John Murphy, welcome to Acquiring Minds. Thank you, Will. It's an honor to be here. John, lots of elements to your story. Among them, that you graduated from real estate investing, you were a successful real estate investor, to buying small businesses. So, we're going to want to hear about that evolution. Plus everything else. Let's get started, John, with some background on you, please. Absolutely. Uh first, just want to take the opportunity to say thank you for the podcast and all you do for the community. Uh you know, I myself have listened to it many of your episodes and it's just been an absolute uh pleasure and helped me on my journey to acquire my business. So, I want to say thank you for that. Well, you're welcome and thank you for saying so, John. Really appreciate it. Absolutely. So, background on me, uh I have a little bit of a unique upbringing. So, I was born uh in California, but grew up primarily overseas. So, uh my parents did some aids and missions work. And then came back to finish out high school in the US. College, ROTC, joined the military. And uh did that for 6 and 1/2 years active. And then transitioned out of the military to a corporate career. And again, 6 and 1/2 year corporate career. About midway through that that uh stint, I started doing real estate investing. And then built up a portfolio. And subsequently got divorced and lost a large portion of that portfolio. And then uh transitioned out of my W-2 into do real estate full-time. So, let me let me uh pick at a few of the things there, John. How many when you lost how big was your portfolio when you lost a lot of it in the divorce? So, I built it up to 35 units. All like small multi-family. So, think uh duplex, triplex, fourplex. And after the divorce, you know, lost about half of them through some unfortunate circumstances and some investors I had to pay back. Went down to four units. So, 35 to four. Fortunately, I had a lot in the pipeline. So, and a good partner. And built that back up uh very quickly in short order. So, about 3 years after that, I was up to triple digits with a partner. So, we hit 100 units. Oh, wow. Uh um given how quickly you bounced back, was going from 35 to four painful, I assume? Or did were you so aware that that you were going to be able to bounce back cuz you had this really full pipeline that you it wasn't maybe as financially traumatic as that sounds. Uh no, it was incredibly painful, right? It was um one of the the hardest junctures of my life. And I sig- was significantly in the hole due to just all the circumstances that surrounded that and that exiting the business, you know, I had a 10-unit apartment complex that I had under this uh complicated agreement and my investors I had to pay them back and lost that property in the process as well. So, you know, I was in the hole just shy of half a million dollars right after my divorce. So, I was went from a very positive net worth to about, you know, negative half a million dollar net worth. Man. Well, sounds like real estate investing for you. No, I I say that with uh naivete. I've never been in the game, but of course it is it is notorious, especially at the big highest levels, the the those swings. Uh it's known for that. The And then you built it back up really quickly. So, you went from four units uh balance sheet of -500,000 and then give us a picture of your of your quick rise right back up. Yeah, so fortunately, in the pipeline, we had a 24-unit apartment complex. So, uh me and my my partner. And we closed on that. That That was a a slow roasting property that took us 17 months from initial contact to when we actually closed the deal. So, anyone in the game knows that it just takes time sometimes and you have to wait for the the seller to be ready, right? So, that took uh not long after the divorce, I was able to acquire that one. And then uh we stabilized that property over about a year and then did a cash-out refinance and found another 50-unit portfolio and parlayed that refinance into acquiring the 50-unit portfolio. And uh along the way I I had acquired a couple other properties as well through some creative finance methods as which is my preferred route. And because you are now somebody who's bought a small business, I assume your motivations for buying a small business were are similar to the ones that you had to do real estate investing. Give us a little bit of the psychology or the personality type that you are that led you to be this person who is kind of entrepreneurial on the side, first with real estate, later with buying small businesses. Absolutely. I think uh I've always been very money-minded from a young age, trying to figure out, you know, how to make money, but was more, interestingly enough, more fiscally conservative the young when I was younger. So, you think about it, you know, I had a very diverse experience growing up. So, that that enabled me to, you know, deal with risk and deal with uncertainty just based on how I was raised. But I really yearned for that security, that financial security, that uh kind of sense of belonging that I didn't have when I was younger. So, I found that through the military and uh when you're in the military, it's interesting because you have a lot of risk, you have a lot of um difficult things that you go through, but one of the things that you're not really concerned about as much is your financial stability, right? I mean, you're you're getting a a government check. If the government can't pay you, we've got bigger problems, right? So, Yeah. So, that's that's kind of one piece of the risk equation that's off the table uh from that perspective, right? Mhm. And so, it sounds like financial uncertainty. It sounds like you're very comfortable in risk, but financial uncertainty bothers you a lot. On the other on the other hand, you are also somebody who makes moves and puts your capital at risk. So, I it sounds like you really Right. you really crave financial security, but you're also willing to make big bets to to get there, bets where in fact you could lose it all and then some, as you did. Absolutely. And and that process from getting me to where I was then to where I am now has has taken time, right? Time and different activities to build that risk tolerance muscle, right? So, you know, I think I had a bit of an advantage of somebody coming directly from a W-2 to go straight into small business acquisitions in that I had 7 years of real estate investing in my background. And it's a very similar process to go through real estate acquisitions as it is to small business acquisitions. The complexity's just increased. The numbers are typically larger. Uh so, I was building that risk tolerance muscle, right? I was putting my capital at risk. And I was doing things that I was uncomfortable doing. And that that allowed me to parlay all those lessons and learnings into acquiring a business. Mhm. Interesting that you say that it's so similar except more complex buying businesses because while the math and the structuring of deals and the finding deals, those parallels seem clear. Post acquisition, everything seems quite different. One is dealing with boxes, not to not to minimize the difficulty of having a real estate portfolio. Uh and then the other is dealing with people in the in the infinite moving parts within an organization. So, do you think that even even post acquisition, that the parallels are strong? Or are you just kind of talking about just the deal making, finding and making process? Yeah, I'm speaking more uh the deal making process, right? So, the the targeting, the finding, the going through the due diligence, the acquisitions. Uh And then obviously post close, there's there's additional complexities, too. It's just uh you know, it's apples and oranges. I think for me, because I had done real estate for so long, it was much simpler in my mind. So, you know, going the small business route, it's it's uh a lot more complexity cuz I hadn't done it yet, right? So, learning the playbook, learning, you know, marketing and sales that I don't have a strong background in, uh the operations side, which I do have a strong background in. And then also the the aspect of needing to work on the business and not in the business, not buying yourself a job, and all those those different characteristics you look for in a business, I think are are critical to that whole process. All right, John. So, returning to the story now, you build back up from a negative number to a portfolio of you said 100 doors? Correct. And you you referred to a partner. This is a financial partner, business partner, not another life partner. Correct. Yes. Right. Yes. Okay. Okay. So, and then you said you Did you say that you quit your W-2? This is all on the side. What what's your W-2 situation through this whole this whole journey? Yeah, so January of 2020, I left my W-2. And essentially what happened there is I was at the point where I was financially able to cover my expenses, but just barely, right? So after that I'd done small real estate investing, some flips, and some wholesales, and building up the portfolio, but I was always as every real estate investor knows, as you're in the acquisition phase, you're you're very asset rich and cash poor, right? Yeah. So you have very little to live on and in my mind I was reinvesting everything into new acquisitions, rehabbing units, you know, doing the flips, and whenever I'd make money from a