obvious you're like just don't even try man like this is this is not going to work out well uh and I became a little disillusioned by the idea that when I reach the 10-year 15-year Mark of putting in the effort it takes to make a career out of this I might be at the point where I would like children and a family and I might have a selected a career that would make that difficult um it's it was a conscious Choice yeah yeah okay and then and then so freshman year then you start the agency freshman year I started a management company to work with four Independent Artists basically saying what do you need me to do how can I help your career let me book recording studio time for you find you little shows to play do your website uh and then when I was 19 um I got connected to a guy who was working with Ronnie dun of Brooks and dun the large popular country duo and so I I ended up doing the marketing work for Ronnie's Independent Record label from time I was 19 or I guess I just turned 19 uh for for about two years following that um and that was what turned into the agency so so that that work with Ronnie turned into me setting up an agency to do it for other artists and and that in that getting that work with Ronnie in in the world of country music being a 19-year-old that would have been a big deal that would have been an incredibly exciting opportunity I assume yeah I mean I I ow Ronnie uh I I I Ronnie has large significant chunk of what I've accomplished today uh he bought me my first laptop he put me in his house and said I'll pay you to figure out how to do this you're you're smart and compelling or whatever he saw in me and thought I'll I'll essentially sponsor you into doing this um if you'll help me figure out how to do it and we uh we had a really good time it's it's hard you know uh he it's expensive and he decided that ultimately I think there was a better uh situation for him and he they decided to go do a Vegas residency after that and then he ended up signing with a Classics imprint called Nash icon of big machine records but I did that for about two years with him and I I wish that like the value that was created out of that one laptop purchase in 2012 to when I bought a new laptop in like 2020 I mean it's it's it's insane how much value is created and I you know I owe that to him and then so the agency you you you parlay that into an agency and eventually sell the agency can you share you've said that the money from that exit was significant enough that it caused you to contemplate what you were going to do with it so it it must have been more than just a token amount can you give us a sense of how much it was or yeah sure it's it's all relative obviously um but at the time after tax it was about a half million dollars about 500 Grand and that was 24 uh and to be honest with you to my knowledge that's the most money in anybody in my family has ever seen at any one point in time ever um and my wife and I she was working for a nonprofit and we were living very very frugally in this little apartment newly married and we're staring at this that this amount of money thinking wow we could we could hang out for a long time and you know we we don't have to I mean the I mean yes you're going to have to work eventually in your life but that's I mean at the way we were living that's 8 to 10 years of salary right there that yeah we were living off of you know and um we decided said that we wanted to invest and try to do some good with the Investments like I say in a in a way a life-changing amount of money but not enough such that you're retiring forever especially not as a 20 was I 24 yeah 24 year old right well with wealth there are many tiar between having no money and being able to not work ever again if you don't want but each of those tear is still quite significant in life changes all of them and it sounds like you got to the next or maybe skipped even a few tiers um from from zero to half a million bucks post taxes at age 24 not bad um I I was very happy with it so I I'll take that deal that's fine well I but I know where this story is going you were happy with it and then you weren't we we'll get there just but just before we do Garrison the becoming an entrepreneur so you were going to be a drummer then you weren't and then all of a sudden you're you're you're this Hustler who is kind of trying to just kind of be the Quasi manager for other Belmont students I assume they were other Belmont students they weren't even yeah so so um where did that energy come from were you always a lemonade stand kid uh I was not always a lemonade stand kid by any means but I did have little side hustles um I had a small lawn mowing business obviously like a lot of lot of kids do I think I had 10 Lawns maybe when I was 16 and 17 uh and had put together a couple things in high school that were I guess you'd call them independent projects I I started a a battle of the band series at the high school that was a would raise money for VH1 save the music and um I was really involved in Boy Scouts so I'm an eagle scout and both of my brothers are Eagle Scouts and it's there's a it's it's quite good leadership training I think and principal leadership training and there's a lot of independent thought and uh independent work that's done in that but the truth is like being a musician uh and what it the the I guess you'd say like the the hustling side of it is not too dissimilar from I think starting a a business it's at least heard that comparison yeah that's the way I experienced it I mean you you have a view on the world and a particular flavor of something that you want to do and you have to go convince folks that you got some value to to contribute to to what they already do and it requires a lot of networking and a lot of interactions with good good positive interactions with folks and it requires the ability to be highly emotionally intelligent in uh social situations and and rooms U it's it's kind of a weird I don't know the best way it says it's kind of a weird political uh the way people make decisions at least of who they're going to play music with is are they a good hang do they like spending time with these people yeah um and so there's a there's a natural like if you can become warm and ingratiating and ask for the right things and offer the right value it ends up moving a lot smoother sure and honestly maybe I'm better better off saying being in position isn't that far off from being someone who's in sales which is I was gonna say that was the word I was waiting to hear yeah yeah which is which is you know a key function of getting something off the ground but exactly exactly yeah I the heck out of it yeah there were some definite skills translations uh and I I have a little bit of a natural proclivity for that my dad is similar um so you know I wasn't fully translatable but it was enough now jumping back forward again to the exit half a million bucks after taxes your 24 uh feels good then what yeah so my wife says Garrison you really are never s you've never been successful in anything you didn't have your heart in so the the ability to just do it for the money alone was never has never been enough to really get me up get me going um when when I sold that that business I really believed in what we were doing okay so I really believed in the fact that we were using modern digital tools to help Independent Artists grow their careers for a price that was accessible to them and in my mind it was me kind of helping my dad um and helping what he did when he was my age he came to Nashville and was in a band and tried to tried to do very well and ended up not um and I traded that mission for for money I traded that mission for some money and so I woke up with uh some money in my bank account and not a not a reason to go to get up and go to work you know nothing to do no Mission and almost I would say very little purpose and for some reason that hit me really hard I'm just built I guess I'm just built that way um but I experienced a pretty significant uh I guess depressive period around why did I do this what's my mission what's the purpose like what's this for what's this about how do I how do I help and I reached the point where uh a friend of mine told me said Garrison in order to stay happy yourself you got to give the happiness back you got to give it away and so snow snow Ventures the holding company is set up as an extension of it basically says we're going to use the good that we're given the resources we're given to do good for others in a sustainable permanent long-term way and it keeps it gives me a purpose it gives me a mission and that's a lot more enjoyable to me than than the smattering of Financial Security that I had I just didn't I didn't feel very strongly that uh the Financial Security mattered as much as the mission did you know so I don't I don't know it's just the way I'm wired and for better for worse well it is interesting Garrison because um I understand existential crises uh they usually come later in life and usually don't hit so soon it sounds like you you were only able to enjoy your newfound wealth very briefly before before a crisis set in um so anyway so it it does seem like there's something about your personality that might be a little bit different because you do hear that people after they have a windfall it's exhilarating and then it's it's then and then they can kind of go into a funk um so maybe this is just that pattern and you just experienced it earlier than most people would you know relatively speaking to a lot of exits relatively small I experienced about an hour of elation and I remember I remember where I was sitting I was sitting at Soho House in LA with one of my marketing clients and it went it went through and I was looking at the bank account and I was like holy crap Life's good and then about an hour later I was like what am I going to do tomorrow like what's the point you know and it just it just it hit me really quick and I exactly you know I'm I'm okay with that it's it's I find it is a good motivator yeah no well it's it sure it sure has motivated you in a really compelling Direction okay so you've you just said a couple minutes ago what kind of the mission around uh Snell Ventures is but how did you arrive at buying businesses there is essentially um the risk of putting words in your mouth you're generating wealth so that you can then kind of plow it back into good work and help the community ities in which you operate help the employees in which you operate just kind of all the goodness that comes in you just amplify and send right back out Fair yeah that's that's what we're trying to do but there are many ways maybe you could have started a nonprofit maybe you could I mean there's a there's aund ways buying businesses is an unusual non obvious way how'd you land on that well the first thing was it was obvious to me that $500,000 wasn't enough to do the amount of good I wanted want to do um my little personal motto is maximum good for maximum people and if I'm going to spend my life doing something to help others I'd like to do it in as large and permanent a way as possible um but I've always