Danny Fields Steve Reese welcome to acquiring minds thanks for having us be here the two of you partnered to do a traditional search that resulted in the acquisition of Holland Supply Company you've made two more Acquisitions and today we're going to hear how all of this has come together but let's start off Danny and Steve with some background on each of you Danny why don't you go first sure um so I I was born and raised in a a small very rural Farm Town in Indiana um while there I kind of hung out with a group of friends who had a a an interest in in the military and that guided a lot of my interest and and desires to join the military and I ended up going to a Military College in um in Virginia called Virginia Military Institute um while I was there as a freshman uh 9911 um occurred and obviously that's a pretty impactful event um so so that kind of solidified my my desire to join the military and so I graduated in 2005 um earned a commission into the army and spent about nine years in the Army um started off as a logistics officer and then um shortly after moved into Army Special Forces and um so after about nine years I left the Army and moved to Houston really just kind of on a whim um just kind of made sense based on um the opportunities available in Houston um and when you end up in Houston you end up working in oil and gas and so I was working in oil and gas and it was there that I decided I needed to get my MBA um so ended up applying to a few different programs got accepted at Rice University um here in Houston and decided that's where I wanted to to get my NBA and met my business partner Steve Reese on day one and pretty shortly after meeting Steve learned that we had similar interests um wanted to do similar things were both interested in some form of entrepreneurial Pursuit but we hadn't really identified what exactly that looked like and it wasn't until Steve brought to me kind of this idea of of the search fund um he he sent me an article and I read it and it just clicked um but yeah we met in 2015 and um we launched our Fund in 2017 just a few months before we graduated our MBA program at Rice uh spent a little over two years searching um until we found Hall and supply and um closed that deal in 2019 perfect thank you Danny Steve your turn yeah I grew up in South Florida in the Naples area and um I didn't have you know Danny and I have some parallels in our background especially you know the military is the common thread and then business school but I didn't have anyone in my family who had been in the military I guess I didn't really have a sense of what I would do but um my parents started to go through a divorce when I was a teenager um it was very disruptive I wasn't able to hang out at the beach and ride dirt bikes and four-wheelers by the Everglades as much as usual so that was terrible but uh it it wound up you know I wound up kind of heading in the direction of being a bad kid and I had a relative who although not having been in the military went to this military high school and asked me if I'd be interested in going it was um Mass nut Military Academy in Virginia so I for whatever reason I agreed to go check it out and then also was interested and going um so I went and that really changed a lot for me at that point um was kind of difficult for my mom because I was an only kid so she's going through a divorce and now her only kid says he wants to go to a boarding school that was tough on her but ultim Ely I think she would agree it was great for me I got a couple really great uh mentors there um and that kind of naturally I became interested in the military and naturally pushed me towards going to the Citadel went there for college um was interested in joining the Army so did the RTC program and commissioned as an infantry officer when I graduated and served in the 82nd Airborne um over in Afghanistan for a deployment during my four years in the army and um when I did reach that four years I got out of the army and landed with uh one of the military recruiting companies working with them you know these are companies who help veterans get jobs and I was working with them um as a recruiter and also for a little while as an account manager in Austin Texas and um eventually one of their clients uh called intermech Mechanical Services you you I I had a colleague who had been offered a job by them and um after getting on he saw they were growing more they had asked him if he knew someone else and just through a referral uh I wound up getting hired there and that was a really great start I would say to my business exposure and and learning outside of the military because at the citel I studied English and philosophy um so nothing business related whatsoever was kind of heavily invested in going into the military being an in infantry officer and thought I would probably stay in a career there the reason I didn't I wound up having um just some issues with my legs over the four years a lot of uh kind of impact day in and day out running my body wasn't really holding up too well to that that's why I got out anyhow um you know didn't have a business background but really started learning a lot just through doing and having these mentors at intermech I got involved in all kinds of different things from setting up a new business unit to putting business systems in place to working on the diligence of an acquisition and then staying in that acquisition afterwards and it was during that time I was there for about four years and during the second two years I was in business school I was you know had got into rice and was going to the the rice NBA program where ID met Danny and um and that's where we started talking about wanting to buy a business and everything that I had been exposed to at intermech gave me a lot of confidence to do that I think it it showed The Human Side of business to me I worked for these people who had been out on their own as entrepreneurs and I was involved in you know creating new business units and the other things I mentioned so I saw like there's no there's no perfect person who's who's got a silver bullet on how to build a business or buy and sell a business there's a lot of experimentation in it and and you don't always have perfect information so I was comfortable there wanted to go back to business school to actually get some business education that's why I went into the MBA program um in you know in the second year of that as Danny and I started talking about what we wanted to do next um he kind of he told the story there right we we stumbled on the idea of buying a small business and growing it so that's what we wound up doing Steve so going to a military High School really does fix a bad kid no um it can turn out all kinds of different ways right I can attest he's only gotten worse yeah yeah um it was funny when I first showed up there you know it was my decision to go and uh and I think I called home pretty shortly after getting up there and starting and saying like hey this isn't what I thought it was I I should get out of here and at that point you know the money had been paid and the decisions have been made and uh my mom was was tough and she said nope you need to stay you need to spend some more time see how it goes right and and it did wind up being something great for me at least um and I think I think uh for most kids who go there for there are a variety of reasons why kids go into that school um but I think you it's a much smaller student base and you get a lot more focused tension where you can focus on academics or Sports you're just not lost in like a 1,000 person class like you could be at a public school Danny I remember from our preall that you maybe and maybe both of you had some entrepreneurial DNA that there had been small business in your in your backgrounds Give us a little color there yeah actually Steve and I both do um and I think that was largely what um led us to kind of pursue this this journey um you know I'll let Steve St share his specific story but you know I grew up in a family where um you know I mentioned mened earlier it was very rural and what I mean by that is I grew up in my great-grandparents farmhouse um and you know population 3500 OneStop light kind of town but in spite of that my my father had actually um inherited or purchased um a small business from his father so my grandfather started a a gutter and sighting business so they they install gutter sighting s it um and really my grandfather started it just to keep his children out of trouble during the summer um and that you know it ended up growing to the point where it was a profitable business and and um warranted somebody taking over it uh when my grandfather was ready to move on and that was my father my father stepped into that role um and he he he still runs that business my my mother and father are both in that business and still run that and so I grew up around that and I spent most of my Summers um you know earning lunch by by joining alongside my father and and helping him go out and do estimates and collect um some of the tear off gutters and and take that to the scrapyard and um so I I got to see that and I got to see how um you know hard work can can be something that is is something that can pay off um there's a lot of stress that comes with it but there's also a lot of um Freedom that comes along with that as well and so that was something I was exposed to at a young age and um it was something I always I always respected my parents for for sure okay guys well let's um uh return here to your you're at Rice Steve you I guess hear see this article maybe it's your your own uh first exposure to the concept of a search fund but you send it over to Danny you guys have already kind of decided you want to do something together you both have some kind of itch to to do something uh you see this concept of a search fund right price has an ETA conference or or or a dayong event of some kind were you also then able to take advantage of any ETA resources at Rice so rice didn't have that conference at that time uh but rice has taught an Enterprise acquisition class for a very long time I mean one of the one of the people I met at Interac one of the president of the Americas who had hired me there had gone to Rice you know 10 or 15 years prior to us and he took that same course there with a different Professor but um no so I I hadn't even taken the course really I had been talking to a friend who was finishing up at Harvard Business School another former military officer named Travis Reese I said Travis what are you you know we were just catching up he said man what are you going to do with that fancy Harvard degree when you graduate and uh he was like well I'm thinking of doing a search fund and I had no idea what he was talking about so I asked him what a search fund was and he started explaining it and that it really caught my interest right and then he told me about some things I could check out um to read up on it so I did I while we were in school I started reading up on it I found a lot of the material online shared it with Danny and we were like okay we're doing this and then we signed up for the Enterprise acquisition course right and then we started reading everything about it but no rice didn't have a conference at that time mhm in fact I would say that Rice's like philosophy on on buying a small business is very different from the typical search fund method I mean from the traditional philosophy on it I think the traditional search fund method especially today