Derek Turner, welcome to Acquiring Minds. Good morning. Great to be here. Derek, you have acquired two businesses. The first was a few years ago under the traditional search fund model. The second was much more recently and it was under the self-funded search model and that is the business that you own and operate today. Mhm. So, in this ongoing debate about traditional search funds versus the self-funded searchers, it'll be really fun to hear your perspective because here we have in you an entrepreneur who has seen both models from the inside. Um what we're going to do because we have two stories, we need to watch our time. We're going to we're going to hear both of those um maybe in slightly condensed form and because I want to make sure we have time at the end to also visit a few topics that um that you and I talked about on the pre-call, that you've tweeted about. Um so, that's kind of the lay of the land. Let's start off Derek with some background on you and please take us up to what it was that led you to want to buy a business. For sure. Well, thanks a lot for having me, Will. Um I grew up here in Arizona and that'll factor into a lot of my story. Uh my mom's a violinist and my dad is an entrepreneur, so I grew up seeing a lot of uh risk-taking on his part, uh doing a startup in the '90s in Phoenix uh was a much harder slog than most people experienced today, even in this environment. Um so, grew up kind of seeing risk-taking and growing up here in Arizona, uh but went to college in New York City and uh decided after I graduated to move to Detroit, Michigan, uh which was a city I never been to before, uh but I had heard about this very kind of vibrant entrepreneurial spirit that was happening there and ended up joining two different startups over a few years there, kind of early-stage startups. I was on the founding team of one of them and got to really get uh two key learnings. First, I would say I learned that I hated trying to to find product market fit. So, the slog of just starting at zero with a product that you were trying to make the world care about and then, you know, eventually finding it. That that journey I have an immense respect for entrepreneurs who do that. After doing it twice, I just I I know that I do not like doing the zero to one. But what I did love and the biggest learning from that time was that once we had product market fit and suddenly we were an operating business, creating value, uh dealing with all the challenges of growth, I loved that. I loved leading in that context. I loved uh learning in that context. And so, that kind of set me up that uh when I went to business school and I heard about search funds, it connected both of those dots. It bypassed the zero to one and the product market fit search, but it really amped up the operational side, the leadership side, uh and taking a business that already existed, was already healthy, but had a lot more potential. Uh and so, after I heard about the search fund, the specifically the traditional search fund model, um I was pretty much on board from the first time I heard about it. It sounded like it could be kind of a scam cuz it sounded too good to be true and so, I ended up talking to like 70 different searchers and search investors while I was at business school to really uh make sure it's what I wanted to do. And uh by the time I graduated, I had raised a a small traditional search fund, uh small because it was going to be focused only on Arizona, my home state. And so, I got some traditional search fund investors to back me on that. And in uh June of 2017, I started to search uh in Arizona, largely the metro Phoenix area cuz that's where uh you know, 80% of the population is. Um and uh started searching then. Great. Thank you for that. And when you say it seemed too good to be true, uh what was what was so too good to be true about the traditional search fund model? That they would pay you to just look for a business to buy or the economics or what? Yeah, so uh well, I was 27 when I started at business school and the idea of someone uh backing me to buy and run a business uh seemed a little bit of far-fetched. Um and the idea of just giving money up front for the search also seemed unusual. Now, my uh I had a relative here in Arizona that when I told him about a search fund, he's like, "Oh, that's um that's called a grubstake." And apparently back in the mining days when people go look for uh a uh you know, you know, gold out in the mountains, they would they would raise money to pay for grub, for their food and in exchange, the investor who gave them that money would have a stake in in whatever gold they might find out in in the wilderness. So, so the search fund model may not actually be that young. Great. And going further back, uh there is a celebrity politician involved in your past that I noticed you that went unmentioned. So, part of the the reason you ended up in Detroit was because you met whom? Yeah, so I had heard about Detroit and I was researching in my senior year of how to get to Detroit cuz I was just taken by this whole idea. And as I researched, you know, what's in Detroit, how to how to get connected to startups there, I ended up hearing about this thing called Venture for America, which was billing itself as Teach for America, but for startups. And they had just launched, they had just announced and I they ended up having a table at the Columbia career fair and I went down to to to the table and it was just one guy who was manning the table and it was Andrew Yang, who is now leading the fight, I think it's called the Forward Party and ran for president back in the for the 2020 election. So, yeah, that's that's my running with I was I was the first person my my my point of pride is that I was the first person to sign the dotted line and be a Venture for America fellow. The program has continued to grow and thrive even as Andrew's gone into politics. Um and it's it's a great it's a great mission to to create jobs in cities that otherwise wouldn't be attracting um uh you know, top talent. Yeah. Yeah. Well, um at the risk of sounding cynical, you know, that that's a card you can play when Andrew Yang becomes president, you can, you know, you you call him up and say, "Hey, remember when I was your first We'll see. signature." Yeah, maybe I can get a get a ambassadorial position at some obscure country. Yeah, right. Um and also, of course, Andrew Yang is associated with UBI, Universal Basic Income, which is is kind of back in the headlines now that AI is going to eat all our jobs. Is he still is he still big on UBI and talking about it everywhere? I I I think that's still a big part of his platform and it's been something he's talked about for a long time. I mean, he he's he's been worried about the negative impact of uh some of the technologies that that we've been developing over the past 10 years and and the human impact and I would say I share his concern about that. Yeah. Yeah. Thanks, Derek. Now, taking us back up to starting the traditional search fund, so um one of the um critiques of traditional search funds is that you traditionally are are that your investors will not want you to do a geo focus, a geographically focused search. Um but you you were in in in the Phoenix area in Arizona, I guess larger Arizona largely. So, how did you convince them to let you do that? What does that actually look like from somebody who did do a geo search? Yeah, so that was an uphill battle um and I got some advice from some folks who said, you know, don't talk about the geographic focus, just raise a search fund and then if it turns out, you know, everybody ends up kind of searching in the where they live anyway, so just kind of keep it under the radar and and do it that way. I wasn't comfortable with that. I wanted to be super up front that, you know, if if our if my investors saw uh my pipeline a year into the search and it was 99% in Arizona, I didn't want anybody to be surprised by that or or frustrated by it. Yeah. And ultimately, you know, I I think the geographic focus has a lot of value add and I think that there's actually a lot of investors who have come around um since 2017 to the value of a geographic focus um because, you know, the the the common the kind of perspective is you need as broad of a search as possible. Um you know, you want to have the funnel as big as possible at the top and you want to be focused enough that you have you have an industry that you're going after. Um I I think that you that that rationale can be kind of inverted to say that if you're looking geographically, you can be really focused and kind of have a really intense um concentration on a certain area and then you just need to be flexible on on what kind of industries you're looking at. Um a lot of search investors will use the geographic focus as a proxy for lack of commitment. So, they'll say, "Well, if you're not willing to move to the most obscure part of the United States, then you clearly aren't uh bought in enough and I'm not sure if you're really ready for this." And you know, I guess if if I said, "Yeah, I want to search in Arizona cuz I think it's just, you know, a comfortable place to live." Um that would be a tough sell, but there's a lot of value to geographic focus that actually I think increases your likelihood of success. I'm not going to say it's, you know, a you know, dramatic improvement, but when you're looking locally, you can treat um every lead as valuable. You're not doing massive campaigns where, you know, you're going to send an email to 50,000 people and all you need is one person to respond. When you're in, you know, metro Phoenix has probably 8,000 search acquirable sized businesses that are in the right industries. And so, each one of those leads uh is is precious and you need you need to treat it as precious. And so, you change your your tactics a little bit. I did a lot of directly cold calling these places and these owners. I did a little bit of email, but it was all very much um custom to them. And because you're local, I think that your response rate is a little bit better because you are much more of a real presence. You are not an you know, an abstraction that's in their inbox. You are a real person they might run into in the in the supermarket. And then the I think the actually the biggest element here is the velocity of your pipeline. Because if you're searching in New York and you find a target a target in in Colorado, what is it going to take to get you on a plane, to spend you know, 400 bucks for the flight and you know, 300 bucks for the hotel and all the other expenses? What is it going to take to get that expenditure to be acceptable to you? You're going to have to get a lot of information and a fair amount of confidence about that target before you can even get in person relationship building