Jeff Felker welcome to acquiring minds thank you Jeff Shane urom a two-time guest on acquiring minds recommended your story to me he thought it was a great story and a fun business and thought I would too and he was right you bought retro 51 a pen business pens like the things that you write with so let's get into it Jee start us off with some background on you please well um yes it is and I appreciate Shane introducing me to you um we bought retro 51 in 20 well we started talking to the owner in 2020 the original owner and founder and closed in January of 20121 so through covid we made this acquisition which was made it very interesting um but retro 51 is a 30-year-old pen manufacturer we do a lot of very creative type pens my background was not in the pen industry it was all in supply chain and Logistics with the major corporations well give me give me some of that personal background uh going even back I I as I recall you were kind of an entrepreneurial kid whatever color here whatever color here paints a picture of who you are give it to us please um I've always been entrepreneurial um starting out as a kid kid I had a paper route uh detail small detail business where I would detail several customers that were paper out um detail their vehicles on the weekend um I would cut grass basically anything that would make me money my parents uh had a kind of a their process was they would say okay we're going to spend you know granted this is the 80s so we're GNA spend $15 on tennis shoes for you if you want the $30 Nikes then you have to pay the difference so you know that just taught me the value of money and it taught me that okay well okay so $15 I have to work three hours to do cutting three Lawns is that worth so it helped teach me the value of money and the value of hard work um I grew up in a very middle class uh my mom was a nurse and my dad sold cars and um insurance at that time with cars later on and um so not I wasn't wanting for anything but if there was things that I wanted above and beyond that then it was up to me and I had a very for my age I had a BMX racing bike that was completely custom and all my friends were running around on huffies or you smaller store type stuff so it was it was so so you were a successful entrepreneur as a kid yes basically for um okay and then uh I went to school I went to school for architecture for a year decided that that wasn't for me came back to home came to Toledo back to Toledo where I grew up went to University of Toledo and ended up getting an undergrad in marketing and then just started out with different management careers um right before I graduated uh we had our first child my daughter Lindsay and then we shortly about two years later we had my son Caleb and during that time so I was graduated and had a very young family so basically go get a corporate job so I started management uh with roadway Express and then ended up going to vison which is a division of Ford and working doing supply chain type things with either managing the flow through the factory or managing their paint production for bumpers is what they made there and then uh you had an entrepreneurial diance at some point in here as an adult and then that's where in about 2004 um after being settled and getting my MBA I decided that I wanted to be My Own Boss again and purchased a couple of franchises that did custom window tratments and custom and then I purchased ones that did custom closets as well built that up to pretty decent amount with one person and then figured out that I with a franchise I basically bought a job so if I wasn't there doing the work I wasn't making money there's a big difference between buying a job and owning a business were you actually doing the service delivery doing everything so I was doing all the sales I was doing the installations I was doing the followup any type of repair marketing accounting everything I was a oneman show so I had run it out of my house one person with a van and and was there a path did you think to Growing it into a a business versus a oneman job yes yes there there was um One path was uh so I partnered with somebody that was did a car owned a carpet store I did his back end on the carpet store and then we would pass referrals back and forth so that helped me with the sales side of thing as as well and then I hired a salesperson two salespeople and an installer and then we negoti ated a deal with uh a builder in Dundee Michigan that was going to build three phases total of about I think it was 11 or 1200 houses and we just negotiated the exclusive contract for all window treatments going into from the spec level all and up all window treatments flooring and closets so it was a very lucrative contract yeah uh um we did three or four spec houses which was on our dime part of the negotiation was we had to open a showroom to do the upsell so we opened the showroom that was on our dime and two months later the market crashed with the housing market crashed in 2008 so that you know obviously negatively affected everything and we were backpedaling at that point that bill ended up uh going out of business filing bankruptcy almost took me with them at that point and I ended up lasting till about 2010 and during that time frame um I was running it kind of back all the way down to me in the van um by myself but the one positive thing or the positive thing in there though none of my customers got burned none of my vendors got burned and none of my employees got burned I held on to them until they found jobs I helped them find jobs um so you know it probably cost me $100,000 more than what it should have if I just closed and walked away but it allowed me to sleep that was more important to me yeah that's um that's a that's a big accomplishment so but then ultimately ended up costing me everything cost me all my savings my marriage my house oh so um you know but it was a learning curve I mean things happen in life you just you know you can't control what things happen to you in life but you control how you react to them and you know my reaction was basically to pull my boots up and figure it out and Jeff you said you lost everything so I assume that also means personal bank ccy in there it among the basket of other horrible things okay wow so in 2 by 2011 um my house was gone bankruptcy was filed personal bankruptcy was filed the business assets that were left were sold for pennies on the dollar um basically to the person that I was I had subcontracted out my installations to he sub um then closed that completely not even a few months later um and so at that time basically I was looking for a job and Jeff can I can I just ask a little bit more about sure the