Kevin Bibelhausen, hello again. Hey, Walker. Kevin, we were on stage together a few weeks ago at SMBash for a panel discussing raising money from investors as a business buyer, as a self-funded business buyer. Lots of good reviews of your your performance up there on stage, Kevin. So, I'm really looking forward to this conversation. We are going to revisit the topic of raising money from investors as a self-funded searcher, but place that in the larger context of your entire story. It is a great one, and you bought a great and interesting business. So, let's of course start at the beginning. Kevin, give us some background taking us right up to, you know, this decision to want to buy a business. Yeah, so I I graduated college with a degree in music and thought I was going to go and be, and I was for a little bit of a professional singer, professional opera singer. So, I I ended up going getting my master's degree in music and studying down in Texas and thought I was going to go get my doctorate and do that whole academic route, but um it wasn't it's as you as you may know and my my younger self was too obstinate just to see it, but it's hard to make a living doing that. Especially making a living, you know, the create the lifestyle that I wanted to lead. So, it didn't take long before I I changed plans and then moved into a corporate role where I spent, you know, about 10 years leading teams and I did all kinds of work through sales and project management and then I moved into technology and software. Um all that leads up to when I when I joined a Parkland Health now it's called in Dallas, Texas where I was I was in the senior leadership team for technology and strategy ops. And that I mean I I really enjoyed the work. I enjoyed the healthcare industry. I'd been in the industry my my whole career except for the music piece. My dad came from the healthcare industry. So it was just kind of part of my blood. Um and it's funny that like immediately when I joined the hospital, I also started like looking over the fence and looking at like oh maybe the grass is greener over there. I was looking at buying a business because I just read the HBR guide that came out in 2017. I was reading it in 2018. Um and I remember looking at the you know reading the reading the guide and thinking as soon as you come across the the story about the guy buying a port-a-potty business. Like this is the business I want to buy. This is the coolest thing cuz I always knew I had this like entrepreneurial streak. I I And and frankly that that's that's kind of what excited me about the music career is that you are the CEO of your own brand, your own career. It is you you're putting out there. And I really liked that aspect. I didn't quite understand it at the time but but looking back on it, that was that was a pretty big thing for me. Um and so I tried to buy this business in 2018 through a brokerage that everybody's heard of um and it didn't end up working. It was a it was a small deal cuz I didn't have any money. And it fell apart in financing because they they told me I needed X in equity and then you know through underwriting they're like actually we need 2X. I'm like well I don't have any more money. I get that's literally all the money I had. Uh and and I didn't know how to raise capital. I didn't know you could raise capital at that point. I didn't I didn't understand that there was fundraising and self self-funded. It's kind of an oxymoron. I didn't realize you could raise capital for this kind of a search. So you know I knocked on a couple doors, didn't go anywhere. Then I broke the deal and and kind of licked my wounds and went back to my my job. And unfortunately, or fortunately, it I guess depends on your perspective, I was in healthcare and in a health system during COVID. And you know, in addition to being, you know, on the in the um uh the disaster management side of that and opening up the uh uh the command center and and running, you know, helping run the command center for the for the whole hospital. Um I ended up getting COVID and it ended up giving me, I was one of the unfortunate few who got myocarditis because of it, which means my heart went from about this size to about this size. And um you know, it so caused heart failure. And I didn't know that until I went to the ED, uh same hospital I had worked at, and within the first 5 minutes of me being in the ED, uh the doctor looked at me and was like, "You're going to need a heart transplant." Um which is pretty jarring. I was 30 at the time. Pretty jarring, uh especially since I thought it was some sort of like stomach issue. Um it just it's it's difficult to describe how everything, you know, you feel, but I mean it was sort of like one of those things you're never thinking about a heart issue at 30. No history of heart issues in my family at all. Uh so, you know, then then began the the long journey of well, I was going to I was going to be in and out of the hospital for the majority of this is 2021. Um so, I spent a not insignificant period of that year in and out of the hospital. I had um what's called a PICC line, uh which is basically a central line that goes, you know, through through an artery to down to your heart, delivering a continuous infusion of uh what the cardiologist affectionately call the rocket fuel, uh which was keeping me alive and helping my, you know, helping my heart be supported throughout this whole process while they started to titrate me up on oral medications and fortunately and I think it's a combination of of luck, you know, just my body responded well to the medication and age. I mean, I was it was unfortunate that I contracted this at 30, but also I was 30 and so you're able to recover a hell of a lot quicker doing, you know, when you're younger than when you're older. So I haven't had a heart transplant. I was able to be taken off the list, but you know, it was a scary period going through I'm not sure if anybody, you know, listening familiar with what palliative care is, but it's basically where they come in and you talk into life and you talk about, you know, what you sign wills, you sign all this kind of stuff and you know, the it's never something that I had done before, obviously. Most of us haven't gone through that and it was it was a very sobering, as you might imagine, experience. But anyway, so getting through the palliative care portion, it was it was one of those sobering clarifying experiences where I was like, okay, if I get out of here and if I'm able to recover or even if I get the transplant and what what do I want to do after all of this is over? You know, what have I sort of what have I learned about myself and am I am I happy doing what I'm doing? Is this the life I want to be leading? And the answer I kept coming to was no, like I wasn't I wasn't happy with what I was doing. I I didn't I didn't feel fulfilled in what I was doing. I wanted to own more of my career I wanted to kind of call my own shots. I wanted to create value for myself and for my family and for employees and I wanted to be a small business owner still. You know, I I I never really lost that from 2018 I'm reading HBR guide and so this was sort of a moment like I I as soon as I came off the PICC line around Thanksgiving of that year. So I was it was in the beginning of the year when I went in the hospital and I ended up getting off the PICC line right like right before Thanksgiving of that year. Um I started looking for businesses and uh it one of the things that, you know, it's I don't really want to go back to my uh my corporate gig. I wanted to uh I wanted to make this happen for real. And that's when I found, you know, I bet this whole community had sprung up around buying small businesses that just that didn't exist in 2018. Um I was sort of left to my own devices in 2018, for better for worse. I mean, I learned a lot doing that. But, you know, SMB Twitter was not a thing. Um and now there's I mean, there's podcasts like this. And it wasn't back then. Um so, there's a whole ecosystem that had developed around this concept, and I felt right at home cuz, you know, it's like, "Oh, I This is what I wanted to do 5 years ago, and now I'm Now there's it's a little bit more mature. And uh I can actually get the help that, you know, somebody coming from, you know, no finance background, no PE, no investment banking, like I was just a corporate guy. Uh I I needed I needed the support and the help and the network to be able to do uh what I wanted to do. So, uh to repeat the dates here. So, this is late 2021 now when you emerge from your health crisis, and you decide you're going to buy business. Pretty much, yeah. And I started I really kicked off that search in earnest um January or February of '22. It was like late January, I think. Where uh and so, it was about that was about a year after my initial diagnosis, right? So, January uh February 2021 is when I went to the hospital, and then went through that whole thing. And then the following year was when I kicked off my search. Uh around the same around the same months. Yeah. Well, that's a pretty dramatic start to a search, Kevin. Very inspirational. And And look at you now. Here you sit, a little bit over a year later. Uh uh the owner of a a really neat business, which we're going to hear about. Yeah. Okay. So, you start looking. Give us the kind of the nature of your search, and also, you know, you had from your previous, quote unquote, failed attempt to buy a business, you didn't have enough capital, and you also didn't realize that raising capital from investors was a thing. This is something that you learn about the second time around. So, start taking us through that. Yeah, I So, when when we started the search, I was looking I I I made a decision early on that I was uh or I guess the decision was made for me just by my personality that I I had a time frame. I wanted to buy before the end of the year. Uh and I so I drew that line in the sand, and uh I ended up missing it by a couple weeks. So, we closed the 13th of January '23. So, missed it by 2 weeks, but Close Close enough, Kevin. Close enough. Close enough. And uh but that was the goal. So, knowing that that was the goal, and uh hearing a lot about proprietary search, I quickly decided that wasn't for me um just because the sales cycle is so much longer, and it's it's very relationship-based, and over a long period of time in order to actually develop those contacts, and I frankly just didn't have the time for it. Uh so, I stuck to brokerage search, and I did, you know, I