flip or a wholesale, I'd roll that into another acquisition, right? So that's that's how I built up over those, you know, about 2 and 1/2, 3 year span up to from 4 to 100 units with just one partner, right? So doing all those those moves really helped propel me to that point, right? And what was the decision to finally quit your W-2? Getting to that point where I could cover my expenses and buy that time back, right? Mhm. So that had been kind of been a goal if you could make your real estate investing substantial enough that it was kicking off enough cash to live to cover your living expenses if barely, it was time to go whole hog with this, all in. Absolutely, yeah. And that and throughout my corporate career I realized you know, about halfway into it, so call it 3 years in that I just wasn't really built for that, right? So all my military experience, all the the difficulties with deployments, challenges there, and my background when I was younger you know, I found myself funnily enough I was at the tail end of my corporate career I'd gone from operations management to more of a front end consumer facing pricing department but I was more of a senior analyst type role and there I actually had a mental breakdown first I'd ever had, you know, me a a two time combat veteran you know, been through a lot of hard hard things in my life here I am sitting at a a cubicle and I was so overwhelmed I couldn't even function. Wow. It was very it was very odd to me and that that kind of led me down a cascade of um realizing that it was my body telling me that that this isn't what I'm meant to do, you know, it it didn't fit into my my psyche, my personality, and my purpose in life. Wow. And and what do you think was so wrong? Why was it such a wrong fit? Just cuz you're more you're you're you need independence and autonomy? That's a part of it, I'd say, independence, autonomy, and just knowing myself and my capabilities and wanting to explore those and ensure that I'm not leaving anything on the table. I I didn't want to settle, right? And I'd been in the military for 6 and 1/2 years, I had played by the rules, done all those things and now it was up to me, right? So I I was just following the the typical path, right? So you go you go to school, go to college, you know, you get a great job, and that's that, you work for 40 years, right? And and that was not the path that I saw for myself, right? So I wanted to take it on my own shoulders and then do what I thought I was capable of doing. Wow. The people who are in W-2s listening to this genre are feeling the pressure increase of having having seen what your what you did. Where'd you live when you were a kid overseas? What countries? So it was quite a few, actually. It was a lot of countries in the Middle East. Egypt and Jordan were a couple of them. And your parents were Christian missionaries? Correct, and they did aid work as well, yeah. And aid work. Christian missionaries and aid work in the Muslim world. That's that sounds like a subject for another podcast. Yes, absolutely. We'll put a pin in that. We're just about to get to your search here. I know people are wanting to wanting me to get there, but gurus, for lack of a better word, the or coaches, let's let's let's be um not so judgy. That word just has such a negative valence. Coaches is something that I know from our pre-call you you made a lot of use of over your real estate and now business buying career. Say a little bit about maybe who and and why you are so drawn to them and I presumably have seen success with them. Yeah, so I think that'll start getting into the the search process a bit. So early on um when I first found out about, you know small business acquisitions came on my radar I saw you know, scrolling on Facebook, I saw Carl Allen's name pop up. He had this, you know, buy a business in 10 days course. I think he still advertises for that now and it was, you know, 100, 200 bucks, so I found it interesting, thought I'd I'd take the course, bought it you know, went through the whole 10 days and I said, "Wow, this is pretty incredible." And just some of the statistics that that really stuck out to me, a lot of the uh you know, the stats around the only one in 12 small businesses will close within a year. Um and then just the number of baby boomers and and all the stats around that, retiring, the silver tsunami, 10 trillion dollars wealth transfer, all that good stuff, right? Um so that that piqued my interest and then I knew enough to be dangerous, right? So it was a very kind of basic general course. It said, "Hey, you know, these are kind of the general things you need to look at." And so that's that's right after I did those 10 days, I started to search, right? Got on BizBuySell and and looked for businesses that were local to me. So that that was my initial experience with a, you know, small business acquisitions coach. Although I I I will say prior to that I had coaching real estate investing and had been to to quite a few conferences and a couple masterminds as well. So obviously the fact that you you spend your time and resources on the on coaching means that you believe in it. And and I and I guess I'm trying to draw you out because there's there can be skepticism around the whole category. Maybe address that skepticism. Yeah, I think I need to get a little bit further into my story to get to my current coach and how I found him. And then that'll probably help clear that up. Okay. know if you want to do that now or or keep going through the acquisition timeline. No, yeah, let's let's circle back to it when we hit your current coach. Great, John. So you you you take Carl Allen's 10 day course. Gretchen Roberts, who bought an accounting firm, recent guest, that was also her entree into buying a small business, also from graduated from real estate or at least a maybe not as serious as you, but a dalliance in real estate investing or an interest, maybe even. Um so you like you like what you see, you turn to BizBuySell and you basically start your search. Pick us up from there. Yeah, so that was around September of '22 that I took that course and then you know, turned right around, got on BizBuySell, started looking, and found a fencing company that fit the bill for what I was looking for. It was 30 minutes from where I lived, as well. And shortly after that got in touch with the broker. All of it, of course, brand new process to me. I had done a 10 day crash course, so I didn't know what I didn't know, right? Sure. And so I just I said, well, that you know, I'm a guy that I take the information and so this is part of my lessons learned from all of my real estate investing, right? It's you got to get over that fear hurdle and the learnings come in the taking of the action, right? That's that's when you really learn. Like I did the year and a half analysis paralysis when I was first getting into real estate and so that was a big lesson I took from real estate into this. I said, "Look, I know enough to get moving and I'm just going to get moving and I'm going to get this rep in, right? And I'm going to try to try to get it done." And I thought with all of my, you know, real estate experience I could I could get it to the finish line. And which was not the case for this first deal, unfortunately, but we can talk a little bit about why that was, too. So Yeah, let's do that. But first, John, so where are you based? In northern Indiana. And this whole story also northern Indiana? Correct, yes. Okay. Northern Indiana and you said the fencing company checked your boxes. What were your boxes? What were you looking for? At the time I was looking for really anything over 3 to 400,000 in SDE. And I didn't have a very defined buy box, which is, you know, one of the benefits of my future mastermind and coach that I'll talk about. But this this business was about 2.3 million purchase price and had about 700,000 in SDE. All right, well, tell us the story almost getting in and then losing it. Absolutely. So it was less than a month after I'd finished that 10-day course to when I found that this fence company and had it under LOI, right? So then I began my due diligence process which I just piecemealed together myself doing some additional research and some of the resources in the the 10-day course and I the biggest mistake I think I made during this process was trying to apply a lot of creative financing strategies without really understanding the sellers intent and the sellers had been through three buyers previous to me and that should have been a an indicator right there that they weren't really sure what they wanted at the onset and come to find out 5 months later due diligence about $40,000 in due diligence cost. We were about a week away from the closing table and they pulled out of the deal, right? So they they decided they didn't want to sell to me. And the reasoning thing was because of how I structured it and they wanted every piece of their seller note to be collateralized, every dollar to be collateralized which as you know it's typically not, right? So and they they didn't like the subordination clause to the lender, the commercial lender. So this was a non-SBA, it was a leveraged buyout. So we were doing again this is you know year and a half ago so a little fuzzy on the numbers but we were uh some somewhere around the ballpark of 70% bank financed and then additional 30% seller note with a small down payment on my end and