experience and and you I suspect you don't want to dwell on it it's also not the subject of today's interview but um the risk of BK bankrupt uh is ever presentes for people in in our world who buy businesses and and if done with an SBA loan need to personally guarantee those uh loans so it's a very um it's a very serious risk frankly um and there's often debate about how much you truly need to worry about it you'll hear even hear people say well on one end of the spectrum some people won't just won't do it simply because of that risk the personal guarantee is too much risk so they won't go down this path period on the other side of the spectrum you'll have people say you know even if the worst came to pass and your business goes to zero or you can't make the loan and even after trying to work with your bank to defer payments or whatever plan they get you on it all you just can't make it go and you have to file for personal bankruptcy even even that assuming basically you don't have a family and and that there aren't a lot of people around you that are going to suffer you could recover from and and you know obviously these two differing perspectives are just coming from the reason for the difference perspective is because people have a different a way different tolerances for risk um so for somebody who's experienced it what would you say on about this about this debate or this spectrum uh anytime you're an entrepreneur and you go out I mean there's risk in that and you're looking at that it's something you have to decide ahead of time I did have an SBA loan that I was ultimately responsible for and paid off in full um to purchase retro 51 I qualified for a second SBA loan and it's because I handled the first one properly MH so you know you still have those risks of just like with you know one of the things that I ended up getting in trouble with the sales tax and dealing with the state of Michigan and I had to pay all that back too it wasn't you know so that was a personal so even though we we ended up filing a personal bankruptcy I was still left with probably close to $70,000 in debt that I had to pay back and I you know but it was a way to remove us from the house sort out what was left of our marital assets and could we have gotten away without doing it possibly um but it would have taken a lot more and it would have drawn out the whole scenario for probably two to three more years and it was a way to cut draw a line in the sand and say this is the point we're done so it was done not just for economical reasons but it's more for personal reasons as well um but that was all weighed out you know with what I thought was going to happen and you know you can recover from that you just have to understand credit and know what to do and what not to do with your credit and you know I was able to recover from that uh um and rebuild my credit score up pretty significantly within three years now you always have you have that BK on your record for seven and some loans ask for you have to be careful how they W it too if you have ever because if it comes to light then they can claim that you lied on that so so even after seven years if you're asked in a loan agreement you have to divulge it yes and which I do I mean it's part of my history it's part of what happened to me and sure you know it it's a tough decision I mean it's but you know some of the most successful entrepreneurs have had four or five of them I mean sure sure you know and it's just part of it but you know you have to you know to be successful you have to take risks you know if you're going to play it the safe route which there's nothing wrong with then you know you're not going to be able to stomach being an entrepreneur maybe just another minute on recovering you've you said after three years you could recover your credit score seven years um what sorry what was the seven-year threshold what what Happ when it drops off your record seven or eight I don't remember but it's when you when it drops off your officially drops off your credit report then you don't have to disclose it unless you're specifically asked especially if you're asked by the NSB a okay okay all right and you and after how long did you feel like you got your footing after how long of the personal bankruptcy did you kind of feel like okay I can survive I can have another go at bat maybe even probably about three years I I mean I knew I would survive from day one I mean just because you have to but um feeling like okay well I'm in a position where I can can go get a new vehicle I can go do this I can go do that I can do that um probably about 3 years and then closer to the five to seven year mark I started getting the itch to be an entrepreneur again so you go corporate again and as I recall in the preall you you kind of at some point you said to yourself okay this is what I'm gonna this is going to be my career I'm going to be a corporate guy I had my I had my fling uh with entrepreneur but now I'm just going to be a corporate guy for the duration uh expand on that and then how'd it change um well that was about 2010 it you know 20 2 09 to 10 I was kind of like okay well this didn't work you know this is what I'm going to be looking at and kind of mapping out the next five years or so and it I was just the point where I just needed some stability um and I did accept a different job ended up only being there 90 days because I had an offer for the job that I wanted um and that offer came from CSX the railroad uh my grandfather worked there for 45 years and retired in I that's incredible and then uh my uncle worked there and retired I knew it was hard I knew but I knew that it was solid and the biggest thing that was I liked was I was when it was going into as a manager at that time they called them train Masters um you basically went into training and you could be placed anywhere east of the Mississippi wherever they basically wherever they have lines you had no control over where you got placed you so I'm sitting in Michigan my house is gone I'm moving out and I got the call and essentially I well not essentially literally I had a dumpster and a pod in front in my driveway of the house that I was emptying things were going into one of them and I had a Audi TT Coupe that was my toy Jay driver type thing and I threw a tote in the back of it packed up clothes and I left for Atlanta and never went back so essentially while I was training I effectively was homeless because I I didn't have a house I didn't have apartment lease or anything so I would just travel around and do the training and then I ended up getting placed in back in Ohio where I came from originally so you know that was kind of nice because