Dan tagliatella welcome to acquiring minds thanks for having me well I've been listening to you for a while now so I'm I'm excited to be on appreciate that Dan you bought a home services business in a lesser known Niche driveway ceiling your first year in the business was hard very difficult took years off your life your words but the experience was invaluable and today your acquisition entrepreneurship journey is cranking so let's get into it start us off Dan with some background on you please sure I'm uh I'm from Rhode Island uh I went to school here high school and college in Rhode Island and I got my first job out of college in Rhode Island I went to Bryant University in Smithfield and then uh right out of college I went to uh an insurance company called am Insurance in Lincoln Rhode Island and I joined their investment department they had um various Investments but I joined the public Equity team so at the time I was there uh I started in January of 2013 uh they had about a $2 billion public stock portfolio and I was one of the analysts my job was to research companies and make recommendations for what stocks we should buy or if we already own them if we should buy more or if we should sell them uh and I'd make my presentation to the chief investment officer who's also the portfolio manager uh and then he would decide what to do and then it was my job to follow the companies as they went along and uh keep my eye on the stock make recommendations if we should continue to buy more or less or sell out great how long were you doing this public stock analysis investing I was there for four years yeah January of 13 to January of 17 uh and then I quit in January of 17 bought my first company uh at the beginning of or the middle of 2018 uh and then my second company just last year okay so okay so connect the dots between buying your company and 18 it was and what you were doing at this insurance company most uh what we were doing was fundamental investing which which means that we look towards the company's sales and profits and cash flow to come up with a value for the company and then we compare that value to what the stock price is and we try and find big discrepancies between the two and uh so that exercise there's a whole framework that that we were using and it's pretty widely known in the public investing space and even in large Equity uh trying to discover what makes a business really good or bad if you're looking at a good or bad business and then you try and make a projection out um a few years as to kind of where the business is going to be and then based on that projection you compare that to the price that the stock is selling for you compare it to what other people are thinking um uh there's the sell side which is like the brokerage firms that public re uh that publish research on stocks so you can kind of tell what they're thinking and then you compare that to what you're thinking and if there there's a big discrepancy maybe there's an opportunity to make an investment in a company um and then have the stock go up more than uh more than the indexes go up so trying to find good companies with um with downside protection buying them at a price that gives you uh some downside protection as well um was something that I was just used to doing for four years and prior to even uh coming to amama I was researching investing you know for the prior five years trying to formulate my own opinions as to what makes a good company or not um um and I I had this whole framework that I basically developed and wrote down um and I have like this it's not a checklist but it's like a rubric that I use basically to try and uh funnel all companies that I'm looking at through and I did that because I liked it I thought it was fun um and then it was useful when I was at the insurance company as well and uh became invaluable when I quit and started to uh you know buy my own companies on my own so five years before AMA you were you in the five years preceding am you were doing this on your own that corresponds with college and maybe a little bit even into high school so were you some were you kind of a a kid who was always interested in investing and in business yeah absolutely I I opened my first brokerage account when I was like 14 or 15 years old I opened it with my dad and he gave me a little bit of money and he said if I made money I I could keep the profit and I pay him back and if I lost it then it was just on him and so uh I pretty quickly lost it all so that kind of turned me off from the stock market when I was a te teager and then I started looking at other opportunities to make money so um I started getting interested in real estate and you know like uh you can buy all these properties with no money down and so I kind of pursued that for a couple of years I joined like a real estate Club locally and you know I'm buying far the youngest the youngest person in there when I was 17 18 years old um and then I eventually kind of made it back to the stock market as I contined to try and figure out um how I could do business on my own and then I realized through Reading and everything that stocks are just the way you own a company it's it's a company behind there and so you own part of the company it's a very very very small piece but you're a business owner when you own some stocks and you could assemble this portfolio of stocks and you could have your own Little Empire of these stocks you don't get to control anything in the companies but uh if you pick them right then they can do really well so then I started reading a lot about how to how to evaluate companies and so I did that a lot on my own when I was in college I went to school for accounting so I was kind of like dovetailing a lot of the accounting work that I was doing with my own uh research on the side um for in more the investing world and it was really invaluable because accounting is like they say it's the language of business and uh it's kind of like if you were to pick up and move to Japan and you don't speak Japanese I feel like if you don't really understand accounting um you just won't feel really comfortable evaluating companies because so much of it is the financial analysis it's not all of it certainly but but a big big chunk of it is so you really have to be fluent and kind of know what you're looking at so the accounting training with my own training I thought really set me up well and it allowed me to make the switch from accounting into uh Investments and ultimately get the job at the insurance company we ended up owning too many stocks uh the portfolio had about 350 stocks in it and while that was cool uh it didn't really jive with what I wanted to do I wanted to own like 10 stocks and you know if you spread $2 billion across 10 stocks you're making 200 Mill $200 million Investments which which was cool but it was never going to happen um so I felt like I was spending all my time doing all this research and everything and then we' get to take a position in a company that I liked and on $2 billion we would put in 2 million and so if it doubled you know we made $2 million on two billion it was just a rounding error so it felt like I was putting in a whole lot of effort uh for for not a lot of reward I would say and and when you say you would like to own just 10 stocks what what does that mean exactly at what are you saying it means it's more fun it means that if you're going to do all this research find a company that you're really excited about and then you're going to put like just to bring the numbers down you know billions don't really compute for people but like if you're going to throw 50 cents into a stock that you've spent six weeks researching yeah it's just why even bother why spend the six weeks I mean so I enjoy doing this and so if I'm going to spend six weeks I want to go all in and so for my whole life I was very very frugal just kind of naturally so I had saved up a lot of money on my own and I felt like I had the bank roll where I could buy a company large enough on my own and just do it and I could push it all to the center of the table and if I feel like I knew what I was doing uh which was maybe a little bit arrogant to think uh at the time but I I put in I mean I had read thousands and thousands of pages I had this 50-page rubric that I created that I kind of boiled down to eight pages that I would funnel all these companies through um and so I felt like I had a a pretty good idea and you can watch what happens with these companies cuz they're public so by the time I got to the insurance company I felt like you know I kind of had a good idea of what what I should be doing and then as you start to put that in practice across multiple companies you can you can see it work or not work and so um ultimately I just figured hey I've got a lot of money saved up on my own and uh this isn't really doing it for me at the insurance company let me set aside 2 years I'll just quit and see if I can't find something locally uh to try and buy and so you had come up with this notion on your own in other words had you been exposed to quote unquote search or entrepreneurship through acquisition ETA not how you're framing it I mean we had private Equity Investments at the insurance company I had read all all the books on private Equity I was very familiar with what that industry was and so I just figured I'm in public Equity it's the same thing as private Equity except you don't have to Source the transactions you just turn on the Bloomberg terminal so but the analysis is pretty much the same the time frame is shorter because stocks are priced every day so you have to perform quicker um but it's ultimately the same thing you're just investing money in businesses instead of having fractional Stakes you have a controlling stake and so that was kind of the framework that I took I said well I have now private Equity managers they don't use their own money and you know no one's going to give me money at 26 years old or at least not me personally I don't have that Network and you know the pedigree to do that so um I just had my own money and I I didn't save it up my whole life in anticipation of doing this I just saved it up because I I just that's how I am so uh it was there and that kind of all coincided with what I was doing professionally and so I just said I'll do my own uh private Equity deal on my own and just kind of do my own little mini leverage buyout and so that that was the framework and then I it was maybe six seven eight months into me being unemployed and looking around and I would have loved to known about the community because I was was still living at home at the time and you know my dad would like see me in my pajamas at 11:00 a.m. some some days when there wasn't anything to do and he would tell me to get a job and I could have told him you know hey I'm searching this is searching this is what this looks like you know he would say I'm unemployed but uh uh so no it wasn't until six or seven months in um me looking that I even came I even heard of this term ETA or anything like that and it didn't really strike me as it was kind of weird I thought that it was kind of like a branding of something um it was not like anything new um but it kind of interesting to me that all of a sudden you slap some terms on things and create some acronyms and all of a sudden it's like a big thing now to do so yeah exactly and don't forget teach it at Harvard and Stanford and then that's all you got to do and then you got you got a thing that's right now it's legit well obviously this podcast is a is a contributor of all of that uh branding and and the kind of the ecosystem and and calling it by names and considering it a thing um but as I and everybody in the space will acknowledge it's it is in fact nothing new buying and buying a small business has been done since time in memorium that said I you know I I I'm always more impressed with people like you who choose to do this path without having been exposed to quote unquote search or ETA because despite the fact that it's been done forever it's still an unusual path it's not that well known in fact we hear a lot of a lot of my guests will say you know it never even occurred to me I didn't know I could buy a business you know I I always thought entrepreneurship I had to start one from scratch I of course also was was that until way late in life did I learn that this was there was a path here so for when I you know I'm I'm intrigued and impressed when people like you kind of arrive at this path without any influence or any awareness or exposure to the ecosystem um I think that's and and especially because like because it is kind of a an a path less taken um being exposed to search and in fact arguably one of the reasons acquiring minds exists is to expose more people to this to normalize this as a way to become an entrepreneur because because it seems so abnormal if you're not seeing story after story after Story of people who have gone before you and and done it yeah I think um I mean private Equity is a huge industry so it didn't it doesn't feel abnormal to me I guess it feels abnormal to use your own money and do it on a small scale and kind of Step Off the corporate path yeah but um so I guess that's abnormal in a way but you're lucky that you had ideas for businesses you can start I would have started my own company if I had any ideas I felt like kind of a dummy that I was looking and looking for something to do and you know you're seeing like in the early 2000s you know Mark Zuckerberg create Facebook and Tom create Myspace who is Tom I've never even seen that guy interviewed but you know he had an idea and everybody's got these ideas for creating things and um you know I just didn't and I was looking really really hard and I just never found anything and so that led me into investing like hey you don't have to be creative or that smart you can just