it's become so it's become very welln it's a very formalized vehicle but business of businesses small businesses have been being bought and sold or handed down for like hundreds of years right and the folks who taught this stuff at Rice they didn't really take an interest in the traditional model it was more hey how do you find your own financing through a small Regional Bank what's it like to collect Equity investments from friends or family or high net worth individuals how do you source that kind of stuff like how do you look for the alignment between yourself and what business you want to get into and how do you do diligence and kick the tires on the robustness of a company but none of it was the traditional search fund stuff that you would see at Stanford it was more like this has been getting done for a very long time and here's a way to buy a company well it was teaching you self-funded search and the the irony there being that that self-funded has this fancy uh multiple syllable name to it when all it really means is just buying in business and figuring it and figuring out where you're get financing yeah exactly like and and that's what it has always been it has always essentially been self-funded self-funded is really the norm traditionala what we now call ironically traditional search fund is more of the recent Innovation uh that is the exception not the rule yeah yeah yeah the fundamentals are all the same you still have to Source you still have to finance you still have to um operate I mean all those things are still true regardless of of the path the specific path you choose yeah yeah I like Danny's description of his dad when when he took the business he was like he inherited or purchased the business like we don't really know but the business changed hands right and and then he was running this company so there there's many ways to do it great well perfect segue then so how given that Rice uh is to the extent that the that you're kind of being influenced by the class you ultimately took you're in you're being influenced in the direction of self funed even though it wasn't called that uh you ended up doing a traditional search fund so how did that decision come about I think for for both of us it was it was largely similar reason I mean to do a cell fund self-funded search you need some Nest Egg of capital to rely on in in most cases not not that it's required I mean there are there are ways that you can do a self-funded search and still work a full-time job that has benefits like healthcare um Steve and I are of the opinion that that's a much longer process that timeline was something we weren't really didn't really want to pursue and so we knew we wanted to go you know all in on it and you know as as as as crazy as this might sound you know the military does not offer a lucrative um career path in which you make a lot lot of money and and have a lot a large Nest Egg to to fall back on when you get out so we were in a both in a position where you know a salary was important we wanted to search full-time um I had a child um that was that was born um in in 2016 so he he was a brand new baby so healthc care was important to me um and so knowing that we couldn't work somewhere and search um but that we both kind of needed a salary and we needed healthare the traditional path just made the most sense for us before that reason you know I think had the circumstances been different financially then um we would have certainly pursued a self-funded search over a traditional search but for our particular circumstances that was just the the situation we were in yep and why do you say that had the circumstances been different you almost certainly would have done self-funded well I think it just comes down to the economics um you know you've got a lot more control over the search you um you know there's no one really influencing what you do or don't buy um the decision is ultimately entirely up to you um not to say that that isn't really true in the traditional search fund but that you know if you take somebody's money obviously they have a say and and and in where you look and and how you look and it it changes things right um the in the economics are certainly different as well anything to add there Steve I think Danny hit it but um no the the biggest piece of that is the ownership right you if you buy a company if you go through the traditional search fund route whether you're partnered or single you're going to own somewhere you know you come come out owning somewhere between 15 to 25% of the company like if you fully invest um but if you don't go that route if you figure out how to do it on your own you're probably going to come out owning you know greater than 50% of that company it really comes down to the negotiation with who puts some equity in with you if if you need an equity injection um when you're trying to get that deal wrapped up but you'll very likely own more than 50% so you just make out much better in terms of ownership and control Danny you mentioned the not I'm putting words in your mouth but you bet you have a boss of sorts when you do a traditional search fund because you have an investors and investors who own a material bit of the part of the business I mean well over half is that something that now that you're in this project and have been for a number of years uh that you feel I wouldn't I mean it I guess the question is kind of um it's more around like how involved are those investors um I I would say I mean we have great investors um they they intentionally we we picked investors that have broad experience um you know whether it's Finance or operational or in banking whatever the case may be we we intentionally picked investors that had kind of a breadth of of experience that we could fall back on because we didn't have that um now I I think Steve and I would would always agree that we would prefer to own more the business and if there's a path to do that I think we would pursue that um but I also you know have to recognize that had we not had their Capital to begin with we wouldn't be in the positions we are so I mean do do we feel it sure yeah absolutely we've got we've got a board um we we you know we have quarterly board meetings we spend uh time with with most of our board members even beyond that um you know kind of monthly phone calls not anything formal but we just give them a call um just to check in not that it's a requirement but because it's helpful and it's it's good to kind of share that information and and and maintain those relationships but certainly not anything negative um I think we're pretty happy with with who we have on our board and who's on our cap table um and we feel that for sure um but again I'll say if there's an opportunity for us to own more we would always want that MH great okay guys well let's get into the search if you did a traditional search fund there is kind of a Playbook there blasting out emails in your case what would it look like in what year is this now 20 201 2017 March March of 2017 we launched our fund um you know I I think the best place to start here is just to to remind you that Steve and I did not have have any experience doing this whatsoever outside of you know the the theory that we learned in the classroom and um I'll steal Steve's analogy because I I I like it um you know when we first got into this we wanted we wanted the repetitions we we wanted to do this ourselves we wanted to learn uh the process we had just raise some money um that allowed us to get an office um pay for all of our overhead right and knowing that we wanted to get some reps in and talk with business owners we we went out and we bought some data and we started emailing business owners and this was really a Spam approach where we were sending you know 1 to 200 emails a week uh really weren't screening who specifically they were going to we had we had purchased data for specific sic codes that fell into you know the financial criteria that we had we had determined but we weren't really filtering who specifically they were going to um so a lot of the phone calls we got were um you know these were lowquality phone calls the these companies haven't really been vetted all we really know is that it fits a specific SIC code and may or may not fit the revenue profile that that we've asked for but Steve's analogy was hey let's just throw let's let's let's throw as many bullets down range as we can bullets being emails because we need the repetitions and you cannot hit a Target unless unless you shoot at the Target and so for us it was send as many emails as possible just so we can get as many repetitions as possible getting on the phone with a business owner and getting to know as quickly as possible figuring out what is acceptable to say figuring out what's unacceptable to say or ask on the phone call the these are very important things when you've never sourced a deal before and you've never asked a business owner if you can buy his business right that that's a that's kind of an intimidating thing if you've never done it if you've not if you don't come from a private Equity background if you haven't spent time and as an investment banker um or doing those sorts of things that's that's kind of an intimidating ask and so we we wanted to get those repetitions and how long did it take how many of those conversations did it take for you to get comfortable saying hello uh sir ma'am I'd like to buy your business yeah not too long I think that we got really comfortable with that and with the screening process and just handling those conversations in a couple months the problem was that we held on to that strategy for like six or eight months so um at the point that we realized hey we got a lot of the Reps in we kind of understand how to have the conversations had a screen but our quality is just really poor in other words our conversion rate is crap we are sending emails we're we're buying data from a data provider and saying we'd like to get the emails or the phone numbers of people with these kinds of titles like President CEO director right we want that and these sic codes send us that data and then we would drop it into an email campaign and we would start sending it and um I mean sometimes these were like hundreds and we didn't go through and clean the list up so we could we were sending wrong emails to the wrong people all the time and it became pretty clear that we needed to have a much higher quality process right so at that point it wasn't like we developed it we actually went to um a conference with one of the search fund investors it was Pacific Lake partners and they had a couple Searchers um doing a panel talk and they talked about how just tailored they were and we kind of mimicked their process right which was take a lot there there are some things in here that we brought in um from other talks that we heard or other techniques but most of this came from from those guys and it was spend a whole lot of time upfront researching the industry go to trade shows talk to the salese in the industry reach out to people in government regulation positions who regulate that industry learn as much as you can about um you know is it growing are there competitive threats what's the the policy risk how do businesses make money um is there any you know concentration is there a dominant party who's kind of really making it difficult for all the other players in the space like find out who's got who's really good at what by talking to all the salespeople if you go to