I was still close to family and that um and then just started building my career there I'm like okay well 20 years will get me a full retirement so I can retire 62 figure out something to do for a couple years until 65 so I can until I get full benefits and the nice thing is you have Railroad Retirement versus Social Security so there was a lot of benefits to joining the railroad um so that's what I ended up doing and got a few promotions and ended up in Jacksonville Florida at corporate after four years five years and I was there for six years until I made this decision to do this and like once we got to Florida um at that time we were renting apartments renting houses and then we purchased a house in Florida that you know and then it was like okay now I'm really solid and that was about eight years after the bankruptcy nine years MH and okay so eight or nine years after I mean that's that's a good amount of time but you've recovered quite nicely I mean you're a homeowner things are stable you've got a good job that you've already been in for a number of years and have been promoted a number of times you have a clear plan for retirement so um you're back on on track uh as it were forgive the railroad pun and but you but W with that stability comes the itch for adventure or or what so how how does entrepreneurship re re-enter the picture yes um during that time frame um my schedule there was a very good schedule so I had a lot of free time I'm not good with free time I end up spending money on cars doing things with cars and that kind of stuff and um I didn't want to pull money out with to do play with the cars from my salary and from my life so I was looking for an option to basically sub supplement my salary to be able to play with cars um and so I looked at Amazon website I looked at a couple affiliate marketing type programs did a couple started a couple didn't like it um I wasn't able to get the Amazon store going I somehow screwed up the process I think it was 2016 and 2016 going into 2017 uh hedge fund bought a billion dollars worth of CSX stock and put in basically fired everybody from the division manager up and put in their own people so it became very clear to me and especially having the entrepreneurial background that I didn't control my own destiny any longer and nobody's going to take care of you like yourself you know so I started looking for opportunities I started looking for businesses to buy doing some research on different ones what industry do I want to go into what do I like um and then somebody I thought somebody stole a pen off my desk it was a carbon fiber in Black uh CSX pen that I got off the company store and I thought somebody stole it I later found it so I simply misplaced it but that's what the caveat started this whole thing um I Googled all metal roller ball bought a retro 51 stealth which is all black had it monogram with my name on it so no one would steal it again got it in and started writing and was like holy crap this is a really nice pen for 30 bucks you thought somebody stole your pen so you're penless you go online to buy a replacement pen yes and you end up on retro 51 and you buy and you buy the pen that you just described okay and so you get it you hold it in your hands and you're really impressed this is an experience yes and the way our pens write is with the high flow roller ball ink they just Glide across the paper they have good weight they're all metal construction I mean there's just very positive things about the experience uh so then I started doing more research like oh what brand is this okay and then I found that they did a Dr Gray pen which is a skeleton pen that glows in the dark my wife's in medical so I bought her that then i' go to a chiro practor and my chiropractor in Jacksonville is amazing AJ um and I bought him one and was like I just wanted to thank him um and then I bought a fountain pen and then I discovered a letter that the previous owner had put out in the beginning of 2020 and that was March of 2020 that I bought the first pen that he put out in the beginning of 2020 that he was going to close and retire the brand with him at the end of the year uh so I was like H that's interesting where where did you discover this letter just doing research online he had um pen World magazine is a basically an industry magazine that's very popular and I was just Googling retro 51 and reading different articles and found this letter that he had that he basically published in one of the Articles it was like end of an error type article or something like that and um June 2nd I made a phone call and asked to talk to the owner and he accepted my phone call and started the conversation with I know nothing about your business I just bought a retro um stealth and I think it's amazing would you allow the right person or group of people to continue your brand and we started a conversation and be clear in his letter his public letter he said he was shutting it down he was not soliciting buyers correct although may maybe he did put it in that magazine to fish for buyers probably I don't know I know that he had gone down the path of a couple different buyers um making him offers one thing he was not going to do was sell to a conglomerate or overseas or somebody that was just in his words going to bastardize his brand he didn't need the money so it was not worth it to him mhm um so we started a conversation started moving along and the path and you know I did signed the NDA he he agreed to allow somebody um and Jeff you're you're in Jacksonville at this point yes and where is retro 51 based uh Richardson Texas just Northeast Dallas okay and so what do you find what do you learn about the business give us a give us kind of a picture what does a pen business look like employees Revenue do they make the pens is it is it sort of out an outsourced thing pain a picture please all of our pens are made in a factory in Taiwan the interesting fact about that is at one of the trade shows that George had gone to after being in business a few years he had met the owners of this Factory and they were moving from mainland China to Taiwan and starting a business starting a factory to make pens they made the connection and we were their first customer and we have been their only customer for 33 years their only customer or their only customer that's been there the whole time only customer we've been we've been the only customer they've ever had for 33 years wow well so that's very interesting and quite a relationship uh how did you get comfortable with that risk factor they have customer concentration in you so they have but a single customer making their business pretty flimsy it would