buy something that's already there and there's look there's all these public companies for sale every day and so if you can figure that game out you can be in business and and not have to think up your own ideas and so I was like that's great cuz I don't have any of my own ideas so if I just figure out how to analyze other people's ideas and what that future holds for those companies then I might be able to do something with it and then I learned about private equity and and then my own personality is kind of a square peg you know I I tend to just do what I feel is right at the time and and not really I don't really follow a track necessarily so on a personal level it didn't feel that abnormal for me to do something like this Soh MH well uh on the having an idea or not or how how somehow a career and investing is is somehow um requires less capability or talent I I would push back on that pretty hard uh money attracts smarts and trying to find alpha or trying to find good Investments uh you're competing with a lot of very capable people um so it ain't it ain't easy it ain't it ain't an easy path no that's for sure but um you know it wasn't the path for me ultimately because now I'm I'm on my own path so it was it was the right choice and you know now I've got two companies and and I'm having fun doing it although I'm exhausted uh uh but it's still fun perfect segue to Circle back around now you said you had money from childhood uh and in a good bit Frugal uh as you are can you tell us how much yeah by the time I quit my job when I was um when I was 26 I had $250,000 and I didn't do anything spectacular to really to get it um it was just I had my first job when I was 12 years old and I I worked ever since every summer um in between you know school years and everything and I just kind of saved it all and uh you know at the insurance company I was there for four years and they had a pretty good bonus program so a lot of that I don't know probably half of that came from you know those four years that I was there and I was still living at home so I didn't really have any big expenses but it was just kind of methodically and anyone who knows me would would say that I'm Frugal so uh it's uh so yeah I had 250,000 and you start doing some research as to what small companies can sell for and how much a bank could get you and everything like that and I said okay well you know with 250 I can buy a decent sized company certainly enough to make it worthwhile to do so that was basically what I did and I said you know I've got enough money why why wait any longer I had kind of set aside in my mind two years to find a company and I figured out you know what my living expenses might be during that time and um and so that was it and you were living at your parents house so you were you were going to be really low on expenses yes um and so you could sustain that two months two years even though with your balance sheet you could have I mean unless I got kicked out of kicked out of my house but I wasn't anticipating that happening you did get kicked out of your house no no no I said unless I would have been able to maintain those unless I got kicked out but luckily I didn't your your dad finds you at 11:00 a.m. in your pajamas one too many times and gives you the boot okay well give us a picture aside from the pajama image give us a picture of your of your search how did it go uh it started in January of um 2017 and I ended up signing the LOI for the company that I bought in February of 2018 um so about uh a year and a month until Loi and then we closed in May uh of that same year 2018 the seller went away for 6 weeks on vacation in the middle of the L you know in between the LOI and the close so that's why there was such a big gap um but uh I you know I had the company locked up by by February of 2018 and uh in that in that year or so I had signed 100 ndas made one offer and that was the company I bought okay and so 100 ndas what what did your search look like the websites Brokers anything proprietary what it give us a picture no I I didn't do anything proprietary I I just looked on bis buy sell and and there's some brokerage like um professional groups that Brokers can join and I actually got that from the book I uh uh that read book from Harvard uh about the Professional Network so there was like two or three of them and I just looked those up on the internet and I typed in the geographies that I wanted to look in which was Rhode Island mass in Connecticut I kind of wanted to stay within two hours of you know my home and um I just called all the brokers in Rhode Island mass in Connecticut that looked like they did small companies not giant investment Banks or anything like that but um I think I came up with a list of about a 100 Brokers and maybe 15 of them were the ones that were doing you know most of the most of the business so once I kind of looked around at all the companies they had either that they on their websites or on bis byell um there was kind of not much else to do uh I was just waiting for the next one to come up and I was continuing to just check in with the Brokers you can't pestor these people once a week so I would like call a broker and then i' six weeks later I'd call them back and just kind of check in and and so that was it so it was kind of I had a rotation of calling Brokers and I had the alert set on bis buy sell and that was basically how I went about it and you know that doesn't sound like you would have gotten a ton of deal flow were you looking at deals really often or was it like what what did that feel like I looked at 100 so in about a year you could say I did like two a week on average um and most of these companies like the small companies anyone who's who's in this right now looking I mean it is like slim pickings it's like garbage a lot of these companies it's nothing you would want to buy So within 5 minutes you can kind of tell that you're not going to do anything so of 100 ndas that I signed there was maybe five that I was really kind of like piqued my interest and the other 95 I just instantly knew as soon as as soon as I read you know what the broker put together that this was not for me so if I'm looking at two a week and it's taking me 10 minutes a week like 5 minutes each uh no it felt very slow um but that was fine I didn't expect it to go fast and um I just figured that that's what it was I mean and um so I just continued to binge watch Netflix in the meantime well this is where the fact that you you weren't plugged into the search ecosystem or you know you you hadn't been influenced by the way things should go probably helped you because I feel like a lot of Searchers who are following the search path would be really nervous with only looking at two deals a week and their crappy deals that they can dismiss in five minutes um you know there's there's a sense of urgency often and and oftentimes that there's the constraint if people don't have the money to just keep going indefinitely um you were living at home so your expenses were really low and you had this chunk of change and you anyway um but it but it is funny to hear kind of how relaxed in fact your search was I mean did you ever get a little a little a little nervous I mean you know 50 50 weeks of looking at two week and and and every two that you look at almost are crappy are you like are you ever like is this going to work I don't I mean I I had given myself two years in my head and so you know when I was 8 nine months in I felt like I wasn't even halfway there yet so um I only had to hit once and and I knew what I was looking for so in the meantime I like I grew up and you know my friends parents own small businesses and they seem to be doing okay so I knew like there was good businesses out there but you also don't know the numbers so I I mean I felt like there's got to be something out here that's that's going to come up and I just got to wait and I just got to be patient and I had the advantage of um having my own money on the line and so that really focuses not you but me me in a way where hey I can't I can't mess this up so there are no marginal companies I'm not getting a deal fee When I close on it or anything like that it's not free money I'm not getting any options in this company so to speak no Equity Grant it's not like I'm using other people's money and you know when the deal closes I get a fee and then it time vests after that or whatever so I just need to get something done um and if it's so so then just so be it I'll get in there and just try and figure it out this was like my entire life savings and everything I had up until that point and uh you know my favorite move in poker is to go all in and when I do that I like to make sure I have the best hand and so uh I felt like I was going all in on this and uh and then borrowing money on top of of it it wasn't just Allin it was like supercharged Allin and uh so for me to find a deal quickly or to get discouraged or anything like that that it didn't really cross my mind it was just like hey if you're going to if you're going to shoot the biggest shot of your life you got to make sure that you're you're shooting at something that's like right in your sweet spot and it's like the bullseye and so I was happy to wait because I knew when the time came I would pull the trigger and you only have one chance to do that right once the money is out of your bank account you don't get to like save the receipt and be like oh I want to return this company seller give me my money back so um I just felt like I couldn't mess it up and uh for me how that feels is I got to look at a lot of things develop an idea of what's out there and um then make my move when when the time is ready and so that's that's ultimately what ended up happening let me just push on that a little bit because I understand everything you just said but the fact that these businesses so many of them 95% of them it as you said were just really bad just you dismissed them out of hand didn't it concern you the disparity between what you were seeing and what you needed to see it just seemed like I might just convince myself this method isn't working or something because practically everything that I'm seeing is not going to be is not going to hit the bullseye you know it' be it's not like you know 20 of them were almost it sound it sounds like 95 of them were hard no no I just figured though if I was going to buy like you know an outlier company a top 1% situation then if I was going to buy one and I was thinking it's going to be a top 1% company I'd have to look at a 100 so I just felt like you know I ended up looking at I mean that ended up being exactly what it was but um I just felt like I had to look at a lot of things and you just keep turning over rocks and turning over rocks and turning over rocks and from the public space there's all these companies out there you know in the public markets but how often do they really get attractive to you at a price uh that's worth buying not not that often really so if you're making you know two good Investments a year in the public markets and you can put those positions on at size and they work you're doing really really well so I kind of came from that mentality that you're not you're not making a lot of Investments and um so it just it didn't seem foreign to me I get what you're saying but just from my perspective but yes it was in the back of my mind like man I might have to go back to work or something like that uh eventually but I wasn't there I mean I um you know there was plenty of time in my mind I'm I'm reminded of the kind of the Warren buffe ISM about pitches and you know you can you can and all these pitches can come by investment opportunities but you just wait for the one that's just the perfect pitch that you can smack out of the park and but and and and the good news is unlike the game of baseball you're not actually penalized for watching watching pitches come by and not swinging you can just do that forever uh if you want but the what it where the discipline comes in is that you got to be patient and and swing big and swing hard when you get the perfect pitch but don't but you got to wait for the perfect pitch and that can take some discipline uh and people get antsy they get you know they they loosen their own standards because uh that pitch hasn't come along yet and so they start swinging at stuff that isn't isn't right down the middle yeah and he you know what he says is there's no called strikes in investing and uh that's true so uh but imagine though if you took a swing and if you missed you'd lose everything you know would you wait for that pitch would you not be as antsy in fact you might not swing at a pitch that was close but if it's not right down the middle you're not going to swing because the consequences are so big that's why I say I had an advantage that I was investing all my own money and didn't have any investors because I could feel that and that focuses you like you just can't believe and if I had investors at first especially if they're kind of faceless investors if I was investing like my parents money and my in-laws money I wasn't married at the time but you know people that I know and care about that that's a different thing but if I'm investing you know some fun to fund money that has like a hundred different Investments and I don't know these people and they don't know me really and they're just a source of money that's and that's not a criticism of anything I mean you got to do what you got to do so if you want to do this path and you you don't have money and you have to raise it that's that's what you got to do but it I might just take a swing at something if it's been eight months and and nothing's come and it's like well whatever so just take a chance it's none of my own money the personal guarantee means nothing cuz I have nothing and um you know I'll just pick pick back up