started. When you're geographic, my my approach every time was I would get an owner on the phone and within 30 seconds, my only goal was, can I just take you out to lunch? I'm not going to try to ask you what your EBITDA is over the phone. I'm not going to ask you for financials when you've never even seen my face. I'm just going to say I'm local. I like what I can see so far about your business. Can I just buy you lunch or can I just come visit you at your office? And then when you get there and you sit down with them, two things get there's kind of two options. One is you very quickly learn that this business is not worth your time. Because people tend to be a lot more up front and and tell you a lot more in person. So you're going to learn that this is not the business that you want and you're out 40 bucks for lunch and you've killed the deal and you can move on and that's a great thing. The second possibility is that you learn things that you wouldn't have learned over the phone and not only do you get information from that interaction, you have dramatically accelerated the relationship building, the trust that you have with that seller. And so then the velocity of that deal, I think it takes off a lot faster. Yeah. And so, you know, if you think of search as a sales role, the only bad outcome is silence. The second you know, the second place finish is a no and the first place finish is a yes and I think that a geographic focus allows you to have a higher concentration and a faster arrival at the yes or or the no, which are both very valuable outcomes. Yeah. Yeah. Well put, Derek. Have you thought about this before? I got a I get a lot of geographically interested searchers who who are interested and yeah, I'm a big fan especially cuz I I I'd be lying if there wasn't a little bit of a chip on my shoulder from a couple of investors who just off off the off the bat just geographic focus, no can do. Sorry, I don't even want to talk about it. And so I I I like seeing searchers overcome those kinds of hurdles. Great. Well, that was that was quite convincing and just one follow-up on that. When you you said your first and only real goal from that cold call if if they seem at all receptive to a conversation is just to get them to lunch. So you don't pre-screen the business I guess you probably pre-screen the business in the first place to even to even reach out to them, but you don't do any qualification on the call itself. No, so so you'd be surprised by how little qualification I did even to get that to the phone call level. Because the what I learned was, you know, research and this is true of a lot of the people who are maybe coming from consulting or some of these kind of more blue chip careers is that analysis feels like progress when it actually isn't. And so it can feel really good to be doing industry research and oh like I've got this list of 100 companies that I want to call, but you know, let me you know, it'd be respon the responsible thing to do is for me to spend 20 minutes researching each one before I pick up the phone. And what I found is that that just slows you down. What I would do is I would just you know, take out the restaurants, the retail, the construction, the real estate, the the easy stuff to take out. Yeah. I would look on their website for 2 minutes or so and then if it if there was nothing glaringly wrong, then I would start calling. And most of the time they don't pick up, so that's the first thing. And then when they do pick up, the searchers tend to think that when you get a business owner on the phone, they're they're going to start grilling you on their business. They're like, why are you calling me? What do you know about my business? Why do you think that you could run my business? At least in my experience, 95% of the time you get a business owner on the phone and they just want to tell you how great they are and how awesome their business is and they're not going to start grilling you. And so what I would do is I would do very little research, I would call and once I got them on the phone, I would get that that time together with them set up and then in that intervening you know, 5 to 10 days, then I would do a ton of research cuz then I've got somebody on the hook. I want to do as much as I can. I would go way deep and I'll get really rigorous. But it made no sense to get rigorous before you even know if they're going to pick up the phone, if their company is for sale, anything like that. And the script, so I I know that you're you you know, you were kind of this wasn't overly orchestrated. I mean your point is that you were kind of had a a very large bias to action here. But the script that if you actually got one of the owners on the phone, can you give us a sense of what it sounded like? It would it was basically the the generic searcher pitch. It was hey, I'm I'm a local. I'm I'm in Arizona and looking for a business to acquire. I really like X, Y and Z about your business and I don't know if you've ever thought about retiring, but I would love to have that conversation with you. You know, would you be open to that? It was you know, it was it was very generic. I would I would do enough of you know, that 2 minutes on the website. I would get enough to say you know, not not sound like an idiot, but at least it would just be you know, here here I am. I'm in Arizona. I'm looking for a great business to buy. I don't know if you've thought about retiring, but that's that's what I'm looking for. And so the retirement angle I think usually took away some of the intensity of like I'm here to buy your business instead of say retirement is you know, is something you might have thought about and I'm a solution for that desirable thing instead of it maybe becoming a little bit more direct from the start. Yeah. Yeah. And how many lunches like these did you go on? We searched for 10 months before we closed on the business and I'd say I'd take out 3 months cuz I was like very we ended up doing diligence on two businesses simultaneously. So the final 3 months were just not no hope of keeping the pipeline alive. So you know, let's call it 7 months of actual searching. And in that time, I probably sat down with about 100, I would say. Uh uh business owners. So it wasn't a huge amount. We we probably did uh we probably did a like 1,500 people 1,500 businesses were in our follow-up campaigns. Um Mhm. And I should mention we I say we because I had a partner for the search. So a good friend of mine who I knew from my speech and debate days in high school was getting his MBA at a different school at the same time and we ended up pairing up to to do the search. And he so he was from Arizona. We named the search fund after the high school that we went to together. So we both had that that approach. Mhm. Okay. 100 owners, 100 in person meetings. Great. Okay. Well, Derek again, we we need to just be aware of how long we spend on on on your story. Anything more to say about the search process before we dive into the business that you found? Nope. I think the only other thing would just be the amount of follow-up and that that kind of parleys into to the the acquisition. Because the company that we bought we closed in April 2018, but to give you the timeline to lead up to that, we started reaching out to that company at the end of August of the prior year. And I called and emailed them as kind of a a paired set of activities for I think 11 times over 3 months before I got a response. So I got my first response from them at the beginning of December and then by the beginning of February, we had the LOI signed and we closed at the end of April. So you know, I I tell searchers all the time that follow-up is is the forgotten part of search in in my mind and it's follow-up that is relentless. I think a lot of searchers who who especially who come from uh more elite backgrounds think that you know, the rudest thing in the world is to call somebody three times over a month if they haven't gotten back to you. Because that's you know, they they don't want to talk to you. But if you treat this like a sales role, you treat silence as the enemy. You assume silence means that they just haven't gotten around to responding to you and you never assume that silence means no. And so that leads you to follow-up relentlessly because you're just trying to get the yes or the no and you're not going to get too concerned about bothering somebody in the process. Mhm. Derek, do you have a sales background in any of the did you gloss over a sales role at some point cuz you certainly seem comfortable in in what many people consider a very uncomfortable process. Uh well, in one of the startups when when we were you know, just trying to find product market fit that at some point involved cold calling hundreds of businesses trying to get them interested in what we had to sell. So yeah, it was a sales job, operations job, HR job, you know, typical startup. Mhm. Mhm. Okay. And actually one other thing on your search. Any thoughts on on doing this proprietary outreach? So so a lot of my guests and and they've been pretty convincing to me are just like look, proprietary outreach is basically you know, the ROI on that's not worth it. That's the broker's job. Even if you can get somebody who you know, an owner who's willing to talk to you, you then have to explain to them like you know, what what a valuation is going to look like, what a process is going to look like. They're going to be skeptical skeptical the whole time because you know, they recognize that your incentive is to talk them down. I mean there's just so much education and expectation setting that goes into it. All these reasons not to do it not not to mention just all of the follow-up and kind of that sales process that you're just describing. Now, traditional search funds, there's an expectation that you will do that. You're looking for larger businesses likely they're they're not likely to show up on BizBuySell or necessarily in broker search. So your your investors kind of expect it. But anyway, given that you've done it, how do you respond to all of that? So I I think it comes down to self-funded or or traditional. If you're traditional, you need to get a larger business. If you're looking for a larger business and it gets banked or brokered, you're in a competitive process with people who will pay a higher price than you. That's that's That's not 100% of the time, but in general, my experience with this is that whenever I was searching for business over, you know, a million or a million and a half in EBITDA, if it was represented by a banker or a broker, there would be private equity involved, and they will pay a lot more than me every time. And so, in the traditional search, I I think proprietary is important. I think that I never saw a great deal from brokerage. Now, that might