a trade show and you start asking them questions about the businesses or the competition um sales folks will usually talk quite a bit and tell you a lot right so that was you know we would do some online research pick a couple Industries then get out and start really knowing them um and then this is very time intensive right but even at that point we hadn't fully committed to that industry but once we had some of those conversations did that research and and got to the point where he said yes this is an interesting space then we would start making a very careful list of all the prospects so if you're going to these trade conferences or trade shows they'll give you a list of all the attendees and of course you're there so you can also go around and pick up all the brochures talk to all the people but then you can start through learning the language of that industry and talking to the people in it you can usually start to kind of size businesses for example maybe it's like Dermatology practices like a a med service kind of industry and you find out well for every physician or for every nurse you're going to make so much in revenue or each location usually brings in like you know however many million a year or maybe it's a field service company and you start to learn for every truck on the road they usually make 2 million a year in Revenue whatever it might be right yeah and then all field service companies not all but many like on their website to display a big aerial photo uh showing you their entire fleet so then you just say all right I know 2 million per truck and they got 15 trucks and so you're sizing the business right at this point we had learned the language understood how to size it became an interesting space and we got the list of all the players and then we would start making very tailored um letters like physical letters that we would send and hand sign um and you know by hand we would write on the envelope where the you know the address and we were writing red pen confidential so we were doing everything we could to put a personalized touch on it and within the body of that letter when they read it it was completely tailored to them and their business we would mention things like you know we we see that your father Earl started the business in 1968 after getting out of World War II were also veterans right whatever we could find as a point of connection and sometimes not a point of connection just a fact about the business to show them we cared enough to research it right and at that point our rate went from when we were spamming people from maybe a percent conversion rate having conversations and that percent that converted from email sent to having a talk turned out to be poor quality and typically went nowhere it it went from that to like a 40 50% response rate that were all pre-qualified targets and wound up in good Rich engaging conversations so that was a much better approach the irony is that's not how we bought our business our business came in through a broker who had found Danny's profile online on search funer and after he found Danny's profile Steve let me pause you there let me pause you there because we're going to get to that story but I want to double click on a few things here yep first of all it's so funny to me how many people have' done a proprietary search and actually s eventually saw you know quote unquote results from their proprietary search meaning they were have they it felt like they were building a pipeline that could go somewhere still even if they had that much success which is by itself hard to get to to actually figure out a proprietary search method that actually generates decent leads and in enough volume still didn't find their business using the proprietary search yeah um so observation number one observation number two is guys you really you really swung you did the total spam method like just totally unpersonalized spam and then you swung hard in the other way yeah to doing incredible upfront work going to conferences and then and then personalized handwritten letters um you know I'm just for the audience I you know I understand this was a learning process for you but for the audience I wonder is there a Sweet Spot somewhere between those two because the latter method when when you went to conferences and so on I mean sounds great but how many conferences can you can you really go to I mean it would take so long to learn an industry you know you could probably only tackle a few Industries a year with that with that method right how many how many industries did you guys tackle and in how and in what time span probably a couple dozen I think the question of of you know of where's The Sweet Spot I think it's almost like asking the question like what's the silver bullet and where should we be spending time sourcing right and our our take away from this is that there there is no Silver Bullet there is no one place that you should be spending your time in fact you should be spending your time in every possible nook and cranny whether it's a trade show or a personalized Written Letter or a Spam message you should be doing everything and I think our story is perfectly aligned with that I mean we can get into it in a minute but as Steve mentioned we didn't even find our business in any of those ways and that that's one of the number one pieces of advice that I give to Searchers when when when they reach out is I say you have to look everywhere whether it's having a conversation with your Barber and letting your Barber know what you're doing you never know that might be where your deal comes from um it could be from a personalized Written Letter it could be a trade show it could be you ask 10 different Searchers and you're going to find out they found their business in 10 different ways and you can't you can't do just one thing you have to do the all yeah okay so search one thing though um when we did swing hard in the proprietary direction we had already developed all the email campaigns with the intermediaries so there we kind of had two campaigns going intermediary so like estate planning attorneys small business accountants those types of folks who would maybe they've got a customer or a client who's ready to sell their business right and they would know that or business brokers or intermediaries and then we had the direct sending emails to business owners spam we kind of did away with the latter but we kept the former right we kept the intermediary stuff going because it's more transactional and every two to three months hey we're still here just as a reminder this is our criteria have you seen anything interesting like pretty short emails with bullet list of criteria because it's transactional with those folks and um and that is one thing we always recommend to Searchers is like hey up front get comfortable talking to like this is from our experience get comfortable talking to business owners having that discussion um set up your proprietary channels or I mean set up your your like campaigns with intermediaries and get those running and then spend most of your time proprietary that's in the end I think we we both agree at this point the total spam reach approach directly to business owners was like 0% value I think that's the one thing I would completely acts if I did it again I would not do that right I'll just add one last thing here will when when I say that you have to do everything I mean everything and here's an example of of of Steve's kind of termination there was one day um you know we worked in a a co-working space in an office and one day I was like Steve wasn't there and I called Steve where are you and he's like oh I'm at such and such town I I went to this business and I I went to go walk in and meet the owner I mean it wasn't even a letter it wasn't an email he he physically went there to knock on the door and go talk to the owner and I was like all right well we'll see you after lunch um so I mean when I say everything it's everything yeah well it's it's interesting it's everything but in at least in Steve's opinion everything minus well if you I guess you said if you were forced to act something what it would be is is the spam approach and you know it's funny because that also is the first approach that most people take or most people who are doing a proprietary search like that's almost with proprietary search in some people's minds is is is blasting the blasting out emails so interesting that um for guys who are so open-minded uh and experimental that really that that's at the bottom of the Heap in your experience although makes sense yeah I mean it's spam after all I would put like so what Danny was talking about when knocking on doors is I think I had focused on an industry and I and it was a very fragmented industry service industry some something like field service where there are a lot of providers within every geography and we were in Houston so I kind of made a I picked him out on the map and then I made a route where I was going to drive to each one and knock on the door right and um spent a whole day obviously but I would say I think that that was way more valuable than sending out a bunch of emails blindly cuz at least you're putting the Personal Touch in it you're you're going there in person to say hi face to face and your chances are still very low but I think that personal approach is just heads above the uh the spam well and to Danny's earlier point about like doing a lot of that that proprietary spam Outreach um has a dual purpose of not only hopefully finding a Target but getting some practice getting some reps getting some conversations that that inperson stuff knocking on doors uh will do nothing if not get you comfortable having a sit down with a a business owner if you're if you're walking into the office and saying Hey sir Madam can I buy your business in person first time meeting absolutely absolutely and by the way any any anything to share there Steve did you have a script that you eventually arrived at by the end of that day that you thought was effective well I can't recall that I we're talking seven years ago now so I don't I don't remember well can can do you remember if you felt like you were getting anywhere with that with that approach by the end of that route I did wind up um speaking with one or two business owners it didn't go anywhere but you know it was what I expected I expected to fail and I've failed at it but I did have one or two conversations I was just trying something new sure sure great good for you all right all right now so take take us to how you do find the business you were about to say search funer the search funer yeah when when we launched our fun in 2017 uh search funer was relatively new it might have been brand new um I know it was at least relatively new I created a profile on there and I kind of forgot about it you know it had some of my work history which which pointed out uh my time at GE Oil and Gas and again that profile had just kind of been sitting there in the background meanwhile unbeknownst to us the the the seller of Hall and Supply you know he hired a kind of a boutique Investment Bank and he was pretty adamant about finding folks who he had who had um industry experience who understood um who understood the industry who had some familiarity with the products and who had potential to be strong operators that was that was something very important to him and this Boutique investment banker he you know being somewhat familiar with search funds he kind of started poking around