connect I mean personally so I've always connected with the idea of the small business and and it it kind of logically makes sense so they're usually you know smaller companies with a small ownership set and a very intimate relationship with their employees and the families attached to it in a town where they know what's going on they know what the high school needs they know what the Boy Scout Troop needs they know what's going on in the local churches they know which families are struggling which families are going through divorce they they know where the addictions are and the illnesses are and they they know where all that is and they are one of the few entities in all those communities that can direct their excess how they would like all the owner has to do is decide that that's what he wants to do with the earnings and so it's I mean there's an owner or two owners or a small family and almost all of these businesses we buy have some element of that already they've got uh some sort of support fund for the employees or they they hear of um a surgery that needs to happen and so they write an anonymous check to the local church to then pay for that surgery or like they're already directing their excess in ways that help others all I'm doing is saying hey you've run out of the Next Generation to do that very thing I'm going to take it and Steward it for the rest of my life I'm going to make sure it continues to do that for the rest of my my existence and that's why we don't intend to ever sell anything we own um the it's just a real compelling in my mind a real compelling entity in society that says that little business can decide in a unilateral fashion what to do with its excess and it knows it happens it has an informational advantage in that it knows what's going on in the lives of it people their families and that immediate town so it's uh to me it made the most sense that if I bought one of those companies and said we're going to do that forever ever you could probably do a lot of good over time so so there's not just there's kind of a two-prong strategy here it's not just generating wealth so that you can send wealth back out into the world it's also like you said this informational thing where you're buying businesses that are have have a finger on the pulse of their community so where where and how you deploy wealth you have this kind of this this this information Edge to do that in in you know in a really great hyper local personal yeah Community oriented way yeah I'll tell you a quick little story about one of our companies um in Bradford Tennessee it's a small town probably two two and a half hours west of Nashville uh just off the highway in a rural community and that plant has been there since 1909 and um the the lady who runs the front desk has been there since she graduated from the high school across the street when she was 18 it's been 40 something years since she walked across the street and went to work the guy who's in QC graduated the class behind her I think or the class before her maybe um the longest tenured employee lives literally across the street and when I showed up and bought the business four years ago at this point I said hey when you hear of something that the community needs let us know and let's let's put some money in place for you guys to meet it they came to us uh I think it was 2 years ago and said hey the high schools Future Farmers of America needs a new fence and a new kind of uh polish of the facility that's over here can we send some money that direction yeah absolutely and so I mean they feed us and then we in turn give them the the capital to go and find those things um trying to think of another really good example uh uh we did some renovation work on one of the high schools in one of the communities things like that every and we don't about all of them but every employee at the company or every department has at least $1,000 to give away every year to some need in their community so you know we have 200 something employees at this point um and we typically do it by head some uh of our businesses choose to do it by department but they can direct that money and say hey I heard that so and so needs help I'm going to use my allocation to go go and do that does that make sense yeah yeah it's really cool okay well let's fill in the gaps here and and hear the story so you decide this is the way you don't buy business first you buy you look at real estate as as many people do so how tell us quickly about your real estate Adventures yeah it's it's barely an adventure to be honest but it's um I knowing nothing about investing um I simply said what do people do and I hear people buy rental properties so I'm going to go explore some rental properties I had this thesis that Chattanooga sits you know a couple hours between Nashville and Atlanta it's very Tech forward it's very outdoorsy Community there's a a lot of compelling reasons why you might want to leave Atlanta and Nashville and go live there uh and so I called a friend of mine and said hey can you look for properties for me in Chattanooga ideally their properties that we could then rent to low-income families or folks who are transitioning from recovery programs or homeless shelters and we found 11 units down there in the span of about four months uh bought them and then dedicated them to various organizations in the city who uh put folks in it so the the initial thesis was folks who are transitioning out of homeless shelters or folks who are transitioning out of recovery programs or coming from other cities they can live in our homes and in most cases the city will pay most or all of the rents um and so we generate about a 15% return on our cash every year out of that and we've housed in the last well since 2018 uh 35 or 40 different families something like that um all most of which have gone on to live in more permanent situations but uh it's great we still have the portfolio um I just I decided I like the operating businesses better I liked working with the employees and the learning about the companies and I like that better given that by your own description you didn't know anything about investing yeah how did you learn that buying an operating business would be an Al a good alternative or an alternative to buying real more real estate well I mean I had a little bit of just practical uh personal experience from the company I built I just said I like working with the people I like I like the the competition of offering of determining what they're doing and what we can offer and the value proposition to customers and sales and I like the activities associated with the operating company better than the real estate yeah um but from in standpoint yeah I knew absolutely nothing and I just said well what do the best do and so I immersed myself uh similar to ra rapael and those guys very immensely into Burkshire uh and Buffett Munger and have attempted to emulate for the last six years exactly what they might do with our small amounts of capital um and so we run SN very similarly but you know our investing definition is it must promise the safety of principal and it must generate an adequate cash dividend annually adequate being greater than 8% or better than the alternative better than the the safest alternative that we know of um and we try to buy things that we understand and try to buy things that we have shown persistence over many years our oldest company uh is 115 years old that we've bought and they they've shown quite a lot of persistence so uh the real estate it it's awesome we we love having them but they it was my first step towards trying to figure out how you do you both do good and have a great economic return in the same package uh and that was I don't regret or dread any of those activities I just like the businesses better they're just more fun well then why was the second attempt to invest in something a restaurant where did that fit in it's a great question why was that uh so once again by the way I just aired an episode last week of somebody who bought a restaurant it's and it's been a phenomenal investment so despite the fact that restaurants are uh we we talk about how they are the Le one of the least attractive businesses to buy uh Jared Burke and in Hanover New Hampshire is making it work I saw the I saw the teaser for that one and thought yeah that that might work uh and you know so um a friend of mine when I told him I was going to buy this business he's like Garrison what are you doing dude and he's he was thematically right okay but and I know you've heard this a few times but there are certain businesses restaurants included they just have so much love and loyalty uh and and are in such a unique situation that you can see what the mode is you can see like why it's defensible and this was this was one of those I definitely got some things wrong in my assessment of the business so so I can wind back a little bit but yeah basically um the restaurant was one of Nashville's oldest uh restaurants it was founded in the 90s and Nashville has gone through a ton of change a lot of local places are gone and this place happened to be located in a very unique eight or 10 um unit strip center smack dab in the middle of a neighborhood so it was it was not a strip center what you might normally visualize it was kind of this um older cobbled together very very cool looking strip center next to a very popular bar and a popular Boutique and across from an even older Family Restaurant surrounded by one of the oldest neighborhoods in Nashville one of the wealthiest neighborhoods of Nashville so this place was the date spot for all the old uh Legacy Nashville locals and uh the gentleman who sold it to us was wanting the Next Generation to preserve the business and um we we bought it from him for a fantastic price and then Co hit within four months uh and we found out that the community really does love this restaurant you know it was one it was one of the few that was so much there 30 years of loyalty for that they when we texted them and called them and said please buy our our freezer meals and please buy our lasagnas and stuff they bought them in bulk and they they said whatever we can do to help we'll help oh fantastic yeah so so that's what I thought was there when I first looked at it that's what I thought was inherent in this one and we got to test that thesis really quick now yeah what one of the things that I thought was really good that wasn't it turned out to be a double- edged sword was it's small it's like 60 seats and it has a pretty small kitchen and I thought well that's great we only need to staff one or two people um it turned out that I I overestimated people's willingness to work full-time at a kitchen especially a high volume dinner kitchen and so there was a um we we didn't we had a lot of turnover at the cook position and the kitchen lead position when I thought it would be easier to staff that I didn't logic obviously think well they might want a few evenings off to hang out with their family you know and then so this the fact that it was small actually became somewhat of a disadvantage um which if it was bigger