speak to the Arizona market, you know, and and how it might be underrepresented in terms of brokers, but that that was the case for traditional. For self-funded, if I'm looking for a 500,000 SDE or or a million or less in SDE, I I'd probably agree. And and I've been really surprised as I've gotten to know the self-funded community over the past, you know, year, that there is so much success with brokers. And I think that it's a function of there are more businesses and more brokers and less competition under the million and a half or a million. And yeah, so if if for a self-funded searcher, a proprietary is probably not worth the time unless you have a very specific niche, but if you're traditional, you know, brokers and bankers are are necessary, but not nearly sufficient as an outreach. Great. Okay, Derek, let's get into the business that you bought. So, tell us quickly the story of finding it. I assume it would follows the the outline that you just gave us. And then tell us about the acquisition process, please. Yeah, so the company that we bought was in the engineering services space. So, we offered a a service that helped city and county governments, specifically the public works director at those city or county governments, a way for them to assess the current condition of their streets and their sidewalks. And then more importantly, to build a five-year optimized financial plan for which streets to repair and when. So, the best analogy here is if you have a fleet of 100 vehicles, one way to spend your budget on fleet maintenance is to just buy a new engine for every vehicle that that needs a new engine, and you don't spend any money on oil changes cuz you're going to spend all your money on oil on engine replacements. That's extremely inefficient, as you can imagine, because pretty soon if you don't do any oil changes, you're going to have most of your fleet needing massively expensive repairs. So, the right way to spend the money is to actually proactively be doing oil oil changes and then selectively do larger repairs. The same is true for streets. If you only repair the streets that have the worst potholes and you ignore the better streets, you will end up with a snowball effect of a massive problem with your biggest asset as a city or county, needing too much repair that you could ever afford. And so, what we would do is we would take a look at your condition currently using these expensive laser vans that would scan every mile of your streets. And then we would have analysis done using all that data to say, "Okay, in year one, you do this treatment to that street, that treatment to that street street." And then you spread it out over five years so that the aggregate health of your street network at the end of those five years is optimized. So, very obscure. What we liked about it was that it's it's not recurring revenue, but this needs to have if, you know, cities and counties need to do something like this every three to five years. And so, it's, you know, a one-time project, but it's it's kind of needed every few years, so there's a nice recurring element to it. It seemed like it was a very repeatable process where it was send out the vans, collect the data, build a report, seems straightforward. It wasn't. Spoiler. And so, that's that's what we liked about it. We liked, you know, how few competitors there were, how kind of small of an industry it was, but how big of the opportunity seemed with cities and counties. So, that was the business, and it was owned by two people. They had owned it since 2004, and they were wanting to retire. And we kind of they were they wanted to talk to us after we reached out. And it it became, you know, there's there's there's a lot of stuff we can go into from there, but that that that was the kind of context leading into the acquisition. And you and they had just gotten one of your emails, responded to the email, you took them to lunch, and Yeah, yeah, exactly. And one of the owners was in in Phoenix, another one lived in Canada. So, the one in Phoenix was our kind of main contact, and so we that's who we got together with. And own You said they'd they'd owned it since 2004, so does that mean that they had acquired the business themselves and were not the founders? The So, the company had been founded in the '80s, and the two owners who we bought from, one of them had been an employee, and the other one had been a subcontractor. They had bought it as kind of a divestiture slash bankruptcy out of, you know, the company had been bought by a large conglomerate and had kind of gotten sideways, and there was some financial issues that were both based on the business and also some malfeasance. And they So, they bought it in that in that state as an employee and a subcontractor in 2004. Okay. Okay, great. Um And how how big is the business? Give us some numbers around it if you could. Financial numbers and and head count numbers. Yeah, ballpark of when we bought it, but around 5 million in in revenue. And the employees are about 28 employees when we bought it. Okay. And how profitable was it? Can you give us a sense of what It was a little north of one. A little north of one. Basically between one and one and a half. Okay. So, the margins seemed decent, you know, strong as well. So, we liked it. You know, just going back to the traditional versus self-funded, if this is a partnered search that, you know, call it a million dollars in SDE actually represents 500,000 dollars in SDE. Yeah, so it was on the smaller end. But, you know, we liked it enough, and because we had a smaller search fund, that was also a smaller amount that was going to get stepped up and put into the acquisition, too. Okay. Let's hear a little bit more about the laser vans. So, that's that's pretty neat. Um literally lasers mounted on vehicles that drive up and down city streets beaming a laser to collect data about the health of the sidewalks and streets. Yeah, that's that's that's a very sexy way of putting it. But but yeah, basically that's that's what it was. It was laser like laser vans that had a laser that pointed down and basically scanned like a like a like a Xerox scanned the streets. So, every crack and its pattern was being picked up in detail. And it was also really interesting that everybody when they hear about this business, they were like, "This is a data play. This is You could throw on sensors to the to the vans." And you know, everyone would go to autonomous vehicles. And for a number of reasons that wouldn't work out. But, you know, there was there was a way to dress this up to sound almost like a tech company, but it most certainly was not. And and Okay, so why why wasn't it? We're probably getting a little ahead here, but why why That cer- that certainly sounds wizzy to me. Yeah, so because we would only do the the data acquisition every couple of years, it was not helpful to autonomous vehicle companies cuz they need continuous updates to the data. And the data that we were collecting itself is very specific. It's only if you're really doing this kind of pavement management. It is not necessarily There aren't these sideline benefits that we could sell to insurance companies and, you know, what else. Okay. Okay. And the fact that it was So, is this is this mainstream technology that every city uses? It's it's a very it's industry standard, but it's a very unusual technology. So, we we built the laser vans in-house historically, and it's from a variety of suppliers, and it's, you know, a really one-of-a-kind use case of technology that is specifically for this purpose, but in the industry, it was not uncommon. Okay. And follow up to that question, if the business Okay, so 5 million dollars in revenue, you know, that's a that's a respectable size, but for a business founded in the '80s, despite the fact that it sounds like it had some ups and downs, it hadn't grown very large for a 30-year-old business or 40-year-old 30 35-year-old business. So, was that because why? The owners didn't want it to be bigger. And that that turned out to be true. The There was plenty of market demand. We were able to grow top line by I think 40% in the first 18 months or so. So, there were there was a lot of of opportunity to grow the business. They just had decided not to pursue it. And this was largely because the owners were engineers, basically. And they were treating this as, you know, they didn't want it to be larger than what they could really manage, but also really feel like they had a technical handle on all the all the information that was going through the business. So, that was that was our thinking. And in terms of, you know, the ability to grow or the availability of market demand, there there was actually a lot to to try to take advantage of. Mhm. And just one more question on the market opportunity. So, if my town doesn't have this technology or isn't outsourcing to contracting for a provider of this technology, what do cities and and towns do to evaluate and and, you know, record the health of all of their streets and sidewalks? They eyeball it. So, they'll they'll have employees just drive around and kind of give it a one to 10 score and then try to do do their best off of that. And do they do it systematically or do they They Presumably they they do. They would probably say they do, but it's it's, you know, a random city employee driving around and looking through their windshield versus a millimeter level laser, it's the the the difference in accuracy is really significant. Yeah. Okay, very interesting laser vans. Okay, well, Derek, we pay attention to time. So, I want you to kind of fast forward us through the next four years. It It Spoiler, as you said, it doesn't go great. It's It did It It was It was a very challenging acquisition that I learned a lot from, but it was not easy. So, we owned it for four years. We sold it this past May of 2022. And in those four years, there were a number of challenges. One was that the sellers were very, very difficult to deal with after after the close. Another element was that the fleet of laser vans that we had were borderline defunct when we really got into it. We had done technical diligence, but because of how unusual these vans were and the technology in them, there was nobody that could have looked at them and told us anything about the future of their life. Um And so, we ended up having to do a multi-million CapEx in in within 18 months that we hadn't planned on. So, we we had planned on doing CapEx to grow. We ended up having to do a ton of CapEx just to to stay afloat. Um And in that process, we also had to change all of our data work streams. And so, that we basically had to transform everything that the business did from a technical perspective while we also were growing 40% top line. Um And one of the challenges, you know, the market opportunity