seem um so weren't you worri don't you worry that something might happen to them since they're totally Rel reliant on you um yes and then also with being in Taiwan you always have the threat from mainland China um exactly they were planning they they honestly were planning on retiring they are in between my my age and the previous owner's age they're of retirement age so they were comfortable with just retiring so that was their plan so it was just very open honest communication on will you continue manufacturing for us do you have a you know ability to continue the business and they've brought one of their sons in and he's starting you know he well starting he's been doing it for about two years now learning the business inside and out and to continue running it because they want to basically have another 30 years with retro m and they love us we love them uh their quality is impeccable they have amazing relationships throughout Taiwan to do um because to do all the little processes the plating the painting the acid etching and then bring it all in house and coordinate and build our pen MH um you know it is a little scary sometimes that they're are only source but you know I have I've tried to find a secondary source and nobody can touch their quality and you know so it's like I'm just banking that they don't do it they don't you know leave me and I don't think that's a issue I don't you know it would not be I don't think it's anything that's going to happen um unless something drastic happens yeah and to be clear they were Chinese Nationals yes the family or the parents who and now I guess the son is starting to run it starting to take things over yes and and when you say that you've you've just looked around for other potential suppliers should this relationship for some reason not continue and you couldn't find one who delivered the quality that you're supplier does what about the big guys who Pro who sell really really premium pens do they have all of their manufacturing inhouse or they probably have exclusives with their suppliers so they're locked down most of them have exclusives either that or they own their own factories and build their own product um one of them one of the product companies that I tested is a manufacturer um but more of a niche smaller manufacturer that has a large capacity um production facility but again I I've not gotten to the point where I'm happy with the with the exactly happy with the quality now we may go down that road with them on a different design but not duplicating this design and my factory now is um you know with open and honest communication there's really no reason to continue looking outside because they're they're content they're happy they love what we're doing we've kept them busy they really probably could use expanding a little bit um and you know we talk pretty regularly I mean every day by email but we try to schedule a call and do a call every other week um with covid and different things unfortunately I haven't made it out there yet but we are planning a trip in the end of October November time frame to go visit them in person which I'm really excited and anxious to go do oh great T Taiwan is a wonderful place that'll be a lot of fun yeah sorry go ahead I got enthusiastic about country you know and you know one of the things that we were looking at and you know the location of that secondary Factory is not key or not you know not great um for us um so we are the second Factory sorry what's the second Factory no the one that I was testing the one that ah that one um that is in mainland China and you know there is a stigmatism with Chinese product so I don't want to you know that's not that's not an ideal situation for us um so we you know I would like to find one in North America probably Mexico Mexico City somewhere in there um but that's not a path that we've been able to go down yet well what I don't know I not knowing enough about manufacturing I don't maybe these types of situations are more common than I realize where the actual manufacturer that you're Outsourcing your product manufacturing to and you have this very kind of codependent relationship where they they are very concentrated in your business and you in theirs um maybe that's just that's a not infrequent dynamic in manufacturing and it's just one of the risks uh in this industry and this business um but um you know on the other hand coming from supply chain that is that is rather unique and it is something that you you know it's kind of a just like with accounting you don't have the same person do accounts receivable as you have doing accounts payable you know it's kind of a you know you don't put all your eggs in one baset type scenario it is a risk it's a big risk yeah yeah yeah okay well eyes wide open and it sounds like you're exploring your options but no obvious alternative has presented itself on the other hand you you it's sure you know it sure sounds like a great working relationship so the frictionless of this relationship that you guys have developed over years the previous owner and them and now you and them um probably just feeds the momentum of just carrying on with this group uh you guys are you just know each other so well at this point and I and I think the inperson visits on just strengthen that oh exactly exactly I asked them all the time you know because you see on the US media okay well yep how big is the risk how real is the risk and they're like it's nothing Us Media blows out of proportion h they're like it's been that way for 50 years it's not going anywhere and they don't think there's a risk so well not that I'm a geopolitical expert on on uh you know China Taiwan relations but uh I don't know and that don't claim to be smarter than people who are actually on the ground in Taiwan but I would um I would get a multiple a multitude of opinions on that one uh because it sure seems to be heating up and there's lots of Hard Evidence of it yeah and it ways you know but but that helps ease my mind a little bit more sure because I I know that they're I know that they're not naive I know that they're very aware of situations so um but they they say it's not an issue so hopefully that's the case what would you call your business are you a manufacturer or are you something else we're well retro 51 basically is a design house a design house okay yes we we design we design the pen we work with them to create different techniques on the pen like the nuring at the top um and so like this section here the nuring at the top and the clip design you know we work with that and you know say okay we want to do this we want to do that but mostly now we're a design shop and we come up with