and had a little more volume uh then we could have spread it out among more people and we would have been less dependent on one or two Cooks does that make sense I see because it's it's small it's it's too too small to support multiple cooks and so if you'd had a kitchen twice the size you could have staffed a really nice part-time schedule for six or seven guys six or seven men or women back there uh the kitchen size that we had you needed basically uh two two people at maximum maybe three and uh the there wasn't enough I guess the best way to say there wasn't enough hours to spread around um to get some folks who were interested in staying a long time and there was too many hours needed to really convince anybody to be there fulltime you see what I'm saying it was kind of this this dead zone where we needed just a little more capacity to make everybody's lives a little more balanced so you know Lessons Learned but the the love of that thing that was people love it man and it's um what we realized it needed was it needed somebody who was going to be in there every day it was not a fit for a holding company specifically a passive decentralized holding company so I sold 90% of it to a local family whose son is a restaurant tour who's in there every running it and we still own 10% of it and participate in the business with him but and while you owned it and it was the only thing you owned I mean you had your units in in Chattanooga but this was the the first your first operating business that you acquired were you in there all the time what how are you spending your time it's a great question I was in there um pretty much every day if not every other day and my director of operations who's been with me since month two of the business uh she was in there pretty much every day and cuz she she used to live here she now lives in Florida and uh she was in there every day we would work shifts we were just trying to learn the business yeah H but actually I spent the majority of my time uh when I wasn't there uh looking for other companies and I found the two manufacturing companies that we bought in June of 2020 about the same time that I found this place so you know we only owned the restaurant for 6 seven months before we bought our manufacturing company the first two okay okay and just okay well let's hear about those two Acquisitions and then we'll come back to how you're how you're buying these businesses how far this half a million is taking you um I guess you you've already said though that the restaurant was kind of a screaming deal uh you got it for a really low price so yeah it was and I'm not for the purposes of the folks in the community and the folks that know me I'm not going to share what we paid for it but it was a very very good deal I've noticed through all the deals that we've done the sellers who really connect with why we do what we do will often want to accommodate us on terms and price in order to uh get it to somebody that they they know is going to take care of it so um yeah so the two companies we bought in 2020 one's called New Deal trailer parts in it's since north of Nashville they've been around since 1955 making uh trailer suspension mounts so if you look at a utility trailer pulled behind a truck you look at the axles they're hung the the axles are mounted to the trailer with these things called Lea Springs which are just Springs and those Springs are mounted to the trailer with these u-shaped brackets and there's only three maybe four companies in the country that make those because they're very thick metal parts and they require a lot of tooling to make but there's not a lot of they're pretty price sensitive parts it's not like a desirable in Market uh but this company owned 150 something sets of tooling for a wide variety of Parts uh and the seller with was in his late' 70s had had had seven back surgeries and was at a point where he really wanted to get out of the business but hadn't met anybody that he thought was aligned with his way of doing things met me uh and then made us a very very good deal that business was uh is and was quite small it was doing maybe 1.4 million in sales and 300,000 of earnings when we bought it in 2020 by the end of 2021 it did 7.8 Mill in sales and about 2 million of earnings uh that year yeah you want to hear that story I'll be happy to tell you that story it was well well I do but but let's hear about the other acquisition because it happened right around the same time we we did it at the exact same time it's the same deal two different families the same loan package uh and the same bank um but two different businesses acquired at the same time uh it was they're called quad Industries the the one in Bradford I was talking about earlier they make what are called babbit bearings and babbit bearings are a very um old technology so babbit is a type of molten white metal it's made out of a bunch of different types of metals tin lead a few other types of metals and it's put inside kind of a U-shaped metal shell and then that shell goes around these shafts so big reciprocating shafts that generate energy usually used in highly corrosive environments but where a steel ball bearing or roller bearing is too expensive so babbit's been around since 1880 as a formulation and it's been in play for a long time still very much in play um GE uses a ton of very large babits I'm talking 60 72 in in diameter babbit bearings in in a lot of their equipment National oil well uses a lot of them in downhole Drilling and oil oil wells uh turbines air compressors uh and we make the uh only n National manufacturer of babbit bearings under 21 in in the in the country at this point um mainly because you can if you want to buy large quantities you can import uh a lot of them a lot cheaper uh but for those that want 1 to 10 to maybe 25 and they really really care about the the Precision you have to get the babbit in the in the cuts within uh plus or minus 3 10,000 of so take an inch take an inch cut it into 10,000 segments and you've got to get the Precision of the the dimensions they require within plus or minus 3 10,000 if you really worry about that quad's probably the only one that can do it in that size and there's a couple reasons for that um but so we bought those two at the exact same time quad what did quad look like on the yeah on numbers 1.8 million of sales 400 300 400 in earnings it'll do three and a half maybe 4 million this year and 750 to 900 in earnings I paid a million for Quad which included the real estate uh and the real estate was appraised at U 550,000 so the total deal I paid 450 for the business and then I paid 900,000 for New Deal um so you know roughly three times earnings the total financing was the the total deal was 1.9 million oh sorry you bought two different businesses from two different families but one single loan correct how did you swing that I I used an SBA loan and I asked them I told them this is what I want to do and they said okay I mean basically interesting yeah we talk about it if I can there's not a lot of detail other than I showed them what we were trying to build I showed them why we were doing it I showed them that management was in place and that it was within two hours of me and that I was willing to go back and forth and do whatever would satisfy their requirements and there was an SBA lender who who loved it so interesting I'm not sure I've heard that before that somebody did an SBA loan for two businesses but one loan yeah was one loan they Blended quad's real estate into the deal and so it advertises at 19 years and um we lease the facility for new deal but we own all of our other facilities which we have five facilities right now so it's um you know we like to buy the real estate but yeah it was it was a I thought it was unique as well but this particular lender was was all about it so and how are you able to get such a good deal on quad where where the business piece of your million doll acquisition price was $450 business was generating 3 to 400 so I mean you paid less than 1.5x yeah I I ask myself this all the time the truth is the gentleman Who Sold us to business was one of four Partners left in the business everybody else had passed away he was uh the CFO controller and accountant and uh was experiencing some health issues and I I asked him to tell me what it what what what was his price and he said a million dollar and I said can I have the building as well and uh he said yeah and he viewed the business differently than I view it uh he viewed it and we can talk about this with the porter 5 forces stuff at some point but he viewed it that the suppliers to to quad had too much influence and ultimately too much dependency and therefore it would be a really he told me after we closed he said you'll be out of business in 3 years and I said I don't see it the same way um and neither did after you closed that was nice of him yeah I'm not not yeah enough said on that but it's he uh we didn't see things the same way and so far uh we've been proven out to be correct there's a decent possibility we could be wrong in the future I don't know but our gross margins on that business are about 65% um and it has a ton of pricing power and it's it's a really nice it's a really nice business and and the risk that he saw that why he thought the business would be defunct in three years did you perceive that in advance and decide that it wasn't as you were comfortable with that risk or had you not even seen it so okay I knew I knew it yeah I knew it was there and he just thought it was existential whereas you didn't yeah correct yeah I and like I said part of that might be it might have been naive you know this is four years ago I was just kind of starting our investing Journey but I was looking very naturally at dependencies and what I didn't know is that's basically Porters five forces and um one of the key dependencies that that quad has is if they're going to make bearings of a certain size they have to buy steel coil with babbit laid into it already there's only a few people who do that um and specifically there was a company in there's a company in um Michigan in troit called Federal Mogul and they make similar they make a lot of bearings but they make similar types of bearings for the automotive industry and they were selling us material uh they announced a year into the acquisition that they were no longer going to make that material and that we had to put in a final order and and that was what he was worried about what he didn't do was go look for other suppliers and we found a couple other great suppliers overseas and we Import in that material and then Warehouse it and cut it up and uh what we would like to do very shortly and we're going to put some Capital into it is bring that in house our facility is about 990,000 square feet and we use 45 of it right now and the other 45 is empty and we're proba the goal is to put a babing line in that in that side um so we're getting to the point to where we can make that investment but I I thought it was very likely given how use useful these bearings are that there's going to be somebody else on the planet who's going