if it doesn't work out and frankly if these guys own 100 or 150 companies in their fund it doesn't mean anything to them either so it it it's but that was not the situation I was in um so I I I really couldn't screw it up and Dan what was this perfect pitch you you really knew what you wanted what did you want what were your criteria yeah when I like I had said I had been reading a lot and kind of taught myself a lot um about investing and um I had developed sort of a rubric that I had had used uh when I was at am to analyze public stocks and it's nothing new it's just I developed it my own way and through my own primary research and kind of compiled it on my own and basically it was it was a a quantitative and a qualitative framework that both of the that all the companies had to pass and um in order to be a good company and this is these are not my ideas this is like well documented in the field of you know microeconomics industrial economics and everything like that um so quantitatively you can kind of equate all businesses no matter what type of business they are every business takes some amount of money that has to go into the company to make it to make it run so um that could be uh property plant and equipment so trucks and Machinery there are expenses that you need to pay for before you get paid those are your receivables and then if you're selling something you have some degree of inventory those are the assets that you have to basically put into the business so if you think of it like a bank account you have to deposit a certain amount of money into this bank account and then that money then gets converted into all these other assets equipment receivables and inventory and so there's an amount of money that a business takes in order to run and that's its asset base and then it then employs those assets in the business and then it earns profit on that it it does has sales subtract expenses and you get profit the relationship between the profit of a business and the assets that it takes to run um is a percent so if if you're earning a 100,000 but you need 400,000 in Assets in order to make the company run then you've earned 25% on your assets and if you do that calculation across a multip you know a multitude of different businesses you start to realize that there's kind of wide discrepancies in what businesses earn and so as I was looking at companies both at am and on my own that's what I was doing I was just saying okay this caterpillar is earning you know 20% on its assets whereas John Deere is earning 30% why is there a difference they're kind of the same type of company they manufacture equipment and uh they both have uh captive finance companies in there and they sell through dealers and so you say well these are kind of the same companies well why does one earn 30 on its assets and why does one earn 20 and uh in in economics that's kind of the way that they analyze things when they measure profit they they measure it as uh the long-term return on invested capital in a business and so if you look at different companies and you start to do that calculation you can see okay some of these companies are really profitable and and some of them really aren't and that's not necessarily the profit margin or the actual dollar that they're earning I I kind of think of it as if if you are evaluating uh some money where would you put it you can say okay I can put put it into this Bank of America CD and get 4% or I can put it into this investment and get 6% well why would this pay me six if this is going to pay me four well maybe it's a little bit riskier um but what if it's not riskier what if what if they're the same and one's earning six and one earnings four well what's going on here to make that that be the case and so then you have to dive into the the qualitative to try and figure out exactly why and there's tons of Frameworks that you can use to try and figure that out so basically I was trying to look at companies that were earning huge Returns on their assets like returns that didn't make sense to me when I did the calculation I was like damn that's a that's a lot of money and so uh when you find that um in certain types of businesses and in each industry it's kind of different because there are some industries that just earn higher Returns on assets or or invested Capital just because of the financial model of the industry like maybe they have uh uh negative working capital maybe there's not a lot of fixed assets required there's more people that produce the money so there there are different Dynamics between the income statement in the balance sheet that produce the return on Capital but within Industries if you're looking at specific companies there are still going to be ones that stand out or not and so um trying to understand why can really give you insight into if this is a good company or not and why that's the case so so for me Dan let me hop in with a quick question hold your forget where you were where you were the when you say so return on assets you got to when you're evaluating companies it's got to be Apples to Apples it's got to be two companies in the same category and then you can compare return on assets not cross category cross categories in general like in general that has to be the case like Caterpillar sells construction equipment John Deere sells farming equipment but they're all equipment like they're they're very similar they're manufacturing companies that's what I mean but okay but fair enough when you take this metric return on assets why do you apply it why don't you apply it first at the industry level and say I'm only going to look at industries that have incredible return on assets rather than I'm going to look at companies within these industries and and really choose companies that have better return on assets than it than their competitors well yes that's that's a that's a common public investing strategy in fact that's like a fact they call it Factor investing now that's a factor that people use but they they call it quality uh companies with really high return on assets that are stable or you know high quality companies they call them and you can buy index funds where they just do things like that so that is a popular strategy with these small private companies you don't have the luxury of having you know all of these companies in front of you and you're just going to kind of handpick so when I was looking at these 100 companies that I looked at in 2017 it was basically you know this is a food distributor uh this is another kind of distributor okay and they're kind of they have trucks this company has trucks and so you're trying to make comparisons sort of loosely along the same I would not compare like an accounting firm to like the company I own the ceiling company or or the window washing company that I own so um you're trying to make General characterizations and that's more of just having a lack of data so okay okay great and and just before one thing before we get off the concept of return on assets um well actually two questions first so how does you said that like return on assets is is you know a a metric and that it can have it has its own Dynamics with like the the income uh the income statement for example so how do I think about a business that requires a lot of assets even if it has a return High return on assets so it seems appealing versus like you like you alluded to like a very people heavy business that doesn't require any or very little capex um how do how do I think about that I mean the little the little capex company that ju you're just you know it's mostly just selling labor um is that does that therefore mean a really really really high return on assets or am I not correctly there are some business models that are just asset light so it's just by definition they earn a high return on assets so uh but that doesn't mean that those companies cuz because then you have to go to the qualitative like if you've got a bunch of companies like a consulting firm that is just people heavy and asset light um they can earn a really high return on assets but those businesses tend to not be businesses they're like Professional Services or things like that um or software companies which which is a business but when you've got a business that has a bunch of people and then they all go out and start their own firms and everything like that that's part of the qualitative analysis you say if I'm going to buy one of these companies um is that return on assets going to continue in the future for me and so you want something where uh you can say yeah I mean it's not like all the people leave uh there there was like a phrase I heard all the assets go down the elevator at the end of the day elev elevator money or elevator revenue or something yeah yeah and so I mean that's that's a risk so you can say okay these businesses earn really high return on assets but why and you can say well because it doesn't take much capital okay why well because everything's in these people's brain and they went to school to educate themselves and so you didn't pay for their schooling you're you're paying them a labor rate but now they can then take that and that's why you have so many account firms and so many lawyer firms and anyone can just hang hang a shingle now if you're talking about the like for the accounting firms like the public accounting firms those have a competitive Advantage because they need to be registered with the pcaob and there's only four of them and you need a public ACC company auditor so whether those Partners leave or not price waterhous Coopers is a fantastic business um and those are private companies but uh so you have to have something that that's that that you can explain as to why yes you can ident identify that it's high but then the question is is that going to persist in the future and what's the risk associated with that return because that's really the dynamic you want to find the definition of an undervalued investment is that you're being overcompensated for the risk you're taking so this company's earning 45% on its assets and after your analysis and after researching it you're like I don't get why I mean a company like this should not be earning such high profits if you're looking at some of these small companies like like that I was looking at and let's say they've got a half a million dollars invested in the company that means like this owner or this family invested half a million dollars throughout his life into this company and he's earning a half a million dollars on that so if he took that half a million and he put it in a bank account he'd earn like 4% today but instead he took that and he put it in this business and he's earning a half a million dollars on a half a million in asset so that's like a that's 100% return it's like he's got a bank account that's paying him 100% well that shouldn't be the case so either it's like Ultra risky or you've got a really good situation here and maybe he's actually got a really really good business and so that's the qualitative analysis that you need to do it's not necessarily that you know Eastman Kodak had a huge return on assets for a very long time and then they went bankrupt it's not a guarantee but it's if you're trying to sniff out is this a good business is this not to me it's like a tautology like in math you know they have three instead of two lines on the equation there's three so it's like definition definitionally equal it's like a good business has to earn good money or else it's not a good business how can you have a good business that's earning bad money then it's not a good business so um the first the first step that I took was I'm only looking for good businesses so I'm only looking for businesses that are earning good money what's good money High return on assets how high very like where you don't have to think about it so for me I wouldn't even look at anything if it was a company that took Capital not not an accounting firm not a consulting firm but a company that had equipment that had maybe inventory that had a big receivables a lot of these asset light like construction companies you think they're asset light until you have you see that have got they've got like 35% of their sales in receivables that's money you have to come up with out of your pocket while you're funding your operating expenses until you get paid so receivables are a huge chunk of the assets okay well let me let me ask a follow big money big money that's what I was looking for let me ask a followup Dan so I you know use as kind of my shorthand for an interesting business margins you know that admittedly quite simplified maybe oversimplified at times but it's a good starting point you know if a business has low margins probably means it's highly competitive um less room for error uh you know one one Bad season or one bad year can mean the difference between being in the red being in the black uh whereas High margins means um the opposite I mean there's there's room there's room there for some swings uh it means probably that that business has a strong competitive position that it you know has some pricing power um and probably many other things it's probably a signal for other things but I guess that that that is my point is that it is a not it's a barometer of it's a it's a signal of strength at least that's the way I use it have I been wrong-headed please tell me no because that that's what I've been saying for 200 episodes always asking about the margins also it tells you what the profit is like what the person is the owner might be taking home or it gives you directionally what the person's taking home so that's also why I ask it but I I do think margins speaks loudly about the quality of the business am I wrong or right no the margin is a component of the calculation so a high margin increases your return on assets but it's basically the profit margin uh