was there, but what everybody should always know about growth is that you need to service it. Growing looks great until you actually realize you have to deliver on that revenue. You have to maintain quality in that. And so, in this business especially, it was highly technical. So, not only was the CapEx really hard to deal with in terms of expense and in terms of implementation, all of the people involved were doing highly specialized things. So, to give you a sense of this, we had field crews that were operating the vans nationwide. They would be on the road 330 days a year. They would sleep in like they didn't usually have apartments or homes. They slept in hotels that we paid for. Very unusual type of person who needed to be able to do that kind of a job. You drive every day that the sun is shining, no matter what day it is, and you live on the road. You make a lot of money. You can save a lot, but it's highly It's very difficult to recruit people to do that job. Then, on the other end, to do the financial analysis, you need to have pavement engineers who no longer want to do pavement engineering. They want to do financial analysis, which you can imagine if you're getting a PhD in pavement engineering, the likelihood that you want to work in spreadsheets doing financial planning, that's a very unusual Venn diagram, too. And so, because of that, growth is extremely difficult to to try to to accomplish. And so, over the course of those four years, we had to do all of that kind of work. Right when we were getting on top of it, COVID hit. We were, you know, that was a brutal experience partially cuz we had a large customer who uh for a technicality couldn't pay us. So, we had to do some significant layoffs, and that that was not great. Um And so, it kind of eventually toward the end of the four years, it was pretty clear that this business was very difficult, very difficult to grow. Um and ended up getting approached by a supplier in our industry that actually manufactures the laser vans. And they wanted to get into the service and consulting side. And so, it just made a lot of sense to to to pair up, and they they acquired us at the, you know, middle of last year. Um because there was a president running the business by the time we sold, I ended up moving on to the next thing pretty soon after acquisition. But, we had this We have a president who I had recruited who had, by the time we sold, been kind of the GM of the business, kind of doing the day-to-day. He's a wonderful guy, very talented, and really took the reins well. Your decision to sell in the in the trajectory of your experience. So, the I remember from our pre-call, the first two years were chaotic because you get in there and you have this huge CapEx expense. The sellers are uncooperative. Um And And just for CapEx, give people a sense of the the a laser van costs how much? Around $800,000 per van. So, to replace our four Yeah, it's We had to replace our four-vans fleet, which, you know, was very significant expense. Three million bucks. Um and then the latter two years were marked by stagnation. Yeah. Um correct? So, so, I'm just curious like um if you had continued on in the business, do you think you could have brought the vision to reality? I know you were You got this offer. You were approached. All kinds of terrible things had happened. You were probably over it. But, did your original thesis hold true if all of these, you know, kind of unforeseen variables hadn't hadn't crashed it? It's a great question. Um You know, the underlying uh incentive for a traditional search fund is significant growth. You know, the average I think what the average IRR is, you know, 20 the high 20s or low 30s. And so, that implies that you're growing the business somehow, whether it's just by valuation or by actual, you know, financial performance by, you know, 25 to 30% a year. That's significant. Yeah. I think this company, if we hadn't had those those speed bumps and if we hadn't been trying to grow at a really aggressive pace, would have been set for a nice long trajectory of growth. And And that was the plan. We had a president running this business. We were going to be pursuing, we had the investors and I had adjusted our expectations of what growth was possible. And I think that, you know, if if we hadn't gotten acquired, we would have been able to just keep keep growing modestly and and been able to have a have a a long run at it. Mhm. Okay. Well, one of your uh Twitter threads, and I I should plug I mean, of course, we'll link to it in the notes, but um I You got on my radar, Derek, because you started tweeting, I don't know, four or six months ago, and there's a a handful of threads that you've done that have been really great. So, thank you. Recommended for people to follow you. One was about It was so well put. It was sucker versus good soldier. So, as you're in a situation like you were in with your business, and, you know, you want to be the good soldier, you know, it's it's as you said, like, it's not even It's It's well below your bare case. So, you know, the the worst case scenario that you modeled, we're well below that at this point. But, you want to, you know, you've got fiduciaries, you've got your employees, you've got, you know, your your sense of accomplishment. All these things you want to just soldier on. But, at some point in all challenging kind of um phases of life, it's like you ask yourself, but am I just being a sucker? I mean, am I Am I just Does anybody else care? Like, anyway, so, sucker versus good soldier. How did you How did you weigh those two competing um the impulses? So, the context of a traditional search is that it starts out with a very personal pitch. Right? Cuz you're raising a search fund on just you. You're not You're not saying, "Here is this asset. Would you like to invest in this asset?" You're saying, "Do you trust and believe in me? And are you willing to put dollars to that?" So, that's an element that I think maybe doesn't get fully appreciated is that this is not They talk about an asset like search funds as an asset class. Yes, it's an asset class, but at the beginning, the asset is a person, and it's you. And you're getting commitments from from your investors on just the the strength of who you are. Um And what that sets you up for is a sense of obligation to those people that, you know, even if you buy a great company and and you have this asset that you that that's great, um you can't ignore the fact that it all began with you. And you're running the business, and so, you're now entwined with that business. Um So, the challenge there is that you have this personal obligation that you should, I think, have, rightfully so, to these investors. Um At the same time, you also don't have uh any downside risk, and that's one of the benefits of the traditional search is that your downside risk is like career risk, which sounds scary if if you have a really like fancy resume. But, you know, you're not going to lose your home. You're not going to lose your money. And like, you know, I guess the worst thing you can do is get fired. Um That's really not much downside. And so, that that's a really like special part of the traditional search fund model. But, what it sets you up for is that when things aren't going great, and you know that you're not going to hit that IRR target, you're not going to be very far in the money from a carry perspective, you then find yourself and I I found I found myself in a position of knowing that I was not going to be getting a great outcome monetarily. Um And not being willing to leave because I felt like if I left, I was taking this big responsibility and is putting it on the plates of my investors and just saying, "Okay, sorry. I know you believed in me, but, you know, this is not great for my career. You I'm going to I'm just going to leave, and you guys can deal with this." Um I didn't feel like that I could I could do that. Or that I wanted to do that cuz honestly had backed me. And I will plug my investors and my board were the best part of this whole experience. They were fabulous. They were great mentors, great advisers, great coaches. Um And so, yeah, I ended up, you know, in the darkest days wondering, "Okay, am I a good soldier? Am I doing Am I living my obligation out in a in a positive way? Or, you know, am I a sucker and and and just kind of I'm throwing away years of my life knowing there's no upside, not enjoying it, and I'm doing it because I just don't want to inconvenience people. Um it's a it's a tough place to be. Um you know, at its worst, um there were days where I like my best case scenario that I kind of would daydream about is that I would walk into a board meeting and I would board would just fire me. Because then it wouldn't be my like then I wouldn't have quit. Um and I would be you know, be be able to to walk away knowing that I like I hadn't failed them. Or at least I hadn't chosen to fail them. Um so that was that was my mentality for a time, but thankfully, um by the end, my board was so supportive of me that I never really felt like I was being taken advantage of. I never felt like I was the sucker. But you know, if you had fast-forwarded, I I've I've heard of stories of CEOs that you know, really just internalize this and they they will stay on for 5 years knowing that there's no you know, 5 years beyond the point of realizing they're not going to have a great outcome. And that breeds incredible bitterness. And thankfully, one of my my board members had seen that personally, and his commitment to me was that I he did not want me to end up like that. And that he he was committed to making sure that if if there was no great outcome to to be seen that that we would either start finding another business or sell this one and you know, turned out that there was there's somebody who wanted to buy this one. The the buyer, so they approached you, you didn't approach them? Yeah, they they reached out to me. We had you know, we had known each other. We actually had they had been you know, we had bought their products. Yeah. But they they reached out and it made sense for their their strategy of wanting to to get into the service and consulting side. Um and you know, as as we reflected on it and and considered okay, do we want to keep running this ourselves and have the the president run it while I go you know, buy an additional company or something like that? Or or does it make more sense to sell now? And as we reflected on it, it just seemed like there would be a great opportunity for for everybody to to go forward with the sale. Yeah. Well, certainly it was a godsend for you. I mean, this was this was the outcome that that you know, the lifeline you needed to move on. Yeah, because this was a way for everyone to be made whole made whole in a way in the sense that the