that that 30% what 25% seller note, they wanted 100% collateralized and not subordinate to the bank loan which of course the bank was not willing to do so that all of that kind of came to a head and they got too scared and backed out of the deal. And John, when you say you were trying to quote creatively finance this, I guess leaning on your your technique in the real estate world Mhm. What what this doesn't sound quote creative, this sounds pretty standard except for the fact that you you didn't go at the SBA route, you went conventional. And I guess that there was a that they had a bigger seller note than like if you'd gone SBA, the seller note would have been closer to 10 or 15% rather than what 25%? Right. Yeah. So was that was that what what it made it kind of creative? And and then second follow up, why didn't you go the SBA route? Yeah again so this was my my first iteration so it for me I think it coming from my perspective it it felt creative cuz it was my first time going through this process. I didn't know anybody else that had bought a business and quite frankly I didn't I didn't know much about the SBA loan and had I had it to do over again, I could have probably closed the deal with an SBA loan, right? Yeah. And and I will say you know slight caveat I've kept in touch with the seller and my real estate business partner is now under contract and likely going to close that same business in March by the end of by the end of this month. So just a an interesting plot twist there so that that of course has taken place over the last you know 12 months so And is this something you feel good about? Yeah, absolutely. Good. Okay. All right. So I think so you know back to the financing portion to me it felt felt creative because it had a lot of moving pieces and I was trying to leverage all the the pieces all the assets in the business and work with my commercial lender who I've done commercial real estate deals with before and then try and educate the sellers on the benefits of that the benefits of the of the seller note and all all those those moving pieces, right? Okay. And so I what I was going to say too is I wonder I was going to ask why a lender wouldn't say well why aren't why why even if you weren't super aware of the SBA loan option, the 7A option you would think that a lend your lenders that you're talking to would have surfaced this option to you. But it sounds like you just went back to the lender that you'd used for your real estate transactions and you weren't shopping around talking to a bunch of lenders and you kind of came to them with a plan in mind and they were just kind of following your lead so they didn't volunteer the option of the SBA. Yep, that's exactly what it was, yep. Yeah. Now losing that deal as we all know in this world losing deals is part of it. How did how did you react to getting pretty far far along? I mean you you had this thing in your in in in the palm of your hand and then it was snatched out by the seller, that must have been frustrating although as I say it's it's not uncommon. How'd you react? Not particularly well, I took it hard. Um Yeah, I mean when you invest as other searchers know you invest that much time and energy and capital and you know I made the mistake of also kind of setting my heart towards it, right? I I I'd you know burn the ships as they say and envision myself running the company and and I was there mentally so when they just pulled out kind of at the 11th hour it hit me pretty hard, you know? And I'd say a good month or two after that I was I was pretty depressed and I didn't even look at another business. And sort of at least for that moment while you're licking your wounds concluding that maybe you won't even do this path anymore of buying a business? Yeah, I wasn't sure if I wanted to continue pursuing it. I knew you know from a money math perspective I knew it made the most sense for my goals, right? Um but yeah again I just going through that process I I didn't feel like I had the the personal capacity to continue the search, right? Yeah and right, let's not forget 40 grand you said you were in for. Yeah. Painful. Okay. But here you sit owner of a small business so then what? So as part of trying to acquire that fence company I'd sold off about 20 units of my 100 unit portfolio so I had a little bit of capital and a good portion of that went towards that that 40 grand due diligence cost. Wasn't feeling good about the that deal afterwards and then I found another small business acquisitions group and again from Facebook just popped up with one of his videos and and I liked how he was explaining things. His name's Kyle Mallian and he just says had a genuine sense about him and he had an event coming up in Scottsdale. This was last March the event was and I just connected with them and and I took the risk when I didn't feel ready yet. I still felt like I was licking my my wounds quite a bit. Yeah. But just something connected me with him and I knew he I felt like he was a genuine guy so I wanted to go investigate and check it out and see if if he was what he seemed to be, right? So went to that event was incredible value that he provided. He he walked A to Z through the process. You know he's created this great community of other you know searchers which funny side note I didn't even know that term until last summer when I started listening to your podcast so Well he actually John and let me stop you there because I'll say often that there's these there are these ecosystems in the world of buying businesses that that don't overlap a lot. They they they feel somewhat segregated if you will and one would be the kind of the MBA crowd so I have a lot of people on who who come from a business school and they learn about ETA there and that's one circuit and then the SM call it the SMB Twitter crowd uh and that know each other or go to a conference or two and and there's a little bit of intersection between those two circles but not a lot, not as much as you'd think. Um and then you know there's a whole world of e-commerce and and website and and kind of micro SaaS business acquisitions, micro acquire online businesses, that's a whole other universe of people who don't aren't interested in buying brick and mortar offline sweaty gritty businesses at all and I you know rarely cross paths with and then probably every excuse the phrase guru probably has their own little orbit of people and you know it just it's it's anyway that just kind of interesting to me and it sounds like if you didn't learn the word searcher until you started listening to this podcast that that word isn't even used. Those people at the at at what is it Kyle Mallian's and Kyle Mallian's orbit don't even know the phrase or self-identify as quote searchers. It's interesting. Yeah. So they're just they just kind of find it from an ad on Facebook and then that becomes their universe of fellow business buyers. Correct. Yeah. You know, we call them acquisition entrepreneurs, you know. Yeah, sure. Yeah. Yeah, exactly. Yeah, and I think you're absolutely right there and it's it's been interesting too just since last summer when I learned that and you know, learn about the whole traditional search process that I just didn't even know that was a thing. So, it's it's been very very intriguing to go through that process and then do it in a different way, you know, as a self-funded searcher, I guess you could say. So, um yeah, but but yeah, so so back to the the event, you know, went to the event in Scottsdale. Uh fantastic and and what what I really like about Kyle Malian's group and now it's evolved into what he calls the Elite Wealth Club and it's it's more of like a country club kind of membership. So, uh it's ongoing support. He has a whole deal team that he's put together from kind of A to Z. He's got your attorney, due diligence expert, you know, CPA, anybody you need tax from that perspective to get due diligence done and these are all very experienced folks in their field, right? Uh so, he's kind of put this whole deal team together and he is a very just genuine and caring giving person and he's he's personally helped me along this journey too as well. So, kind of talking about your your ecosystems, I think that there are like you said, there are different ones, but I I think it's critical not it's not necessary, but I think it's it's important to get yourself involved into one of these groups, right? Find one that you identify with and plug in and start talking the language, right? I think that's that's an important part of this journey because it's incredibly challenging, right? Uh everyone that's gone through and bought a business, you know, unless they're just way better than I am at it, right? And find it easy. It's it's a it's challenging, you know, you you you're incredibly stressed, you lose sleep, you know, there it's it stretches you in every way imaginable to be an entrepreneur even acquiring an already established business, right? So, I think just wanted to high punctuate that point that it's important to get involved in a group so you have that sense of borrowed belief. You're seeing other people around you that are either, you know, similar to you or even don't have as much experience as you that are acquiring businesses that are, you know, very successful, right? So, so you get to see that uh process with somebody when you're in that group, especially if you're in the group long enough, you