did everything that, you know, everybody tells you to do. Just get on broker lists, start setting up calls. What I didn't do great was I was I was very broad in my search um as far as geography goes. And, you know, that was that was because I was with a certain capital provider who was who was um you know, encouraging national search, and and I would have moved anywhere if for the right business. But, given my, you know, given my uh preference, I was living in Texas at the time. So, Texas would have been nice uh to buy a business in, but I was also attending uh the Fuqua School of Business at Duke, uh and so, North Carolina made sense, or you know, somewhere in that Carolinas-Virginia region made sense. And um that's how, you know, I I ended up falling in love with with Heritage Fabrics, which is the business that uh that I bought and moved to just north of Charlotte in Concord um beginning of this year. And when you say working with a capital provider, let let's hear a little bit more about the Yeah. What is that mean? Was that your answer to having money to, you know, the investor capital that you needed to buy the business? Let like let's let's get into that some. Yeah, I was scared to raise capital because I didn't know what I was doing. So you you had decided you did need to raise capital. You're not so flush now a few years later that you knew Definitely not. Definitely not. I'm not going to need money. No, um you know, coming out of what amounts to public health IT um not a lot not a lot of money there. Uh and so I certainly was was not I didn't have a bankroll. Let's say that, you know, like a lot of the guys do coming out of, you know, uh uh sort of more I guess those you know, sexier jobs they come out of IB or they come out of consulting or something and they've got a little bit saved away. That wasn't really the case for me. So I needed to self-fund the the whole thing and and what may basically pay for make sure I could pay my mortgage. Um and so I I ended up leaving my corporate job and picking up a couple consulting assignments just to be able to pay my bills. Um and you know, I I was afraid to raise capital. I didn't know I at that point I knew you could and it seemed to make sense for me to say, "Okay, well, I'm going to try and buy a the a bigger business and if I'm going to try a bigger business, then I need to raise money and but I don't know how to raise money. I don't have I mean, I don't have a network of high net worth individuals in my Rolodex. Uh it's just not my background. Um so I didn't really know where to start and so there's there's starting to be some capital providers that the equity providers that that have come on the market. I partnered up with one of them thinking that, "Okay, now that can solve my raise issue. You know, they're going to help me with that. So I can focus on finding the deal and and doing all the underwriting all that kind of stuff. Um you know, that ended up that ended up not working out. I got a call you know, three days before my LOI for Heritage was signed and basically got the you know, hey, this is after signed contracts and everything. Um I got a call hey, good luck to you. We're just super busy. So you know, see you. Um so I was I was left with the decision at that point like one do I tell the broker? Um and I've he he may watch this and I've we've had this conversation where I was like you know, hey, I just so you know, we kind of pulled the rabbit out of the hat with this one because my capital provider dropped you know, three days before and I had to scramble and figure it out. So you did not tell the broker after that after the capital provider dropped. Yeah, I mean that wouldn't have scared them off. That would have sunk the deal for sure, but you know, I had enough faith in myself and at that point I well the reason I had faith in myself is because I made some phone calls afterwards and I talked to the guys you know, from SMASH. I talked to I talked to Sam Brzostowski. I talked to Kevin Henderson. I talked to Eric Pacifici. You know, I those were the first three phone calls I made after after the other phone call. I'm like guess what just happened. What do you think I should do and to a person they're like you know, you can do it on your own. You can raise it. You'll be fine. Here you know, we'll help you with a list of people to reach out to and so that's that's what they did and Sam published that list on Twitter. I've referenced you know, I've referred multiple people. I was just talking to a guy yesterday. I referred to that list. Like look, they're what they're what we call public domain investors like people who are people who are active in this space who want to be who want to be LPs in these deals and want to see deal flow. I mean they exist out there and there shouldn't be any guarding the door and getting if you're willing to grind and do the work, you know, you should be able to get in front of these people and and and raise you know, a pretty substantial amount of money. A couple of follow-up questions. Did you already know personally Sam or Kevin or Eric, the three people you reached out to? Yeah, so I actually the way I met them was through Twitter. Uh so Kevin was based in Dallas and so was I. So he was the first one I reached out to. Uh and I kind of I I I I don't even remember what the initial contact was like. It was basically like, "Hey, like your content, you know, what what I'm looking to kind of get back into this space and Kevin said, 'Uh hey, we're doing this SMB meetup in Dallas. You should come.' So I did. Uh and then from there, you know, we had a conversation. He's like, "You know, you really ought to meet my friend Sam. He's got this bootcamp in Tampa that he takes people through and kind of just, you know, takes them through the whole search process and you meet different, you know, deal team members and uh you'll get a network and all this kind of stuff." So I said, "Okay." Um and I took a look at it and I I put in my application and um you know, went to went to hang out with those guys uh in Tampa for about a week. And so you did the bootcamp? I did the bootcamp. Yeah, and and it was great. I mean, he he he he was he was right. I mean, there's two there's a great people that run that and um and the network is great. You know, I I still I still talk to some of the people, you know, from my bootcamp class. Um and in fact uh I think Sam just posted a couple weeks ago that five of it was like five of 20 or 25 five of 25 something like a pretty good chunk of us had purchased businesses within that year since the bootcamp. Mhm. Um which is pretty cool, you know, so now my my cohort, my peers have taken the next step. And so now we're all we're all circling around and saying, "Okay, so what about these CEO groups that we can put together and share, you know, kind of what we're going through." So that's sort of a next phase of the uh of the of the whole search process is now, "Okay, we we did it. Uh how do we get better at it? And how do we make sure we don't, you know, step on a bunch of rakes throughout the whole process? So, yeah, it's a lot of fun. By the way, the investor list, so that was something I linked to in when I republished our panel from SMB Nation, we'll be right to again here. That that really is a valuable resource and it's it's great. I mean, it it it's I just I love the internet. It's simply a Google Sheet. I mean, it's nothing fancy. It's just like a live Google Sheet that anybody can click on and get some basically have a Rolodex of investors at their fingertips. Yeah. Um Sam Rosati and Kevin and Eric of SMB Law Group, when they said, "No, Kevin, you can do this." Were they saying that because they liked your deal or they liked you or are they just encouraging people? I'm just I'm just curious. Like, they were so they were so sure that no, it's okay if you lost your capital, you can still make this happen. I wonder what they were evaluating to be so confident. Yeah, I mean, I think there's definitely a an aspect of of personality there, too. Like, hey, you're you're committed enough. You're you're grinding enough. Like, you're not you're putting in the work. Right? Like, you're not just passively looking. You're you're you're putting in the work and you're going to you're going to get a hit, essentially. The um But but of course, it comes from the deal. Uh you know, you have to have a good deal with good terms in order to in order for the deal to pencil out and be attractive to investors. Um and so, when they when we talked about the deal, it's like, you know, they said it was one of the things that was reemphasized at bootcamp, too, where you know, if you have a good deal, capital will come. Yeah. And that sounds that sounds sort of flip, but it is it is true. Yeah. If you have a good deal, it the capital will be there. It may take a little bit longer than you think. I mean, I was fortunate to be able to raise pretty quickly. I offered pretty aggressive terms purposefully in order to raise quickly, but um Aggressive against yourself like generous to the investor. Is that what you mean? Yes. Yes. Yes. Mhm. Great. Um and and so the the business that you found was from a broker in North Carolina. Was it like on BizBuySell? I know you didn't find it there, but was it? Do you know? I don't think it was on BizBuySell. Just knowing knowing the broker, I just he doesn't he wouldn't want to deal with all the low-quality leads coming from BizBuySell. It was a It was a high enough EBITDA business that I mean, it was on their website, of course, but not I don't think he would have blasted it out. Just not It's not the right vibe Well, especially knowing the company like I know it now and knowing the owners, they wouldn't have liked that. Um and so it needed to be a little bit more selective. So, I actually found another SMB Twitter connection. I found the business through Clint Fiore and so this broker was part of I think he leads a mastermind and and Clint is part of it or vice versa, one of the two. Um It's it's sort of like a best practices group, right? So, so he knew this broker uh and I found this deal through him and then so I connected with the broker in North Carolina and we had some conversations about the business and um you know, then we went through the typical IOI LOI process and then did it on-site meeting and everything. Mhm. Mhm. Great, Kevin. Well, we're we're going to hear all about that, but let since we're at this stage in the story, let's let's dive a little bit more into this process of raising capital. So, your equity that you thought you had pulls out 3 days after LOI signed, you talk to Sam and Kevin and Eric Pacifici, they say you can do this. Um anyway, the investor list. So, what how much money do you need to give us some numbers? Yeah. And then tell us how you like literally what it looked like when you opened up the spreadsheet and did what? Um I needed about 800 grand. 