to put babbit on steel and yeah I went and did a little bit of research and found that there were some so I know it sounds really simple but I just that was a dependency that's you know quite acute in this business but is something that I was willing to to take on well Garrison now let's zoom out a little bit you mentioned Porters five forces so I I do want to get to that now but just before we do sure just just um speak to us about the evolution of your own sophistication at this point in the story because you went from you know just a few years earlier not knowing anything about anything to then buying some real estate because that's what you heard people do deciding that that wasn't great still not knowing much about much buying a restaurant you know so by the time you buy these two businesses you're getting into um a different League I would say um although still small businesses uh and your analysis that you just shared with us was not so naive I mean you were looking at the risks and poking on the risks and and seeing out trying to figure out if something if one of your suppliers went away how you would plug that hole and um so so anyway talk to us about the evolution and you're getting smarter as you do this I hope I'm getting smarter uh all I know is but at this point in the story because now you're super smart no thanks yeah I mean I guess I would say that when we bought the restaurant I thought I saw something good and i' had been reading a ton of Buffett and a ton of ton of Burkshire there's a essay a Warren Buffett book that I've worn out and I've got the complete Financial history of Burkshire sitting right here on in a book and he kept saying buy things you understand buy things you understand and I'm like okay what does understand and he answers that in maybe 200 the 2000 annual meeting I have listened to every single Burkshire meeting on YouTube probably three times at this point at least how many hours of cont they each they're each about four hours and the earliest I can find is 1990 um so I don't know do the math I drive a lot uh but it's basically he says by things you understand by things you understand what does understand I have a clear conviction or at least a well reasoned conviction about what the future economics of this business might look like well into the future at least if you're going to do it mathematically maybe 20 years so the question is it's it's kind of like real basic like what is in this thing that has made it stick around for so long like it's already been around for a while why I like old stuff it's already been around for a while like what is it and and until I can answer the that question it's not a mathematical question it's a qualitative Ence question it's an investigative journalist question until I can answer that I don't buy and I really don't think I can price it until I do that so at this point in the story I'm looking through I mean I kid you seriously everything we've bought except for our most recent two Acquisitions were listed on businessesforsale.com so like I literally would just look at listings all the time and I would scan it and go yeah instinctively that thing doesn't make sense it do nothing that differentiates it it's somebody could open up right next to it do the same thing and it has has nothing to defend against that I was trying to just go through very redneck basic questions to determine whether I thought it was thought it made sense and uh the restaurant The Thesis was basically this it's a low price the brand is worth that to somebody else in Nashville if we can't do it and the People based on where it is the people and how long it's been around and the stories and people love it so if we have to ask for help there a lot of brand Equity that hasn't been tapped let's let's try that um wasn't much more sophisticated than that to be honest uh the manufacturing Focus was can I understand what these guys do why the customers need it uh how difficult it is for someone else to get into this business based on the people that are already in it how what do we bring to the party like what do what do we compete on uh and then what else is out there that might might change this like is there something out there that might make babbit obsolete or might make uh suspension hangers obsolete or in the case of our last manufacturing acquisition portable racking systems Obsolete and I didn't realize that those are reporters five forcers I didn't realize I was asking those questions but to me those felt like the most logical questions to ask and um I I told my wife in the beginning we're not going to buy anything that we can't liquidate every single thing that's and sell it and at least pay off what we the loan we took out so that criteria forced me into heavy asset stuff you know and so and and another way of putting that is you buy it for less than you could you could flip it for the next or excuse not flip it but liquidate for very next day correct yes correct or or at least that there was such a like obvious clear like for instance with new deal so we bought it for $900,000 there's 25 or 30 presses in there there's inventory some of the presses are 500 ton presses 20 ft High great great machines but the tooling You' probably need to spend about $5 million to rebuild that tooling it's worth that to somebody does that make sense like scrap scrap scrap value you probably could get two 300 grand out of it but like it's it is I'm walking around looking at it and I'm like there are plenty of other contract metal stampers if I told them hey I'll just sell you this tooling for $900,000 and it allows you to immediately compete in this line of business with maybe two three other competitors in the whole country you're going to walk into two3 million in Revenue day one just by buying the customer list of the tooling I thought that was pretty pretty pretty sound so yeah yeah could be wrong but it's there's a there's a lot of things in that industry that might prove us wrong but it's that was the rationale at the beginning so well Garrison I love how you I really think that that's a neat way of putting it the the investigative journalism um I don't think I've heard somebody else use that uh analogy also the kind of qualitative analysis that you're doing here is I think a lot of people come to this world focused more on the financial aspects of of doing the deal and and and kind of the modeling uh which is very intimidating and off-putting to a lot of people if they're if they don't know way around a financial model which unless you have a finance background you probably don't you probably didn't so what about so what about that piece of your education the quantitative to go along with the qualitative skills were you developing them yeah it's a really good question I am selftaught in most of that but I had a couple friends who helped me a lot uh in 2018 and 2019 so I got to see when I sold my marketing company I got to see two other transactions pretty quickly that some clients of mine went through they sold some big songs catalogs um one to a very large pension fund one to a private buyer and my uh two good friends who brokered that deal used it as an education for me and then the guys that bought my company they also showed me how they did it they showed me what they their assumptions were they showed me their their spreadsheets and and then I just kind of sat down to be honest with you I just kind of sat down and said all right forget the colors forget the the the formulas forget the the interest and precision How can I just get on paper some estimates that are reasonable and conservative and directionally correct um that that show me that if I buy this thing at this price it's going to create some amount of safety for me and in the beginning that was just an estimate of liquid value and then like possible strategic value it's now basically uh very conservative discounted cash flows you know what's the present value of all the future cash flows out of this thing I am almost 100% self taught in that um and I I don't know that that's a good thing you know but it's I have adapted it to just make it work for my my way of thinking um but I I kid you I kid you not I sit on chat gbt all the time and say just teach me how to do this teach me how to do these things Financial stuff or everything yeah yeah and then I check it with some friends but my my financial models are not super sophisticated so I I lean very heavily on my assessment of the people my assessment of the of the porters five forces of the manager and their ethics and and basically the the organisms that I'm getting into business with the the the qualitative substance and then really trying to get at the essence like what are the elements that this thing has like great example new deal because they're small and because they compete in a really cost um cost sensitive industry price sensitive industry they have this culture of radically low over head um and I don't have to teach them to keep their cost down they inherently are trying to keep their cost down because for the last 70 years that's how they've behaved that's really interesting and is definitely a really big advantage over time right so I mean the fact that that's built into to the way these guys work and just talk and behave is I mean that's really that's that's an advantage for us you you don't find that in in you find indicators of that in this in the financials you find like signals that that might be there um and I'll say this just as an aside one of the things we do in diligence that's very different uh I allow every employee to come sit with me oneon-one and ask me questions um I also interview every employee that's willing about their view on the company and all I'm trying to do is just build in my head a story of what it is that this thing is like on a day-to-day basis what how does it behave to its suppliers its customers its people the community what do what does it bring what are we proud of what do we think we do well um and once I get that I then go look at the financials and I have a couple key indicators I want to see Mar gross margins above 40% ideally um and I want to see as high as possible of eida margins um and then I want to Discount that eida by some future capex allocation somewhere between five and 15% um and then I want to price it at above a 20% yield so I want to be earning 20% % off what I pay for it so that's four four and a half times um and we've put out 38 sorry to interrupt Garrison but that yield number is effectively capping what you'll pay for it so that that's how you back out into a multiple you're not going to pay more than 4X ex x correct and I have ex me 5x yeah it's 5x but but our Blended our range actually is 1.5 for for Quad to six but there are qualitative reasons for choosing an 18% or a 16% yield on the 6X side um and I can tell you about that business if you want but we our average is four and a half um and we've put out like I said 38 million to do that at that price um and then last year our eidas were like 9.2 as a group and so you know I'm really I want to clip above a 20% return on invested Capital uh and then I want to