get to see people go through and acquire and do all that. I think that's that's where a big part of the value is in these groups is when you're going down the journey uh and you you start losing faith and you start, you know, taking the lumps and you say, well, is this really worth it or not, you know, and then you you can pick up the phone or jump on a Zoom call and people are saying, nope, that's part of the process. This is what you need to do next or just focus here. You know, there's a ton of value in that and it just kind of lifts your spirits and says, okay, this is normal. Yeah, everybody's experiencing this in one way or another or for for their own business and I just need to take that next step and keep moving, right? Well, it sounds like it was precisely that emotional support or exposure to success that got you out of your funk. It was this Scottsdale experience that kind of woke you up to try again? Absolutely. Yeah. Yeah. Well, everything you just explained there, John, is um kind of the spirit of Acquiring Minds. Uh you know, show showing that this path is is real and you you use the phrase borrowed belief. I I really I like that. Mhm. Uh the sound of that. It's more elegant than how I say it, which is showing people that this isn't weird. It's not weird to go Maybe I'll start using borrowed belief. There you go. All right, great. So, you're in Kyle's group. You are seeing other people be successful. You you've dusted yourself off and Yeah, so part of what I got in that group was his particular buy box, right? And the buy box that he likes to target is business that's, you know, 1 to 5 million, 10 years old, 10 plus employees and then profit margins of 20% or greater, right? So, so that gave me the the focus to go out and search again and I even took it to the to kind of the next level to stretch myself a little bit. So, right after that event, I jumped back on BizBuySell and I targeted businesses with an SDE or cash flow of a million plus, right? And I was looking I expanded my geographic reach a little bit to neighboring states. So, again, I'm in northern Indiana. Uh very shortly after that, I think it was a week or so of searching on BizBuySell, uh I found the commercial painting company that I now own and that's in Grand Rapids, Michigan. So, 2 and 1/2 hours from where I live in Indiana. So, from from there, reached out to the broker and then that that got the ball rolling and shortly after that, went and did a site visit and then began the due diligence process and then from A to Z, it took 8 and 1/2 months to close that deal, right? All right. Well, let let let's spend some time here, John, but before we do, say again, please, what what Kyle's recommended buy box is, please. What were those criteria? So, it's 1 to 5 million in revenue slash purchase price, 10 plus years old, 10 or more uh employees and then 20% or greater net profit margin. A glaring absence there of recurring revenue, which is we talk about a lot on this podcast and plenty of people will say, including me, will say, let's not overemphasize that and that's too strict a criterion, but um but it's usually, you know, if if if we're all if we're all being picky, it's usually top of the list. What does Kyle say about recurring revenue? Too too too picky? Uh I mean, I don't want to speak for him, but the gist I kind of get is is it's more of a nice to have. Yeah. You know, it's not it's not a necessity and there's there's plenty of examples of why that's true, you know. Yeah, sure. Sure. And and also relevant to the business that you bought is project-based in kind of construction versus versus maintenance or some sort of naturally recurring or reoccurring relationship with your customers. Um did he or do you did you going into this process have any thoughts on that particular spectrum? No, quite frankly, I I was just looking at the business more holistically, right? So, I mean, the business I bought is 60 years old, you know, company that doesn't stay in business that long unless there's something there, right? So, um yeah, I just for me and from an exit strategy standpoint, I want to hold on to the business, you know, I'm not planning a I'm not doing a traditional search where I need a 3 to 5-year window where I'm, you know, doubling revenues and net profits and then making an exit, right? So, my plan is to hold on to the business for now and grow it slowly organically over time, right? Yeah, so, yeah. Yeah, I mean, it's probably time for me to just stop asking about recurring revenue. It's like I I I'll I'll ask about it and then I'll say, but as we know, it shouldn't be overemphasized and and yet by always asking about it, I'm doing the emphasizing. So, I think I think I'm just going to stop asking about it. There you go. Much much more interesting, I think, I I I don't want to overstate this, but kind of my reflex is to say, more interesting potentially is age of business. Um you know, that that is such a strong indication of uh of kind of health of a business and um fundamental strength of a business. Absolutely. So, um so so plea please carry on. Tell tell us about what you found. Yeah, so the business that I ended up acquiring is again a 60-year-old commercial painting company. We do about 80% commercial contracts, 20% industrial. And the company did 8 million in revenue last year and has approximately, give or take, 50 employees, right? Seasonal work. We we flex a little bit on that. So, that's 50 W-2 employees, full benefits and uh yeah, so that's those are essentially the numbers and it was right at that million-dollar SDE range at purchase. So, a million dollars of SDE on on eight or so million of revenue is that doesn't get us to the 20% margins. So, I What did you how did you get comfortable? Yeah, so through the due diligence process, I I saw some you know, fat that could be trimmed, right? This is a second-generation owned business and the previous owner had owned it for 38 years, right? His father started it in 1963. So, there there was uh it was a lifestyle business. We'll put it that way. So, there was uh definitely some fat to be trimmed and I saw that coming into it. On top of that, there were a couple interesting factors. Uh so, the model for commercial painting or painting companies in general, um a lot of painting contractors will be more of a uh contract seller. So, they will hire uh subs to do to carry out most of the fulfillment for the contracts, right? So, we have a bit of a unique competitive advantage that we have such a large W-2 base of painters. So, we're a bit more flexible length we don't have language barriers sometimes that you have with subs. So, so those are all positives, but it's more expensive, right? And that that reflects in the financials. So, that's that's an opportunity to transition to more of a hybrid model where we're bringing more subcontractors in and helping those mar- use those margins a little bit there. So, that was one piece. The second piece is we have an in-house uh blasting and coating shop. And and that, so you know, we're talking about recurring revenue, well, we you do have contracts, that's not technically recurring revenue. It's with a customer that is they they frequently need products coated and blasted and and that's a ongoing, you know, one-off contract. So, it looks very similar to recurring revenue and that that's a segment that I'm interested in in growing in the company. And actually uh just tried to lease a new 24,000 square foot facility, but unfortunately somebody came in and put a better offer in. So, I'm still looking for for ways that I can expand that segment of the business because I think a couple reasons. One is, you know, if I do plan an exit in, you know, 10 years or or whenever, then that's going to be something attractive to a potential buyer. And the other piece is the seasonal work for the business is, you know, from about mid-November to March, you know, we're in in West Michigan, we we shut down our external exterior painting, right? So, uh if we have that recurring interior revenue and jobs, we can keep folks busy during the wintertime. We won't have to lay off as many due to seasonality and that will will keep the cash flowing in the wintertimes, which is a pinch that I'm feeling right now. And just so I understand the seasonality piece in the in the um laying people off and rehiring versus subs. So, the way it is now is that they're fully W-2'd, but laid off in the winter and then rehired? And you want to change it to subs? And why is that? Why it sounds like you are the business already is flexing with the lay- laying off and rehiring. Right. Yeah, it it it's a hybrid, right, of the two. So, um the previous owner ran the company like that. He would do the layoffs during the winter. I'm I'm not really interested in doing that. I think it's a good mechanism in order to get through your low performers. So, if you have folks that haven't been performing throughout the year, then you can weed through them and then refill the pipeline in the springtime, right? And so, that's a good mechanism. Um I would prefer to keep everyone employed though throughout the entire year and then flex up with subs during our busy seasons, right? That that just gives you a consistent flow and that way you're not holding on to more employees than you need during the wintertime, which is killing your margins. Got you. And but just to be clear, he wasn't doing that either cuz