800,000 dollars. Yeah, and it was a sort of it sort of fluctuated based on, you know, how I was modeling it. And it's it's a little squishy until you kind of get to the end you're like, "Okay, this is the deal we're going forward with." But I That's about what I needed. Um and it's by no means the largest raise ever in self-funded. I mean, there's people who have raised more than I know about um for sure. Uh but it's a substantial chunk of change, especially considering that I'd never done it before. I didn't have a network of high net worth individuals. So, I was very reliant on I was very reliant on that list. And very reliant on network referrals uh to people who you know, sort of second connections of people that were on that list. Um you know, it's funny the the uh the giving nature of so many of these people. I remember specifically, you know, emailing So, I went through the whole list. I I emailed or called all of them. Even if they said they only invest in HVAC, I didn't care. I called them. Um How long is the list, Kevin? How many people is on this? I think, when I I I think that's about it. I'm sure it's growing. I mean, I I'm on the list now. So, I know it's growing. By one, at least. Yeah, yeah, at least by one. I'm sure there's more, but but uh but yeah, I I kind of went through the list and did email blasts and did, you know, I had a teaser and I had a SIM and I had I had it all automated. So, when they sign the NDA, they would where they get a teaser, then they sign the NDA, and then they'd automatically be sent the SIM, and then I would follow up with them um uh um in after a couple days in reviewing it and trying to schedule a call and have the conversation. But it So, it took me about 5 weeks to to raise the 800 grand, but and keep in mind like this was during This was literally before Thanksgiving to right before Christmas. So, I was raising money over the holidays. You know, I I remember sitting in my parents' basement in uh uh at the end of the year and during Christmas. My parents thought I was crazy. Um they they really didn't know what I was doing. Um to to them I mean, looked like I was doing a drug deal or something in the basement. But, I'm just like dialing for dollars, right? Trying to Trying to, you know, get investors on the phone and I had an investors drop out at the end. And so, I had to make You know, it was It's a wild process. Uh and it's in It's It's incredibly stressful. As if you don't have enough stress on your plate doing this whole deal, the capital raise process is is yet another uh thing for you to handle and just is If you have to raise as much money as me and you didn't have, you know, a network going in, I mean, you're you're collecting a lot of small checks. Yeah. Um And by small, you mean 50,000? Yeah, which is wild to say because that's a ton of money to me. Right. And it's just So, to to say that those are small checks is like is is still kind of blows my mind. But, in the grand scheme of things, they are. Right. And But, every time, you know, I would get So, like, "Okay, I'll take a flyer on you." And But, that flyer is $50,000. That's not an insignificant basically gamble on a on a new on a new uh new searcher, a new GP uh of a an industry that's that's a little wonky. Um you know, not the traditional tried and true. It's not a It's not a HVAC company or a plumbing company or something that's been beat to death in the search world. Right. So, I mean, I I I kind of love the fact that my entire cap table is filled out with these small investors because to me, it's like I I'm going to get I want to be able to reward them with, "Hey, thanks for trusting me. Here's what we're going to Here's where we're going. And here's here's what here's what the the end goal is. And we're going to grow and there's opportunity in this industry." And I love the fact that there's, you know, they're just regular people. You know, there there's there's of course there's attorneys and insurance guys and all this. But, I got I have a a JAG lawyer, you know, in the service. I've got, you know, just just regular people. And I love that, you You it's it's just people who are who are interested in who are interested in building equity through assets and and helping And and and so these these these quote regular people, Kevin, they're basically presumably they've heard about this list or maybe they're from Sam Rosati's network and so they're just professionals who have some liquid cash and want quote unquote exposure to this asset class. They just want to be in some SMB deals. Okay. So they're not professional they're not professional money allocators or capital allocators or or even private equity funds, although I'm sure there are some of those. There's got to be some of those and on that list, but No, well oh, on the on Sam's list. Yeah, there's some family offices and things like that on there. But but no, primarily primarily that list is is regular people. And there's there's people like me on there with with funds and and things like that, but but yeah, mostly it's just hey, I'm a I'm a successful big law attorney and my my time is is spent best doing what I do and not, you know, underwriting a bunch of deals necessarily or or trying to do this this search thing on my own. So, here's the check, put the money to work. I'll go I'll go, you know, do what I do best and you do that, you know. Mhm. Mhm. Um Kevin, you said it's just crazy and wild to raise money. Um is there anything any way you can elaborate that I on that? Is is it you just a lot of calls going back and forth cuz you're basically scrambling to to to to scare up every penny sort of thing or is there something other other other than that that's weird and wild about this process? I think it's I think it has to do with the time frame or the the deadline I gave myself. Mhm. And I I don't regret it. I think it was very important to kind of put that line in the sand if I want to buy before the end of the year. But in doing that, I didn't you know, when we talked to Costa during the panel, he mentioned, you know, there's a lot of socialization that goes on with the investors and really kind of building that credibility before before you go and ask for money. That's not what I did because I I I didn't I didn't have those investor like I didn't have that network and I and frankly I didn't have the time. Uh so I didn't start reaching out to investors until QOV was just about finished. So I had I had maybe 6 weeks or so to get the capital. Um was that the right thing to do? I don't know, but that's that's what happened. Um going forward and you know, I've I've got connections with with more people and you know, I can start laying the groundwork a lot earlier on and I'll have a track record, but initially you know, why would anybody talk to me unless I had the deal, you know, to the point where I I had spent money on it and and diligence and making sure the numbers will flush out. So I felt the responsibility to go in there and and make sure that the deal was buttoned up and ready for ready for prime time uh before I started asking for money because I frankly I would only get one crack at it, you know, if there if if they turn me down, it's you know, that's that's one that's another person to cross off the list and suddenly, you know, your percentages get lower and lower and lower. Uh you know, so if you screw up early on and you and I which I did uh for sure my my pitch got way better as time went on, but some of those early investors um they they may have been interested if I had a a more fully formed deal and knew what I was doing in the beginning. Uh but yeah, it's a learning it's a learning experience through the whole thing and and the the pressure uh of raising capital in a short period of time. I mean, that's why I mean, we can talk about this later too, but that's why that's why I joined Formation Capital as a GP because it's it's an incredibly stressful thing to do to raise money, especially your first time and you know, having a fund that that invests in these kind of deals, you know, that's that's more professional and more professional fund managers and and and investors uh who've got a network of people to be able to come in and write a much larger check. So, if if we're writing out a $500,000 check for my deal, well, suddenly I only need, you know, two to 300,000 friends and family, call it, right? Even though they they're friends now, but they weren't friends then. Yeah. Yeah. Um, Kevin, let let's just highlight the the point you just touched on a second. You mentioned how Kosta Dobrynin on the panel that the three of us were on said, um, you know, kind of cultivating a relationship with investors before you go to them and say, "Hey, investor, can I have 50,000, 200,000 dollars for my deal?" And there and and it's kind of like that and Kosta wasn't the only person to say that. It's That's kind of like the best practice you heard floating around SMB Ash a lot. And it's intuitive. It makes sense. Like, much easier to ask somebody for money if they know you. Um, of course. But but on the other hand, you I think it was you on the panel who made the point that like that that's all well and good. That sounds good, but it's also like a lot of investors are like, you know, they it's when you have a a live deal that they that they realize that their own time is going to be is going to be well spent um, by talking to you because they also are protective of their time and they don't necessarily want to talk to some searcher who's just starting and, you know, in a year might, you know, bring them a deal. Uh, because, you know, they just So, so there's kind of um, there there's kind of there's kind of a contradiction there. It's like, yeah, you want to cultivate, you know, they they want to know you as well as they can before you ask them for money, but at the same time they don't they probably just don't want to talk to some every random searcher who gets a notion to like buy a business. And they can't. Yeah, I mean, so so it's kind of like I don't have an answer, but it's just it's this tension is something to be aware of. Totally. I mean, just going back to the point earlier about where