and found search fun specifically found my profile and then I don't know why we never asked him we found my profile and then he reached out to Steve to ask Steve um about the business and whether or not we'd be interested in it and that kind of that started the conversation but I always joke and say you know we could have we could have just sat on a beach for two years and drank my ties and and surfed and still found this business and I think that that that speaks wholly to the idea that you need to look everywhere um you know this could have obviously been very different for us but the we were kind of at the right place at the right time um which is just so much of search is just fate and being in the right place at the right time um but if you aren't in every single place that you can be at every time that you can be then you'll never be at the right place in the right time well that's the thing Danny is like the way I see this is like yeah you just fired up a search funer account on this new website took you a few minutes then you forgot about it but like you probably only did that cuz you were so immersed in Search and so desperate to find anything I mean you were just doing anything you could and so while like the the the marginal amount of time that it took you to sign sign up for search funer um seems like a whim really it was part of a larger story where you were just trying to be everywhere uh you know the the phrase is the you know the harder I work the luckier I get or increasing the surface area of luck the moment of luck feels like luck but really you know if you had been on the beach for the last 24 months it wouldn't have happened cuz you would never have gotten around again a search funer account but I but of course take Surfer though and and also I'll say you know on the other side of the table this Boutique this guy at the boutique bank is doing the same thing he's like you know I'll just look you know I'm looking for a needle and a hay stack what's this this search fund thing there's some new website about search funds where these NBAs are going on and talking to each other I yeah I guess I'll go in there and see if I can find you know something um so it's kind of like he was doing the same thing on on on the other side he wasn't just using the the traditional formal channels he was trying something new fangled um but and and and then just the last observation is on both sides when you're representing a seller or when you're a buyer looking to for a good business it just takes one right the it just takes one so doing these things with the idea yeah I mean it's it's kind of you're looking for a needle in a Hy stack but all it takes is one and then it's all worth it so y i I will say that broker yep so he had been a investment banker for a long time right he had been kind of through this through this process a lot and he was even though he went on search funer and that was kind of a new thing I would say looking back on it he was pretty targeted so he knew because of some of the Dynamics in the industry it was very unlikely to get a strategic acquir um in that position and between that and the company size in the staff being older and needing needing someone who would come to it not kind of suck the business up into a larger Corporation or anything like that or relocate it he really understood I need probably some younger entrepreneurs who are going to be willing to come in here and he was aware of the the search fund space right so that was the first targeted approach of matching the second layer of that was he started going through people's profiles and he did end up telling us later he clicked on or he he stopped on Danny's profile and then did research on us and rearch and and reached out to us because we had oil and gas backgrounds which within the search ecosystem is I would I think is a minority in this business that we bought was also in the oil and gas space but more of the utility space it's far far down Downstream oil and gas were providing products to utilities but um then he also realized okay these guys also have an in like they've got some industry background that's going to be relevant here and he was 100% right like when we started talking to the business owner between the things Danny and I had worked on in Danny had General Electric with the actual products with one of the divisions of GE that sold products to Holland and me on the Natural Gas space with some of the projects I had worked on at intermech and some of the mechanical Concepts and Services I was familiar with um we hit it off with with the seller immediately like Danny knew some similar people I was able to speak the technical jargon with him and there there was almost instant Rapport from that standpoint and I think that's really where it all came together had there had that Rapport not been there if it was an industry that we weren't familiar with I think it could could have been very similar to the other four Lois we signed where we didn't have experience and it all fell apart right but like we had some experience so we saw the value and we were able to communicate it um to our investors in like a credible way well sounds like this broker was this Investment Bank Boutique broker was looking for a unicorn some young people who have some oil and gas experience who want to buy a business you know I mean how how many boxes was he checking did he have a lot and you guys just checked everyone so lucky for everybody um well perfect segue then so tell us about Holland Supply Company what what is this business so Holland is a distributor of natural gas products for utilities uh Gas Utilities so we buy from a handful of of Manufacturers um and we resell those products to to Gas Utilities Within kind of a defined territory um so Holland covers the Midwest um and you know it's primarily gas measurement and and pressure regulation equipment there's a handful of other kind of ancillary things to that but that's really our core competency or bread and butter and what I mean by that is you know if you use natural gas at home you have an ugly gray box on the side of your house that's measuring how much gas you're consuming so the gas utility knows how much to charge you each month and next to that ugly gray box is kind of a a a cylinder saucer shaped U device called a pressure regulator and that is dropping the pressure um into the house um so that it's safe to use inside the home for all the appliances that that use that gas and again that's kind of our core competency um everything from the residential um products up to kind of larger industrial you can go a little bit further up Ste up stream um but larger industrial um products of the same same function and but is it mostly residential I mean is that more than half your business uh it's a big piece of our business for sure just because you know you think about the volume of of of Gas users in in the United States it's primarily um primarily homes right primarily homeowners um make up the big chunk of that um of course businesses use gas like like restaurants and um U manufacturing plants and hospitals and schools but there's far more residential consumers of gas than there are you know commercial and Industrial consumers of gas and and so the kind of hero products from your your the the products that you distribute from your product line are these meters and regulators and for for a mental picture it's like what we would have on the side of our houses and so your customers are primarily local municipal or Municipal utility companies or I guess they're not Municipal typically they're bigger than that but yeah it spans the entire range everything from uh a municiple um you know we've got some customers some utility customers that only have only service 100 gas customers um and then we have some gas utility customers who have literally north of a million um so it spans the entire range there kind of depending on the utility but they all they all need the same products and can you give us a sense of the size of the business both in terms of Revenue and employees and history of the business how old is this business yeah this business was founded in 1968 it was founded by um a man named Earl Wen who um prior to working at a large gas utility Columbia Gas of Ohio he was actually actually a Navy Frogman during World War II which is the predecessors to the Navy Seals which was you know going back to the previous story kind of one of the other immediate connections we had with the seller Steve and I both having military backgrounds and what we did in the military was was instantly something he recognized um and appreciated so that was kind of another source of connection but Earl had started this business in 1968 he was an engineer at um at a utility and decided he didn't really want to um lead he didn't really want to be a manager of people uh that was ultimately the the utility had told him hey look you're going to manage people and he said nah I don't really want to do that and they said well we're not really asking you and so he found an alternate path and started haul and supply and became a distributor of of these products and and Earl ran the business from 1968 until about the 80s and his son Craig had continued in the business um and Craig had really really um tried to grow the business and at the point that Craig uh went to Earl um you know Craig had said hey look in order to grow this business we need to we need to hire folks and Earl said well if that's the case I want nothing to do with it I don't want to manage people I didn't want to do it 30 years ago and I don't want to do it now so you take the business so it's just the two of them in the 80s it's just the two of them yeah I think you know ears yeah it it was really just the family it was run out of the garage you know um Craig Craig would would help um you know in some cases change out some components deliver the product help sell um and then they would they would you know lick envelopes and send out invoices from the kitchen table and um it was in the 80s that Craig said he wanted to grow the business so the the the ownership transferred to Craig he moved it out of the out of the garage into an actual facility uh began hiring employees and it kind of Grew From there he added new product lines expanded the territory um and kind of made it what it was when we uh bought it in 2019 but when we acquired it in 2019 it was it was still very lean the company was still very lean uh so you know financially it was kind of in the low eight figures um and had eight employees including Craig because when Craig stepped out and Steve and I stepped in there were nine total employees um of which Steve and I at the age at the time we were 33 and 36 we were the two youngest employees in the business and even with us being at 33 and 36 the average age of the nine employees was 55 to give you a sense of kind of the tenure of of the employees that were there which is is it's a double-sided sword it's it's it's good and bad it's good because this is a technical business that requires a lot of technical understanding of the product products and the employees certainly had that they had that pfold more than most people we've come across because they've been in this company for decades uh the downside is that half the employees kind of had their foot out the door they were ready for retirement so um you know that required some kind of immediate changes and created some immediate challenges for Steve and I but um overall you know we saw