is a piece of it you have to then do the other side that's your numerator essentially so you have your sales minus your expenses equals your profit and then you take your profit and then you have to look at how much money you had to put up to make that profit it it's the same way if you're like I said if you're going to think about putting money into into a CD you're saying I have to put up this much money to get this interest rate back and the profit is the interest rate but you're forgetting the other side of the equation which is how much did you need to put in to make it happen and I'm just right now just talking about what the company has in it not what you have to buy it for um because a company that earns a really high return on assets you're going to have to pay more than the assets uh are worth and that's what the Goodwill is but um you've got to look at if you've got $100 in sales and $40 in profit those are 40% margins but if it takes $1,000 in assets to make that $40 I mean that's not very good you know was that 4% so it's you would expect like real estate companies have very high margins if you look at there's publicly traded real estate companies those are 40% margins and um but all the assets are on the balance sheet um you know all your costs are on the balance sheet and so you just got to have a relationship between the income statement in the balance sheet and the other thing uh which which um you know is also important is that IA we're talking about profit and you know I think you're assuming IA I mean that's not profit iita is like uh that's the gross cash flow but if you take all that money out you're in trouble uh so um you know that's not really what the profit figure is so if you have 40% margins and $1,000 in assets you might have to save up for maintenance Capital expenditures and that 40% once you take that into account is really maybe 10 depending how asset heavy the business is so um no but Mar margins are a component of it and certainly you want higher margins than lower and certainly higher margins offer a bigger degree of protection when the sales fluctuate weight so I I would say yeah you definitely want High margins if you can find them but a low margin business doesn't necessarily mean it's bad because if it if you have to invest a very low amount of money in that so if you're if you have sales of 100 and you're earning uh $3 that would be a 3% margin but if you only have to put up a dollar to do that uh you know out of your pocket then then you're still making good money and that is what the model of many Distributors look like very very low profit margins um you know they might only mark up if you look at some of the big public companies like Costco I mean I think they only have a 10 or 15% mark up which means that they're margin on that if you just uh do the numbers out it's much much lower than that in fact I don't even think they make money on their uh on the product sales their whole model is selling the uh you know the subscription and uh there's a big industrial distributor there's plenty of these Distributors tend to have very low margins uh but the asset base is lower um and so you can make that work well Dan I don't I don't want um to get too sidetracked here but I think this is an important education for for me and then therefore I would assume somebody who's listening to this um as but does does the calculus change as business buyers because if if we're we're not thinking about the initial assets that have to go into getting a business up and running the business is already up and running so as long as we don't delude ourselves about eitaa and we think more in terms of like ebit and in fact you know what we're going to have to pay in capex on an ongoing basis and we factor that in realistically to you know we account for that and you know an annual spend um and then we have at the end a margin or or or you know a final cash flow number and we look at that compared to the money that we had to bring to the table for the the deposit for our SBA loan or however we did it um doesn't that that calculation isn't that kind of the be all and end all and that encapsulate whatever assets were there or whatever the founder needed to put in to get the thing going that's already baked in well I mean to a certain degree yes but you know what what would you say what would you throw out as kind of a typical multiple that you might have to pay to buy a small company say three and a half okay um I'm I'll just say four because the math will be easier so if you have a company that um is making $100,000 right and there's uh let's say $200,000 in assets so it's earning 50% on its assets which is very high if it if it has Capital uh you know equipment and everything like that so if you're making a hundred and you pay four times you're going to pay 400,000 for the business and it has 200,000 in assets so people talk about buying a dollar for 50 you're you're buying 50 c for a dollar you're paying double what the owner actually invested in the company and the reason you're doing that is because he's earning a high amount of money on that so you're paying four times but you're paying two times what this guy actually put in so he put in 200 and you're cashing him out at four why would you ever give someone 400,000 and get 200,000 in return right the reason is because it's earning 100,000 a year for you the reason why the return on assets going forward matters and not just at that initial uh initial base is because now that you own the company it's going to affect the rate of growth that you have so theoretically if you have 100,000 and 200,000 in assets if you save that 100 and plow it back into the business that 200 in assets is now 300,000 and if you can still earn 50% on that your 100 your 100,000 in earnings now becomes 150 you just grew your profits by 50% so it's the return on incremental Capital that's really important and that is taken into account when you say okay if I acrew for maintenance capex that's great but what if you acrew for growth and so you say Okay I want to grow this company if you have a company that's only earning 5% on its money if you take all your money save it and reinvest it and you're able to deploy that incremental money at the same return on assets as the base business you can only grow at 5% a year because you're Capital constrained and so I I'm trying to look for a situation where I'm not Capital constrained it doesn't mean you have to have a capital light business but if you have capital in the business it needs to earn a huge amount of money and so that way you can have what I what I think of as like an and business you can max out the growth of the company it's very hard to grow a business 50% a year but especially in these small companies but if you can grow it at 7 8 n 10% a year and you're earning 50% on assets well you can reinvest 10 to grow it at 10 and then the other 40 you can take out so I I call that an and business you can grow and distribute if you're only earning 5% then on the company's assets you have a choice to make either I can take this money out and you might need that to like live either I can take this money out but then there's no growth because it's going to require me to invest in order to grow and so you have a or decision you can either grow or distribute the money and um that's why a low return on assets is is you know is not great if you have plans to grow and it also means that probably it's pretty competitive industry because you know the returns have been competed down to that level uh High returns are dangerous because they invite competition everyone's seeing like wow this company's earning a lot of money so you really have to have a way to protect that uh and protect those High returns and that's that's the gamble you're taking if you buy you know a company like that and so it helps when it has a very long history of earning those High returns and it helps if you can specifically identify why you think that is and you can say yeah I'm going in here this guy deposited a half a million and he's earning a half a million well why isn't everybody else doing it then and oh here's the reason and that's that's then the qualitative part of it that you have to do so it's just a screening tool um and it's something that's really widely used in the public markets probably even in big private Equity I've never worked there but um certainly in the public space when you have so many stocks to choose from how do you Whittle them down this is one of the metrics you know that you can that you can Whittle down and say what companies do I want to do further research on well it's really just the good ones you know and I Define that as a high return on assets for a long period of time but that's what happened in the past your your job as an investor is to make a judgment call about the future and so just because a company's earned High returns in the past that doesn't mean it's going to continue to do that in the future and so this is where the game is played this is ultimately why you know you're really just a gambler at the end of the day and you're trying to be a really good one Dan any thought on why return on assets is is a metric that we don't talk about much I I mean it could just be that I'm not asking and everybody else is uses that metric all the time I doubt it but maybe but let's just for the purposes of this this question assume that it's not talked about used a lot uh among Searchers any thoughts on why that might be given that it's such a common metric in you know in in stock analysis public Equity analysis land yeah when you're doing fundamentals uh you know fundamental stock analysis it's very very common and uh so it's it wasn't necessarily new to me I don't know why I've I told you I listened to a lot of your episodes I've talked to some kids offline uh call them kids I mean they're uh you know young adults and uh I've never heard anyone really talk about it and I I frankly don't know why um I guess there's more pressing things that I guess they're more concerned with the incremental what they can do incrementally so you know if a company's earning 5% on assets and and then they're like well I can come in and change things and you know to go to from 5% to six that's a 20% growth you know and then to go from 6 to 7 so they feel like you know but I feel like looking at the base of what you're actually buying and how it's been over a long period of time is really indicative of the ease with which you're going to be able to do something with this not that it's not going to operationally be complex but really do you have um a wide openen field in front of you or is it very crowded and it's going to be really tough and I feel like if you're ignoring the base business and you're just looking at the incrementals uh of what you're going to do with it but you're ignoring that it's not really that great to begin with I feel like you're going to have a a tough tough time thank you for the education Dan let we we got us this has been great but we got to Circle back now to your story now let's hear about and we're gonna I guess we're not going to fully leave the topic because we're going to hear about how return on assets in your qualitative uh filters performed when you applied them to the company that you found so so tell us about what you found um and quickly H how did you find it and then why did you like it I was just calling the Brokers like I had said and I called one of them and the company wasn't listed because it's a seasonal company it only operates 6 months out of the year and I called the broker in August and the company was operating and the guy didn't want to put it on the market while he was still like working like a madman during the season so he said it was going to come on the market in October I called him in August he said call me back in October I did I got the information sign the NDA uh like I said I did that calculation uh I saw the Last 5 Years of fin finals I did the calculation on the last 5 years I was like you know salivating and then uh eventually after we signed the NDA I went back uh let me think it was it was 2017 that I saw and I went back to 2006 uh as well and I did the calculation for each year and I'm saying wow this is you know it's it's even getting better as time goes on it's you know it's growing uh the return on assets is growing he's earning higher and higher profits on the same asset base and um so I was like yeah this this to me is I better start sniffing around here and it's certainly got the the financials that I'm looking for and um so then that that was it I just was calling the broker and you know serendipitous great well tell so tell us what the business is what it does what service provides more about the history employees Revenue Etc give us the bullet points it was it was a um a pavement sealing company sealer is uh I'm sure everyone knows what asphalt is but like on parking lots and driveways it's a liquid Co that you put over the top of pavement and it dries um and it it's kind of like a protective layer on the surface of the pavement and we also fill in cracks on asphalt and we fill in potholes so if we see a piece of pavement we'll put hot asphalt in a pothole we'll fill in all the cracks and then we'll put the sealer on top and it makes it look really good and it also uh helps to prolong the life of the pavement so that you don't have to replace it as soon and primarily focused on driveways so a residential business almost exclusively residential great and this actually isn't a business or a service that I've heard about before of course I've heard about asphalt businesses but never this particular so this is a niche within asphalt you you come in after asphalt has been laid and you put this layer on top so so why is have I again just been ignorant of something that everybody else knows about or is this some super nichy thing