these people kind of come from. I mean, they're regular people, but they're busy people. They're busy professionals. They have to They have to operate at a pretty high level in order to have the capital to invest in these deals, right? So, cuz again, $50,000 is not a paltry sum. Yeah. Um so, they they have to be fairly successful professionally. Uh and they don't have time to talk to, you know, each individual searcher. Now, I I talked to a ton now, you know, as as as part of the um as part of the fund uh and and generally just because I like it. And I know I remember I remember what it was like uh where, you know, those those early conversations were so key and I appreciate the people so much who who really just out of the goodness of their hearts, uh you know, did things to help, did point me in the right direction. I'll never forget. Um And I've never I've never really even talked to Nick to Nick Hashka. Have you had him on this podcast? Oh, yeah. Yeah, a couple times. shout him out here because I will never forget and we should tag him because I will never forget emailing Nick and and seeing if he was interested in investing. But, his email came back and it's something to the something to the effect of, "Hey, we're working on another deal right now where we don't we're not we're not interested for whatever reason, but I will send this deal to my investor list." Mhm. Who does that? I mean, like that's that's incredibly kind. He didn't have to do that. But, but that's that's indicative of this community. I mean, there there you know, there's more people like that than than people that, you know, you you you don't like or people that are out to get you. I mean, there's I mean, so, again, never I Yeah. Yeah. Yeah. Well, and also, Kevin, I I I I feel I I just want to clarify what I what I just said. I also don't want to suggest that people who are just starting out yeah, that that investors just don't want to hear from them, aren't going to take them seriously. I mean, and I I certainly don't want to disparage people who are just starting out. I mean, everybody started out at some point. So, you want to build relationships with investors, but also investors can't talk to everybody that might want to talk to them. And so, you just got to thread that needle. So, that's all. That Yeah, and the best way to prove that you're you're bringing value to the table is to bring a deal. I mean, that's just that's the reality. Yeah. Yeah. Um great. Well, Kevin, more to talk about on raising money, believe it or not. Uh actually, quick aside, you mentioned tech that you use to to automate the sending out the NDA and when they signed, then they automatically get the SIM. What is there is there a a SAS tool for that or did you jerry-rig something with Zapier? I I jerry-rigged something with Zapier. So, again, my background's in technology. So, I I hate doing repetitive processes. And um I So, anytime someone I just actually this this was born out of my my relationship with brokers and my experience with brokers where I mean, I'm sure you've had people, you know, you've talked to people who it's like they just, you know, here is send this fill out this form and it's like six pages. Transworld's famous for doing that where they got, you know, a whole stack of stuff you have to fill out. Or just the the broken processes, super manual, very dinosaur, very paper. And um it just made me frustrated. And so, I was determined to have the opposite uh call it user experience or investor experience. And so, they were able to, you know, I would I had this email that I would send out and say, "Hey, here's the teaser attached. Um if you would if you want to know more, click on this link to fill out the NDA." It was all DocuSign. And as soon as they would fill out the NDA and sign, uh I had a zap in the background that would send them uh my my data room uh filled with, you know, a model, historical financials, tax returns, um the SIM, you just all all all the investment materials that you would expect. Um and then from there, you know, I would I would then follow up in a few days uh and um and see if I could close. Mhm. And what data room what were you using for data room? Just like Dropbox or or some data room specific? I use OneDrive. Okay. Okay. Great. So, there's some trigger in DocuSign that when somebody signs, then you use that trigger in Zapier to then send them another email with a link to your One Box, which is your data room, effectively. Very cool. Very cool. Um Kevin, you I saw a LinkedIn post of yours where you say where you talk about this uh fundraising process. You say, "I raised a good, you know, $800,000 from only 300 Twitter followers." And And so, what I want to highlight there in which was the I'm just highlighting what you were the point you were making is you know, it it's it's becoming trite to say get on Twitter, SMB Twitter's the best. Yeah, I say it all the time. Like, you know, so everyone knows that already. But, I But, you you were making a really good subtler point, which is that I even people who actually do, you know, take action on that on that call and get on Twitter, they probably feel like, "Well, no one's going to take me seriously until I get above 1,000, 10,000, you know, I have some respectable number of followers." Because, you know, we're all programmed by social media now and we all want big followers, right? Follower numbers. Um but, you only had 300. And And so, which is not a lot of Twitter followers. You can scare that up pretty quickly. And so, your point was like, you know, not only get on Twitter, but like, you don't need to be, you know, one of these Twitter superstars or even have, you know, a few thousand. 300 Twitter followers was enough for you. Expound on that, please. Yeah, because it was a place for me to to talk about what I was doing and and establish credibility or establish myself as somebody who was Look, I'm I'm I'm very honest. I I try and I try and come out on Twitter and say exactly what I'm thinking and feeling. Sometimes it's good, sometimes it's bad. I mean, I've I've had posts in the last couple weeks where it's, you know, you you have the Well, there's this operations post, but you have the extreme highs and the extreme lows um in business. And there's obviously the same thing in search. Uh and search is incredibly lonely. Uh running a business is lonely, but I I think search is lonelier. Uh if at least it was for me. And I think a lot of that was just the desperation to be able to finally do something. And so you're you're constantly driving and um you know, that being that being difficult. But yeah, I mean 300 followers you can I only have like 2,000 followers now. I mean it's still not a ton, but it's it's about it's about having an asset that you that you put your thoughts into that somebody can go and review. They can kind of see your your thought process. Like, oh this guy is he's talking with the right people. He's writing things that I that that that resonate with me. He's he's thoughtful. Uh and he's present. You know, just just the fact that, you know, being it's a little bit of a squeaky wheel type thing where, you know, if you're if you if you try and out if you're a wallflower, I I've talked to hundreds of searchers. Well, that's probably an exaggeration. I've talked to a lot of searchers. Sometimes it feels like hundreds. Uh who who uh who say, you know, I'm a I'm a lurker on Twitter. You know, I use And that's what I used to do for sure. Yeah. Yeah. Um but it was only after I really kicked off my search that I was like, I need I need community in order to do this. Uh because it's, you know, I'm I'm grinding away at my consulting jobs. I'm, you know, I'm frankly being a bad employee doing that. Um because most of my effort and my thought was going towards search. Fortunately, I was remote the whole time. So I'm sorry to my former employers, but that's that's the reality. Um and uh I mean just like you said. Yeah, look. You mean it is what it is. Um they know that. I got uh I I certainly got got the can on one of the uh consulting assignments because I was um I was otherwise occupied. And I deserved it. I definitely deserved it. Um but yeah, it look. I mean you just need to be able to yourself out there and and be public and I think that whole building in public thing is is maybe overused, but it it's true. Just to be able to put yourself out there and have that have that uh memorialized in social media so people can go back and kind of see the evolution. It's great. I I highly recommend it. Well, and actually, so Kevin, it maybe that I missed your point of that original LinkedIn post cuz it wasn't about the fact that you had few followers and your follower count is less important than just being there. You what you're what you're exhorting people to do is you you do need to not lurk. You need to put yourself out there. You need to write stuff so people can see and get to know you and as you as you put so well, kind of memorialize your thought process. So this isn't just getting on Twitter and then lurking around. This is getting on Twitter and putting stuff and actually putting your thoughts out there. Even if that doesn't that doesn't accumulate tons and tons of followers, that is beside the point. But having a document of your thoughts is valuable and does require you to put yourself out there and and really to only to truly get the value of Twitter, um you're going to need to do that. Yeah, I mean, followers are are are I guess you could say a symp- like a symptom or not not a symptom, but like an outcome, you know, of of the work you put in and and why you're there. If you're there just to gain followers, you know, you can go buy followers like some of the some people who are on Twitter. They go buy and follow go buy followers. Um you know, ask them how it does for engagement and all that kind of stuff. Who cares? It doesn't it doesn't do anything for you except for, you know, yeah, give give you a a bit of posturing and like, oh, I've got 10,000 followers. Okay, but they're all fake. Who cares? You know, if you have if you have a small amount and and your your intentions are I want to put myself out there. I want to meet cool people. I want to and and just and and DM people and and just treat it like treat it like a networking tool like it's supposed to be used. And, you know, don't don't be a jerk. Don't don't send out a bunch of like there's I mean, you I'm sure, receive all of these DMs on Twitter where they're all the hustle bros out there like, "Oh, do you want to get ripped