he was laying people off. So, he was still protecting his margins in the winter. Correct. Correct. don't like you don't like that method. It's disruptive and you'd rather you'd rather flex He was flexing into weakness into low season by letting people go. You'd rather flex into high season by adding on temp. Correct. Or or excuse me, sub work. Yeah. And typically you'll get better margins with with subs anyway. So, the the challenge is more just the the quality control and representing your company well, right, when they're on the job site. So, And John, give us um more detail about what the company actually does. So, you said commercial painting, industrial painting commercial 80% industrial 20%. Sure. The coating and so on. So, so give us more, please. Yeah, I mean, from the commercial side, we do a lot of uh contracts for interior, exterior, you know, retail uh repaints essentially. So, think of I don't know if you're familiar with Meijer. It's it's big retail chain like Target or Walmart. They have, you know, large um commercial sites and they'll update their color scheme, corporate color scheme, and then we'll have to go through and generally what happens is you'll get a a local general contractor. They'll be multi-million dollar contracts and they'll do a full remodel and then they'll contact us as a sub to do the painting portion. So, we'll go in, we will do a full exterior repaint, we'll do uh interior repaint, we'll paint the deck and then all the walls and and all the ancillary pieces as well. So, that that's kind of been the bread and butter for the last 10 years for the company. That's been some big contracts for us. It's great and we've got several of them lined up this year, which is fantastic. Um and then we also do but we we do a full spectrum of things. So, uh industrial, think, you know, wastewater treatment plants, think uh any type of piping at industrial sites and we'll do uh you know, big tanks. Um we we haven't done water towers in a long time. That's uh another story from the the previous owner and his his brother who kind of took that segment of the business with him when when they split many years back. Um but yeah, so so that's that's generally what we do. We are capable, of course, of doing um floor coating, epoxy floor coatings as well as, you know, any smaller projects that require any type of coating. But uh we want to focus more on the commercial painting side and specialize in that, right? And by the way, when you were getting close to closing on this business, did you were you having flat tra- traumatic flashbacks to your previous deal with the fencing business that that fell apart at the last minute? Yeah, so I guess we didn't talk much about the the due diligence process uh which was lengthy. Like I had mentioned, took 8 and 1/2 months from from initial contact with the broker to when I closed the uh SBA loan. So, uh an interesting note there, originally my SBA loan was structured with the real estate attached and they had some great introductory terms, you know, so they they quoted me 8 and 1/2% for uh 25-year amortization, right, which was fantastic. Basically like mortgaging the business, right? Um unfortunately, after the phase one came back, phase one environmental inspection, there was uh a couple areas that were barely over the minimum contamination levels and so we had to go back through and do a phase two assessment, which was an un- unpredicted due diligence cost to the tune of about, you know, when it was all said and done, $35,000. So, that was a a pretty pretty big hit for me coming into it. Um phase two came back, still had all those issues. Turned out it was going to be another 5 months or so to get through uh the remediation planning process with the state and the the seller was not really interested in that and waiting another 5 months. So, and at this point we had been uh this was probably around I would say September or so. So, we had been going for 6 months roughly at that time and uh he you know, he he wanted to close. So, he he put a he put a mark on the wall for end of September and said we're we're going to close, you know, September 30th regardless of how we structure things. And so, uh we ended up signing a three-page management agreement where on October 1st, I take over the company without having closed the loan yet. So, he essentially handed me the keys to the company and with the understanding that the um SBA loan was still in process and going to close. Uh we didn't know the timing exactly, but sometime in October or November, right? And it ended up being the end of November. So, it was a it was a very interesting interim period and and it was very uncomfortable period because I felt all of the responsibility to you know, guide the company and make decisions, do all these things, but I felt like I didn't have any authority and we were both kind of in the office together and because I hadn't given him a dollar yet, essentially, right? Yeah. So, Uh yeah, it was unusual. So, you were in there for about 2 months, October, November. Yep. As titled with kind of GM or future owner, Yep. but you're stepping on each other's toes cuz he's still there. And you haven't paid a dollar yet to for it. And and so I get I mean I guess the risk at this point is all his though. If it blows up, you know, you just walk away. So so from that perspective, not not the worst thing in the world for you, but strange. And yeah, I can imagine those were uncomfort- an uncomfortable couple of months. And how was this being presented to the employees? So the interesting thing about about this transaction is my first on-site meeting with him shortly after talking to the broker, you know, I met the entire team. So a bit unusual. For frame of reference, my the fence company I almost bought, 5 months of due diligence, I didn't meet one employee, right? They were very very hands-off. They didn't want anybody to know. They were afraid people get scared and leave or or whatever. Just a lot of fear from that that perspective. And for this for this company though, he said, you know, come on in, meet everybody, meet the team. And I I think that really speaks to just the level of motivation, right? That the seller has. So if if he's ready to open up his books, open up the doors, and and gets you a in there and ready to you know, do everything you need to do, that's a good indicator that that he's serious and he's ready to sell, you know, you're you're going to have less pushback throughout the process. So Yeah. I mean, the seller Yeah, invited you into the into his living room to live live for 2 months and it didn't even have a deal. You know, there were hadn't even had a deal. too. So I negotiated half a million in working capital as part of the the deal. And on October 1st, when we signed that three-page agreement, he transferred that working capital into my account and let me start running the company, right? All expenses, all all everything started routing through my new set of books. So not only had I not given him a dollar, but he transferred the working capital to me with just the three-page agreement. Wow. That's that's a That's a level of trust that he had with me, right? Well, I was going to say, so is this is this trust or is this just white-hot eagerness to to move on and get out of the business? Maybe a bit of both. Maybe both. Yeah. Can you tell us more about Yeah, so I guess the deal terms and um how you structured everything. Yeah, absolutely. So ended up landing on a $3.5 million purchase price. And again, that the working capital came with that, the real estate came with that. So about another half million for the real estate. Again, that had to be pulled out of the SBA loan because of all the environmental issues, right? So I ended up negotiating with him to 200% seller finance that to me, right? Which we didn't end up closing on that until the end of December as well. So there was a lag on getting that done. From an SBA loan perspective, we did a 80% leverage, so 80% LTV with 10% seller note and then 10% equity injection, but that equity injection was split in two. So 5% secondary seller note and then 5% direct from me. My equity injection portion of that. So that that 5% is on full standby to the SBA loan, and that 10% is I'm able to pay him interest only on it. Starting as soon as I started paying the SBA loan. Great. And so just to for the audience who might not be familiar with this structure, 80% SBA loan, 10% seller note, as you said, interest only bullet payment at the end of 5 years. Is that what you said? Yep. And the then that leaves 10% left over, the equity injection, which the SBA wants to see. And 5% So half of that 10% is 5%. You brought that, your cash out of pocket. Correct. And then the other 5% is a full standby note which for for all intents and purposes from the SBA's perspective, they'll treat as equity injection, even though it's actually more seller note. Correct. Yeah. And I got for a while I would get tripped up on this phrase cuz people would say the 5% this 5% full standby, it's like equity. And I'd be like, you know, it's basically like equity. And I and I I I thought people might mean that literally. It's not equity. It just means from the SBA's requirements perspective of equity injection, they'll allow you to treat that as equity injection. But it's just more But it's just more seller note fundamentally. Yep. Exactly. Yep. And I just want to make sure we