we saw a company that was performing very well almost in spite of itself um you know had a tenur staff was doing very well had systems and processes in place um but more than anything what we liked about the business is that it wasn't um it wasn't like your typical box in box out distributor in other words we weren't just buying stuff and and shipping it we were providing value the business was providing value in some way and there's lots of sources of value that we we uncovered once we started doing diligence but those sources of value are really what gives it Danny let me can I pause you there because I want to get into I want to ask a question and I think it's it's going to tea up that answer yeah yeah um but let's just highlight for a second you gave us a uh a vague Revenue number low eight figures so let's be conservative and say 10 million okay in Revenue um with nine employees so this business is doing over a million dollars in Revenue per employee yep um yeah yeah and now that seems like a lot am I right you are correct I mean yeah okay yeah I think by just making sure just making sure I that that's as impressive as it seems yeah that was actually one of our investors that was kind of the first thing he pointed out was I cannot believe like the revenue per employee of of this organization um and you know revenue is one thing but the earnings had to be there as well and they they were um and and well Danny can I ask you what margins look like cuz my you know understanding very broadly of distri distribution businesses is that margins are are pretty tight so what do margins look like that was a key finding in diligence we looked at the margin we said this isn't like a distribution business this looks better than we would expect and that's when we started finding the sources of value um you know that it really wasn't just a box in box out distributor the margins were higher and that's because there was some kind of value being provided there um and we can explain that yeah I would like you to explain that but can you give us a a range of margins yes I'll say our our criteria was our criteria was we were looking for margins um this was our financial criteria it's on our website we were looking for margins north of 20% and it met that it met that criteria well I think the website was 15 we were looking for yeah we I 15 to 20 yeah but it was okay so it it met the criteria and and a typical distribution business of course typical that's an enormous category but how much better than quote typical is 20% yeah so typical from what we learned is 5 to 10% for a traditional box in box out distributor so more than double more than double uh and by metrics if it's 5% to 20% it's four times as good okay so now please do tell us how is this business able to not only generate so much revenue per employee but also keep margins in a at a really fat level compared to other distribution businesses yeah I think there are kind of two buckets here one is um the actual activities in the business and one is for the folks out there who think about businesses like assets and and just like major levers what are you doing to conserve cash or raise margins we I'll explain that to you the first one was on this the activities of the business the value was on the sales side and in a workshop so on the sales side although many engineers at utilities are they're Engineers right they really understand like physics Concepts and principles um they understand everything about their entire system and they know how to regulate pressure but they don't know all the different devices that different providers offer and so if a utility engineer calls and says hey we've got a new um a new development that was built it's all restaurants on the bottom floor and it's residential apartments for you know the second through the fifth floor and we need to run gas to all of these you know we we were awarded the contract to serve this development gas um can you help us pick out a pressure regulator or like a regulation and Metrology set well from that point forward there are a whole lot of questions that have to be asked to really spec the correct product and not only the correct product but the right configuration of that product so the sales team is going to be asking questions like okay what's your line size what's your pressure in that you're feeding and what do you need to drop that to after you drop it you know what's the linear feat on that pipe between the regulator and where it's going to feed into the application what kind of application is it is this like in in some of these restaurants do they have any um high efficiency systems that might very quickly draw upon that gas whereas the residences on the second through the fifth levels are going to be very steady draws on the gas and a lower volume so you're going to have to pick different products that are going to feed the right volume the right pressure um and and it becomes fairly complex right so they're guiding the customer to which product is going to be the best fit for the application and then sometimes there are tradeoffs sometimes you might have two or three products that could work one may not be in stock right now you know it's going to be another 10 days one might be more expensive one might really nail the application for exactly what the engineer wants to do but for like double the cost of something that gets within 5% and it's still safe right so then they're talking through all that that's the sales side is the educational consultative um sell with the customer and then the other side of of the value is I talked about the configuration of a product right so like our most simplified product can be configured 120 ways because you've got different parts that can be changed in and out of it now we don't hold 120 configurations we hold the most common Sellers and then we hold the parts but we've got technicians and we've got pretty robust training uh um programs that we've developed for this now where we've got each product all the mechanical or electrical procedures that can be executed on each product and then like a library of start to finish pictures each step how you do that to train technicians right we've developed that since coming in a lot of it was tribal knowledge before but our technicians know how to do all this right so on the Sal side let's say from that conversation I just explained they selected a product or a couple products then that's going to pop up in the Fulfillment queue in the warehouse and in the workshop and the workshop supervisor is going to assign that order to the technician who is suited to do it right and there might be more than one person who could do it but then what they're going to do is if it's that that product that comes in 120 configurations or can be and we've got configuration five but we need six they're going to they're going to start making the mechanical changes to the device and then they're going to test that device and make sure sure it works exactly the way the customer needs before they ship it out so those are like the sources of of value and then there's just how would an investment banker think of this as an asset well it was because the business owner changed nothing for like 20 years and didn't reinvest very much and ran everything you know he he was extremely Frugal and he was not optimizing for growth at a certain point after running the company for four years he was clearly like just optimizing for profitability so he was very costc conscious and was not making growth efforts to do new stuff and I think that allowed him to to fatten the margins a bit Steve you just said for the last four years or 4 years 40 he ran this was Craig this was the S yeah yeah yep yeah okay yep yep the everything you just described on the sales side about the the consult the consultative nature of the sale the handholding the configuration the Deep Tech technical expertise um to uh that is offered by your team is that therefore to say that your competitors don't offer that they they got a catalog figuratively speaking and they just expect their customers to to pick something on their own out of the catalog and say give me five of these we have competitors who also do this I would say that and you find this in many Industries maybe you've got uh you've got different players but they're all they they've each got something that differentiates them from the rest of the crowd and we were really really good at this on a specific group of products in our portfolio um to to the point that you know first of all those products are they're complex so they're not easy to learn they're difficult to learn um and I think that's really where I came in because we became really good at that on those products also allows us to do well is is focus on lead time so lead time in our industry is everything lead time is king um so I'll give you an example there's actually there's actually some products in our portfolio from some of the manufacturers we we rep where you can order it today and it'll take roughly two years for it to show up wow imagine placing an order for something today and it shows up in two years that requires an immense amount of planning on the utilities part to kind of forecast exactly what their needs are going to be in 2 years and no one can do that well and admittedly you know no one can also no one can can stock the types of volumes that that some of these large utilities require on an annual basis anyway but what I can say is because of our you know upfront technical ability to to size and in in some of those cases where Steve mentioned where they have a few different options we can say hey look we've got option A in stock option b is also another option but it's not going to be here for three more months but our inventory and and the combination of of expertise on the front end plus the expertise in the warehouse what it allows us to do is ship 70% of our orders within three days uh which is which is huge I mean when you have a portfolio of products that you know if if the utilities were able to order these directly from the manufacturer in most cases they're going to take 6 months on average to show up um you know every product kind of has its own individual unique lead time but on average it's about months across the board um versus us you know being able to deliver 70% of the orders that come in within three days that's that's a huge source of value for our customers sure well that sounds that really does sound like a differentiator Danny but of course carrying lots of inventory ain't free to you guys so so so but but the carrying cost of all that inventory uh off more than offsets I guess the the um is more than offset by the additional Revenue you're or or margin you're able to drive from doing so I guess sure it definitely complicates the equation right you've got to not just have inventory but it has to be the right inventory and the team has to know how to make those specific changes and still test the product and make sure it works properly so it's it's not just a a dollar um I think we look at it like more like balance sheet income statement right that the inventory is going to be it's going to be cash that's tied up on the balance sheet but if that results in income going up on the income statement then it's worth it like this is about growth sure and I think um that's something we also found early on right when we were doing diligence on the company and trying to get a better just get our arms around what are levers for growth if you