recycle all earnings so I want to put all earnings back in and and keep all earnings and then reinvest them at the same rate and I just learned all of that through listening to a ton of Burkshire asking chat GPT and Google to tell me what it means uh and then asking my friends just teach me the language of this investing thing and um I'm getting it I'm still very young in it but there's a um I think I think I'm getting it and the financial piece I don't really think it drives the boat like I think Buffett said at one point like financial statements are not the territory they're just a map so it's like you you they're not the substance of the territory they're just a map so you see signals of what it might be like of what the business might be like but they're not telling you the reality of the business it's the business that tells you the reality of it and that's for whatever reason maybe it's the the musician background or the interacting with people background or the you know the music industry uh kind of DNA that I have that's the way that I interact with these companies so and that's what gets me comfortable I'm less comfortable making a decision just off of the financial statements uh although I have a very very good friend who is a value investor in the public markets runs a ran for 12 years a$2 billion doll portfolio for one of America's largest wealthiest families earned 19% annually for 12 years and doesn't visit companies sits in a closet and reads annual reports and he is he doesn't want to talk to the people he doesn't want to talk to management and he can make good decisions that way I I just can't so that makes sense well it does you've told us so you've told us how you've kind of you're an autodidact on this on this Finance stuff and and how you've leaned on kind of qualitative assessment over quantitative while you bone up on the quantitative stuff and it's a journey you're not fully there yet but obviously you know quite a bit um but now if you would speak directly to the person who doesn't have Financial chops who's listening to this and and is really intimidated by that piece of it you you you've told us what you did is the answer do what I did you know countless hours of Warren Buffett and just study study study or is there maybe a short like reflecting back on how much time you've given this project is there a shortcut or what would you say to that person yeah I would say that don't let Okay so I don't want to say this uh the Buffett describes it as like the high priesthood of Finance he's like you need to you need to learn the acronyms and you need to learn the formulas in order to be in the priesthood and it's I think it's ridiculous I mean there are a couple basic things that you need to know I think personally about the assessments and they they are basically if you're going to put money out today what do you expect to receive as the years roll on and what are you what are you giving up by choosing that opportunity over some other opportunity that is the present value concept um so the the things that matter basically are how much money's coming in how much do we keep after we pay for all the stuff that we have to have in order to do the job what what do we have to pay for after that and why do we have to pay for it office overhead and and all that like what's how do we keep that pretty low and what's the final number and then how much of that actually turned into Cash uh and and didn't just live on the accounting statements how much of that's actually in the bank I would say when they're doing diligence go into the bank statements take five years of bank statements go through every single transaction and just try to rebuild the p&l like just put it put inflows outflows reductions for the stuff that went out to the owners and see how much cash is left over every month and then put your debts service on it I do that for literally every acquisition and it's tedious um but I I would say Do not over complicate it all you're trying to figure out is how much money is coming out relative to the money that you're having to put in or the the risk that you're accepting so like I've uh personally guaranteed a lot of this uh money that we've put out so I don't count this as return on Garrison's capital I count this is return on the purchase price what did I guarantee and what did I pay you say how like like what it's to me it's it's as if I bought it all with cash in my mind um and wait I I missed that point can you say it again yeah yeah so basically when I'm thinking about our return yeah it's going to be uh the net earnings number before depreciation after you kind of adjust the depreciation thing a bit divided by the total amount of money that was was paid out regardless of the fact that the bank paid it or the fact that paid it or some some com because I'm guaranteeing the loans and in my mind like I just I don't know I know people would disagree with me on that but that's feels a little like common sense so so whereas another investor might be like the return on my investment if I'm buying this business with an SBA loan I'm putting in 10% 20% of my own cash so when I look at the cash that comes out of it I compare it to that 20% of the Enterprise Value you Garrison compare it to the entire the ENT price of the bus the um and by the way what that is for the audience is is what you'd call the unlevered return on investment as if you did it without debt um but of course the power of lever Leverage is that you get to amplify those return those returns well the truth is like early on we didn't really have much of a choice we had about $500,000 to work with and we were trying to we were trying to buy we thought we saw a lot of great things and we're trying to buy as many as we could so we we did you we took on significant loans as we went along but I never wanted to pretend that I was I don't know in my mind a better investor than I thought I was because I I had access to the SBA or whatever it might be um it's you know and that is just straight from Buffett that's just straight from Berkshire it's like when we get to the point to where we're able to take down a 20 to $25 million purchase in all cash that's what we'll do like I I W I won't use if I use leverage it'll be very very very small um and so why why why what's your opinion on Leverage it sounds like you have a philosophy there uh yeah I do it's it's similar to Raphael's and those guys but I just don't like how it makes me feel you know I just don't I just don't like the fact that it sits in my mind as something that taxes my managers it taxes the employees um possibly it create it increases the possible existential risk for a business that I've told the family that I'm going to Steward for the rest of my life sure you know so so fun the risk weighs on you weighs on your soul a little bit and and of course it does put the business at more risk yeah for but I just have just I've have chosen to have a real sensitivity to that because that's what the best do like the the the the one I'm choosing to model myself off of that's what he does therefore that's what I'm going to do and um I guess the the best way to say this is like and he says it this way it just makes me sleep better um but I mean our our average interest rate for the loans we have is like 5.5 so I mean we're we're we're we still have we have really good cost Capital like I'm not super tore up about the position we're in I just would prefer to not have any of it I'd prefer to to be able to recycle all those earnings into another investment yeah interesting how everyone has a different emotional relationship to debt yeah Raphael and those guys I've heard you say a couple times and so the audience uh who's anyone who's not clued in whatever a month ago maybe a month and a half ago an interview with Rafael Quinn who's who's who buys businesses um to hold forever value investor very much in the in the wor Buffett vein just like you Garrison so thank you for that plug um all right we've we've heard you mention also Porter's five forces now a few times tell us please uh what Porter's five forces is uh Professor snow yeah it's I'm going to try to be real redneck about it but uh so Michael Porter a Harvard Professor from the 80s he kind of pioneered this field of strategic management it's basically if you're a manager over a corporation there are competitive forces that you deal with regardless of the business there there are things at play that you deal with regardless of the business um there are five of them that he describes and and I would recommend his book highly it's called competitive strategy and it's it's it's it's a bit academic chat GPT can summarize it I have it I have it explain it to me a lot um but the basic um takeaway like the business school 101 takeaway from Michael Porter was there are five forces that every business deals with how much bargaining power do your suppliers have over you meaning if it comes down to it and you guys disagree on price who's got more power uh how much power do you and your customers have between each other does your customer have the ability to dictate that price price or do you have something they need so badly that you can dictate the price uh how easy is it or um uh natural is it would be would it be for somebody to get into this business and compete with you that's number three ease of competition uh based on the competition that's already in that industry how intense is it how much does it have to like is is it a race to the bottom in all cases is there like what's the competitive set look like and then what are The Logical uh substitutes and alternatives to the thing that you do that your customer needs Alternatives is is uh they're kind of the same way of saying the same thing but basically what else can the customer go get that you uh that you offer that you're not considering as a competitor or you're not considering as a competitive offering so in the case of quad our bearing facility we have uh pretty significant bargaining power on the supplier side if they decided to raise our prices 200% we're going to be we're going to have to scramble to find somebody else and it's going to be it's going to be difficult you can offset that by ordering a lot more material at a certain price tying up your cash and that material by investing in product development research development to get your own uh capabilities in house you can go to somebody who has the capability but isn't in that line of business and set up a strategic partnership which is something we've started to do um but as it stands today and as it stood four years ago that's difficult that's that's the that's the weakest point of that company on the flip side though the customer doesn't have many Alternatives and it gives you uh some significant bargaining power so when the customer has a certain pain point with that business uh they need 10 very precise bronze bearings that uh are critical to the operation of this oil drill they don't want to import them um they're really concerned about quality because it's going into say a government application or something they can't bring them in overseas we need