in 6 weeks? Or do you want to do What whatever it is?" Who is that guy, by the way? I don't know, man. Like but but there's there's no shortage of people doing that stuff. Don't do that. Be a real human being when you reach out. You know, don't just try and blast stuff out there to try and set meetings with people. Like that's people can see right through that. You're not fooling anybody. But be be a real approachable human being and you're you'll you'll see the difference. You'll you'll convert a lot of uh a lot of calls and just frankly make new friends. And that's that's what this is all about. It's all about relationships. Great points, Kevin. Uh I want to ask just a couple more questions on on raising money from investors because I think this is just going to be so valuable for people. Um and then I want to just hear to kind of the math of this to the extent that we can we can do this off the cuff and comfortably. Um the the questions are uh or one one is just to let people know. So, ultimately, raising this $800,000 you actually didn't need to bring any of your own money into the deal. Now, as you and I have joked, like that we're not out here advocating buy businesses with no money down. Um but it happens to be, you know, it happened to happen in your case. So, anything anything to say there? Yeah, look. I mean, I I certainly didn't go into this process thinking that I was going to be able to, you know, not put a nickel into the business. And that's not It's not entirely true cuz like I did pay for QofE. I did pay for Right. You know, so I did pay for certain things, right? Important clarification, yeah. Yeah, yeah. But as far as equity that I that I put into the deal, like I I only own common stock. I don't I don't have any of the preferred shares that investors um that investors own. And I I could have bought preferred shares, you know, at the same terms and I I just didn't. I didn't have to. I had I had the fortunate uh position at the end of my race to be oversubscribed. Um even with people dropping out, which they did at the 11th hour, you should prepare for that if you're raising your own money. Um And even even with that, you know, I had enough people at the end where it's like I I ended up actually, what's funny is one of the guys that that I had to turn down is now my partner through Ocean Capital. Um so that's we stayed in contact and and that's how I ended up with those guys is, you know, he he emailed me about a fund that he was starting and to send him any deals, you know, that I was like, well, I'm I'm thinking about doing the same thing. And so now we're partners. Um so you just never know where some of this stuff is going to go. But yeah, it's, you know, I I was in the fortunate position to be oversubscribed and I didn't I had the money ready to go, but I did was able to leave it on the sidelines. Um I was okay giving up the extra equity in order to stay liquid on more liquid on my personal side. On your personal side, yeah, great. And other question, Kevin, what So your this initial group that you were working with who had you thought was going to provide the capital and then and then bowed out leaving you, you know, to scramble, what is the learning there? One of my guests has talked about basically kind of at the kind of talking to two different sets of investors at the same time with the idea that, you know, he might ultimately decline one side. I don't know what the the ethics, the the morals are here, what the best practices are, what investors expect. What what can people How can people prevent you know, the the struggle that you had when you lost your capital and had to scramble to put together a a group? It's interesting. There's actually a couple lessons, I think. You know, the first one is um First of all, it was a blessing in disguise because it it it it gave me the opportunity to to really get outside my comfort zone. I mean, the whole search process was outside my comfort zone. Bec- I I had done it before in in '18, but but nothing at this scale and certainly not at the size of company I was looking at. Uh so, that was uncomfortable, but I figured it out. And same thing with raising money. Uh it's a lot of it's a lot of stress and it's a lot of effort uh to do them simultaneously, both first time. Um but man, did I learn a lot. And and it really changed my perspective on a lot of things. And um I guess I would say that, you know, if if you're up for the challenge, if you if you really feel like you can grind through it, I I think it's a a worthy exercise to go through in raising your own money cuz you're going to you're going to meet a lot of friends. You're going to uh you know, who and that again can turn into partnerships down the road that you that you otherwise wouldn't have thought. Um so, so definitely that was a a blessing in disguise. I would also say trust your gut because if you who it's easy early on uh when you don't have a nickel in your in your um in your soft commitments to sort of uh pitch investors like or or to think about investors as like, "Oh, do you have a pulse? Are you breathing? Can you write a check?" Um that's great. You're welcome on the cap table. That's probably not the right way to think about it. Uh I certainly had that attitude early on because I I didn't know what I didn't know. Um but I I I would tell anybody that's looking to raise capital from an individual, from a firm, whatever, that if your conversation with that person is anything less than, "I want to go have a beer with this guy" or "I want to you know, this person would be fun to go to dinner with" it ain't worth your time. Because that you're you're I think Coast have said this on our on our panel like, "You're getting married to that person." You may have said it well. It's like, "You're getting married to that individual." Um I mean, there's there's a certainly you know you can exit later but but for all intents and purposes you guys are you guys are joined at the hip. And you you better make sure you like that person because they're going to be all up in your space if things go wrong and you know if if they're not supportive people you should you should be able to figure that out right away. So a lot of it is just intuition and and I didn't trust mine. I I was in that sort of desperation mode. Um so those are the two things I would say you know Trust your gut. And you know you never know what might turn into a a good experience or a blessing from from something bad that happens. Yeah. Sure. Well and what about Kevin having a single capital provider? So you know there are some searchers you know might work with a group as you were starting to do or might work with a family office and so they have one source of capital versus raising from you know smaller checks from a lot of different folks. That that you know the the a lot of checks from a bunch of different folks kind of diversifies the risk away of you know your your big capital provider pulling out. Any thoughts on that kind of I I don't know many people who've had just the one provider. Okay. I I know they exist but but I would say this like you're also How how how are you going to be in this business long term? Are you going to be are you going to is your plan to acquire more companies or is this a one-and-done? If it's one-and-done fine. Go use the one capital provider and and move on with your life and that's that's an excellent you know I I certainly could do that if I wanted to and and never step back in the into the world of SMB Twitter or any I would be miserable. I love this community but you could do it right and have a very nice life. I would also say this too like I like the fact that my cap table is large. It made it a huge pain in in closing the loan. Definitely. But guess what all those people are invested with me now and it's easy to have conversations with them about future deals. And so if you have if you have more than one capital provider. So if you had somebody that brings you a big check, again like that's First Round's model, right? They bring a $500,000 check, but you need 800. Uh that's I think actually a positive for you because you can go find two or three investors to make up that two to $300,000 that are going to be in your corner, that you know, you maybe you put on the board, maybe you use as advisors. Um I I recommend that because you're those if if it's all about long-term and you're thinking, you know, you're thinking about the future, building your network that way is a good idea and not just being reliant on one provider. Mhm. Great, Kevin. Let's do a little bit of numbers to help people understand. So let's say I had been one of your investors. Let's say I um gave you a $50,000 check. What uh what are what are the expectations around, you know, my piece of the business, my return, when I'm going to be paid back? What does all of that look like? Yeah, so I I put um I as as my conversations progressed with investors, I realized that uh the most important thing, and maybe this is obvious to everybody, but it certainly wasn't obvious to me at the time because I'm thinking more, "Investors want growth. Investors want growth." That's not really true. Investors want their money back. They want their money back as quickly as possible in order to de-risk the investment, right? So if you if you give me $50,000, the first question uh that you would probably ask is, "When do you When are you going to give me my money back?" Um and so when I modeled, I I I ended up switching my modeling to to be more of like a payout, you know, at the end, you know, with a recap or a sale or whatever, to okay, I'm going to try and do heavy distributions up front if possible. Um of course it's a model, right? Anything can happen, but I'm going to try and do heavier distributions up front and make sure that, you know, they get their they get their pref rate and everything, but they're also getting their capital back. That's only it's that's going to build credibility um you know, that I have their interests at heart. I want to de-risk for them. And then have everything be I call it blue sky upside, right? Once they get their money back and they've they've been paid their their preferred rate, everything that happens from there on out is is all upside for them. Um and that's that's a much more fun place to be because then it's then it really is about growth. Um so for the first couple years I'm I'm focusing on I mean I'm focusing on growth, of course, but I'm also thinking about how to do distributions, healthy distributions, in the first couple