investors were able to have an outcome that they that they were they were happy about. I was able to to move on and the team was able to to have a shot at at being part of a really exciting change in the industry of having a supplier and a service provider combined. Mhm. Mhm. Very interesting, Derek. Okay, well, we're we're going to leave this story for the moment and circle back to it after we hear story number two, self-funded search. Let's go. All right. So I'll do the quick version. Um in 2017 in the first search, a friend of a friend of a friend of a friend introduced me to a company here in Phoenix that fabricates rolling shutters, which are like storm shutters or security shutters. You'll see them you know, in front of storefronts or covering windows for hurricanes. In Arizona, we use them for heat insulation. Um so I met them in 2017. They were too small at the time. Uh but uh towards the end of uh my time at the last company, I was looking for the next business cuz the the idea was we would just keep the company and I would look for the next business. I reached out to them. And it turned out they'd grown a lot in that time, this this rolling shutter company, and I started talking to them. And uh the owners were fantastic. The two the two guys who who um owned the business are wonderful guys, and I got to peek under the hood of the the financials again, and they had grown it to the to a meaningful amount of EBITDA, then you know, in between a million and two million. And uh what was even cooler is that the cash flow looked great. And as I looked at it, I realized, you know, this this is like ideal SBA acquisition. It's it's on the larger side of SBA. It's got good cash, a long history. We've been around since 1979. And you know, and the owners I have such a relationship with them that like we could we could get through the potential hurdles of the extra SBA paperwork. Uh so about a year ago in spring of last year, started I basically pitched them and gave them an offer. I had you know, my wife and I had worked through the personal guarantee and whether we were comfortable with it. Made them an offer and turned me down. Um and they just said it wasn't it wasn't time. Um then I said fine. A month later, we ended up selling the engineering services business. And then I was faced with what what do I do now? I had just you know, done this 4-year you know, difficult operation. What did I want to do? And uh I think you know, a lot of searchers end up going to investing or something kind of more divorced from operations after they sell. Anything but operations. And I love operations. I love the human scale. I love the the challenge and the sense of being on the battlefield that comes with operations. I don't want to be an investor. And so as I searched kind of what I wanted last summer, I you know, put the nail in the coffin of not wanting to be an investor and wanted to be an operator. And I was playing around with some ideas around search and doing like a serial search fund and all that kind of stuff. And then these these owners of the rolling shutter company came back to me and some you know, there had been some developments in their personal lives that that made them want to sell. And they gave me a counteroffer that was acceptable cuz the business had grown in the time since. And then we were off to the races. So October 1st, we signed an LOI and we closed on January 3rd of this year, so about 5 months ago. And I felt like I had to just you know, change change a lot about my my identity from a traditional search funder and that community that I felt so connected with to all of a sudden doing this SBA self-funded approach, you know, pitching that to my traditional investors, getting to know other self-funded folks, trying to figure out SBA while I was under LOI. There was a lot that I just had to learn really fast. And it's been a wonderful journey to to really be now a business owner instead of just a CEO. Um and we can jump into that, but that's just been it's been a wonderful journey thus far. I've loved the the sellers, the employees, the business, the you know, being the owner. It's been wonderful so far. Great. Well, we are going to hear more about it. But Derek, just one thing, when you were you had your general manager president installed at the LaserVans business, and I think the way you put it was so you and your investors investors agreed that you were going to start looking around. You did. You had reached back out to the the rolling shutter guys. But I don't understand. You're still working with your traditional search fund investors. You were going to go do a second acquisition according to the traditional search fund terms. Yeah, we basically had come to to say, well, why don't we just look for another business to either integrate with the engineering company or just have as a separate acquisition. And we were going to treat it like the you know, the the cash from the operating business that was basically funding my search would then be treated as search capital when I found something. So that we we hadn't gotten to a ton of detail. It was going to depend on what we found. Um but that was the direction we were taking was to say, this is a good business that we have. It has you know, but it's a lot it's a lot slower of a growing business. And so let's just keep it growing and have this great president running it. And then I would just find the next business. And so that's that was I was already kind of searching by the end of 2021. And and it would have been according to still search fund economics, traditional search fund economics. I can't remember how it was different, but it was it would it would have been very familiar to a traditional search fund economics. Well, circling back to your point, Derek, that that a traditional search fund is getting investors to invest in you, not an asset, not a business cuz you haven't found an asset or a business to buy. They're really betting on you. They the fact that they wanted to you know, basically double down on you after a rather rough go of it with the LaserVans business and they they were prepared to invest in you again, certainly suggests a vote of confidence. No? Yeah, well, I I think Is that is that is that the right interpretation? Did you feel that way? You know, throughout the 4 years with the the difficult business, my what I tried to commit myself to was that even if it wasn't going to be a great outcome, I wanted to do it very well. And that I would show the investors and myself that no matter how discouraged I was or how much it had differed from what I thought it could be, that I was going to still I guess be a good soldier. I could be a truly a good soldier. And so as a result, you know, even though the outcome was not fantastic for the investors, they had gotten to see up close how I handled a lot of really brutal challenges along the way. And so yeah, it was I was very humbled to see that what even when I was kind of going off the path and doing a self-funded deal and and uh raising money for that, there were search investors who I'd worked with who still believed in me. Mhm. Cool. Well, good good for you. And then so so perfect segue then. So you you then are doing basically a self-funded search. You have this deal in hand and you now go back to the same group of investors, but according now to self-funded search economics. So you say, come into this new deal and you know, here are the terms. It's you know, they're self-funded terms as opposed to traditional. And and so they not their favorite terms. Right. So I poked the beehive nest the first time with a geographic focus and then I poked the beehive nest the second time by trying to to do self-funded deal. Man, you must have a lot of personal capital in the bank with them. Seriously. You're drawing it down and they still like you. Well, there and and there there were a lot of differences of opinions. And and I guess for somebody who's thinking about this, there there tend to be two ways that these search investors would approach the the question of do I invest in a search fund a self-funded deal where the searcher owns a majority from the start. And one one school of thought, which was an immediate no to me, was that they just looked at those terms and they said, as a principle, I cannot get behind the searcher owning the majority. I just I don't I just don't think it's right. Doesn't matter what the IRR looks like. I don't I don't care what the investor the investments looks like or the asset. I just can't deal with the searcher owning the majority. The other interesting the other kind of school of thought was to look at it as an investment first. Okay, I don't I don't care what the cap table looks like. Tell me if I invest a dollar tell me your assumptions and tell me what that dollar will turn into. Yeah. And if that and then if I believe that you were going to be able to accomplish that, then yeah, I'm I'm I'm in for it. Um so that and so it was it was a mix of those from people who were traditional search fund investors um that they they they took different perspectives. Mhm. I don't I don't fault them at all cuz I I changed the script on them and they they have a they have a model that they love. So I don't blame anybody for saying you're out you're you're changing the model and I have a model that I have more than enough cash you know deal flow in. I'm going to stick to that. I I don't I don't begrudge them at all. Yeah. I mean and a lot of people just have kind of like a hard a bright red line and like for you know for for searchers it can be the PG. So a lot of people won't do self-funded search cuz they just will not do a PG just Yeah. It's very binary and so it sounds like these guys some some investors might be that with with majority ownership by the searcher. Yeah. Um All right Derek. So So you're only 5 months in. So this is going to be there's not a story with a conclusion yet. So give us an update on the how it is going. Um it's going great and you know there are so many interesting comparisons between the two two deals. One would be the sellers. So I I have really enjoyed working with the sellers for this deal. The last sellers were incredibly difficult to to deal with. Um and so you know whereas in the last one it was tumultuous from the start. The you know things things were fiery basically from the first couple days of of closing. Uh this time the sellers I I you know that I love them when they visit. You know 5 months in I I would love it if they dropped by more because they're so enjoyable to be around. They you know during the deal process they let me meet all the employees 2 months before close in the context of just going alongside the employees in the unloading an inventory container shipping container from Germany. Um and they just introduced me as the guy who's buying