different designs and whether it's what our new literary series which we just we did Winnie the Pooh now we launched Allison Wonderland a while ago and now we just launched the 20,000 Leagues Under the Sea acid Ed Nautilus pen um so constantly refreshing the designs uh so we essentially are a wholesale company um we do have a retail arm at our website which is just retro5 51.com um but we're primarily a wholesale company and a design house great what's the employee makeup of a business like this when you bought it what what is revenue of a business like this and and margins and profits if You' share well um when we bought it there was about eight eight employees like I said he his idea was that he was closing the business until so until we actually closed on the business his mindset was he was closing the business at the end of 2020 so he was pairing down inventory he would not replace people when people left um everybody knew that was happening so other people were leaving you know looking for different opportunities to support their families um he did say that any body that stayed with him till the end would be benef would he would take care of because he needed people to run the business um but at the same time he wasn't going to stop anybody so the promotional side of the business was let left to go down n you know organically um we had the only salesperson was the sales manager left um who retired about who was planning on retiring at that time but then retired about three months after we purchased the business um so there was about eight people and it was one designer two people in the warehouse A A Ware office type manager the sales manager and the president and the owner and I came in and basically replaced the owner replaced the president and replac the sales manager with myself within 4 months and we were then I think we were down to six employees and the revenue was right around 2 and A5 million and then we started growing we added an intern in the design Department hired them fulltime and they're still with us that was uh Mac right now now and he's been promoted to our digital brand manager um then we hired another intern in the design Department that her name's Angel and we hired a social media manager they have uh left but we've Angel has kind of taken over that role as social media manager designer and is doing a amazing job with it we hired another designer so right now we have uh Richard Angel and Liz as our designers Mack is our brand manager and we have three office people now um so so so you took it from how many employees right now we're up to 14 including myself 14 and two and a half million doll of Revenue what what are margins like in a business in a business in a pen design house pen business on the product itself it's right around 50% so we pretty much function off of Keystone and um within so 2020 what is that what does that mean he is 50% margin 50 points okay um so when we took over you know everything was pairing down a lot of the big big big customers bought a lot of inventory because they thought the brand was going away mhm um so we were very the first quarter we were low on inventory um we didn't have a lot coming back coming in because orders had pretty much paired down to because you're not going to bring inventory into a closing business um so it took us a good six months or I mean um 60 days to build back up inventory so the first quarter of 2021 was um pretty much a wash there was that's actually been the only quarter that we've not made money um and a wash because you were just reinvesting all cash flow back into the business to build back up inventory yes and then we were looking at and and Jee if the business was 2 and a half million when you bought it in Revenue but it was also being basically slowly closed what had it been at its peak or I mean what what did you think the potential and it's it's or I should say in its recent years of strength what was that Revenue number more like and so in other words what you might be targeting at one point he was up to 25 employees and about 8 million in sales oh but when how recent was that that was early 2000s so by the time you know he had decided that a long time ago that he didn't he didn't really want a business that big he wanted a small so he was managing the business down um and comfortable so 2021 we ended up about 2.7 but we pretty much did that in the first in the last three quarters okay and then 2020 one two three 2023 last year we were at 3.5 and we'll break four this year so overall we've we've raised the about 32% fantastic and and and what did you kind of what were you hoping to do are you on track are you are you exceeding what you would wanted to do um we're on track with the goal but we're not on track with my stretch goal my stretch goal I wanted to be at five right now okay but um with the economy um interest rates going up just prices of everything going up um you know that has slowed our growth uh not nearly as much as it does has with like some of the other larger pen manufacturers that are making you know four or500 pens because um while our pens are a luxury item I get it that not everybody's going to spend $60 on average for a pen but if you want a really nice pen but and you normally write with Mount blancs and you need a pen and the economy is you know you're probably not going to spend $400 on one you know yeah so it hasn't affected our business as much as it has the higher end stuff um so but there has been obviously it exists right now and you know I'm hopeful with what we you know the election coming up that things will start turning around um in the economy and you know my goal my goal going into this was um 10 and 10 so that's our Baseline goal so 10 million in 10 years and so this is would be a good time to ask about the the demand for pens overall in the pen industry so other than your um your supplier concentration you know the sole supplier and and them you being their sole customer the other risk here it would seem is that that it's in an industry that's in Decline people are using devices and now writing less so the $8 million that the seller founder had gotten the business to in the early 2000s you might Wonder Could That Could you ever get back to that point because has the market just contracted in a in a in a secular permanent way um so so add address the address the bigger question of how you think or you thought about kind of overall demand for pens and then and then what you you know and then your 10 for 10 goal and and how big you think you can get this business okay um we are such a small niche in the market that I do believe we can the the shares market share is still there we can gain market