years in order to try and make my investors whole uh perhaps quicker than quicker than normal. And so let me let me trace this through and and you correct me if I get it wrong. I've given you a $50,000 check and you've negotiated with me let's call it a 10% pref rate. Mhm. So that means you owe me $50,000 and every year uh you're paying me 10% on that $50,000 and that's compounding. Um so what so so I'm getting a return on my money and you're going to pay me back, but I'm also getting equity. Let's put a pin in the equity Let's put a pin in the equity for a second. So let's say uh and so when you talk about distributions, people probably know this, but this is basically just the profit you're taking out of the company um to give to the investors rather than reinvesting that profit back into the company to to grow the company. Okay. So let's say So let's say you pay me Let's say just to make it super simple, you pay me pay it all back in 1 year. Um you would pay me my $50,000 back at the end of year one plus plus $5,000. Exactly. Took me a second. Exactly. Plus $5,000. Um and if it if it had been 3 years, you'd pay me, you know, the $50,000 over the course of 3 years, but whatever my balance was with you Exactly. was compounding at 10% on the balance remaining. Yeah, exactly. So and so that's the that's the kind of debt piece. I mean, the way the this is structured is a bit of a debt equity hybrid. So, that's the That's the debt piece. But, for my money, for my $50,000, I've also got a piece of the business. So, it's preferred equity. And so, what does that look like? Do I have proport like my $50,000 is proportional to whatever the valuation was? So, let's say the valuation was $5 million. Does that mean I have 1%? My $50,000 gets 1% of the $5 million business? Um I think not. There's a step up. Can you Can you explain how that works? Yeah, so it's proportional to the equity that's injected. So, I raised 10% of the deal. So, on, you know, for for round numbers, we can say, you know, it's an $8 million deal. It wasn't quite $8 million, but whatever. I needed to raise $800,000. Uh and that $800,000, there's there's a step up applied to that. Now, step up market step up somewhere between I would say two and three is pretty high, but you know, it's a one and a half to two and a half is kind of market for a step up. Um meaning so, you put in a dollar and you get that multiplier for the equity. So, $1 equals two. Uh so, you would you would get um you would get a uh percentage based off of off of that. So, it's a sweetener, basically. You know, your money goes further. Um as it So, $50,000 would really act like $100,000, no step up, right? You could put in less money and get more equity. Yeah. Exactly. Yeah. So, you're putting in $50,000 and in return, you're actually getting $100,000 of equity. So, the step up is to is meant to communicate that you're basically you as the investor are in the money from the very moment of your investment. I mean, it's a pretty It's a pretty sweet deal. Um and and and right, you made another great point that one confusion amongst beginners is they they think about the amount of investor capital as a percentage of the enterprise value. It's not. It's a percentage of the equity. So, there was $800,000 of equity into your deal. So, whatever $50,000 would be percentage of that $800,000 of that equity. Exactly. Well, um I'm I'm I'm revisiting this um more and more in the podcast just cuz I think the more people hear, you know, beginners to this whole model hear it, the more it'll kind of settle in cuz it it takes a minute to to learn how these things are structured. All right. We are actually going to move into the acquisition now, Kevin. So, tell us tell us all about tell us all about the business you bought, please. So, I purchased a company called Heritage Fabrics. Um and uh from the beginning of this podcast and, you know, knowing my story, uh I did not have any experience in the textile industry. Um and the joke that I would always tell um investors as I was raising it was like, "Well, you know, Warren Buffett bought a textile company. It worked out great for him." And then, you know, they were like, If you're savvy, well, if you're savvy and you you know anything about the history, right? It's like, "Wasn't Didn't you say that was his worst investment?" That's the That's the joke, right? So, no no, Warren Buffett bought a mill and that was when mills were declining and all that kind of stuff. So, we're not a mill. What we do is we we do the design here in North Carolina. Uh we have designers uh that that work for us and they work with the mills in collaborating on on design, color, um construction of the product, and then we do the weaving overseas uh in a number of a number of uh a number of different countries. And then we import the product back and then sell it to um uh companies that basically serve the interior designers. So, somebody's coming to redo your house, they would use one of our customers to provide the fabric to provide the drapes, provide the upholstery, all that kind of stuff for for your renovation or your um home refresh, right? And And similar things for for hospitality, right? We We do a decent hospitality business, too, where if you go any we we've had product at everywhere from the Four Seasons to to a you know, Courtyard Marriott to you know, any any of that kind of I mean, it's it's the gamut, right? So, we have customers that will go out and bid these contracts to do a hotel refresh, which is a as a increasing business right now as people come back from COVID and a lot of those refreshes, you know, they got to do every 5 to 7 years. A lot of those were were put on hold. Well, now now the dam is breaking and they're they're starting to do those refreshes now that people again and um frankly, if you've traveled anywhere in the last couple years, like you know, it's needed. Some of those hotels are a little worse for wear, which is good for us. Yeah. But yeah, so that's that's the business, right? We're we're we're a we're very much a middleman since we don't you know, we don't manufacture any product here. Um it's it's it's not cost the cost to manufacture here in the states is tough for textiles. Everything can be done much cheaper overseas. So, we keep we we're I think I think of us as more of a design house, you know, with it's it's we're product based and we're design house. I think is the best way to the best way to really describe us. And so, your your vendors would be the overseas mills Mhm. and and and who provide the actual raw material of the fabric and do the weaving and you'll work with them to come kind of come up with designs, which are then proprietary Heritage fabric designs. Yep, you got it. Heritage fabric designs, got it. And then on the other side for your customers, is your product um the way you sell your product is it kind of like a do you have like a book of fabrics that an interior designer flips through? How do they buy and find your product, your fabric? Right. So, our customers put the books together. So, customers So, we sell into a specific type of customer and their their whole model is it's changing, but they're the the historical model is is do those books. They're incredibly expensive to produce, um, but but for us, the way we show product is is is we have, you know, big old swatches that we go to and we visit customers. We just did a show in High Point, North Carolina, where we had everything hanging on the wall. Uh, it was beautiful. We I mean, the team did an amazing job and that was the first time they'd shown in 7 years. Uh, and we had a we had a really great reaction. But, um, but those customers, so, uh, that that would sell directly to interior designers will come shop our line uh, and basically fill out their books. Um, you know, they would have exclusive product that they put in their books, but they're not going to have exclusive product for everything because that's very expensive. Um, so they would come to us with what's called open line, where we would sell to uh, these these these companies are called jobbers. So, we would sell to a jobber in New York, but we'd also sell the one in California, the same product, all over the country because it's it's what we call open line. Mhm. Okay, great. Really interesting business, Kevin. And the I think you said revenue was around 7 million. Uh, revenue is closer to 10. Closer to 10. Okay. I don't know where I got the seven number. Revenue is close is is approaching 10 million dollars and what are margins and SDE look like if you can share that? Uh, margins, we stay around a 50% gross margin, 45 to 50% gross margin. Um, and you know, that's that's sort of a blend from, you know, furniture gets a gets a lower margin for us, uh, just based on that industry. Uh, cut yardage is obviously the highest margin since we're selling, you know, anything we would send out with smaller cuts. It's we're going to charge a little bit more for it and so all of that blends together and and you end up with that 45 to 50%. But we that's where about where we try to stay. SDE when I acquired the business was, um, uh, 1.7 for the last, uh, last couple years. Uh, well, that's a pretty sizable uh business for it especially pretty sizable FTE number. Any thoughts on why you were able to to buy this business as opposed to a strategic or a private equity group? Yeah, because the owner. Um, the this industry is filled more than I'm sure there are other industries like this, but this industry has so many multi-generational owners and families. They're I mean, from the mills I was just I had dinner with I had dinner with a customer yesterday. And we were talking about this like from the mills on down they're all family businesses. There aren't very There's There's been a few that have been acquired by private equity and frankly run into the ground. Um, but by and large if they're it's all family enterprise. So, the owner or previous owner was adamant about making taking care of the staff, making sure that they just didn't get absorbed as a division somewhere and you know, the staff would be an offer anything. He wanted to make sure that that the people were taken care of. He wanted he desperately wanted the the business to stay independent. And as I go around and travel and talk to customers, I I realize how big of a deal that was and how um how well he set me up uh that way because, you know, we we are a very important supplier to a lot of the largest uh jobbers, these these interior design focused companies in the country. Um, we