the business and I'm just working alongside them in the warehouse all day and it was just a radically different approach than the last deal where on the day of close we shocked all the employees with a hey we sold the business today. Here are the new owners. Here's a formal meeting and by the way we never have meetings like this. So everybody's just uncomfortable. Um this time it was very smooth. I got to work out of the business for 6 weeks before close. It's just been it's been it's been wonderful. So the business itself has been great. I'm still learning about it especially in in changing economic climates. This is you know I'm still learning what what the impact is. Um but the team has been great. The product is awesome. I've called every customer that we've installed for the last 5 months and they all love it. So it's been really encouraging to just end up with a simpler a much simpler business a simpler product and a team that that has just been doing this kind of on their own for for a while now. Mhm. And I don't have to pursue 30% growth every year which is even better. Yeah. Yeah. Although ironically I guess you might get it. Yeah, exactly. But I think after the experience I had in the last business if you were to offer me 50% growth this year, I'd probably say no you know I'll take 20. You know I I don't I don't want I don't want to risk things. I don't want I don't want it to be crazy. And I you know I think when I first searched there was a part of me that would judge business owners for having not grown their business more and for patelling. And now after the experiences I've had, I in no way judge a business owner for for not growing their business. Growth growth is horrible in many ways. So you know I I I think I have a more balanced approach where before I would have said growth is fabulous and just like yeehaw let's do this. And now you know growth is is terrifying and has a lot of upside but also a lot of downside. And so if you want to grow slowly, you know just make sure that your your cap structure is built for that because what what's tough is having a cap structure that demands growth and for you to not want to grow. It's better to have a cap structure that's okay with slow growth and then you can decide if you want to grow faster. Mhm. Mhm. Yet yet another mark in the pro column for self-funded search over traditional everyone. Um Let's hear about a little bit about the the going back to the first acquisition and the bad sellers. So bad sellers versus good sellers. Just curious why do you think that you didn't catch the bad seller the the fact that the sellers were bad guys maybe you don't want to call them bad guys but it was going to be this very problematic difficult people. difficult people. Why didn't why wasn't that uncovered in due diligence? So it was in the sense cuz we were spending hours with the the sellers during diligence like anybody would. Um and they were difficult to deal with but you know what we thought was that these were people who had never sold a business before which was true. And they were doing something very very unusual for them like very very uncomfortable and with very high stakes. Um and so we interpreted some of the abrasiveness and the difficulty with them to to just basically them being way outside their comfort zone which they were but it turned out that that their their behavior was not unusual for them. Um and part of it was that they they hid they hid their you know some of the stuff they're like an example the 50/50 owners they would be on calls together all the time for during diligence and we got the sense that there wasn't like a wonderful relationship there. But we learned after we closed that they hated each other so much that there had been a 2-year period where they hadn't spoken to each other even though they were 50/50 owners of the business running it together. Um and so it was something where yeah I wouldn't have said oh these guys are you know I get along great with them but there was a sense of like okay they're doing something uncomfortable they're a little bit abrasive but it's fine. But what happened was that they you know maybe we should have taken that more at face value said like you know if we don't if you don't enjoy talking to the sellers during diligence as it gets intense that that's that's worth something. You know there's always going to be intense moments but if you're if you're doing hours and hours with these people and you're like you know what I just don't like this. I don't like interacting with them. Um then don't expect that to get better. It might be worth it. I mean it might be that they they you know that you buy their business they get they finish up and then you know it's fine but the problem with with our situation was that they ended up being absolutely critical to the business in ways that that that would that we were not aware of. And so if they were extremely difficult to deal with and they were critical to the business. And so they ended up being this like really difficult position of you know we couldn't dismiss them. We needed them more than we ever expected and that was a recipe for misery. Yeah. And say Derek you're you're working on some future acquisition and you're having interactions with prospective sellers that feel the same. Uh your kind of your spidey sense is tingling. What what do you ask or what do you probe in the future now older and wiser to uncover if it's a a green light or a you know a deal killer? Well that's tough because like one of the big comforts that we had was that we looked at the employee retention data and the employee there were a lot of long-time employees. And so part of our rationale was you know that these owners can't be that bad because employees clearly love it live it and they love staying there. So why if if they were horrible there the employees would leave. Now it turned out that it was just that the they had weeded out the people who had were willing to accept that kind of environment and the people who were willing to accept it had stayed. And so it it it goes to the point of it's hard to assess these things cuz we we were we had our gut feel interacting with them and then we were looking at the spreadsheet and the spreadsheet said things are great. And so we thought okay well maybe the spreadsheet's right and our guts are wrong. Um I don't know what you would ask. I don't know what you would look for. I think it really is a gut thing and and this is useless advice but you know for a searcher you know maybe it's worth it. Maybe you were it's worth powering through a tough seller relationship. I don't I wouldn't advise somebody to just be like you know what if you don't if you don't love the seller just kill the deal from from the get-go. But just be aware that like it could be a problem and assume especially if you dislike the seller assume that they are far more critical to the business than you expect and that they're going to be around a lot longer than you expect. And then really calibrate for it. Yeah. Yeah. That's great. That's great. Okay. All right. Uh Coming back now to acquisition number two this the the business that you're in now. Let's hear just a little bit more on the business before we move on to some of these these themes that I want to hit before we wrap it up. The so rolling shutters the business you're you're a you are a a fabricator of these and an install and and service. Yes. So we fabricate and assemble them and then in the metro Phoenix area we install them but we also ship them nationally through wholesalers and dealers. Mhm. Okay. And again these are like metal shutters that you like pull down that cover the entire kind of panel of your window that needs to be covered. And give give people a visual just in case you know they've never lived in a geography that has these things. Yeah. So so maybe the the more common one that you might have seen is that in any kind of large city storefronts like bodegas and other kind of stores at the end of the day they pull down this metal you know shutter in front of their business and lock it up. That's that's kind of the more the the more commercial approach. Um but we actually do a lot of residential work which looks like metal shutters that are motorized. So they're operated by remote or by a switch. And it's a way for you to first of all get security, so they're made out of metal um, and they can prevent people from coming in. We just had a customer the other day tell us that we our product saved her life. She's an old widow living alone. Someone tried to get into her house and the shutter stopped them. And she would she never would have heard them because she took out her hearing aid at night and it would have been bad. So, it's a great security product. The second thing is it's insulation. So, in Arizona where it gets to 120 in the summer, you can close this and not only does it block the sun from coming in, it also is a physical insulated barrier to prevent the heat the ambient heat from coming into the room. Um, and then they're also total blackout and privacy. So, it's a way to just you know, all of us have probably had the experience of buying blackout curtains and being completely dissatisfied with the their ability to actually blackout the light. These are on the outside of the window and they seal, so there's no light coming in. Um, so it's great for uh, for kids' rooms. That's my pitch. Visit us at rollashield.com. Good. Good. I love it. Yeah, it's it's funny as we you and I talked about in the pre-call, uh, a lot of non-Americans have blackout, usually metal pull-down curtains, at least in apartment buildings around, you know, the world that I've seen. And they'll come to the States and they'll be like, "Can can we get all the light out of this room?" And like you can't. I don't know why Americans I don't you know, like it doesn't bother them to have absolute darkness and and black when they sleep. Other people seem to need that and it's an expectation. So, um, all right. And what is it like an average order value for something like this? It's Uh, average is a pretty pretty big. Yeah, so average total order is $5,000 or so. Um, but if you think about like a an average bedroom window, it's about 1,300 bucks. Which uh, might sound expensive unless you've ever quoted out like Roman shades or other kinds of like custom blinds, it's actually pretty similar. Um, so it's it's a kind of a higher-end product. A lot of our customers are retirees. So, they'll use this to lock down a winter home for multiple months. Uh, or just for additional security. Uh, and then on the commercial side, it's mainly security. But I think that there's, you know, part of my goal with this business is to make people aware of the product and all of its uses. Because uh, the people who buy our product like love it. They adore