somebody who's going to do that there's really only a couple companies that do it and it's mainly because babbit is kind of hard to work with and it's kind of a foreign substance and that level of precision is really hard to get I I've I've taken those bearing designs to one of our other companies that has a CNC Division and said can you guys make this and they said if we got that we would know quote it we can't we can't make that the tolerances are too tight quad happens to own some machines from World War II that allow them to do that um and it's a it's it's kind of mind-blowing that technology from that era would allow you to do it but it's it's one of their competitive advantages it gives them bargaining power uh nobody's getting into this business like very few people are going to going to go and one try to figure out how to work with babbit it's it's a hot casting process it's it's kind of intense uh and then try to figure out that Precision that level of precision from a customer expectation they're GNA have a they're gonna have a hard time with that and they're just going to pass on that Revenue stream they're just going to say forget that and the folks that are already in it have a real nice oligopoly so there's only like three other companies in America that deal with babit at all in any application uh and from what I from what I've found and some of that is repairing big bearing some of that is making big bearings of that is casting it but um the compe the competitive set is already pretty small and balanced and it's unlikely to get much bigger um and the substitutes are interesting but they're not things that we couldn't adapt to for for example uh certain bearings and I had to learn all this like this is part of my diligence process this this is how I think about diligence um part of the uh part of the things that exist out there there that are alternatives to babit um or substitutes for it are ceramic bearings um silicon bearings and certain other types of chemical compounds the difference is is they're all pretty extreme in price at this point um which defeats the purpose of why you're buying babbit in the first place so it would it would perform the same function but it would uh not it would not like it would eliminate the price like babbit's the best alternative all in now if somebody if if ceramic improved and the ability to produce a ceramic bearing improved and the price got dramatically cheaper we would then have to go and adapt to that and start producing ceramic bearings does that make sense yeah but it tells you the vectors on which you're going to need to compete so I I look at everything through that lens and I look at it really quickly um and that's my that's my initial screen and filter for every company that we look at and um it's why most of our you know we have like I said five companies that point it's why most of them are classified as a small piece of a big thing um because there's usually bargaining power in that and in most cases they use a material or a method or a process that's easily they basically like you can get from a lot of places and there's already a pretty nicely balanced little competitive set um and it would be hard to get into it if you wanted to do it uh and um there are very few practical substitutes or alternatives for for what they do and when you say a small piece of a big thing what did you mean by that Garrison so uh take the trailer business it's a couple brackets and equalizers that is one part of a very large trailer project so the guys that are fabricating trailers are taking uh probably 20 different material types and Welding it together quickly to get that trailer out the door all we're doing is selling them the brackets and the equalizers that go on the the axles and the the mounts like it'd be the bearings are very very good example the customers on that end are building or repairing large Industrial Equipment Power Equipment we're selling them a piece of that uh our racking business uh sells portable stacking racks which are modular racking for moving weird hardto handle material types around so like coils of Steel carpet uh tires Pipe and Tube when customers are buying that they're usually they've also spent let's say 10 times or five times what they spent with us on the structural racking that goes into a distribution center so the guy that's in charge of buying all the racking is spending a lot of money on the structural racking and a small amount of money on the portable racking for us it's more about quality and delivery than it is service levels than it is about price so you get you get a little bit of pricing Power by being the small the small guy does that make sense it does and it and it reminds me of a theme that comes up again and again it's where where you you particularly common in manufacturing where you want to be the widget that is low price High essential y highly essential but low price yeah so when when you're when your customer is looking at their you know all their expenses and all the things they're spending money on and and they're feeling tight or whatever and they need to go out and and negotiate prices down you're so far down the list that they're not going to get to you or it's not even worth their time because it's a really small expense um that it's it's it's funny how often I find myself saying that because it's a it's a phenomenon that seems to come up at least in high quality businesses again and again yeah our um CEO so I hired a gentleman two and a half years ago to run the manufacturing group uh he comes from Illinois toolworks ITW which is a massive holding company of industrial businesses they own 860 something individual manufacturing businesses all of which are about 20 million of Revenue a piece very decentralized very small companies um he's 55 and he likes to talk about the long tail of stuff you know you Paro it out you've got all the stuff they concentrate on up here and then you all this little stuff down here that's just don't hold up the project just get it to me on time and get it to me right that's what I love I love that and so Porter F force is just another way of accessing the same conclusion you know running a business through Porters 5 forces it's a good forcing function to make you understand the the kind of qualitative nature of the business and and where yeah I mean I mean that's the point is that it's an exercise for you to make sure you understand how how um not what's going on in the balance sheet or cash flow but really the the the the forces that are are acting there um it's it's really powerful you know one of the things Garrison I would I would want to ask about this is like you know it's a you're an investor first and foremost like Quin like Buffet so you're just waiting for fat pitches I assume I mean you can look at Sim after Sim after Sim there's no you don't feel compelled to act when everything isn't perfect Noe um and so therefore you probably have a higher bar than maybe a Searcher who's got a Runway and they're really looking to to just move on with their lives and buy and own a business and start operating so a lot so where I'm going with this is that a lot of the businesses that my guest would buy probably would quote fail Porters five forces or they'd be quite vulnerable in one or two of the the uh according to one or two of the forces Home Services being a great example so if I buy a plumbing business the the competitive environment is terrible y the um what what are some of the other things so the the price sensitivity of my customers I like I can't just double my prices because they'll go elsewhere um and I'm probably forgetting others no you're it's it's you're right that's why I've stayed away from those historically I've had a hard time getting around a really unique good home services company for example and I've looked at them I just I have a hard time with them for for this very reason yeah yeah for this very reason and I'm not saying they're not great businesses for an awesome operator I just don't look at it as an operator yeah right exactly so I guess so the takeaway for the audience is or for the Searcher is it's a it's a really valuable exercise but it might be too high a bar frankly to pass uh if you're looking to get in there and own and operate in the next year or two Garrison can wait and wait and wait for that fat pitch and for that business that Nails it on all five on all five forces but maybe the person listening can't well I'd say that's probably true but quad none of our businesses are perfect in that okay so like we we've every one of our businesses has some deficit along one of those vectors and um the cool thing about great man management is that they can go and find some way to smooth out those vectors or solve for it or defend against it like there's a reason in our Marketplace here in Nashville there are three quite large home services companies All Above 150 million or so in Revenue they compete ferociously but there's one in particular that has developed some great value propositions that makes them a lot stickier than somebody else and that's why they're the leader that that you want to as an investor at least I want to find a manager like that you know I want to operat like that um but I would say maybe like forces might just be a little bit of a look into a crystal ball of what you're going to deal with over time and so if you're a Searcher and you're like hey I'm gonna go buy something it might just help you be clear eyed about the the Dynamics of what you're going to be in for for the years that you're in it and that's okay if if you can operate in if you can be successful in that like rock and roll you know well and and two points on that it's it's kind of like I if you see that along one of the porter 5 fores vectors it's weak but many business you know like you said all businesses are probably going to have some weakness on along one of those vectors if not more it's kind of like a pick your poison thing it's like can I handle for example if you're comfortable being in a really competitive market and so you're looking at a business that has that quote weakness you just you're fine with it that that that's an environment in which you're comfortable so it kind of surfaces to you the poison that you're going to have to deal with and then you can decide like is is the pain of this particular business one that I'm more comfortable with than the pain of that business over there first second this is another this seems like a really valuable exercise to identify how you can add value to a business so if a particular business is really it performs really poorly on one of these vectors along one of these vectors and you feel like there might be an answer to that or or a way to improve upon that it it it surf it's another way of surfacing how you can get in there and make the business you're buying a stronger business and add value to that business what the way we typically do this is we just kind of you know look around and oh they're not doing digital marketing let's do digital marketing oh they they don't have a you know they're they don't they're not um direct deposit