that's only found in Rhode Island or what do you think the company's in Connecticut uh so I moved from Rhode Island and and I went to Connecticut um I don't know it's it's certainly in the areas we operate I mean a lot of people are doing it and it's not just when they get the driveway paved in fact it's you know it's every couple of years or so that it's being done as kind of a maintenance thing so uh I don't know I never I didn't know what it was either until I until I found the company but uh it's something that people do and um certainly they do it on parking lots a lot but people do it on their driveways as well and uh he had a pretty good siiz company um in the areas that he operated in and it was ear earning good returns and it was probably doing so because it it was very nichy and um big commercial ceiling companies aren't really interested in residential work and so we've got a a pretty good siiz residential business and um so I bought it and um why wouldn't like do do traditional asphalt businesses offer this service like why why don't this seems like it would just be an additional service that they'd offer they do but traditional asphalt businesses they do the initial Paving so lay the asphalt you don't seal a piece of pavement until at least a year preferably two after um and so it would seem like a thing where they would lay the pavement and then they'd get you on the maintenance schedule after for the ceiling but the reality is is uh the dollars are small in ceiling compared to Paving and nobody likes to chase small dollars and so they'd rather just go and do bigger and bigger Paving jobs the equipment is different um so you have to have a whole different you know set of equipment that you have to invest in and buy and at the end of the day if you're a large Paving Company the money you'll make from doing the ceiling afterwards it's kind of like a headache it's even more seasonal it's extremely weather dependent if it rains you know you could have the whole all the stuff wash out it's kind of a big headache um and that's why I think a lot of people um they'll start sealing and then they move into commercial ceiling which is even easier because the customers are less picky and then eventually they all start chasing Paving so the question you're asking me is like why don't people go in reverse uh it's really the other the other way around they they start out small doing little residential ceiling jobs then they try and do commercial ceiling jobs then they buy big expensive Paving equipment and then they want to do Paving and the dollars are a lot bigger in Paving so there's plenty of large paving companies that have big commercial ceiling divisions as well but it's still only like single digit percentages of their businesses because ceiling is just not a huge um huge attractive thing for them to do so we don't play in the commercial space really at all we we have very niche residential business how old was the business it was started in the 70s by the um guy I bought it from and how many employees and and what was the revenue when you bought it when I bought it um so I bought it in 2018 so you know the prior uh year a couple of years were all pretty much the same it had um they were running three crews four guys to a crew so like 12 employees plus the owner and um they were doing 1.2 million and earning 44 on that and on that 440 there was about a half a million in assets okay so so there's there's the just north of 80% there there's the metric that you like so much and so 80 is huge in your experience and Industrial bus if you put money into a bank account and we're making 80% interest rate yes you would think that would be very very high yeah and certainly in I mean if you're earning 20 like in the public company space if a company's earning like 20% return on Capital that's that's very good you know that's really really good and so something that's 80 there's one of two things either it's just a temporary thing which I knew it wasn't cuz I went back almost a decade on the numbers and saw that it wasn't temporary or it's just like a highly risky thing that that's you know but you're sealing pavement I mean it's labor it's material you buy company's been around for 40 50 years doing the same thing the same way um there wasn't any sort of technological innovation that was going to happen happen really that I couldn't adopt no one was going to seal a driveway any differently China's not going to come over and compete with me in ceiling Amazon's not going to undersell me and ceiling um it just didn't seem like there was much that could be disrupted about the company other than me dropping the ball providing bad service you know the employees you know having bad relationships with the employees and things like that it seemed like a pretty stable and boring thing to do and so why would something like that be earning that much money on its own asset assets um and it's it's because it's it's a good business well but why you had said like at least in public markets if if you're getting great return on assets that attracts it that attracts competition why hadn't this guy's return on return on assets number been chipped away at over the years and also why did he not follow the trajectory that you just explained of in this industry where somebody might start out doing uh driveway ceiling but they Aspire and graduate to you know commercial jobs in pavement I asked him that question um a couple of years after um I bought it from him and the answer he gave me was he he just wanted to keep his life simple he was happy earning what he was earning his passion in life is traveling so his only purpose for work was to make as much money as he could in six months and then shut down his house for the winter and travel all across the world he's been to every country that you can safely travel to he told me one time time he added it all up he spent over a year of his life in Italy um he when I bought the company from he says you know I've worked for 40 years and had 20 years of vacation so this was just it supported his like travel addiction and so he really he knew how to do driveways he knew how to handle the residential customers in terms of their common complaints and things and he just had no aspiration to try and grow any bigger than that and what happened was the business over 45 years grew on its own and he just stuck to his knitting and because he didn't have I don't want to say the ambition I mean he would say I didn't have the ambition to do it but because he didn't really want to go chasing higher and higher dollars and have people owe him bigger and bigger checks and he had to chase them for money and stuff and he just didn't want to do it and so it was sort of like a a quirk of his personality right that this developed this way nowadays we'd say you know he had a strategic vision of just finding a niche and you know but he didn't it just happened because that was his personality and it developed into something so what happens is every time we do a driveway a yard sign goes out up front and so you see this driveway look really nice and then it has our yard sign and then someone drives by and sees it and they call us and then you know we do their driveway and another yard sign comes up and so he was in this very tight geography and over a period of 40 years he ended up doing thousands and thousands and thousands of driveways and he built up this really like geographically dense um customer base and they were all doing residential work and so all these yard signs would go up and it kind of fed on itself in most businesses there's a trade-off between price and volume the more volume you're doing the lower price you're going to get or have to pay and the less volume the higher price you're going to have to pay so residential jobs in terms of the square footage of pavement they're small and so you generally are able to charge a higher price per square foot than you would if you were doing a giant parking lot those get bid out they're more competitive the margins are lower but the actual dollars are bigger whereas in the residential business the actual dollars are lower that you're making on a $300 job but the margins are higher and nobody has a problem with that so what happened and the reason the this business is good is because of the geographic density we are able to seal as much pavement square footage of Pavement in a day almost as much as a commercial company can do they don't have to drive around they pull up to the job they Park there for the whole day and all they're doing is working the whole day when you're doing a lot of little jobs you have to drive around so there's a lot of down setup time driving time unloading the equipment and so there's a lot of productivity downtime because we um basically roll up to a neighborhood drop anchor and do all the driveways we're able to get a large amount of square footage of pavement sealed in a day and do commercial volumes at residential prices so we don't have the trade-off between price and volume because um the only way that was really achieved is because of the density and then the route optimization that has to happen around that and so when that happens if there's 20 driveways on a street and we do let's say eight of them the other 12 people see our yard signs and then they end up calling us not all of them but you know we'll get a few phone calls from that neighborhood and then we do their job and then more yard signs go up and then more people see our yard signs and then we get more phone calls and so it kind of feeds on itself and what happens is we develop a reputation as the driveway ceiling company uh you know in this area and because people don't generally purchase Contracting Services on price alone having a brand and a name reputation is a form of protection um you know it's it's like a structural advantage that we have because people will generally they saw their neighbor have their driveway done so they know we did a good job and they don't have to risk that a contractor is going to take a deposit not show up splash the sealer all over their house because they know we do a good job and for a few hundred $ it's not worth saving 20% or 15% um to just go with the guy your neighbor used and that everybody knows and so we have a few things going for us which is we have this density so that we have this you know profit Dynamic whereas we can do high volumes at high margins we have this branding around all of our yard signs that are up and we also have because we're so highly productive we have prices that are very very competitive with anybody that would be to come in so if you were to come in and try and like out compete us and charge really low prices to try and get volume one people don't care enough to really switch um you you know for $25 savings to switch from the company they've been using for 20 years um and two you couldn't generate the volume of work that you would need to get your labor and Equipment as productive as you would need it to be in order to make it worth your while the other thing is it's just a small industry I mean 1.2 million in sales that's that's not huge when I bought it so you'll do all this effort and risk all this money um to basically you know not make that much money and uh you know in the grand schema if you're a big company trying to come in so um so it's kind of insulated in that way and um as long as we kind of continue to stoke the fire uh you know we can have a good business and we've done you know a lot of the demographic work on on our geographies that we operate in we know how many households are in there we know the income levels and the plan is to just do uous Geographic expansion where we can preserve our brand name and just expand on the margins of of where we operate and we think there's there's a lot of room to grow there's not infinite Room to Grow but there's a lot of room to grow just kind of at the margins in the areas that we operate in and so you know I've owned the company for six full seasons um and when we bought it it was doing 1.2 and 440 and I was doing everything you know I I was doing the work of three people I've hired three people to take over all the tasks I was doing so and just this past season uh you know sales we did 1.85 and and IA was 760 and it went from 440 me doing everything to 760 you know me working maybe 100 hours a year you know a couple hours a week in the business now so um as not bad congratulations Dan thank you 760 uh in SD no that's IA that's IA so that excludes so so that's everybody's paid for Wow 760 in IA for a few hours of your time a week well yeah but I don't want I mean it was it was a lifetime of my time over the past five years we're going to get there don't you worry because there's a lot there uh although we are we we spend so much time on return on assets we got to be a little bit efficient uh hearing what your transition was like let me just ask a couple follow-up questions on this interesting positioning you have in the market or this Mo um you had said you can you see yourselves kind of moving outward in this radius contiguous neighborhood to contiguous neighborhood but I'm just wondering like um given that I didn't even know what G that uh driveway ceiling was I first of all how many neighborhoods are there really you know even if there's 50 neighborhoods and you and you and you're able to penetrate one uh you know a week that's which is like you know you know you're heading the bullseye every single time you're there not that many neighborhoods 50 100 and you know in a given radius and then you probably don't need to reserve them because how often do people get things re their driveway is resealed you see where I'm going with this I mean like the Tam seems small and you've already said that it basically is but it it seems even smaller maybe than you're making it sound with your growth strategy but no I