we are primarily known for drapery and sheer products. Uh so, mostly window. Um, we're doing a little bit more upholstery, but that's certainly not, you know, what we're known for. But you know, as suppliers go in and out of business, uh the ones that like us have been consistent maintain stock. We don't We don't play games with um you know, keeping keeping low shelf quantities. I mean, our business is inventory. You know, we we have to have inventory in order to ship. Otherwise, they why wouldn't they just go overseas? Right? Um so, that's that's our business. And why did you like the business, Kevin? Aside from the fact that it had a nice big SDE. Well, certainly that was a screening criteria, but yeah, I mean, I I'll tell you. Um I mean, I certainly wasn't looking at the textile space. Uh I started as you might imagine looking at healthcare companies and looking at, you know, more technology companies, IT service companies. Um but I found the multiples uh from that were that were related from COVID. So, they were all having banner years and then wanted to trade uh on those years that weren't sustainable. So, that was that was a bit tough in the healthcare industry. IT services is a is a pretty big target for PE, so you're competing, you know, with a lot of uh a lot of larger acquirers. Textiles is a little sleepy. And um so, I was able to buy it for a reasonable multiple. Um and that was attractive to me. So, that So, it was they were willing to trade reasonably. Uh they weren't, you know, asking 10x or, you know, what something crazy like some of the IT services companies were. Um and honest to God, and this is something I've told I've told so many searchers, and I see I see a lot of the opposite. I see I see some, but I see a lot of the opposite on Twitter where I I bought this business because I trusted the owner. Um the owner, honest as the day is long, you know, look across the table, you look him in the eye, you know he's you know he's for real, and, you know, that's backed up by the fact that when we did QOV, everything flushed out uh pretty darn close. Um and so, I knew what I was buying. You know, they they do reviewed financials and audited or audited financials every single year. How often does that happen for a small company, Small privately held company? It doesn't. Yeah. So, I knew what I was buying. And for my first acquisition, that was really important. You know, I started I started thinking like I could be excited about anything, right? Even if I ran a plumbing company, I could be excited about that product. I I doesn't matter. Like I just wanted to get in the game. I kept telling people, I don't care what jersey I wear, I just want to play the game. Porta potties, man. Yeah. So, so I at that point I was industry agnostic and like it's a cool product. It's fun, it's pretty, it's you know, it's fashion. So, there's some excitement there, but look, I mean the financials were good. The people were honest. The team is long long long tenure. There's a There's a lot just the bones of the business are good. And they frankly, I mean they they were they were stagnant because, you know, there's um the previous ownership group had different goals. They had, you know, they were they were getting older and needed to to to take care of family, frankly. And it was just time. And so, you know, me coming in with with more energy and and youth, I think is good for this business, but also good for the industry. And I I can't tell you how many times I've heard that just being around and visiting customers, being in different shows, where they're excited to see somebody, you know, in their 30s come in from outside of the textile space. They're a little leery. You know, it's like why would you choose this business and where did your money come from? Like do you have family money? Decidedly not, but you know, they're they're curious about how I raised $800,000 on Twitter. Yeah. Yeah, I told some of them and they're just like uh they That must blow their minds, yeah. Yeah, completely foreign. Yeah. Really cool, Kevin. Um you mentioned maintaining stock and you know, that you're an inventory business. And And one of the cons of this business or one of the the weaknesses, if you will, which we've talked about pre-call, is how working capital intensive it is. Um so, elaborate on that and then and then tell us managing working capital is something that, you know, a lot of people come into buying a small business come into a small business operations and ownership and they're just kind of smacked up side the head with the realities of that. Uh I I suspect I I would experience that, too, because it's kind of like from the outside it's like what's what's, you know, what's so tricky about it and then to a person they all say it's tricky and it it's it's a it's a skill set. Um and so, as I understand it, it's particularly acute in your business. So, um educate us. Yeah, so it's that's absolutely true and something that I I mean, I certainly didn't understand the full picture and the bank didn't definitely definitely didn't understand the full picture, either, because I we were undercapitalized. Uh we got lucky. Um you know, we we have some good cash management and um you know, we were careful, but we were a business paycheck to paycheck, technically. You know, if you want to use a a more of a personal finance term. Um for the first few months and and we kind of still are. Um I'm waiting for my line of credit to come in because uh but in I I was promised a line of credit um before uh during in my term sheet, but uh that didn't end up materializing. So, I've been fighting with the bank and the SBA for the last 5 months trying to get that. Hopefully, we're going to tie that up next week, but um I'll let you know. But that's a huge piece. That's a huge deal for us. Like I keep telling my my VP of ops, like where are we going to go celebrate after this closes because once we have that line of credit, which is based based on our assets, we have a we have a really the inventory is very valuable and the AR is very valuable for us. So, we can borrow quite a bit of money uh against that stuff and which will only fuel growth. So, we'll have access to a lot more capital, which will be awesome for the business to actually breathe some new life into it and um I'm very much looking forward to that. But, yeah, the working capital side, um, when I came into the business, so we typically will release twice a year. They'll release a spring collection and a fall collection. In order to meet the deadline for the spring collection, we have to order product in January, which is right when I was coming into the business. And if we spend, you know, that that that collection costs $300,000. That's not what we have in the bank today. Uh, so money flows quickly out of the business when you're paying your vendors overseas, and then you're floating it for a very long time because you don't see a return on this new product that we just showed. We really don't see a return for a year. Because now what will happen is all of our So, we just got back from the show, right? Uh, in High Point. We got an unbelievable response. So, we're going to be starting to send out samples. So, what they do is they get the samples, and they'll get samples from all these different suppliers, and they'll go through and say like, "Okay, here's what we want to book. Here's what we want to order." And then they'll request sample allowance from us, which is typically given at a discount because making the books is very expensive for these customers. So, then we'll we'll have to decrement our inventory and take the hit up front, uh, or take a discount, um, in order to give them some material in order to make their books. Then you hope you get a placement. Uh, or or you get the placement, but then you hope then you hope it actually sells. You know, it's going to be in a book that they give to interior designers, and the interior designer's going to go through the book and figure out what they want to order. Mhm. So, it's it's a long sales cycle. So, you really don't see And those books will come out now in the fall, right? So, so it'll take another season for everything to sort of work its way out, and then we'll find out who, you know, which products did well, which products didn't do well. Yeah. So, it's it's a it's a it's a it's a gamble. You have to have a lot of trust in your team and in your designers in order to make sure that we need to make we need to make beautiful product that's going to stand out, be differentiated against our competitors because it's we're we're taking bets here, you know? We're we're making bets on this product and not all of them are going to be winners. I mean, that's just the nature of the That's the nature of this business. We're going to have dead inventory or inventory we need to liquidate through other channels. Um so, yeah, that's it's it's a it's a challenge. It's a fun business, but that part's a challenge. And it being a challenge, is that because there's a learning curve and you, Kevin, are figuring it out and once you do, it'll kind of this question of working capital will stabilize or is it a constant challenge? I mean, sure, sure, it'll stabilize, but but just cash management in general and the fact that you're making very long-term bets on this company. I mean, you're again, you're not It's not like you're It's not a service business where I'm collecting credit card immediately after service, right? You go in, you repair the pipes, you know, swipe the card, revenue gets in my bank account, we're all good. That's not the way this happens, right? Where our payment terms are long, payment terms are, you know, 60 to 90 days, um both supply and buy side. Um and, you know, we're not going to see a lot of sales and repeat orders on this stuff until 2024. Yeah. Um so, it's that part won't go away. That's just the nature of this business. Right. But certainly some of the kinks will be worked out and we'll get better at at managing the cash together and and a line of credit will certainly help as, you know, I look forward to closing that in the next week, let's say. Great. Well, yeah, let me know. Just a couple more questions, Kevin. I just want to um call out something that you told me on the pre-call, going back to the trust with the seller. Mhm. You actually stayed at his condo when you were visiting the business. I assume this was post-close. Uh there probably wasn't so much trust that you were staying in his place pre-close. But uh but that's that's nice. Tell