it. The company has grown a lot over the last 10 years with no marketing or sales because people buy more of them. They keep adding to, you know, other windows to their installation or they just tell their friends about it. And you know, word of mouth has been huge. So, I I think there's a lot of opportunity to try to make a bigger market here. Which is kind of unusual, I think, for a search fund business where this in some ways feels like a startup in that like there's a product that I need to like educate people about and then sell it to them. Um, but it's also like an established business that's that's cash flow positive. Well, and and to and to the kind of tension between those two those two features of this business, why if it kind of is demonstrating product market fit, why isn't it bigger? And and you know, why aren't there big giant established players that offer something like this that have been around for 50 years, sort of thing? I think it's because it doesn't look very good. And so part of my goal is to make the product look better. Um, it can look kind of industrial. Um, but uh, yeah, I don't I don't know why it's more why it isn't more popular. Now now listeners who are in Florida would recognize them as hurricane shutters and they're they're very common. Um, but I I think that as energy costs go up and there is a big value to the insulation element, um, that will make it more attractive as well. Okay. And you said it was founded in 1979. Yep. And so it the the original founders invented this technology or or came up with the product. They they brought it the the product, I mean this is is so popular in Europe that I wouldn't call them inventors, but they they started basically bringing the material over from Europe and and assembling it here. Mhm. Mhm. Great. And as you think about one other just question about the mechanics of the business. So, a non-recurring business, so basically what you might call kind of project work or construction work that does not a perfect fit, but I think listeners will understand. Non-recurring fundamentally. How do you get comfortable with that? Uh, just that the the history. I mean there's just so much history of the business staying steady over, you know, decades um, and growing without any advertising or marketing. So, my my mentality is, you know, there are going to be more retirees than a fewer in the future. Uh, energy costs I imagine are going to go up more in the future. Security concerns I unfortunately I think are are a long-term good trend. But more importantly, I just see this as, you know, the the product's not been marketed and therefore there's less awareness of it. And I think that and and from the highly enthusiastic experience of our customers, I know that once people are introduced to it, they will love it. And so, I see it as the growth and the kind of reliability of the business comes from a known a a product that I know is great and just trying to get it more well known. Mhm. And so as you think about the I know what you just said about super, you know, high growth that it might not be as appealing as it as as younger Derek would would have said. And that you're only 5 months into this business, but as you think about growth prospects and really kind of creating consumer awareness for something like this, does this it feels like something where you have I don't know if it's a franchise or a dealer model, but but you you just have other people, you know, licensing or relationships with other people in other markets around the country to really kind of hit scale and and do the the selling in the in the install work. Yeah. Is there what what have you thought about that and if so, what what is the model? Just kind of educate us on what that looks like. It might look like. A little bit about franchising that that could be interesting, but it seems so complicated that I just and I've heard a lot um, from I think it's Josh Matzner on um, on Twitter talking about the kind of the downsides to to franchising. Um, I I do think this is going to be if we really wanted to grow the business, it's going to be channel and kind of partner based. Whether that's, you know, lead certified consultants who are, you know, realizing that this is a fantastic, you know, energy saver for large buildings and having them, you know, talk to architects about it. Or having dealers who would otherwise be selling, you know, gates and overhead doors and other security products. Um, I I do think that that's going to be a big element um, of just raising raising awareness and and having partners who would give us a lot more of a national scale and the ability to service customers nationally. But I don't know. And it might be that we do it ourselves. And maybe we're opening, you know, offices in key geographies in the next few years to a to be able to capture the fabrication through install um, value chain. Okay, Derek. This is awesome, but I still So, let's now close out with a few questions about some of the the kind of themes of your experience thus far with these two businesses. So, uh, one of the things I wanted to hit going back again to your first business was based on a Twitter thread that you wrote about hiring a GM. And you ultimately did successfully recruit and install and train and install a GM who apparently got to the point where you were able to step out of the business and even contemplate looking for another business. You start your thread by being like, you know, this is this is kind of the fantasy, but it's so hard. Uh, talk talk us through that. Talk us through your experience and what your takeaways are. Yeah, I I think sometimes in this community people talk about I'll I'll just I'll just put in a GM. Um, and there's some good jokes on Twitter about like how like that is not that easy. Um, and I think that what it stems from is just people wanting to move so quickly that they just want they don't want to get bogged down in the operations. They'll just get a GM and so that they can focus on buying the next business. And in my experience, you know, let's just take the the engineering company. Um, the first thing that I'll I'll say as a caveat, I needed a very unusual person. I needed somebody to not just be a GM, but also in this case have a PhD in pavement engineering and doing pavement management and all that. So, I admittedly had a much longer recruitment time, which was basically 6 months from actively trying to find somebody to installing them. Um, so that it but and but it's not easy to do it a GM in general. You're looking for an unusual kind of person who's really effective leader, is willing to do whatever it takes and, you know, ideally knows your industry. So, that's the first barrier that you want to be aware of is just that it can take a long time to just find somebody. But I think the one that's more overlooked is the the transition time because um, you can't just hire a GM and then like have a month-long like, "Okay, great. Take the reins." Um, you first of all, I think need to know the business yourself to really be able to oversee a GM. And that was one of the things I experienced with the president of this engineering company. Because I had led the business for 3 years myself, I knew all the the the numbers to look for, all of the signals of things going well or poorly, all of the problems that could be around the corner. And so, I could give him a lot of autonomy, but I knew the key things that I needed to pay attention to and coach him on because I had lived through it the hard way. So, I'm I'm a big believer even in this business that I I'm hoping to eventually have a GM running it. I'm glad to be operating it even though I'm doing things that, you know, people would argue are below my pay grade, but it's allowing me to know this business inside and out. So, that if I hire a GM, I can I can account hold them accountable and and oversee them better. And if it doesn't work out, I'm not terrified of jumping and replacing them, having to like fill the gap if I need to replace them because I know this business. So, I think that's another element that you you don't want to optimize against operating the business when you're wanting a GM eventually because operating it gives you the ability to actually be a better leader for that GM and and keep that GM more accountable. Um, and then finally like transitioning can take a long time because the GM is unlikely to have all the skill sets you need. Like the guy that I I hired to be the president, he had never had like true P&L responsibility. Financials were not comfortable for him. And uh you can take that for granted sometimes when you're you're you're running a business that, you know, I'm not a super financial guy, but I I know a lot of financial things as a result of of the work that I've done. And so you might, you know, they might be ready to go on day one to do the operational leadership, but you need to be thinking about, you know, are they really like do you trust them to hire people? Do you trust them to read financial statements? Do you trust them to you know, uh deal with customers super well. So, just be aware that when you hire somebody, this is a super special hire, super super difficult one, and a high a big investment on your part. And so I I think that my main caution to people would be assume it'll take a while to get them, and more importantly, assume it's going to take a while where you are fully in there with them, like 6 months or so or more, to just really make sure that you've set them up for success and that you're not just placing them, leaving, and then realizing after the fact that you just put like a a toxic person in there, or an incompetent person in there, um and then you have to pick up, you know, an even bigger mess. Uh what about this model, which is one that's come up with a few recent guests? They and caveat, this needs a a large enough business to support this, which is buying a business and bringing an operator along with you to install on day one, and then you but you also are very active in the business, but in you're kind of working hand in hand with your Mhm. now hired GM and operator, but they are likely somebody with industry experience. So, at the So, at the very least, they're kind of keeping the trains running on time. Yeah. And you and you are, you know, from day one kind of doing, you know, searchery stuff, transitioning, professionalizing, uh you know, putting in the SAS and the tech or whatever it is. Um and and probably a lot of the financial stuff, cuz you probably want to have pretty tight reins on that, even if this GM is financially literate. Um How does a model like that strike you? That sounds great. That sounds like you you've you've found a shortcut to the recruiting challenge, and you're you're staying in there and operating alongside them. Um so, that