understand the real estate. So be- because of the the environmental the environmental considerations and additional costs, it couldn't be acquired with an SBA loan. It was It could still be acquired? So it could have been rolled into the SBA loan, but in order to do that, we would have had to gone through about a 5-month process where we would have this remediation plan developed, sent to the state of Michigan, approved by the state of Michigan, remediation plan executed, and then verified by the state of Michigan, and then that process would have to go to the SBA for their record and approval, and then they could lend on it, right? So the seller wasn't willing to do that, so we came up with the arrangement of he would just seller finance it to me. Thank you. Okay. And so so So the SBA requires stipulations piece of real estate that's going to transact. But if the SBA's out of the picture, this piece of real estate can transact regardless, and you don't need to do all that stuff. Right. Yeah. Different lenders are going to have different, you know, requirements around it. We still had to come up with a remediation plan, but as long as we had that they call it the baseline environmental assessment, as long as you have that, it essentially takes the liability off of me. Then I can go and to a commercial lender and they'll lend on the property, right? So eventually I'm I'm going to finance him out of in the short term. Okay. And and just phrase that I heard you say, John, mortgage the business, effectively like mortgaging the business, which you did not end up doing. Right. Just spell out that out super clearly for us what you meant by that, even if it didn't come to pass. Sure. Well, that was more of just a comment about the the rate and terms of the SBA loan. So, you know, 8.5% at 25-year amortization. I mean, you're ballpark, if you're looking at a, you know, commercial mortgage around 7.5% depending on the lender, and most commercial notes are 20-year notes. So if you you take the 8.5 and 25 years, it's going to be very close to the 8% and 20-year, right? So that's that's essentially the same as mortgage. Just to also point out here, John, going back to your ambivalent relationship to risk and uncertainty. You are very levered here. I mean, you basically brought 5% to this. And the real estate. So care to elaborate, or is that all there is to say? You're right. I am. Which of course, you know, read between the lines there, comes with a level of risk, right? And so to kind of speak to that risk a little bit and the seasonality of the business, I'm getting a first-hand lesson in cash flow management, which I didn't have a lot of previous experience. So, you know, over the October to February period, our our revenue is about half of what it is during our our busy season. So when you throw that much debt on a business, we're essentially cutting the SDE in half on top of reducing the revenue by 50%, right? So you can imagine you're in a you're in a bit of a tight spot for cash flow. So I've been managing through that on a a very close basis. And I have some levers I can pull if I I need to inject some additional capital into the company to keep it floating till we get to some of our larger contracts that I was talking about in the summer season, one of which we're going to start in about a month. So this is Now, you of course knew that this was a very seasonal business, as we already heard talked about the analysis there. So the tightness that you're experiencing now as we as we emerge from winter, is that unexpected? Is it Was it a slower winter than previous winters? Or, you know, this is about kind of what you expected, it's just now you're actually in it and feeling it, and it's it's different to be living it. I think it's a it's a combination, right? So it it was calculated, I would say, anticipated. I think living in it is is a different thing. You know, I get the feelings now that I didn't have when it was on paper and I was looking at it. And the other piece is there were some additional unforeseen costs throughout the due diligence and closing transition period, right? So for example, you know, if you remember recall those 2 months in October and November when I hadn't closed on the loan yet, well, we're anticipating closing on the loan, so I had kicked the insurance on for the company, and of course, everything was still in the prior owner's name, so he left his insurance on, and I committed to pay for all expenses during those two-month period. So, essentially, I was paying double insurance for those two periods, right? Yeah. Uh that on top of the the environmental due diligence costs, we unfortunately had an overspray incident at one of our sites during that period, and that that was another, you know, 30 grand. So, all these little you know, I say little, but you know, 20, 30, 40 grand here and there adds up quickly, and that kind of put me in a disadvantaged point going into the slower season, right? So, just a combination of things, yeah. Yeah. Well, it sounds like I was going to say, so this is this this is the seasonality, not really J-curve, but it definitely is also I guess I guess it's not technically J-curve stuff, cuz usually we I think the strict definition of the J-curve is the new investments that you're making into the business to set it up for for growth. So, new expenses, marketing, what have you, layering in tech, stuff that the previous owner wasn't spending on, you, new owner, now spend on to as an investment for growth, but in the meantime uh margins and and and cash flow dips. This sounds like it's not even new expenses that you're spending to grow, it's just kind of the deal deal-related costs or transition, I should say, related costs. Transition, yeah. And then just incidents in the business, just the vagaries of stuff that happens in the business. Yeah, exactly. Yeah. Yeah. Okay. Um Well, how are you how are you feeling? The these big contracts, are they feeling like so long as they come in as expected, everything will be fine if we were having this conversation 60 days hence, you'd be fine? I I think it's going to take longer than 60 days. Okay. Because uh you know, all these contracts, they're going to take um generally, like for our major contracts, we take about 6 to 8 weeks to complete the project, but then you're getting paid by the general contractor, so you're on terms with the general contractor, and they can range from 30 to 60 days. So, you extrapolate that out over time, we're fronting the costs for 6 to 8 weeks, and then not getting paid until about 2 months after that, right? So, that's that's about another four-month window before I'm starting to see the income from these larger projects hit my books, right? So, that I would say, talk again this fall. I might be feeling a little bit more comfortable. So, for even for a big project, do you have to front all of the costs? They don't pay you a deposit or they pay pay you on a rolling basis for, you know, percentage work completed, stuff like that? Uh we do. We do bill partials. Uh so, it's not not the full project, but uh it just depends on what this the stages are for that particular project, right? But that's that's in general to to get full 100% payment, that's how long it would take. We're starting to wrap up here, John, but um still some kind of big themes I want to hit. Well, tell us about working 2 and 1/2 hours away from your home. How how how is that? That's uh that's a long way away. It's not crazy, it's doable, but it it feels to me like one of those distances where optimistic searchers like, I can do that. I can do that. And then they do it the first time, and they're like, I can't do this. I can't do this. Yeah, it's it's definitely interesting. So, essentially, I live a double life right now. So, I have 50% custody of my two kids, and uh I live a week in Indiana, do some real estate things, do the dad thing, and then the other week I'm here in Michigan, you know, running the business. Of course, there's overlap with both, right? Um but I I did end up closing on a a house about 20 minutes from my business here in Michigan, and that's where I live for the weeks I'm up here, and then, of course, live back in Indiana there. So, it's it's not as bad as you know, 2 and 1/2-hour one-way commute, you know, every other day or something like that, but it is it is uh you know, very very separate experience for both weeks. Yeah, I'm reminded, John, of something you told me in the pre-call about um basically about two pieces of real estate up there in Michigan. The real estate that came with the business, the one that we've already talked about, and then this house uh You see where I'm know where I'm going with this? Tell us, please. Yeah, so about the about the real estate, which the appraisal was a bit undervalued, so I'm getting a little bit a little bit more than than what the appraisal came in in value with the real estate. So, as as I mentioned previously, I pulled it out of the SBA loan, and the seller agreed to 100% finance it for me. Uh so, essentially, I just had to pay some of the closing costs for that, which was around $500, and then on top of that, I purchased the house with a VA loan, and so, yeah, went through SBA loan and VA loan consecutively, two of the most, you know, stringent loan processes. Although, I will say, the VA loan felt like a piece of cake after going through the SBA loan process, which, you know, that