share um the majority of people still in even in the pen industry um don't know about retro 51 so we're doing a much better job at that we're reaching out to different Industries like and different people um via social media doing different types of shows rather than pen shows so that's all gaining knowledge or gaining market share and gaining new customers uh when he was roughly around the 8 million Mark he was doing a lot of more desk accessories games type Knick knacky stuff too which um you know while we can go down that road I want to stay more with desk accessories then I do with you know he had like a back caming game a chess set and things of that nature actually one of the biggest things that he had was a this tissue dispenser box called Rudy that the you pull the tissues out through its nose it was like a TIY statue type thing okay that was that was picked up by Target and they did millions of those um and then the other big one was he sold reading glasses in Barnes and Noble or was I think it was it was one of the stores I don't remember so um so those were the two bigger things that really elevated those numbers up so one of the things that did increase over Co was um medical professionals were uh recommending journaling and writing and that so that is actually continued in the popularity of journaling is still very very prevalent um and there's a cathar type when you're writing down versus typing it's much more personal it's much more you know it's slower and intentionally slower especially if you're doing it with a fountain pen which when I Journal I like to write with a fountain pen just because it you know I try to write slower and really thought get my thoughts out um you know some of the bigger manufacturers like if there's a if there's a market out there for a $500 roller ball from Mount Blanc or some of the other bigger manufacturers um and that's just one of them you know I really don't see why there wouldn't be a market for our roller balls that are under $100 yeah especially with our creative designs and the different things that we do we do on them because we have um designs for pretty much everybody from like I said the Winnie the Pooh our car cat dog rescue our owl rescue sea turtle rescue all the way through to military planes we're going to be introducing a new plane design here shortly we have license agreements with the Met um we just launched a license agreement with the Imperial War Museum and launch their Spitfire pen so we have such a broad spectrum of product and then also our just our classic lacquers and that I the demand will you know I think we reach a lot a lot of people and the biggest interesting or one of the most interesting to me things that has happened to me is at pen shows people will come up to me and um I still get it and thank me for rescuing the brand and not letting it go away oh and then uh it's always a great sign yes and then they'll open up their portfolio which is basically a pen holder and they'll have you know David Oscar's that are5 $6,000 a piece so Mount blancs Esther Brooks um no nalar you know all these higher-end pens and they'll have like the top row will be that so have like five six s eight n of those and then they'll have seven Retros h because we just are like the go-to for roller balls and I know a lot of the I know several of the people that work for other pen manufacturers like that have their own products that have their own lines that collect our pens and they're the owners of those businesses well that's uh very promising um you know the other thing about this indry I would imagine is like surely everything going digital and everybody starting to collect information and notes on their devices had some impact um but you're Now On The Backs side of that so it's like whatever disruption to the industry that digital devices was to to to traditional writing that digital devices was going to cause it's probably caused it by now so you don't have to worry the previous owner probably did he he went through that roller coaster or that uncertainty but now you where the business is today is probably where it settled out or I should say where the industry is today is probably where it's going to settle out it's probably not going to decline further or be further threatened by digital disruption because that's happened to the extent that it's going to happen is that how the pen industry sees it or am I being optimistic I'm not real sure how the whole industry sees it um the all the trade industry and stuff like that are very optimistic about and you know the way that I read some of the information is that the pendulum is actually swung back a little bit away from the digital yeah um even see that you know when you're writing with a a digital pen like you know with the Apple pen or remarkable or what some of the other ones out there it's the sensory is not there and so when you write with a pen on a piece of paper it's more than just you're make you know you're not you're not just making a note you're you know it's more it's the feel of it and stuff like that and it's the same way how a lot of people feel about electric vehicles when you drive an electric vehicle you don't have the sound you don't have you know yeah there's benefits to it um you can argue the environmental benefit or lack thereof however you want but you know you don't have that engine noise you don't have the visceral feeling of it you have the G forces from the acceleration but you don't have the sound to go with it yeah and it's you know so I mean I know I know one person that they just bought an older car that they've always wanted for that it's not nearly as fast as their Tesla it's not nearly as comfortable it's not nearly but it's all about the visceral feeling it's and it's a it's a manual so it's about Shifting the gears and that and I feel writing instruments are the same way I mean a apple pencil is very yeah you know but a pen is something that you pick out you take and you show people you know yep great and so we we still haven't heard what margins could be in a business like this so Jeff if you hit your 10 million in Revenue in 10 years uh and assuming there's no loans left over at that point what could The Profit what could the SD or eat on a business like that be um I'd say probably between 25 and 30% 20% and 30 net margins yeah at um probably 20 at the low at the lower end oh wow so it's um so pretty good margins than yes those would be good margins if 20% is the is kind of the floor yeah in in the railroad industry we called it the operating ratio okay so I think an operating ratio of you know a 7 to a08 is doable okay well Jee we haven't gotten into the terms of the deal