think our goal me and my manager our goal is to double from here over the next decade so I think we I think we can double the volume of business that we're doing over the next 10 years that's a 7% growth rate that's not going to knock anyone's socks off but that's really really solid you know if you if you're talking about the multiple you buy the company at and you know we're already up from 440 to 760 is what over 70% you know in five years that's already a really good return if we double again from there uh you know we we'll be sitting pretty at a million and a half or so and you know for a nice niche business there's no need if we can grow beyond that that so that's one location we have one shop we have a geographic radius where it makes sense to travel from our shop each day and back so I think one shop can do double given the amount of households in our area and how far we can realistically travel in a day and still maintain our productivity there's a radius about that and so I know how many households are in that radius I know our penetration rates and I know if we make some assumptions about penetration rates that are really conservative that seems to be where the numbers pencil out question is is can we create that demand you know can we start marketing in a way that's enticing to people and start doing that we've already been doing it over the past 5 years um you know to go from 1.2 to 1.85 in sales uh that's over 50% so it's it's been happening uh and that's what that's what's going to keep my manager busy over the next decade and and by you know by that time if we're able to achieve it that's one location you could then theoretically open another location and do the same thing and then do the same thing and do the same thing I'm not sure if we have the ambition to do that necessarily you your life's going to get really complicated at that point um but certainly that's an option so we're just focused right now on trying to maximize the productivity the one geographic area that we have and until that happens um you know we don't really have any Grand plans beyond that well and to the point about potentially someday opening a second location or not but but just that that's a segue back to something I wanted to to ask you about this this interesting Market penetration that you have and and how it you know it allows you to kind of um it gives you kind of a a flywheel in in the neighborhood you know one job begets another with the signs and the reputation that's actually not a dynamic I've ever heard um although it's you know basically just Word of Mouth marketing is is what that is um but I wonder if it's something that people listening who have Home Services businesses or aspire to buy a home services business is something that they can affect that can deliberately kind of a strategy that they can pursue where you have you know the very the very effect that you described do do you think it's and therefore like you kind of talked about it as something that happened organically over 45 years could it have been could it could it be for the listener accelerated uh compressed uh if if they if they proactively went after such a strategy yeah I mean you're talking about at a very high level it's it's a route density model in order to maintain the productivity you have to have your guys working for the most amount of time during the day and not driving around so any type of business where you have mult where where the guys are starting somewhere at the beginning of the day and they're going out as opposed to the customers coming in so they're going out and they're doing a bunch of different stops and then coming back so it could be anything any type of distribution business landscaping companies that are mowing lawns uh the ceiling business like I have there's a lot of businesses where you know you've got technicians on the road and you're trying to maintain their productivity the way that you achieve density though you can't like in an HVAC like an emergency plumbing or like something like that business you have to have a backlog from which you can pull tight jobs if you're scheduling on the go in other words a plumber hey my my toilet's clogged you need to come here but you don't have like a thousand jobs to choose from in your backlog and then you pick the 20 that are close together for that day you understand so you're just kind of going wherever the customer takes you cuz it's an emergency Serv service so there are some Dynamics where it just it won't work but if you have the ability to plan out in advance the routes then yes I mean that that that could work uh for sure and you can accelerate it it's going to be risky because you're going to have to invest a lot in marketing and there's no residual value to that if it doesn't work so you could just be like lighting money on fire but certainly you can do it I mean um yeah it's not a unique model at all it's the model that was specific to this company that I bought and um we're trying to exploit that as much as we can by getting even de dener and denser and denser and then taking that and exp you know expanding on the periphery in order to preserve the brand and maintain the equipment and labor productivity but there's nothing unique about it if it's however much money you want to spend to try and make it happen and accelerate it but you have to have the right underlying structural Dynamics for that um so if I thought I was going to buy a plumbing business and do this and I got into the plumbing business and I realized all these calls are like just in time so to speak like you get an emergency call and then you have to immediately go out and then you have to immediately go out well if they're on two sides of town you don't have a choice or else you're not going to get the call because people buy plumbing services partially based on your availability when they have an emergency so the purchasing decision on the part of the customer doesn't really uh elicit itself or or you know tooing what I'm talking about doing in this you know in this space so you've got to do the analysis right but absolutely Dan the so we've talked about return on assets we've talked about this interesting moat that the business had other than just just strictly Financial quantitative uh quantitative analysis of this business you know you kind of as you've described to us you kind of start there and then you bring in kind of qualitative uh assessments of the business and I know that you had a couple that you you would then look at a business with what were those and why did this business check the check the boxes for those so the quantitative analysis is a long a long history of a high return on assets the qualitative analysis is trying to figure out why and figuring out yeah it it earned that much in the past and that looked good in the past but like I'm buying it now and my return is going to come from the future so is it going to look that way in the future and that's what we have to try and figure out so um part of the qualitative analysis is just what I just described figuring out why is this company earning this High money and then if you go through the procedure okay they have extremely dense routes their guys are really productive and they can charge a high price per square foot and they have this flywheel with the marketing and everything like that and the customer purchase decision on Contracting is generally not solely based on price and so you can develop a brand name and so all that work is the qualitative and say okay it seems like this return is pretty protected but what you don't have um what you have in in these small businesses that you don't have in the public markets is you buy one of those companies and they come with professional managers and now it's like okay can I do this um yeah the numbers make sense and the theoretical framework for why it's looks like it does make sense but like I've got to do this I've got to put the the numbers on the board whereas the old uh the the seller is the one that was actually doing this so um the final analysis was more personal I like could I do this and you know I just basically talked to the guy and asked him what he was doing all day and he answered me he says I answer phone calls I answer emails I give estimates I uh schedule the work you know I route the crews and I said okay that seems uh like something I could maybe and it sounds sounds easy enough and it didn't require any sort of like training it wasn't like he was an electrical engineer or something like that and I don't know anything about that so it kind of fit I I said okay if he's going to stick around and teach me how to do it whatever it is I'm 26 I'll just dive in and whatever it takes I'll learn and and it seemed like I could learn it so it felt to me like the numbers were right the explanation around the numbers that I could come up with were right and it seemed like I could then replicate it myself and so that was really it and and so I I ended up making the offer and and bought the company swooped all my clothes out of my closet and drove down to Connecticut it and rented an apartment and um and then that was it and then uh it was smooth sailing from there uh Dan what did you so and and real quickly terms of acquisition what did you pay for it and was this a SBA uh 10% maybe you already said so but remind us uh I yeah I got an SBA loan uh from it the multiple I paid is kind of like in that generic range that that you hear everywhere I don't want to say specifically because I'm still in the game and I consider that to be kind of competitive information you know I I bought a second company and uh you know I don't want to put my deal terms out there too specifically but it was a normal deal that you've heard on 200 episodes okay fair enough all right so uh and and then you you know happily ever after right okay so tell tell us about tell us about the transition and you know how what the seller was doing was no big deal so he he didn't like he didn't lie to me or mislead me in any way everything he said that he was doing he was doing but I didn't realize how he was doing it so um and that was maybe my my fault because I was just willing to say hey whatever the day-to-day life is going to look like I'm just going to do it I mean this is is a great company earning High returns in an industry that's not that's stable and you know I'm just going to do it and so what I found was that he had kind of a unique schedule and way of doing things so he would wake up in the morning around 7:00 a.m. when the guys got down to the shop and make sure everything was good he he worked from his house and so he wasn't down at the shop he was in his home just kind of available to take phone calls and the way that we schedule work because it's so weather dependent is we don't plan it too far in advance so we're generally calling customers just a day or two in advance to tell them that we have their ceiling planned for the next day the way that he would call customers because we're doing like you know a 100 a day is he would set up he had a rooc call thing and it plugged into his landline phone it was like this like it looked like a Nintendo 64 and he would plug one side into his computer and the other side into his like phone jack on his landline phone and he would then export out of his database into the phone system all the numbers he wanted to call and he had a pre-recorded like tape and it was his voice and the phone would dial the customer would pick up or would go to voicemail and he had a message that was pre-recorded that told them we were coming tomorrow and the instructions for what they had to do to get ready for us if your each phone call took about maybe I don't know two or three minutes let's say and so if it took 3 minutes to go through a list of 100 calls it took 300 minutes right and so it was like there was like the phones were dead because he couldn't it was it was using his phone line so he couldn't do anything so he would wake up at 700 send out this call at about 9:00 and then he would go back to bed and he'd sleep till about 1:00 and he would get up at 1:00 so this phone thing would be running while he was sleeping and he would call he would get up and he'd have a bunch of voicemails and so from about 1:00 till about 5:00 he would answer messages he would return a bunch of phone calls the phones would be ringing with customers and he would be doing desk work at about 5:00 he would go out for about 3 hours and he would do estimates and then he would come back at around 8:00 it's a seasonal business it's still light out and he would until the end of the night he would put in all his estimates in his database answer any messages deal with any problems that the guys had um and then at around like 11 or 12 o'clock he would do the routing for the next day after all the customers called in and canceled and everything and and he you know this is who we were going to do tomorrow he had all these maps that he would print out by hand he would go to Staples and print out like 3x3 maps of every town we were in and he'd print out like you know 50 or hundred of them and then he would clear his kitchen table and he'd sit down with these paper maps and because he knew all the roads off the top of his head he was able to Route the crews on these paper maps with a pencil you know this job first this job second but he would just like know where like Smith Street was so his hand would just like go okay number one and then like whatever the next street he would go over here and like put number two and um I didn't know that so he would finish up this routing at like midnight or 1:00 in the morning and then he said he would eat dinner and maybe like go on the treadmill and he'd go to bed around like 3:00 a.m. and then he'd sleep till 7 a and he'd sleep till 7:00 a.m. and then he'd wake up and then he would send out his Robo call and deal