to their employees let's Implement that all those things are great and can and are often low hanging fruit that can move the needle quickly but they're not um there's not a strategic framework there and maybe for Porters 5 forces could be that yeah I it helps us not guess on where we need to invest effort you know um I'd say it's very true you know Buffett said I can't remember this 2002 maybe he said somebody asked him what's the best business he's ever seen and he said the Harvard Business School uh and he said if you uh drop prices demand goes down you raise prices demand goes up that's a pretty great business and if you run it through Porter 5 forces like okay let's just let's just run it real quick uh how much power do you and I have over dictating what Harvard charges us to get an NBA can we influence that at all zero we can't influence that at all uh How likely is it that somebody's going to set up a true alternative or substitute to the Harvard Business School MBA if somebody wants to set up a new University and just compete directly across the street what's the likelihood that they are going to make any progress in the next hundred years on that it's pretty low uh how many folks are competing with Harvard really the Harvard NBA truly uh today Wharton Columbia maybe maybe like a London School of Economics maybe like a small handful uh and the one place where they might be somewhat weak but have done a really good job by being just being Harvard bargaining power suppliers who's your supplier it's the teachers it's the talent the professors that you're attracting in there's a good chance that the very best of the best like the Michael porters of History can dictate a higher price because you need them to make that NBA worth something but they kind of need your platform too right you see you see what I'm saying I mean even Harvard which is the best business that Buffett said he's ever seen has a um has a slight deficit in the fact that it needs certain key suppliers in order to be what it is does that make sense yeah just it just tells you on like the vectors on which you could could invest and well as you were going through that exercise I I on probably three maybe even four of the vectors in my mind it was like well the brand is so strong here um that's why it you know it that's what gives them the negotiating power with suppliers that's what allows them to charge students and students will pay anything and so that go that probably goes to why brand is so valuable and Buffett has said like he'll he'll just pay for brand because it brand straddles a number of those vectors it just gives you power across number of those vectors well that's what a good operator can build like a good operator can take the raw material and build that you know cool thing about being an investor is I get to pick from all those great stories about you know which ones I want to put Capital into but I can't do what a great operator can do and build something like that over a lifetime you know Garrison we're um pushing up on time hard uh but I still have two important things I want to do with you um if you'll give me the time if you can't let me know sure no no I got plenty awesome the uh first is to finish out your story so so and we're going to have to do that quickly unfortunately um and then I want to just hear uh take a take a look under the hood of what your life is like because it's not all just moving uh you know the chess pieces around you had a hard day as you told me as right as we got on the call and so we'll just want to hear about that it's not as glamorous as it as it may always seen so first can you can you kind of bang through the the next three Acquisitions yep we did uh our third acquisition in the summer of 21 we paid 9.9 million for the real estate business of a very large quirky Job Shop uh in Columbia South Carolina they basically offer six different Market or six six different Manufacturing Services in one business they're the largest metal non-captive metal stamper in the state of South Carolina CNC tool and die machine rebuild custom automation Aerospace stamping all under kind of one roof it's it's a very unique offering in a very popular area uh so we bought them and then we acquired uh what we believe to be um but it's hard to know but at least the top three uh leading domestic producer of what are called portable stacking racks which I talked about earlier it's a company called tier rack tier rack out of St Louis uh and they make basically racking custom racking systems for shipping and moving around and distribution for stuff that's hard to put on a pallet so Walmart uses them for Christmas trees and uh good year uses them for large agricultural tires and Lowe's uses them for lumber and it's you know we use them internally for coils of Steel and it's uh they're used in nuclear waste facilities it's like you got to move stuff around it doesn't all fit on a pallet um and so you need a custom solution for that and that's that's what they do and then we bought a company uh whose name I won't mention because it's a um it's been asked that I don't but they're uh one of the leading managers of medical trusts for paraplegic families uh in the country and uh it's a fantastic family business Second Generation and we are uh partners with the family in that I Own 100% of the equity in everything that we own at this point except for that business we own 80% then the the founding family owns 20% um so we buy one or two companies a year and we usually are looking for at least a couple million of eida the biggest I've looked at is like 15 million of ebaa uh meaning that I actually like was pursu suing and could close um I'm looking at one right now that's about 5 million of evida and they're that's kind of the range we're in and we we try to do one or two a year and so tell us what the overall the aggregate revenue of the holdco is today and in E you would yeah the last year end of last year was 37 million as a hold Co to like total uh and iida was 9.2 roughly it's like right in that ballpark um and you know the rental properties are not big contributors obviously but the major contributors are the racking Company the company out of South Carolina and then the trust company and where do you think you'll get in in at the end of this year I don't know it's depends on if you do another acquisition depends on another acquisition the racking company is a we knew this going into it it's a boom and bus company it has really high highs and really low lows we're in a low low right now we uh just got confir that we got a large almost $3 million order last Friday that'll probably take us to another high so it you know you never know with that company but if we do another acquisition if we do the acquisition I think we could do this year I'm looking at I'm visiting it next Friday that will put us at um using last year's numbers that'll put us at about 60 of Revenue and 15 of iida roughly thereabouts so and that like if we can do one or two of those a year it's it's a good thing to do so at age 30 yeah yes I turned 31 in July and this is what you intend to do for the for the duration of your life yeah I mean it look like you find something better to do meaning some other way to help and do something contributory but I see it as personally like a like an honorable thing to say we're just committing to this great family business that we're going to hold it for the rest of our lives I mean they so the racking company they had two private Equity offers and our offer was about 6 million below the largest private Equity offer and they they picked us because of what we do um and there are sellers out there who that really matters to so that that's kind of why we're in the marketplace and Garrison how do you um convince sellers that you have this uh that you have this approach this philosophy um because you could imagine people being skeptical of it you could imagine as seller being like this guy's saying he's he's trying to help the world but like you know maybe he's maybe he's a shark so how do you really prove prove prove it to them well I mean the first thing I do is I try to communicate it as authentically as I can but two I let them diligence me so we have annual reports of everything we've given and what we've given to and the programs we run and I encourage all the selling families to call the employees call the plant managers and just ask like I mean I'll give them any reference they want to talk to you know they talk to former sellers whatever it might be um let me be honest and clear very clear we have not been perfect in this at all like systemically we're a young company and we are getting systems in place to make sure we do what I want to do right and authentically which is led to part of the frustration and uh pain of the last couple days but um there's not been any doubt or when people sit with me and they look at our not just our what I say but the track record is well documented they truly believe like he's actually trying to do that and then they may ask the question of like am I willing to let him go through the bumps of growing into it um with my business you know so so like typical alternative that we've noticed to us is an ESOP so people might um look at us and then they might say Well they're a little young or they're a little new or a little unproven we love what he's trying to do and we love what he has done but maybe we'll sell it to the employees instead um but I just do the best I can I mean I just I tell them what I'm willing to do and I let them talk to anybody they want to and I hope that they'll tell them the good and the bad you know and then just let them take me from there so okay Garrison well tell us a little bit about the the getting your hands dirdy that you had to do the last couple days why it happened what's happening uh and why it's not just um all moving money around all the time yeah so we have this business that's um they're they're just super passionate people very very lovely lovely people and culturally they believe very strongly in what they do they have very high standards um when they when we acquired them we uh wanted to Institute some services and some some features to them that we thought would be really really good and we told them hey we're not going to make any changes to your business that are not a creative and positive for everybody we're not going to force something on you which that's that's our way of doing things well we implemented a bunch of changes Health Care um new handbook uh direct deposit some some things that you know some very basic things and had no idea that the net result of that was a lot of pain and confusion and uh I guess the feelings of Abandonment and cynicism and bitterness towards us us because we didn't communicate it well manage it well like ease it into ease it into the process um and so I had in a plant two days ago the entire Workforce walk out and um and got a phone call saying we can't handle this anymore and I had no idea what they were talking about and so I had to parachute in I did parachute in immediately got in the car with our CEO went in there spent 5 hours with