let's do that quickly because we're already kind of at the at the end here but I think it's important because it it was a little bit unusual including the fact that you have Partners in this and how that took shape so tell us what you can please okay um well yes I do have two partners Adam and Joe um the previous owner actually helped us put those together um that partnership together Adam and Joe both reached out to them individually or him individually um seeing the ad these are two guys who saw his letter I should say Adam did Joe knew Joe is an SBA banker and he was representing a couple that were in the process of buying the company and then that couple um I don't remember if it's a husband or wife which one of them blew up the deal basically didn't want to do it um so after that Joe reached out to George the previous owner and basically said um you know hey that I was representing them if anybody needs SBA help whether it's I'm helping them in the loan itself or just guiding them let me know and so when it became evident of what we were going to pay for the business and the down payment needed that I didn't have enough down payment uh he introduced me to Adam Adam reached out to him and said basically you know I know nothing about how to run a business but my whole background is creative um in he lives in LA and is in that whole world and creative side of things writing trademark or trademark Professor or copyright Professor that's right of writing um and he said but you know I don't want to see the pen the go anywhere I can gather some money for an investment and so he brought me to Adam and then we were looking at SBA funding and so introduced us to Joe for guidance and then Joe ended up becoming a partner as well um Adam is involved in the business day-to-day he's our chief marketing officer and Joe while he's involved he doesn't collect a salary he's basically an investor but and what was the equity split among the three of you um I I'm about 30 I'm roughly 35 37 somewhere in that ballpark um Adam is about 29 and then Joe's about 25 I think it is and the money that you brought to the deal was did you put in any money or you put in what you could towards the down payment okay yeah we we all put in what we could towards the down payment it the down payment had to be 400 grand um uh I actually put in the well Adam and I put in the same amount but we put in and then Joe put in a little bit more even though he has less of a ownership stake that's primarily because we were both planning out working on the business but it was mostly my sweat echod of putting this deal together and working sure to gather everything that and I was the one that was moving to Texas to do this and to run the business on a day-to-day so and I was goingon to ask that so you have you moved to Richardson Texas Adam CMO and your partner who's in La is still in La yes doing working remotely and um your family at this point you you had kids you have kids I do have kids but they're both adults they they're adults and both families of their own okay great so it was a matter of you and your now partner moving making a decision to go from Jacksonville to Richardson Texas and I wouldn't be able to have done this without the support of my wife I mean she has been amazing I don't know how many why would be okay with me coming to them and saying hey I've been talking to this guy about a pen company and uh I think I want to pull the trigger and buy it quit my corporate job uh have you quit your job sell our house and move to Dallas and so by the way what did convince her or it's just it can't have just been faith in you well a lot of it was faith in me um okay but she does have uh an associate and accounting so I knew that I had to have the numbers in a row um spelled out and I had 24mon projections you know all the things that are required due diligence um and as for the SBA I had all put together before I even approached her with it because it had to make sense I mean that's the biggest thing it had to make sense for us I knew that it was something that we weren't going to able to move here and you know I didn't collect the salary for 6 eight months but it's not something that we were able to move here and I would be able to take a year and a half to of not getting paid or money out of it to be able to live yeah yep and well speaking of spousal support that was a requirement of yours and your partners as well yes um one of the things that I think because my our partners I never met I didn't end up meeting them in person until August of 2021 6 months after we closed s months after close wow um so it was very very important to me that they had their spousal support that their spouses met me talked to me you know on Zoom know that my SP spouse supported you know and if I they had any questions you know and I'm all about open and honest Comm communication I mean you may not like what I have to say but you you know and you may not agree with me but I'm still going to tell you and you know if it's a disagreement we can talk about it you know no two people think alike and the actual terms of the deal so you guys uh you've shared what your split with your partners is what what you that you went in um you've shared what your split with your partners is that $400,000 was the down payment what more can you say about the deal what was the purchase price and in other terms if you would um the purchase price was pretty much one one times Revenue so we were right around 2.5 um we were able to put the down payment down um we were lucky that uh he was willing to do some owner financing and then we were able to get the S secure the SBA loan for the balance um the one interesting part of the SBA loan is we were able to collateralize Goodwill um over 30 years he's built a brand and that allowed us to take a very good chunk and move that around as Goodwill and be able to actually um depreciate that or amize that I guess is the better term for it um during you know over the last few years to help with taxes and that kind of stuff and that's unusual in SBA acquisition deals as you understand it um it's different it's a lot it's legal and it's you know obviously they allowed it um but it's something that we were looking at and I could I found a precedent for it um so that was what allowed me to look into it and go farther but to my knowledge it's not real common um just because you I don't know why honestly I mean if you have a solid brand that has a you know our pens have a cult-like following and we there's five or six Facebook groups dedicated in buying or selling our pens secondhand that you know we put out a post and it gets spread between those groups and so you know