with any problem s that the guys had or any like customer issues 9 9 9:00 a.m. in the morning he'd go back to bed until about 1:00 and then he'd repeat so he basically split his his sleep up and he was kind of like SE semi nocturnal almost and I was like I'm not I'm not doing this so and I didn't have the ability to do it so I had to very quickly come up with a way to like route the cruise better and just figure out a better system so the last piece was the database he was using was one of these old school databases is where you don't have a mouse you have to use your cursor the screen's blue all the text is white your cursor is blinking white and it only worked on a Windows 2000 machine because the company went out of business and they never right there was no other versions that so I I very very quickly had to replace his database figure out a different way to call these customers and figure out a different way to Route them and so in the meantime I was trying to run the business and do all this stuff and so I quickly replaced the database found online that there's plenty of like SAS programs where you can just pay monthly for robo calling services and so they'll use their own phone line and they send out the call in 30 seconds not 4 hours so I could easily just export upload Boom the call goes out I get a barrage of calls back people calling me back after they get called but the whole thing's done in 30 or 45 minutes and then you can go onto your normal stuff which is your normal customer phone calls and you can start on your routing you know at like noon not midnight and um the database plugs into it's a custom database it's a desktop relational database we've now got it hosted in the cloud on an oracle server and we integrated through an API into this robocalling system so we don't even have to pull up the robocalling system on its website we do it right from our database and then we found a route optimization software I initially was using Google Maps uh but then we switch to uh you know a real route optimization software that we also pay monthly fee for that we also integrated to our database with an API so I was doing all of that and running the company at the same time so that's why I said to you you know it took five years off my life I feel like I'm going to die five years earlier just from the stress of that you know that 2018 season trying to do all this and I I had to I mean I don't have a Windows 2000 computer so it was like you don't have a choice and I had to figure out a new database and um I didn't know the streets off the top of my head so I had to figure something out and this like phone tree thing that he was using that was the brand name phone tree I'm I don't even have a l do they even have landline phones anymore like with phone jacks like they did so I was just like I had to do this and um I could have easily of I don't want to say avoided because had I known ahead of time I might have not done the deal you know I be like what you sleep like during the day I mean why do you do that and he would explain it and I'll be like wait so how what am I going to do and I might have not even done the deal um but I was so drawn to the financial characteristics of it that I said whatever is going to happen is I got to figure it out and so I just dove in and when you are put in a situation where you've got everything you have on the line and you've moved away from your home I don't know anybody in Connecticut at all and now you've got a situation that you have to adapt to and you don't have a choice and everything's on the line you you know you'll Elevate to a different level that you didn't even know you had and um you know you'll get things done that you otherwise might not have um so it was it was really a gift that I didn't know about this ahead of time going forward I mean if I bought another one I don't you know I don't want to do something like that again I might be a little more um Savvy and in this second company I I kind of was um which I'm not even sure we're going to have time to talk about but uh I don't think so but but it was good I was young and and I I wouldn't recommend it for everybody the one thing I did want to say about it that I've heard a lot you know on your podcast about well just you got to buy a bigger company you know that's why something with 440 when you buy it you got to buy a bigger company yeah it's not that the company necessarily has to be bigger from a profit standpoint it's just that the functions of the company have to be covered by more people so this guy was doing everything he didn't he did everything except the labor and ultimately I had to hire three people to to replace the work I was doing I have a full-time estimator now and I have two people in the office my manager and someone else in the office that do all of the routing and the customer uh communication on the phone and email and the estimator does the estimates and so you know but had the business been 440 when I bought it and had all those people it would have been the same thing as 440 without those people in terms it doesn't have to be like more profitable it's just that it has the functions of the business have to be covered and now what I did was I you know I took the 440 and it grew and then I used a lot of that that was 440 with just an allocation for just paying me in that number that's not SD so that that's 440 in IA paying myself one person it it's now 760 and I'm paying three people you know so a lot of that growth I I purposely reinvested um to try and you know achieve something where other people could now help and and have opportunities of their own and my manager set up he's he's about to buy into the company as well I'm offering him an opportunity to buy in and so he's very excited about you know he knows all about this growth plan that I talked about and now he's got a great opportunity in his life that he wouldn't have otherwise had so um it's very cool because I I've got to achieve something for myself that I that I wanted to do and and him and the other people that we hired as uh are doing so as well um but it's not that the company has to be bigger it's just that it has to have more people doing more things well I do think that the that that is how it's communicated you know try to get a million doll s business be because it suggests a larger a less a less fragile business because usually SD is an indication of you know a signal of of size um but of course as we've talked about on the podcast like a million in SE could be or let maybe not a million but let's call it 750 in SE could be that because the owner is doing so much and he's or she is not paying other people to be to doing it so to to be doing stuff that he should so in fact it would be look more like a $400,000 SD business with you know a management layer or two managers and you know that's not super fragile and can survive without everything just coming apart if somebody sneezes um is effectively the same thing as a $600,000 SD business where the owner is doing absolutely everything and it's and it's super fragile so you really have to understand you know if there that's the question is are there you know if you poke this thing will it will it topple over yeah and and I would just give alone does not tell you does not answer that that's correct yeah yeah just because it's high or low you can have a 900,000 SD and you still got the owner doing everything I mean or you could have a 400,000 where the owner has kind of delegated and trained people and stuff so it's not the presence or absence of a high profit number it's more you've got a that's part of the qualitative analysis on the operational side figuring out what are the functions of this business scheduling estimating answering phone calls and emails and who does those things um but again that wasn't a consideration for me because at the time I was 26 27 and whatever he was doing I was going to do and if this was how I had to get into the opportunity then that's what I was going to do and after looking at a 100 companies and not finding anything close to a 80% long-term decade return on assets like that it didn't matter what he did if he went out in the middle of the night and did the rain dance I was going to be out there with him doing it so it's just whatever it took was what I was going to do because I wanted to make sure that my 250,000 was as protected as possible and that meant to me I had to buy the highest quality company that I could find in my geographies that I could afford and that was my opportunity set and this was the one that popped up and you know I took a swing and and reflecting back on it now despite the fact that you're going to live five years less than you other would have it's you you sound very content with how or more than content with how things worked out even the grueling first High season you know it seems like you feel was you know you you earned your stripes and you learned a lot and you push yourself to another level of uh performance for sure and then I'm a masochist so I did it again okay well we we have about five minutes to hear about that but is there anything else to say about and by the way what's the name of the business the ceiling business stuts driveway ceiling stuts driveway ceiling uh is there anything more to say about that you you've you've told us where you where you're sitting now but basically sales are up what 50% in five years but iida has doubled so um not quite double but yeah okay clo right not quite doubled but close to whatever whatever that is almost 80% higher um fantastic and oh and that and the important thing yeah if we go back to the return on assets it's the same number of trucks so the productivity is continue to in increase as the density has gotten more and more and more dense there's less and less and less driving and so we're able to do more and more and more jobs per day so we're still running three trucks we were running three trucks at 440 we're running three trucks at 760 and you've turned that $250,000 that you'd spent the first quarter Century of your life saving into a bank that throws off three times that that amount every year yeah is that a right way to look at it that that would be correct yeah pre-tax uh you know before moderate amount of Maintenance capital and before the debt too but yes I mean effectively yeah just uh I think just the distributions I was looking at the numbers just the distributions that I've taken have been nine or 10 times and then um if you assume kind of standard multiples you know on the 760 it's probably another 7 to 10 times in equity value so um you know somewhere between 17 and 20 times 17 and 20 times your initial investment of 250 uh five years later yeah well done all right you know I'm not so sure you're masochistic I I think you're just chasing you know 20x in your all over again let's have uh five minutes on on the on the second acquisition so after um you know I had hired everybody and trained them and the way I trained them was I created these training manuals that are literally step by step they're like hundreds of pages to how to do everything and I trained these guys on these manuals and I was there so it took me a year and a half to train the manager it took me another half a year to train the guy that that he works with and then another half a year to train the estimator so they're very very well trained they know what to do um and so that basically I found myself bored and so um you know uh because I was Frugal I don't spend all the money and so it was just kind of accumulating and I got to the point where I said okay I can I can probably do another one of these things and we wanted to move back to Rhode Island so so we did so I live in Rhode Island now the company's in Connecticut about two hours away from me and um I started you know kind of looking at other companies and and something came up this window clean company uh in Rhode Island that had the same Dynamics same thing 80% almost on the dot uh return on assets and for a long period of time it was being sold by somebody who was in his late 30s his grandfather started the company he he inherited part of the company he owned it with his dad um and he he didn't it wasn't his passion you know the the stuts company also had uh the owner had a son my age maybe a year or two older than me and he didn't he's a Management Consultant and he flies between New York and London and he didn't want to he didn't want to take it over so that's why he put it up for sale so it was a similar situation the the guy that I bought it from very nice family they uh he he likes real estate he's a real estate investor he owns a lot of real estate this was his dad's thing and and it got to the point where his real estate was big enough that he could sell this company the window cleaning company so he did he put it up for sale and and I bought it um and um so they had an office staff in place at the time um and then they have about um 20 guys out on the road every day cleaning windows all across Rhode Island so it's a pretty residential yeah it's almost the same model I didn't intend for that I would have bought anything I would have bought a Manufacturing Company a Distribution Company it just had to have the financial model and a way for me to explain why that was going to persist into the future for me um but this just happened it just happened to come up so uh I saw it I already know about the routing I already know how to manage the guys uh that's a big big part of it um and getting the productivity out of the guys not only only through the density but actually through their attitude and and them actually getting the work done every day talk to talk to us about that what what did you learn uh at stuts to become a better manager that it's sort of like um uh Goldilocks like you can't be too hard and you can't be too soft you have to be like right in the middle