the with the the the plant team hearing everything uh and realized uh we did a really bad job of delivering on the uh leadership feeling the the the the smoothing of the transition the the smoothing of the transition everything we did did have the result that we wanted it was going to be a net positive and it was a net positive we didn't integrate it well at all and for whatever reason the the the primary thing that I need to do better and have not done well over these years is spend enough time in the early years with the teams I really lean heavily on um The Operators at the plants to uh make make 95% of the decisions and our CEO to do that but they need to feel me you know they need to feel our culture and our why and I'm I'm not there regularly enough for for them to feel that and I realized that like if we're going to do things that we know are net positives for these folks and that they want us to do they've asked for and we're not going to follow up on the implementation we're not going to we're not going to manage it to the the the last minute and that I'm not going to be there to take the bullets that's going to be really hard and so I I've uh I just realized I don't I don't have a and this is something we have to have an early uh warning system you know like a tornado warning system for what's going on at the plant level s related to the fact that we bought the company um it's it's usually just like Hey we're going to we're going to offer you guys a better deal on your health care by joining the group plan okay that requires some administrative changes there are there are it's Rife with the opportunity for hiccups and potholes and distrust so what we have to do is we have to handle that with kid gloves well we just kind of did it and then didn't really check in you know and so uh I had some folks who had been working there for 20 25 years who were just like what is happening and nobody called me and that really bums me so I I don't know why and I found out over the last couple days that basically they um uh don't feel like they know me you know and so I am now committed to being at that plant at least every week if not every other if not more frequently I shared a lot of my personal story my family background and things with them spent a lot of oneon-one time with them um and the key thing in my mind that I have to do in that situation is not be defensive like it's I have to take it's my fault you know and there are things that they could have done different there every there's some folks that are culpable in this that's not the point like the point is we screw we screwed up and I screwed up and so it's very very important for me to be there own that hear them out write it down follow up deliver on it and then make sure my team feels the same level of expectation um so it's just honestly I'm chalking it up to being young uh the fact that we are new in this system of integrating companies and we have not had this one before to this extent to this extreme extent um the the main reason it got so extreme was because they didn't feel like they were being heard and there was a Communication channel right above them that was blocking the news from getting to us and that was that's a big deal so I have had to go through and kind of break that the last couple days and um we will uh it seems like I called up there three or four hours ago and they said it feels real normal today everybody's in good spirits what you did yesterday was really good work um and we'll uh I'm going to be out there next Wednesday and then we're just going to keep moving so mm it a it was a long couple days how it feel were were you were you panicking at all or were you mostly disappointed and or what what was the emotion cuz you're big enough now that this wasn't going to be even an absolute disaster wasn't likely going to be a fetal position moment for you as it might be for a Searcher who bought their business and is looking at a mutiny um you're you're big and diversified enough Maybe I'm Wrong um I don't yeah I don't feel like we are but I also I also look at every business as an individual commitment to a family and a group of employees and so it's to me it's like there's there's no excusing my disappointing them regardless of size or commitment it's it is um it's as if it's the only business I own and that's that's the way it should feel no I was terrified I was Absolut that's a buffet thing you know it's a so but I was I was absolutely terrified um and very very very focused like the the way we are set up is that my leadership team in Nashville and Ohio is where we have our coo for the manufacturing group they are in charge of everything that goes on in the facilities and the people just below them are in charge of those facilities okay so it's very decentralized I I only spend my time mostly on Acquisitions um and basically uh if we're going to run that then I have to trust completely that the folks below me and the folks below them are going to make the same types of values based decisions I would make well we're still really young with a lot of these people and so sometimes they make decisions that they think are best but are may be a old school way of doing it or a fear based reaction or that you know they're they may react in a way that doesn't align with our values and that's what happened um and I'm not doing a good enough job of communicating why we do it how we go about things uh and then being there to model it does that make sense yeah sure um so yeah I was terrified and I said everything drop everything get in the car we're going and we're not going to leave until uh I'm going to I'm going to pour my heart out to these guys explain to them our intentions hear everything they have to say honestly and perfectly not question it not defend myself at all and want to and then ask how what can I do to help like what can I do to fix this now and um it really galvanized our team and we realized oh we we've got to do this better next time so uh when like I said when I called up there today and then talked to a couple of the other leaders they were like you really did a great job of making us feel better yesterday thank you for thank you for coming thank you for taking action thank you for being here uh and it seems like we're okay right now so um we still are probably gon to have some people who who leave but if they do leave they're going to leave because they're honoring a commitment to a new job and they're going to they're going to feel a lot of respect towards the way we've handled the the cleanup so there is a leadership change that'll have to be made um and there is a uh there there's um some some other like key things that'll have to be done but uh it's just I just felt really sad that it got to that point that I didn't know and and that the system kind of failed to deliver on our values yeah uh and that that it won't happen again well I mean it may happen again but I I'm there's a couple things I'm doing differently to monitor what's going on that I haven't done in the past just to to make sure that we get ahead of these things before they uh you know become unhealthy yeah well Garrison it sounds painful um but that you deserve congratulations for for the action that you've taken and how you've handled it and of course the Silver Lining I guess is that you'll look back at this in five years and it'll be a key moment in in in helping you in your own learning about how to communicate values up and down the organization and how you make snow Ventures that much more robust and long lasting so some of this stuff has to happen to stress test the apparatus of the of the hold co uh and then you emerge on the other side stronger and all that yeah I was in my YPO Forum earlier today and one of my buddies there was like yeah this is going to happen eventually dude he's like it's a good thing it's happening now and I'm like yeah you're you're right um it's it's it's reorienting for everybody they realize like oh we we slipped a little bit um we will I mean look I I view this as a permanent stewardship commitment to these people their families in that town and so if we say we're here to improve your lives we're here to do things for you guys that no other employer does and and you know there's a lot of those that that I could talk about or that most employers question whether it has economic value or not and I just think it's a good human thing to do and then we go and make their lives harder or miscommunicate or uh are heavy-handed with them or like abrupt and dismissive I mean it's just very very uh jarring and the truth is a lot of of our employees um have already had experiences with Management in the past where they feel that management may not be trustworthy and it is one of my deepest desires that they feel trustworthiness from us and dignity because of what we do for them that makes sense and yeah so that's what that's what got me upset was that we we failed in that mission and yeah uh but this is exactly what every owner that I've bought from would do and so I'm just trying to do what they would dud you know this is the kind of principal nature of what they've done for I mean this particular company has been around for a long long time and that last owner had a really hard 2008 and uh did some really virtuous things for the employees during the 2008 setback and we're just trying to do what he would do so yeah does that make sense it does and we're gonna have to leave it there Garrison thank you for sharing that um bit of yeah real painful yeah yeah real life it is a um despite Us ending on a on a bit of a a down um moment here it's a remarkable what you're building um how early in life you're doing it it's really going to inspire people um thank you for the the education on Border five forces I I've been exposed to it um it's actually taught in the acquisition lab so Walker D and Chelsea Wood it's a big part of the the um instruction there um but I haven't actually heard it come up much since I did the lab over two years ago so I was Rusty and and it's such a valuable tool that it should be uh talked about more so thanks for the education on that and for sharing how can people get in touch with you Garrison if they have questions want to say hi want to say congratulations yeah uh couple ways um our office line does come uh to me and to another person so it's uh yeah so it's 615 uh 68234 12 feel free to call leave a message or send a text and I get that then my email is just Garrison doell Snell ventures.com and it's really easy so just to holler at me um I love getting messages from folks who are trying to do this and have had have helped a few people with Acquisitions recently specifically in structuring their financing or putting the deal together or something so if there's anybody that needs it or wants to talk about it I'm happy to to discuss it with them so well yeah you're talking to the right crowd and there probably will be um a lot of inbound from that invitation so very generous of you Garrison thanks for giving me so much of your time and coming on today yeah dude thank you I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business