look at even in publicly traded large companies that focus on reselling a product um whether it's like messen in the healthcare space or it's Amazon or many others look up distribution companies those that are growing you're going to see inventory going up like significantly year on year and all of this value that you that you all just described there there's a lot of kind of nuance there and and so did you figure all of that out during diligence before you signed on the dotted line or is this only things that were revealed as you got your arms around the company as its new owners yeah we figured out the sources of value during diligence yeah we didn't really we understood them a lot better as we started running the company but we we found them during diligence and recognized them and is this something that the owner also recognized Craig like you know you know these These are why we out you know beat out X Y and Z competitor because we carry lots of inventory because our salespeople are basically Consultants you know I think he inherently knew that but I'm not sure that he would he would say it in those words would you agree with that Steve yeah I think he knew it in a completely different way he knew it from a standpoint of like hey this is how my business runs Danny and I were looking at it like most NB who are going to run a search fund would which is like hey if I stack this next to other companies what makes it different like how does that happen relative to another company I don't think that Craig thought about it that way because he was born into and grew up in this company his whole it's just this is what he knows water he was swimming in as it were um and so you had mentioned I think Steve that as an example customer somebody's putting up a new building uh new construction you know um retail ground floor five five floors of residential apartments or what have you or some new I think you also said like some new big development somewhere else anyway so is the is the business tied to new construction is my question no I mean if you look at the gas industry this is kind of like a market sizing exercise right but there are like 140 million residences in the US and about half or 70 million use natural gas so if you've got like a 3% depreciation rate that's about 2.1 million have to get replaced every year and the grid has been in place for decades and like you know over 100 years so the the largest portion is um is maintaining the installed base and then growth is on top of that so to your point well it is tied the the growth of the business is somewhat tied to our ability to capture new growth of of new gas customers but most of our business is is the the replacement like like Steve mentioned it's there's a very large installed base of of gas infrastructure in in the United States that's been there for many many decades that has to get reped in out every single year and I guess there's also another Nuance layer in there between just maintenance and actual growth like real estate growth and it's retrofits it's there's a new technology that's going to be cost-saving so we're going to retrofit something older with that or it's hey they installed a regulator in a meter set that allows you know so many cubic feet per hour power but now that neighborhood has grown you know two times over the last 20 years and they need a new regulator a meter because they have more gas that needs to flow through that set so they need to upgrade the size for the volume right there's also a lot of regory oversight the regulatory environment is changing um especially now frequently and those regulatory requirements in some cases require those utilities to go back and rethink how how they their infrastructure operates and like to Steve's point that creates retrofit opportunities or opportunities for new technology Steve it was pretty interesting what you said about if you think about you know the universe of possible customers or at least the End customer of the 140 million homes in the US 70 half of which use gas natural gas and take a 3% appreciation rate and you know that there's just going to be a a predictable rhythm of call it reoccurring Revenue those probably might not have been your customers if they if their if their boxes are decades old but it it's um I think it's a it's a great way to uh build some reliability of Revenue quality of Revenue feel uh into your business if you can't just say you know beyond just is it recurring is it reoccurring or is it one time is it project you you know it's um you can really kind of start to start to yeah like I said liability and quality of Revenue even if it's not technically reoccurring or recurring yeah I think that's spot on I think you know every every Searcher is looking for recurring revenue of some of some nature um this certainly is not recurring Revenue but I think the way we've described it is that it behaves like recurring Revenue it's not a subscription but to your point large installed base getting replaced annually um it still behaves that way well and you guys now have the tenure of six or so years in the business to have your own data set has it been where orders just kind of come in pretty reliably for for replacement homes sort of thing like like the model would suggest uh yeah I mean it you you start to see those kinds of Trends with certain customers right so yeah answer is yes but it's like customer to customer because when it comes to policies um there are Utility Commission rules rules although they they vary state to state but then even within those rules obviously there's an ability to interpret it and then for utilities to set their own policy so each utility is kind of like a snowflake when it comes to how they manage their operation so now I want to return to the question that's been on the tip of my tongue and and we've already been glancing off of the your experience your both of your experience in in oil and in gas this is clearly a very technical business um although you you guys might be talking about it with such confidence because you you know you're now you're now industry veterans you've been in this for six or seven years but for a Searcher who might have come across a business like this today and and not have the industry experience how much has did the experience that you guys have how much was that actually relevant was the broker right to to grab you guys or could he could he have grabbed somebody else uh speak for myself I'm going back to discussions we were having with um you know financing parties Equity investors banks at the time when we were trying to close the deal I I don't think this deal would closed if we didn't know what we were talking about there and didn't have the experience with it we just wouldn't like conceptually I don't think we would have come up the learning curve quick enough to really during diligence be able to understand what was in front of us when we were at on site visiting the company and then have to turn around you know first of all like fact check that on our own understand if it was true or not and then second H you know after we arrived at the answer yes this is valuable these things are true be able to relate those Concepts and the technical Concepts and the industry Trends um to investors and bankers like if we didn't have the industry experience I don't think think it would have closed that's my thought yeah I'd agree with that part I I don't think that there's anything necessarily unique about the business itself that you know it's not like Steve and I are the only two people who could come in and run this business because we have industry experience I think plenty of people could come in and and do well um after understanding you know operationally how the business functions I think what we had was kind of uh a little bit more understanding of the market and the industry that it served um and to Steve's point I think that's what got the deal over the line with some of the some of the um you know the bankers and the investors because you know let's face it you mentioned natural gas and people immediately are scared it's it's oh my God that's a fossil fuel that's a bad word um I don't know anything about oil and gas or energy because I mean in in the search fund Community I don't know that there's ever been another deal in in this space um so it was it was new this type of deal in this industry was was unique to all of our investors and we had to get them over that initial um education Obstacle of hey look this this isn't a cyclical environment this isn't you know this isn't the volatile oil and gas environment that you're probably um thinking of in your mind when we say oil and gas and so there was a lot of Education that we had to do on our part to educate the investors and the bankers that um you know this is a stable industry this is a good place to be yeah their concerns were much more about the market than about and and how this does what it does uhuh and so when you say oil and gas and investor is gonna say cyclicality and volatility thank you y the precise two words I was looking for cyclicality and Vol volatility that's what oil and gas screams to everybody yeah yeah well I mean to people who don't invest in it right um point is yeah and I think that's where we really had to when we were talking about that with them what we were really doing was delineating different parts of the energy Market because there's absolutely a part of the energy Market that's highly cyclical and volatile and you're not going to get away from that in that area when like we're not in that area but we had to be able to articulate that and explain where we are in the energy Market to them what of the fact that you're in the fossil fuel business for for you know very forward looking people how do you how do you neutralize that concern well I mean you don't really neutralize it um I think you just have to talk about how much energy gets used and where it comes from and how quickly new sources of energy can actually be established and serve a material amount of people right so like there's there 330 is million people in the US and um there are plenty of experiments out there for new technologies solar wind so forth even stuff like growing algae and then burning off algae uh to create energy because it's just heat transfer right but like let's say in let's say you do you can create you can grow algae burn it off and generate energy to recharge a phone or send electricity to a stove so you can cook dinner on it right well the next question is like well how much energy does it take to serve like 10% of the population in the United States CU that's 35 million people that's a lot of algae and how much would it cost to do that and and how long would it take to set up all those Farms right well think about having to build build windmills or having to build solar panels and having to install all of those right the same way I mean it kind of comes down to like the availability of the energy source um the cost per BTU the infrastructure that's already in place to actually carry the energy once it once the energy is generated how do you get it to a user right and then finally the carbon intensity of that um and the big sources right now are petroleum nuclear Renewables wind and solar uh natural gas and coal and really what's going on what's been going on since about 2005 is coal has been tapering off and as it tapers off about 2/3 to 70% of it is picked up by gas and the remainder is picked up by Renewables and the reasons for that