sounds great. I mean, it sounds great. I don't know if it's actually doable. It's It sounds like the people I talk to who are like, you know, I'm going to build a holding company and we'll buy a business and install a CEO during due diligence and like I I guess private equity companies do that regularly, but they have a you know, a large amount of money to to spend. So, yeah, it sounds great. Um if you can do it, fantastic. Yeah. Okay. Um Okay. Uh let's talk about your board your having a board with a self-funded acquisition. So, you have thoughts on this, which we hit on pre-call, so please share them. Just a quick thing on that. You know, I had a board for my traditional search fund, which was the biggest I think one of the best parts of of the of the search fund operations. And then for the self-funded deal, I have outside equity, but I didn't need to have a board. I think it's pretty common not to have a board, and I hear a lot of self-funded search folks uh explicitly saying they chose the model to not have a board or a boss. And in my case, I opted to have a board. I have two of my investors who are a long-time operators. Both of them did a traditional search fund. Um one of them is now an investor, and one of them is still operating. And I I love having them as a board. They not only give me great mentorship and advice being, you know, well down the track from me on operations, but having a board is valuable kind of on its own. There are two schools of thought when it comes to interacting with the board. One is the board is annoying, and writing a making a board deck for a board meeting is a chore, and the board meeting is just obnoxious. Um the second option is that a board meeting is a chance to get yourself out of the weeds, to force you to think and speak more strategically. A board deck is a way to focus your energy on an overview of the business and condensing the biggest challenges to the business and prioritizing them. Um and then the board meeting becomes a highly valuable moment of reflection and problem-solving. And the thing is, you can have the same board and have those two different mindsets in yourself, and you end up wasting your time if you have the first mindset, and it becomes a goldmine in the with the second mindset. And so I'm trying to have that mindset with this board of, yes, because of the personal guarantee in the SBA loan, they you know, I I they can't fire me, um but I I just had my first board meeting a couple weeks ago, it was formal one, and having to put together the materials for that and prep for that meeting made me think about things that I was not thinking about, cuz I'm so in the weeds, I'm not thinking about, you know, my hopes for the next 2 years. I'm thinking about next quarter. So, I just I encourage people to to give it some consideration to have a board, not just an advisory board of people who didn't invest and are just going to give you some advice, like people who are really invested, who are going to to be there for you, and who will hold you to account. Um cuz it'll make you a better operator. Mhm. Well put again, Derek. Last question for you, sir. Let's hear now uh your thoughts on traditional versus self-funded. We've We've It's been a a theme underlying this whole conversation, but let's let's address it head-on. I'll give you some direction here. I thought it was really interesting the kind of qualitative distinction that you made a few minutes ago about now feeling like an owner. As a self-funded searcher, you feel like an owner of your business, whereas under the traditional search fund model, you felt like a CEO. I think it's really it really captures something. So, elaborate on that, please. Yeah, so you know, with a traditional search fund, you are representing other people's capital. And you like So, that's good in the sense that you don't have capital and that you're not going to lose your capital. At the same time, your only value equity value will come from returning the other people's capital with a return, and then you get the, you know, some extra after that. Um And as a result, you are rightfully think of yourself as a steward of other people's resources, and as somebody who's been hired to do a job. Um At the same time, the employees uh either recognize that that you are not actually the owner, or they just don't understand. Like what like what does it mean to be a CEO and have investors? Like it's just not usually that accessible and understandable to most employees. Um What I found now that I'm an owner, um I I recognize that everything that's going on around me is, you know, is to some significant amount my my capital, my responsibility, my, you know, wealth and legacy for my family. And from the employee perspective, an owner makes a lot of sense to them. They They They They know that model. They know what a business owner is. And as a result, I think that also helps bypass some sense of like I'm just like a like a overeducated suit that has been brought in on behalf of faceless investors, and instead it's just I'm here, here's my family. I'm I'm in charge and I'm the owner, and we're all in this together. Um and I think that that's helped build some trust that otherwise was maybe harder to get in in the other context. Um So, I I find that really really rewarding. Now, I I as much as I loved the spicy debate about, you know, self-funded versus traditional that you hosted, you know, a year or two ago, I'm not too doctrinaire on it. I think there's some really beautiful things about both, and I would recommend both, depending on on what things you are solving for. Uh but I will say that I I'm really enjoying the self-funded journey right now. Um I don't know if I would have done the self-funded journey to start off with. I think that a lot of what I'm enjoying right now, and a lot of the reason that I'm not super anxious about the personal guarantee and everything, is because I got to go through a first round where I didn't have downside. I got to experience a really hard acquisition, and I got all of those learnings that could have been like experienced as just frustrations got to be converted into high-impact learnings because of my board. Cuz I would be going through these really difficult challenges, but I would always be processing them with my board, and they would then speak into them with their advice and how to how to frame it and how to move forward. And so, you know, I In my case, I I am living the kind of yin and yang like the benefits I'm experiencing in the self-funded model are partially informed by the benefits I've already received from the traditional model. Yeah. Well, I heard you or maybe read you characterize a traditional search fund as a good on-ramp into buying a business, because you have the support, you have the kind of guardrails, um you your your financial downside is very limited. Um so, I thought that that was interesting, because it's just a a great way to put it, but also uh a little bit counterintuitive, because I think for some people, going back to the point about how self-funded searchers, some of them have the impulse to not want a board, cuz they don't want a boss, um because boss represents responsibility and stakes other than just the stakes of their own life. So, so in some ways, I think traditional search funds seem more intimidating and more daunting to people uh that you're going to go out and ask, you know, for money, 2 years of, you know, of salary from these really fancy kind of basically private equity investors, uh and then they're going to be breathing down your neck to get this really, you know, this high IRR return on like for for the next number of years. Like it doesn't feel safer. It feels higher stakes and more intimidating. So, I think they're kind of both true, but it's interesting to hear you you characterize it as kind of like a little bit of a lighter introduction to buying a business. Yeah, well, it's it's more accessible, um but you're you're right in the sense that like it it might be harder in the sense that you have to perform at a level that nobody's expect little nobody's holding you accountable to in a self-funded deal. So, I would argue that, you know, you want to have your standard set at a high bar earlier in your life, because you can always lower the bar, but it's harder when you've done things at whatever bar you would just set without much external input and then later on try to then like change what you think of as the standard. So, you know, I I think it's it's it's really helpful to start out with a bunch of investors who are just going to automatically have you perform at a high at a high level um because that's what I loved. I love I really liked feeling like I needed to be my very best. And that, you know, you know, I'm kind of a people pleaser and so it stressed me out a lot to try to like live up to what I imagined they wanted me to be like. And so there's a lot going on just for me. Um but the result was I did a harder thing and I performed at a higher level than if it was just me in my own head kind of, you know, it's the same reason that you work out harder when you're either with people or especially if you're with a coach or a physical therapist or, you know, whatever. Um you know, they're they're going to push you and uh if you, yes, it feels more comfortable to not be pushed, but you end up stronger because you get the push. Whenever you can put yourself in a group of peers or with you know, teachers or coaches that have a higher bar, you're going to end up better, but you're going to have to work harder. And so don't be afraid of that. And I don't And the search community is full of people who are not afraid of a challenge. I think that maybe it's their their sense of independence they really want to protect. Um but I think I'm going to ultimately have more independence in my life because of the excellence I had to learn by having accountability. Yeah. Great Great point to end on. Derek, uh I've already mentioned your Twitter. It'll be linked to. If people want to reach out to you, is that is that your preferred mode of communication or should they hit you up on LinkedIn or what? Uh try Yeah, Twitter's probably the best. I'm not the best at dealing with a lot of inbound, but hit me up on my DMs on Twitter. That's probably the best way to do it. Um and if I don't get to you right away, I will probably still get around to it at some point. So, forgive me. Cool. Derek, what a what a great and thoughtful conversation. Thank you so much for coming on and um Roll a Shield. Let's Let's see where you are in 2024. Looking forward to it. Thanks a lot, Will. And thanks for for putting this podcast together. I really love listening to it. Great. I appreciate that. 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. 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