we have a solid brand you know and you know some of the largest companies in the world you know what you're buying is their name you know you pay a premium for Adidas Nike Puma you know right good year you know because of the name brand so that's all Goodwill right well I and I I should know this this is why I'm pressing on it but but I I think that that's probably the case for a lot of my guests who buy businesses where there's not a lot of capex so you know that's not where the purchase price is allocated it's allocated to to Goodwill I mean that what you're buying is is the name of the brand the ringing phone um the contracts and so I just what I'm I'm kind of thinking out loud here I'm wondering is your case so dissimilar from my average guest I should I should ask more about how this purchase how purchase prices are allocated to kind of better understand that you know that's just a matter of the way I looked at it is even if retro went out of business there would be demand for Retro Retro products even even if George if he would have closed the business there would still have been a demand that's why the larger customers bought eight months worth of product MH um so you know and that's why you know outside of the secondhand you know the pens that we do at unlimited release you know we sell for $ 6070 and some of them like our Halloween pen which um we did a Sleepy Hollow which which was like um the story and then a Frankenstein and then this year's will probably do the same thing they were sold out within 3 four hours and on eBay that night for four times what the purchase price really wow so you know and we did 1,031 of them for Halloween so you know that's what gives a company Goodwill yeah because even if you know even if the world exploded and we're we're out of business and that I could sell the inventory I could sell you know I could get rid of the product in online there would still be a drive for it well Jee I want to ask um one last just question on the negotiation and then we'll close out so a seller who has announced to the world that he's basically shutting down hasn't left himself a lot of negotiating leverage frankly because he's like you can come to him and say well I'll buy your business for half a million bucks it's half a million more than you'll otherwise get should be you know that's got to be appealing um so did you lean on that strategy or or or was his position such that like look I have as much money as I need I'm really not g to be I you know I'm I'm really I really don't need your money so I would actually in fact close it rather than sell it for a few hundred thousand dollars yes that's exactly where we were we were at he man he's really done well with this business to be willing to walk away from you know whatever lower price you might have otherwise offered it's not just this business he's at other businesses yes um so um his position was basically when they were going down the road that with the sale that Joe Joe was representing for the they did a business valuation they came back with a number and he was happy with that number with which was right around the 2.5 and he said this is the price take it or leave it so all the due diligence was justifying that price not trying to come up with a new price so and I it really it didn't matter he made it more than clear that you know he was in a position that this was non-negotiable so so his position was hey guys I've already had this business valued already done a lot of the diligence here it's worth two and a half million we can do this if you want to pay me two and a half million otherwise I'm closing this thing down and I'm walking away even if you offered me two million no I'll take zero over two million yep wow very interesting but it wasn't just about the money it was you know during this whole process process we had to prove to him how we were going to treat retro how we were going to treat his brand how we were going to continue honoring where it came from but yet progressing further so and that's one of the things that we've managed to do very well um and you know that has actually brought us a couple more opportunities that we're looking ATA with the potential Acquisitions yes of other pen businesses yep and other other businesses outside of the pen industry but oh and and so sorry final final question but related to the what are what are industries that are related to the pen industry like things that go on the desk you were saying earlier desk accessories um Collectibles our pens are very collectible you know we have we have some customers that literally have thousands of our pens oh um and so collectible items we were looking at a company that did a lot of sports memorabilia but tied it into products and we actually used to make a pen for them and that was just one of the things but they did cufflinks watches wallets um shot glass holders just all kinds of different stuff um all based around memorabilia and we were looking at that company um it ended up not working the way we wanted to so we didn't do it but you know that was an opportunity that was brought to us because of how we treated retro um the brand retro great Jeff well if people have questions for you uh want to learn more want to connect is there a way that you prefer they do that yeah my email is Jeff at retro5 1.com more than open just make sure you mention that you heard me on inquiry minds and um that way I have a context of where you're coming from you know because I get a lot of random emails about selling me stuff so those don't get much attention fair enough Jeff Felker congratulations on this really interesting business and you know reflecting back on 13 years ago now I guess 2011 somebody who went through bankruptcy and um pushed through and uh Clau himself back and now is uh bought another business and is is a business owner of what seems like a as I said a really fun business with a lot of growth ahead of it so congratulations on that whole trajectory and thanks for sharing all of the details with us oh thank you very much will I appreciate it and it's been enjoyable I like I like sharing my journey because it's head it's up and down but also you know if I can Inspire one person to be an entrepreneur to do something then that's great I have a niece that is a entrepreneur she um does like little 3D printed things does shows and stuff like that but you know anytime I can support her and you know talk to her about it you know she's very grateful and it makes me feel good because she's learning from me so well you and me both uh I share that that spirit thank you Jeff thank you will appreciate it I hope 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