is you know around 2000 we found out in this country as new production techniques were developed and Technologies were developed we found out we had more gas natural gas in this country than we could even consume in the next 100 years given popul potion growth right um so super cheap very available and uh the grid is has been in place for over a century so easily transferable for a customer to use and then finally carbon intensity if you change a carbon fire power plant to a natural gas Firepower plant you reduce the emissions by half so all these discussions about how do we lower emissions how do we meet the Paris Accord goal right like pre-industrial levels if you can do one thing and you can reduce emissions that are currently going out into the atmosphere by 50% that's clearly the biggest lever that anyone knows about right now so there's a huge switch to natural gas right like we don't really have any doubt there's going to be a day where Renewables are making up a significant chunk of energy consumption but right now it's not significant um and it's because of all the things we just mentioned the time to build them out improvements in energy storage improvements in trans transmission so you can actually move it um in the investment to make all that happen and then there's a lot of loss like with solar as you transfer the electricity the capacity Factor how much energy you lose after it's initially generated is I I believe greater than a third right so you generate like 100 megawatts and you're left with left than less than 70 it's just an uphill battle it's not going to be like many journalists put these salacious headlines out there that would make us all think energy is going to change and we're going to be living on a new Energy System next year that's not the case like just physically speaking to get all this done it's probably going to take another two three decades yeah I think you know Steve and I are not anti- renewable in fact like Steve said we recognize that there's a place in our in the grid for Renewables and I think what a lot of the headlines would have people outside of the industry believe is that there's this there's this option for either or and it's not it's not it's not either or it's actually both and it's it's a conversation of not either natural gas or Renewables it's both natural gas and Renewables um it's it's you know reality has to set in there and you start talking about the cost you start talking about the availability um the reliability of each of these different types of of energy uh um and it again I think the more you the more you understand the more you realize that it's it's a it's a conversation of both and and not either or but you know I I I wish the media did a better job of of rather than the either or conversation focusing on on how it has to be both that was a great explanation guys I'm glad I asked okay we're going to start wrapping up here but all we've done is arrive at your ownership of this business we haven't covered any of the of the intervening uh six or so years sorry youo you closed in 2019 I keep saying six years so it's been it's been what 5 years about 5 years yep almost five five years okay y so give us the bullet points on those five years we just drink my ties and surf yeah that's all we do during your search after your search it's all surfing on the beach um man so points the first phase was I mean assimilating ourselves into the company and really understanding it at a more granular level so we spent a lot of time um with each part of the team doing the jobs they do right next to them or just asking them to show us uh we also it was that was the technical side of it and when I say technical I don't just mean the products I also mean understanding the market better like just getting more in touch at a granular level with the whole company all all departments everything that it does right another part of that was was trying to start upgrading the the company because it was a distribution business we now were going to be audited um and there was no inventory system um so we needed to bring some new softwares into the company and and that was a lot of cultural change so we managed our way through that and that it took a long time and it was a quite large project bringing a new Erp into a company that was running on Doss um do man I haven't heard that word in a while yeah yeah black screen blinking cursor that's all you get there it is um so there was that and then the final part was the team Danny alluded to it earlier but the team um had been here for a really long time we knew we were going to need to bring new people in kind of have like a right seat left seat ride so newer folks could learn from those who had been pretty open and told us hey I'd like to retire in the next year or two but the timeline got compressed um you know with within I think a year the most valuable employee passed away in his sleep and um another one retired and a year after that so at the two-year Mark a third employee retired and that those three were the entire Salesforce right so as this was going Danny was building up a new sales team and getting them in here and learning so uh we we had almost 100% turnover um you know within 2 years and now we've still got some of the original original company or original uh staff but that was the the third big component was the team kind of shepherding this retiring generation out and and not so much that we were pushing them out they were willingly saying like I'm ready to retire but we had to find a way to retain the company's technical competency cuz that was really the core of value yeah exactly as you said the sales process was so much about that kind of technical consultative handholding I mean we were very involved with this like bi-weekly meetings where we would prior to the meetings set a plan with new employees who were learning from the sales staff a very detailed plan on what they needed to learn how they were going to learn it and the folks who were retiring all of them had worked here I think greater than 20 years and that's an emotional time for them um they're getting ready to step away wondering what retirement's going to be getting told by Steph Dany these 30s something year old guys who just bought the company they worked out for a couple decades and Steph Dan you're telling them I need you to teach someone else everything you know they've and they've never done that before so we had to be very involved um we had to set the plan and then we had to handhold the plan very religiously by like having bi-weekly meetings with everyone and sometimes getting in like sometimes forcing the training to happen um right being as kind of delicate as we could but some things just don't happen I'm sure you know you've got your own background in business and in small businesses there are just moments where you have to be hand on Hands-On to make sure things get done like that well I mean this is this was just a giant exercise and change management you know a phrase that you hear a lot in our world obviously um give us something you were doing poorly in this CH in this in this two years of change management that you then corrected and did and did well that the audience might learn from I think you could easily just say Inventory management are you're talking about like a function in the business h no actually I'm not I mean like you guys were like okay we have to these are the things we need to change we're going to put for example put in an inventory management system and or you know get this tribal knowledge on paper whatever all the many things were um but you you know you're bumping up against this you know this aifi culture and resistance and and and so you got to sell it persuade people to do it get on board and you probably were pretty clumsy to begin with and you know met more resistance because you didn't say the right thing or whatever did you get better at it and and if so how you know I hate to turn your question around but Danny and I have talked about this before the thing we learned the most in the military or the thing that we've agreed was the most valuable lesson was um adapting to culture and building relationships I think on that level we probably did well at that but it was at at the cost of driving any kind of growth within the first like year and a half two years that's probably what we did bad at we had we had to be so immersed in the operations and so like manage the relationships with the people and managed the change so closely that was all laying a foundation that we could use for growth grow later but but we didn't focus on the normal things that people would focus on for growth right out of the gate I think maybe that's the answer of what we were bad at well I but you were bad at it so do you feel like you could have accelerated that so it wouldn't have taken a full year or so before you could start flipping levers well bad at when I say bad at it it is starting to grow fast like we didn't start to grow quickly right yeah I don't know that we could have done both I mean if if if there was a way we could have done both I think it it's it's beyond me um there's there's plenty of people who probably listen to this podcast who are far smarter than us but um and who have probably done it but um outside of just finding more people to do more things um which you know the the balance sheet didn't support we um using the resources we had we I think we focused on the things that we felt were the priority at the time well on growth you eventually did get there what what has growth looked like or where where does it stand today it's been it's been a journey for sure uh so there's there's of course organic growth we've added um some other product lines we've um you know we've signed agreements with some other manufacturers expanded our our territory um we've started offering new types of Technology um so we've had some organic growth from that from that respect um you know at the beginning of the podcast we talked about how we just recently finish an acquisition so um that's that's on the inorganic side so as as a distributor of measurement and regulation products we buy a lot of pressure regulation products and we found an opportunity with one of uh our manufacturing Partners um to acquire a couple of their product lines uh a couple years ago and so that was kind of our first forray into into manufacturing we we approached them and we ended up acquiring those product lines when we bought them the lead times were um you know over a year probably around 70 weeks um 70 week lead times and we've brought those down more recently to around 20 weeks but um you know again those two product lines did not come easy we didn't buy a going concern we didn't buy an operating business what we bought were assets we bought the manufacturing equipment we bought the inventory and the IP and we had to transfer everything from Pennsylvania to Ohio to a new facility we had to stand up a new Erp we had to hire a new team uh develop a new you know set of company values um you know we we inherited more than a Year's worth of backlog of orders um and it was so you essentially started well you bought the assets of a manufacturing business uh somebody a vendor of yours and then you started took those assets into a shell company and basically re restarted it I should say including with all new staff and so you kind of have a parallel company now you did not absorb it into Holland correct yeah we intentionally made it separate because