should give you perspective if you have any experience with a VA loan. So, um but anyway, all all things said and done, I ended up just paying closing costs essentially for both with how I negotiated it. So, I added a million dollars worth of value of real estate for $1,000 in closing costs. Pretty great. Yep. Yeah, that's that's phenomenal. Anything to tell us about the painting business? You know, I just always like to when I where I can use the guest as an opportunity to educate the audience on the nature of this business, this industry. The maybe what can you tell us about the painting business? Maybe I'll start with my prejudices. I assume low skilled, although if you're doing, you know, this isn't house painting, this is commercial industrial, so there's going to be more presumably more skill required there. Um obviously blue collar. Um but still I would think that even more skilled than house painting, still pretty low skilled. I'll stop there. What what more can you tell us, John? Uh yeah, sure. So, I think, you know, we are towards the end of the skilled ladder for, you know, blue collar type trades work. Um but I will say it it does take some specialties to do some of the things that my folks can do, right? So, uh a lot of experience, a lot of collaboration with both the um the paint company suppliers, right, that do a lot of the assessments on site to determine, you know, the ability uh for product to adhere to different surfaces, and and a lot of those those types of conversations just take time and experience, right? So, you need to find the right coating for the right application, and that's that's a skill that comes, you know, over time. And I'm I'm 5 months in the seat here, so I have a fantastic team that that manages most of the operations in the day-to-day, and I'm constantly learning from them from that regard, too, right? So, I think it's from an overall standpoint from the painting industry, I really really enjoy it. I was in Orlando last week at a an expo for one of the the biggest industry associations, and it was an incredible event, cuz you got business owners from coming from all over sharing best practices, sharing how they do how they run their businesses, and I think those things are incredibly valuable, too. If I give, you know, an another piece of a nugget of information for whoever recently acquired a business is get plugged into your industry associations, and borrow their success, right? Yeah. Talk to them and and learn how they do things, but that's that's been a a side note there. So, uh from a labor perspective, it can be a challenge to, you know, find qualified folks, find experienced folks. There's lots of laborers, there aren't exactly a lot of painters available, right, that have experience. Uh so, it there's a train-up process, and then on top of that, my labor force is uh majority is older, cuz they've been with the company for a long time, one of the strengths of the company is, but also a potential challenge point going forward, I'd say, in the next 3 to 5 years, is transferring, that's one of my my top uh to-do items is transfer that knowledge to the next generation of painters, right, and and the admin and everything here in the company. So, Well, we we all as we all know about the silver tsunami and the the baby boomers as owners transitioning, forgetting that in many of these baby boomer businesses, the the people who work at them are also uh retiring, and um the the labor isn't there there's a a dearth of people to come fill their shoes, uh which is going to present a challenge as And a skill gap. well-documented, talked about a lot. What'd you say? And a skill gap, yeah, absolutely. Yeah. Yeah. John, say a little bit about the management layer that it sounds like you have. So, you're able to work on the business, not in the business from day one. Tell us, what does that look like? Yeah, and Uh, this was part of what attracted me to the business so much and I would say to anybody out there looking to buy a business, you know, look at the owner. What do they do on a day-to-day basis cuz that's going to be you, right? When you step into that business. And so the previous owner, he uh, for the prior 3 years wasn't in the business very much. His wife had some health complications so he stepped out and let his his folks kind of run the operations uh, day-to-day. So I have a a VP that's been with the company for, you know, almost 20 years. I've got an uh, two admins have been with the company for just under a decade. Uh, my main sales guy about 17 years and I have three superintendents that each between 20 and 30 years with the company, right? So they've a very tenured staff. They've they've been here a long time. They know the process. They know what they need to do and they're they're very autonomous. I think the challenge with that is, like I mentioned before, it's it's a family-owned business so they do things the way they've always done things. So my my goal is to come in and professionalize the organization. You know, I'm looking at implementing EOS, redefining roles, building that structure within the company and, you know, either hiring people or or reorganizing how we lead the organization, right? And then uh, bring in more resources too from a technology standpoint uh, in particular, right? Yeah. And so in terms of that the improvements to the business, the growth potential in the business, you'd said that you are not I mean, you want to um, build the company to sell as we all do so that it could be an attractive acquisition candidate always, but you're not actually building it to sell. Either you are an indefinite holder. Um, But so what are some of the opportunities that you see for growth? You've talked about, you know, EOS, um, professionalizing things, but what about growth? Earlier you mentioned the the service of the What was it? The spring and the There was a There was a a business line that you wanted to to grow. Uh, the sandblasting, the internal portion of it, right? Yeah. What we do in the house. do you think about in terms of of growing? Yeah. So for growth, um, honestly, some There's some marketing and sales work that would needs to be done. Uh, potentially bringing in another estimator and bringing in more work and then So that's that's one piece, of course, right-sizing the business and getting all of our operations streamlined, everybody aligned from an incentives perspective as well to make sure that we're on solid footing as we grow. That's that's a critical factor. And then uh, again, moving more towards a hybrid model instead of just W-2. So bringing in a bigger subcontractor network that we can offload more of this this front end more of the front end contracts that we're getting in, right? And so so that's kind of a few components there that that will help us grow and scale. And technology is going to help as well to bringing that in. And there's there's a ton of opportunity. One segment in particular that I like is direct to owner of small businesses or small commercial or industrial sites. Uh, as working for general contractors is is good but you're working on their terms. You're getting payment terms. When you work direct with an owner, they're signing your contract, right? So you can dictate the terms there. And there's there's just not a lot done with this company that's marketing direct to those people. So I think that's that's one avenue that I want to keep exploring and building on. The tightness of cash of cash right now. Um, all these these initiatives that you envision the one week on, one week off. So these are all some of the realities and challenges you're experiencing. Anything else? Any anything else that about your story that kind of challenges that needs to be aired? Uh, I mean uh, I'm always looking, you know, I'm a acquisition entrepreneur at heart, right? So I always kind of have a a bit of a pipeline of talking to different businesses, different owners. So Tisk, tisk, tisk. Let Let Let things settle here for a minute, John. Right. So a part of that's just the group I'm in, right? So it's a bit of the the model, the mastermind group is is to acquire multiple companies, right? And and build out a portfolio of companies. So yes, uh, that's I don't get me wrong. Nothing wrong with that, you know, all in good time, sir. Yeah, for sure. For sure. Yeah. You wouldn't You wouldn't be the first of my guests who bought a business and was like, "Wow, this is pretty good. Let me Let me do another one." Yeah. Yeah. Uh, John, give us a give us a picture of if all this works out what it what it'll look like for your net worth and and if you can also kind of compare that to real estate. I mean, can can we put some some actual numbers behind your balance sheet in this whole adventure? Yeah, and I from a comparison to real estate standpoint, right? I I like to give people this example, right? Uh, so I own a duplex outright. It's worth right around $200,000, right? So you could say that's that's the capital I have invested in that asset. And that property will return to me around $20,000 a year in annual cash flow, right? So and these are rough numbers, right? It's not exact, but it's close. So if you're transitioning, look at a small business acquisition like the one I just did. Call it $200,000 all in, same capital outlay. I now have an asset that's going to produce for me you know, all things being equal, it operates as it has been, projections