I think a lot of people struggle with being an authority figure when you employ somebody you whether you like it or not you have a certain degree of power over them in the in that context the reason you can say hey the floors need to be sweeped and they'll go and sweep it is because you control their income and just like we try to avoid customer concentration in in the business purchases they are concentrated they have one customer they sell their labor to you and that's one customer for them so because of that they're willing to do what you say in order to keep working and that whether you like it or not has a dynamic where you are able to control their actions to a certain degree um and that is very uncomfortable for a lot of people and a lot of people shy away from that and they don't want to have the confrontational conversations that are required to really effectively exercise that Authority and that's doesn't have to be big stuff it doesn't mean you're firing people or doing anything but like if they have to keep this area clean and it's not clean well it's not going to break the company if you don't say anything and so you just don't say anything and then things start to accumulate and that's how you build a culture and so being a good manager to me the hard part about it is setting the standard and not letting everyone around you slip from it and in order to not let every anyone slip it's like there's this term in physics entropy from kind of like from order to disorder and that's the natural order of things and you are the boss it is your job to not let anyone slip from the standard and when they do you have to kind of gently bring them back to the standard and it doesn't mean you're yelling or Screaming but it's just by the nature of it is a confrontational thing to do to tell somebody to do something or to tell them you know they're not up to this and this is what I need to see andove and it's so easy to avoid that and so what I've learned is no matter what we're not going to slip from the standard and uh that doesn't mean I'm authoritarian at all I'm pretty L fair but I would say my management approach is is pretty barbell I'm very very L Fair it's kind of whatever you want to do to get the work done as long as it's done correctly but if it's not done correctly and I bring this to your attention one or two times ultimately you're either getting demoted suspended or fired and sticking to that uh even when you know it's really tough to do and you do that a few times and people see that and it starts to change the culture pretty dramatically pretty quickly in a positive way because all the people that were doing that stuff they don't like the people that weren't anyways and so but but as a business owner you're is like man I need this guy but like you really don't I mean you'll you'll find somebody to replace him and and they'll be better and everything like that so the hard part of being a manager is not it's it's the internal conflict that you have where you want people to like you you know you want people to think you're a nice guy you want to have frictionless interaction with everybody and you want everybody to Think You're great and that is not possible by any stretch of the imagination everybody is going to tell you what you want to hear now everybody is g to laugh at your jokes I've never been so funny since I own these companies so you're you're kind of walking through this Haze where they say it's Lonely at the Top you're walking through this altered reality where everybody's on guard around you and there isn't any way to not have that happen so you have to accept it and accept the position that you're in now and just say look the way that I get these people to like and respect me is to preserve their jobs and to make their lives as easy as possible by not having them drive around too much not breathing down their neck for minutia things and showing them respect when I talk to them and just how I conduct myself in front of them but they would they'll respect you and like you more for doing that trying to than trying to be kind of more friendly with them and that I would say that's the biggest takeaway that that I've learned and and and you went and you learned that the hard way at stuts your first acquisition no I I wouldn't say so the my the guy stuts was like that and so I just learned from him I I had never managed anybody at 26 like I I'm managing guys that have been doing this their whole life that are in their 40s like who am I but all of a sudden because you have this Authority you control their paycheck they will listen to you and so it's like wow you need to rise to the occasion what am I going to do with this and you could really mismanage that and that's why people hate their jobs and hate their bosses and everything like that so um he was really good at it I thought and um so whenever there was a sticky situation that came up I called him and I just asked hey this is the situation what do you do here and he would tell me and then I just repeated it and eventually over time that's how I learned and um I would say with with this next company with uh the window washing company a Anda uh the name of the company is an ana window cleaning um because the guy that I bought it from was not fully kind of immersed and there dayto day he was doing his real estate stuff and um the culture of the company really that this was a huge skill set that I brought I had to kind of bring everybody back and and we let some people go absolutely at first that that weren't reallying to come on board or improve and and what we've got now is guys that have been working there for a very long time that I promoted very happy to get the the promotion and there just kind of like even killed calm guys that just get the work done and everybody is very very happy with how it's going so um that that was something that needed to happen and it and it did and it's it's been go it's been going great since um and the guys are a lot more productive you know it's it's amazing how much better work we're I've owned the company less than a year sales are up 20% with the same number of guys because they're getting their work done every day it's like I didn't do anything yes I'm helping them with the routing I'm giving them a little boost because they're not driving around as much but maybe that's half of it the other half is just they're finishing their work and they're not screwing around um and uh and it's because I think they feel a lot more respected and they feel like um you know I'm paying attention and and this is my focus and I'm treating everyone fair and the guys that are screwing around they're not there anymore so uh we've got a good a good cast of characters now and we've got about 20 of them so um you know Dan last question on your second acquisition just to solidify this return on assets lens this business it sounded like it also really showed uh a strong performance on this metric um can you explain that to or you know walk us through what you saw there and then sounds like you're always follow-up question when you see really really strong return on assets is why what's the what's the how is a company able to maintain that yeah the numbers were about 80% uh same as same as the ceiling business and it it had the same Dynamics in terms of the density so it's again I didn't I didn't pick this company because of this but it just happened to be the same thing so if you think of the square footage of glass you're cleaning it's because we're so heavily conc concentrated in residential we do a lot of commercial too uh more than the ceiling company but it's it's vast majority residential if you park in front of a giant skyscraper and you're there all day or two days you're highly productive the whole day but the price you're going to get for those windows is a lot lower uh because you're doing so much and they get big out it's the same thing it's a few hundred the average price is even cheaper to clean your windows than do the driveway it's a few hundred customers do it a couple times a year you go into their house and into their home so you got to be a reputable company so a brand name matters they're not just going to let anybody off the street um you know into their home and into their bedroom and things like that so you're there for a couple of hours and so you really have to be reputable and have a good reputation so even though we don't have the visible yard signs the company has a phenomenal online presence um and that is sort of the effective yard sign when people look us up and uh because the company's been in business since 1930 it had a really really good word of mouth reputation and so it had this big base of customers that I bought and um they were really close together and the routing was not optimized they did not even use a map to schedule and so we've built a custom mapping program that we've integrated to their SAS database CRM uh through the apis and that allows us to now visually schedule jobs and so we've improved the routing and so we've achieved the commercial volume of window cleanings at residential prices so it's the exact same thing and we've done it through the routing and we've done it through even more at this company getting the guys more productive as well um and so that's that's basically what the model is we've got a structural Advantage because of the density those profits are protected and we're able to price our services accordingly to protect ourselves from people coming in at scale there's always going to be somebody who can just like hang a shingle and kind of walk around with a bucket and do it but okay so let's say they do that and they take 10 of our jobs well how are they going to grow from there you know once and then they have to start adding overhead and all this type of stuff so they're always going to be these little small guys but you're talking about a company now we're doing and we cover the entire State we're by far the biggest company by far it's not even close and um so we've got a nice model here and we've got a really good online reputation and that matters in this business uh your reputation matters and we're able to protect it through charging very very fair prices because of our labor and Equipment productivity and still earn the high return on assets and what does revenue look like and you said 20 employees what does revenue look like how I bought it at the beginning of 23 so in 22 it was 1 195 just under 2 million um and it was doing 580 on that so it was like 30% and just like I said it's up 20% over that in less than a year um just from you know the routing efficiency and the the Labor uh the guys actually just getting it done uh so we're just under 24 now and and that's up to 800 because most of that just dropped to the bottom line I haven't added anybody yet all right Dan this has been a lot of fun and an education as I've said any last anything we didn't touch on or any last message for people listening uh before we close out yeah go for it you know if you if you you know your personality if you have the personality where you can do this then just go for it I mean it's not that hard to educate yourself it would take a little bit of time uh but if you you know if you learn a little bit about accounting and you learn a little bit about economics and and you know this return on assets and long-term uh return on assets and then you do the qualitative work there's all stuff out there that you can that you can read you can read a microeconomics textbook uh you can read you know Michael Porter those those are major major books for me the the five forces you get like a page and a half in college on that those books are 900 Pages he wrote a book in 1980 called uh competitive uh strategy that introduced the five forces in 1980 and then he wrote in 1985 a book called competitive Advantage where he introduced the concept of the value chain and everything like that those books are 900 Pages combined so the page and a half you get in college on the five forces that is not even close to the depth that he goes into to help you evaluate businesses from from a qualitative standpoint and understand what's going on in the industry um and what's going on in the particular business and the value chain of that business um that you can educate yourself so if you if you really want to pursue this there are resources out there that you can pursue and read and learn um to try and make it a lot more likely that you'll be successful with the acquisition um it just takes a little bit of education and time and learning but um and look I'm not saying I know all this and and this could all blow up on me next year so um you know I'm still in the game it's not like uh I've retired yet so um I think you should go for it and uh but it's definitely not for everybody and if you're considering that it might not be for you it's not for you because it's going to be uh you have to be kind of Allin mentally and and willing to do whatever it takes and if you're a little timid or anything like that I I guess that's normal but to me this was an obvious path like it was just kind of like hit me like a like an Anvil fell out of the sky and just hit me in the head like this is what I'm going to be doing and kind of nothing's going to stop me from doing it so I would say if if you've got the personality for it it's a cool thing to do it's very very stressful uh there are definitely negatives to it but if you don't think that you have the personality I would highly encourage you not to do it because it it will break you very very quickly all right all right Dan on on that note uh what's your preferred method of Outreach if people want to ask you a question um you can find me on Dan tagliatella thanks for so much time what a fun and Illuminating conversation thanks will hopefully other people find it useful 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