that little story. Yeah, it's actually actually goes a step beyond that. So, the the apartment So, the owner lived in uh in Winston-Salem, which is about an hour from here. So, he would drive in um but his wife uh his wife put put her foot down and said, uh "You're not driving back at night." Because he would he's a night owl and he will stay at the office until late. He'll he would he would be here in very late in the in the evening and then uh try and drive back and she said, "You're not doing that anymore." So, the the the solution was he rented an apartment 5 minutes from the office and would essentially do like the consultant's schedule. He'd come in, you know, on a Monday and then he'd leave on a Thursday or whatever uh and stay in this apartment. When I was talking to him uh you know, obviously I moved my family here from Dallas, Texas and we're trying to figure out the living situation and uh he's like, "Well, you can just I mean, you'll have the corporate apartment, you know, just you can have that. You can have all the stuff in it. You can have uh because I'm not going to need it anymore. And so, the business was paying for the apartment and so, when he we I gave him about a month, you know, I stayed in an Airbnb for the first 4 weeks or so, but um you know, once he had all it's a one-bedroom apartment, so there's no way I was going to end up staying with with him, but you know, we we exchanged the keys at that point and was like, you know, he took me around and he showed me all the modifications he made to this apartment. He'd been there for 10 years, 9 years, something like that. So, it it was like a sec- it truly was a second home to him. Yeah. Um and it had been, you know, furnished with uh I mean, he's from the furniture industry, so uh lots of nice furniture, uh quality stuff and look, I mean, I I it worked out for me that we had an pretty immediate place to stay while we you know, sell our house in Texas and figure things out here um for long-term plans. But yeah, it's uh it the living situation was kind of funny, you know, in in talking about like, "Well, maybe I'll maybe I'll buy a house immediately. Maybe I'll uh I I had an idea at one point that I was going to buy an RV and live out of the RV in the back of the warehouse. Um I love the scrappiness of that. I mean, just trying to figure it out, right? And he's like, "Well, you can just have this apartment." Okay, that'll work. So, it worked out great. Well, I assume that had been an ad back that apartment. So, you you know, you probably which No, it wasn't. Really? No. No, that mean there's there's a lot of things I mean they they were very They were very fair. Kevin, I haven't even asked you about what I think is one of your favorite topics because I see you talking about it on social media, people. Uh the people aspect of uh of of buying and owning a small business. Um Just as a as a hook into this, one of the things that you you've said recently is like, you know, private equity type financially minded uh people need to recognize that the realities of being a an SMB owner are much more about people. That is a theme that comes up time and again on this podcast. What do you have to say on the topic? Yeah, without people you don't have a business. I mean, you I I it's incredibly important to me that the team is bought in, that we have good people around us. Um and to to a person, I mean, we have we have great people. Um and I want to do everything I can in order to support them and help them flourish, you know, professionally, economically. Um and you know, it doing so is a privilege. And that's a differentiator we have in small business versus being in in a large corporate. You know, it's funny that when I was talking to um I was talking to my VP about, you know, how to how to do reward how to do bonuses, how to do all this kind of stuff for employees that that have gone above and beyond for the show. And uh he he gives me a suggestion like, "I didn't realize I could do that." And he kind of looks at me and he's like, "You can do anything you want." You know, which is which is very it's it's freeing in a way, but it's also like, "Oh, I kind of can do what I want here. And I don't have to go and ask permission from my boss's boss to give somebody a raise or to, you know, help them out with, you know, some some random thing or to, you know, give them a day off or to let them work from home or to let them, you know, whatever it is, you know, there's no there's no red tape they have to go through. Um and I think if you're not if you're not using that to your advantage in small business, you're leaving a ton on the table. If you're ruling I mean, if you're ruling is not that's that's not quite a Freudian slip, but like if you are ruling with an iron fist and you're you're a tyrant and you're, you know, that's that's the model that you're going you're I think you're going to be in for a rough time and that's that's what a lot of I mean with a lot of these people, I mean, they've not the previous owner, but the but the founder came through and when ruled with an iron fist. He built a successful company, but, you know, they they sort of lived in fear um uh of of of him. And, you know, I could not be more opposite from that. So, there you know, there's a lot of adjusting that they have to do and um a lot less of, you know, like guarding things for job security and I have to basically tell them it's like, "Look guys, if I'm bringing in a improvements or I'm bringing in new technology, it's not to it's not to replace you. I'm not trying to replace you with technology. I'm trying to remove some of the medial tasks and let you work at a higher level uh and do things that are, you know, a little bit more challenging and things that are, you know, that you're capable of doing, but for right now you're you're basically stuck pushing paper because that's the setup that we have and I, you know, you've been doing it for 20 years, I get it. But, um but you have enough industry experience, I mean, they 20 years industry experience, like they know what they're doing and they could be so much more valuable if we eliminate some of that, you know, paper pushing medial stuff and give them the ability to actually kind of grow into grow into higher-level responsibilities and take more ownership over certain areas. So, I think if you're not providing those growth opportunities and you're not providing the the flexibility that you can offer as a small business owner, I think you're missing the boat. Great. Well put. Kevin, you to last question, uh you've mentioned Fruition Capital a couple times. Tell people about it and tell people who might have a deal how they should how or if they should reach out. Yeah. So, uh Fruition Capital is a we're raising our inaugural fund right now for um for first 5 million. Um it's going incredibly well. Uh we've got, you know, a lot of positive responses on both the searcher side and the investor side. Um it's a bit different of a model than some of the other ones that are out there, but but we're all I mean, I I know a lot of the capital providers out there and they're I mean, there's a lot of good people in this space. But, uh we want we want to come in there and be a fund that uh is known for, you know, having great investor relations, finding awesome deals, uh unique deals, and good sponsors, and then just being great operating partners uh along the way. You know, we we want the long-term we we we're aligned in the long-term success of our of the sponsors that we that we end up backing, and we want to eliminate the stress uh from from uh from your deal. Yeah. And but in the raise process because look, I I know how it is, and it's stressful. And if I can if I can even give you, you know, if you can have half the stress that I did doing this raise in a short period of time, I think that's a success. Um you know, having having more options available to you is certainly uh a positive thing uh as a searcher. And as an investor, what we provide is we provide diversity. Uh you know, we provide, you know, access to a number of deals uh in a fund versus one one deal at a time. Um and frankly for all those busy professionals that I mentioned, you know, like that are on my cap table and that are on, you know, a number of cap tables, investing in a fund might be the way to go because you're able to basically outsource the diligence and the deal process and you can just you could be the bank, right? And you're able to again work at your highest and best function, if you're a big law attorney, insurance, whatever it is, um you can work at your highest and best level and let, you know, let your money go to work in these funds finding awesome entrepreneurs who are willing to and to I mean the thing I kept saying was I'm willing to crawl over glass to make this deal happen. And I think I even posted that on Twitter and during one of the periods where I'm just like, I will get this deal done. Um that's that's not necessarily a rare sentiment of these among these people, you know, they're they are the people who are going to close deals, the people who are going to get into this this this niche are incredibly dedicated, incredibly passionate, willing to just put it all on the line and um I mean there's there's no I don't I I can't imagine doing something else. Like these are these are some of the most, you know, they're some of the smartest people, some of the nicest people and everybody wants everybody else to succeed because there's plenty of room for everybody. Um so, you know, to kind of put a bow on it, you know, if you're an investor and you're looking for diversity in investment, uh please reach out or if you're a searcher, uh I I I've talked to tons of searchers and I'm happy to talk to you. Um you can just reach me at kevin@peoplehuston.com, that's the easiest way. Great. Or Twitter, right? Of course, as we've been talking about Twitter. Twitter, of course, and LinkedIn. You're active And LinkedIn. I'm I'm I'm nothing if not reachable. Kevin, thank you very much for coming on to do this. Thank you for being on the panel a few weeks ago. You are very generous with your time and thoughts and I appreciate it and I'm sure the audience listening to this will as well. So, thanks a lot, sir. Thanks, Will. It was a ton of fun. I hope you enjoyed that interview. Make sure you subscribe to the Acquiring Minds channel below. We are now publishing twice a week. So, tons of new interviews and stories to come. Stories that will help you along your own path to acquiring a business.