are accurate half a million dollars of cash flow annually. So same capital outlay, 20,000 half a million. And that's that's the power behind small businesses, right? They are they are cash producing machines. And so you can over time build a big enough real estate portfolio, you know, I could refinance that property and go buy, you know, two or three more duplexes and spread that out, but I'm still not going to get anywhere near that level of cash flow. So unfortunately, I kind of kick myself cuz I think, "Man, 7 years ago if I'd found small business acquisitions instead of real estate investing I would have done it, right?" So to speak. Yeah. You buy the cash flow and asset and then real estate, of course, is a great store of value then you park all that capital in real estate once you accumulate it, right? And then sail off into the sunset or do whatever you want to do. So yeah. Yeah, so that's that's kind of the methodology. John, the half a million dollar number from the small business cash acquisition and the cash flow that it generate that's after the SBA loan? Correct. Yeah. And the $20,000, of course, from your duplex is also after after your mortgage on After all expenses, yeah. Yeah. And so that's just today. But if we also look at both of these assets after paying off their respective loans then the numbers get even more compelling. Right. And then that's not including any potential growth, right? Or operational efficiencies gaining on the margin, right? So, you know, I have a 3-year goal to get my company probably conservative goal to you know, eight figures in revenue and uh, 20% net profit margin. Right? So you look at the upside there and then I'm I'm a big uh, reinvester. I love to reinvest in both my real estate and businesses. So uh, as soon as that margin starts growing, we start getting more profitable, that's all going to pay off the SBA loan, right? So then that'll free up more. Yeah. Yeah. And so to be clear everybody, recall the business doing 8 million plus in revenue now, you want to get it to 10, which does does not seem unrealistic at all. You know, one of the things that we side note, one of the things we see in this world is business buyers being too optimistic about growth. Um, you need to be conservative. Getting from eight-ish to 10 uh, in a few over 3 years is is seems pretty realistic. Uh, and then improving margins to 20% which would which would mean 2 million dollars of EBITDA a year and once you pay down that debt, um, that's all free cash flow. Uh, so pretty pretty exciting. And then what about what would you tell real estate folks about about the nature of the work? I mean, this is this is also a very different. This requires you to go all in. Okay, some people buy a business as a sideline cuz they're going with an operator and they keep their W-2s. I've had a few of them on the podcast, but those are the exception that prove the rule. You are the rule where you are you know, this has become your job as well. So what what would you say about that contrasting it with real estate? Yeah, it's it's a different level, right? And your your experiences are going to vary, right? I think uh, you just have to approach it with a burn the ships kind of attitude, right? So, you just you have to go all in. And there's, you know, you can quote or cite different sources, but if you ever want to achieve something big, right? You're going to have a period of imbalance in your life. So, it for people that are looking to get in there like, "Oh, that's great. Just buy a business that's, you know, big and you can just kind of do some stuff at the top and let it run." You can get to that eventually, depending on the business, but it's going to be everything you've got for a period, right? And it's going to test you in ways you never thought possible. So, you have to go into it with that mentality and say, "I'm I'm going to do whatever it takes to get it done." And then just just approach it full force, right? And there's different strategies, of course. You've had guests on that, you know, higher operators as they're going through the due diligence process and all that. So, I think yeah. I love that how you put that, John, that to do anything What is it? To do anything big in your life, there's going to be a period of imbalance. That's kind of stating the obvious, yes, but I've never heard it distilled and yeah, I just really like that. It um Because because if you if you feel imbalance, for a lot of people, if you feel imbalance, you suspect maybe you're doing something wrong. But of course, sometimes you need to sprint to get to the next level and then things can settle out and you can hang out there for until and unless you want to sprint again. Yeah, what's interesting is I've I've had a few conversations with folks recently that are looking at getting into this and you hear kind of these limiting beliefs in their mind or just misaligned expectations. They're like, "Oh, well, I want to go buy a business, but I want to buy a business so I can have more time with my family and I want to have more freedom and this that and the other." And it's like, "Okay, yes, that's the end goal, but what does it take to get to that end goal?" And usually it's an intense amount of pain and suffering, right? For a short period. Because you you have to you have to sacrifice something to get that, right? At least that that's been my experience and everyone that I know, right? Yeah. Unless you've got, you know, a rich uncle or something that's bankrolling you. You know, that might be a different experience. But if you're building something when you come from nothing, you're going to have to go through that period of discomfort in order to achieve it, right? Well, John, for a guy who's experienced discomfort, you shared with us, of course, an unusual childhood, um a mental breakdown, your words, sitting in your cubicle, a divorce where you lost this real estate portfolio you'd built up or almost all of this real estate portfolio you'd built up, a deal to buy a fencing business that collapsed at the last minute, um and probably more where that came from. What's your headspace like today? How how are you feeling? Yeah, on March 8th, 2024. Yeah, I'd say generally good. I'm optimistic about the company. It's a challenge with our cash flow struggles right now. Mentally sometimes it definitely weighs on me cuz I haven't experienced the the full season yet. So, Yeah. but overall, I would say optimistic and looking forward to the future. Cool. Anything we didn't touch on, John? I didn't ask that you wanted to make sure the audience heard? There's one piece I didn't really mention is I know you've had a lot of veterans on who have gone on to acquire businesses and I think there's just an incredibly strong correlation with the military service, especially when you look at non-commissioned officers and officers, and the experience that they go through it's perfectly lines up with small business ownership, right? Or small business leadership. And that's something, you know, for any of your listeners, because I you know, I have a bunch of veteran friends that I'm trying to walk through this process right now. And if you're at all considering it, I think they need to know that they have all the necessary ingredients. And this is a prime example, right? So, as a military officer, you go to a unit, you quickly learn that unit in a short one to two-month time frame, you're leading that unit, right? And then you have to go and execute your missions and and do everything at a very high stakes and a very high level. So, small business ownership is essentially that. And then you repeat that two to three-year process throughout your career in the military. So, when you come into a small business, you have to quickly learn an organization, albeit very different environment, different industry, and then you have to lead that organization through that ambiguity, through the challenges, through the, you know, dealing with people issues, it's the same process, a different environment. So, I think you're going to find that more and more of your guests and people in this space are military veterans because that skill set, that dealing with ambiguity and uncertainty and making a decision and pressing forward to achieve a goal, I think is a critical component in the entrepreneur world and the acquisition space. Very well put, John. So, it's it is a bit of a I mean, it's a well-known fact that there's a lot of veteran presence in our world here, but I never had somebody spell out just how tight the parallels are between what you do as a leader in in the military in the US military and what you do here. So, very compelling argument to to the veterans listening contemplating this path. Thank you for saying that. Absolutely. What else? Anything? I think we hit on most everything. Great. John, how do you prefer people reach out if they have a question? LinkedIn or email, john@dcd-inc.com. DCD, we didn't get the name of your business. Dave Cole Decorators. Dave Cole Decorators. And was it Dave that you were negotiating with who It was his son, Bob. who handed over the keys before you'd even given him a dollar? It was his son. His son, yeah. All right, John Murphy, thank you very much for your time. God, we finally could make this happen and appreciate all the transparency. Yep. Thank you, Will. It was a pleasure. 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.