Holland being a distributor we know that it's it's uh you know the activities that Holland needs to be good at are different than the activities that our other company utility solutions group needs to be good at a distribution in manufacturer although there are some similarities are two completely different activities and we wanted to make sure that the teams um were able to develop unique skill sets and and we didn't want to combine them um so we did that intentionally but um you know we started a couple years ago with that first acquisition with that that that manufacturing partner of two product lines and then in October so four months ago or so we acquired seven other product lines from them um and it was under the same kind of structure where no employees in the deal it was just um assets again so we had to with that one you know more more product models requires us to to grow the team even more so we had to hire we've had to hire about 40 new um employees as a result of that acquisition wow um and we're still in the middle of that we're we're transferring and and uh standing up production so it's it's an ongoing process but we are kind of you know we're knee deep in that right now so what are you guys today distribution guys or manufacturing guys why don't you it's a vertically integrated manufacturer right so like now I guess the way we look at that is utility solutions group owns the design owns the electral pro intellectual property and makes these and then our go to market strategy is to use Distributors one of which we also own so with that particular distributor we're vertically integrated um but we've got you know we've got we combine all of our Distributors the utility Distributors and the commercial industrial we've got north of 20 Distributors and we own one of them so yeah the the vertical integration is kind of a small piece and but and so what is the Strategic play being ver vertically integrated are you able to offer more competitive pricing sort of thing if somebody buys from you know buys your pro product manufactur by you via your dist Distribution Company via Holland sure that's a possibility I guess all the generic kind of economic implications of vertical integration are there like okay like what you mentioned or like uh you know it's reduced cost it's there are some intangibles that are pretty valuable like the cross trainining between the manufacturer and the distributor so that the folks at the distributor who are really smart on the application learn more about how it's built and the people at the manufacturer who are really smart on how it's built learn more about what customers think of it and how it's applied um you know there's somewhat reduced inventory holding cost because it's on a net level because if you own both companies and you can also manage the production schedule more closely than an external party would have that you can kind of shorten lead times right uh to Distributors what does the lay of the land look like in terms of size of businesses how many employees in revenue is Holland's the Distribution Company and how many is Utility Services Group how much and how many if you can so Holland is now uh so we were like I mentioned when we acquired Holland including Steve and I was nine employees we're now uh north of 20 I think 22 or 23 somewhere in that range at Holland um so we've more than doubled the employee count the the revenue is increased uh from where we started I don't know somewhere in the vicinity of 50% um at Holland and uh USG utility solutions group the manufacturer you know as you mentioned was kind of a shell company we started the The Entity in 20 21 2021 um with zero and employees other than steveen myself and um that company is you know probably by the middle of this year will be around 60 employees well that's an interesting turn uh right to to have gotten into the manufacturing business it's been a ride for sure um it's a a lot of ups and downs it's a labor intensive turn yeah it's been a lot of work for sure I mean we are absolutely in every sense of of of the word like we are running two companies completely now fortunately Holland is is you know with established process that's been around for a long time it's it's been a little bit more hands off which has allowed both of us to focus a little bit more of our time on the standup of of utility solutions group and the acquisition that we just finished there so pretty fortunate there but um it has been yeah very Hands-On very labor intensive um and certainly a lot of work and a lot of emotional roller coaster writing for sure how close are you going back to Holland how close you to that north of a million dollar Revenue per employee number these days we're not close to it we're not there but we're working our way we're working our way back for sure okay give us a few more years okay yeah I mean like that goes back to saying the the former owner owning it for 40 years probably the last 15 20 he was just maintaining what he had right he wasn't trying to grow he came into grow and you know what that means lots of Investments lots of new headcount and it it takes a lot of time for that to start paying off yeah more time than you want always always yeah guys anything that we didn't get to that you'd like the audience to know if you're going to buy a business um I I've got one thing yeah right I think the number one characteristic well I'll put it this way because there are different flavors we talked at the very beginning about um you want to do self-funded you want to do traditional if you do traditional it is in investment right you have investors who would like to make a return and the way that happens is through growth there are also some Financial engineering tricks you can do but really growth is is the number one thing right so if you're going to do a traditional search I think uh I I would really say the number one thing to look for is a growing company if it's already growing the momentum's there that's something that's really hard to get if it's not there and I I think that's that's what's going to make it worthwhile to the the Searcher the operator in the long term is something that's already growing yeah the only thing I would add is just just know what you're getting into I mean I think there's a lot of um I I don't know I actually don't know what the data says I don't know enough of this but I would assume there's plenty of people who pursue a search in kind of the idea of of this sounds like a good path for me it sounds good it sounds interesting I like the idea of the financial Independence I like the idea of you know the status of having the the CEO title or ownership Without Really knowing what's involved in that and I can tell you like it's it's a day in and day out grind every day feels like a grind and I'm sure you know every every entrepreneur's experience is different but I would also assume that most most people who were in the seats that Steve and I are would agree that it it's you know it it's different than just showing up to a 9 to-5 plan you're you're going to miss birthdays you're going to miss family events you're going to miss weddings reunions um one day you're going to be excited about a really big sale or an opportunity that's that's in your pipeline um and you're going to ride that high until the next day when you're concerned about liquidity concerns because a customer can't pay you um and every day is just a journey and every day there's new problems to solve and as the owner they're your problems and no one else's sure we've got employees who who who take you know emotional ownership in the business and they they love what they do and they're passionate about their jobs but without having their name on the cap table they don't truly own the risk and so um that risk is is yours and yours alone and just know what you're getting into and you can do that by just go out and interview as many people as you can not just the not just the ones who have been successful with search but also the ones who have been unsuccessful find a broad array of people who um have have done search whether they've been successful or not whether they've enjoyed it or not and just speak to as many possible people as you can to really know what you're getting into to make sure that it is really a fit because it is absolutely a journey every single day and but just before I let you guys go Steve just on your takeaway here that that you would recommend people particular traditional search fund folks that they buy a growing business is Holland the right kind of business that you that you're recommending people buy that was that was growing or or not because it did take you a while to grow does it apply to you or not I was saying that because we are the cautionary tale I mentioned that we staved off big growth efforts for a year or two because we had to keep the core of the company together and had the company already been growing that wouldn't have been a sacrifice we we made right like ultimately especially as a traditional search this is an investment you're taking investors Capital you need to make uh make them a return on that right and every day counts so if the business is all already growing that's just easier to do I guess what I was getting to was that wasn't our situation and so it's taken longer to create that growth and that's just more time that that we weren't creating that return we're glad where we are now but it would have been nicer um to have that have that move along a little bit faster and I recognize that might be the Grass Is Always Greener like uh it it show me an entrepreneur who thinks their company grew fast enough right like they're they're probably not out there exactly so yeah yeah and but I also I had the impression from your previous answers that it wasn't growing because that you it didn't come in there and it wasn't growing like crazy because or you couldn't grow it like crazy because you had to kind of do some change management there for the first 18 month months but was the market opportunity there to to grow if you could just get everybody on board because it because you have Tim ultimately that was there um through the strategies that Danny brought up new products being added to the portfolio and building out a sales sales and marketing kind of engine right the the team and the resources on the marketing side so yeah it was there um it just took us some more time than we really wanted for that to start for us to execute those strategies and then for those to start and fruit but and and then the Acquisitions were those kind of because you thought you had exhausted you were getting impatient for growth maybe or you thought you had exhausted kind of whatever kind of organic growth you could do at Holland so it started how did those fit into this whole your whole kind of like takeaway for the audience it started by necessity Danny do you want to talk about that one yeah this was this was part opportunity and it was part survival so um our manufacturing partner had approached us and said hey look there there's a couple of product models that um that obviously Holland's familiar with we sell a lot of them um that we're just not able to manufacture this was kind of peak of covid when there were a lot of Labor constraints and this particular manufacturer they um you know their their Factory was in um a very rural part of of Pennsylvania very small town so already labor constrained you you double on top of that the the co constraints and they just they had to allocate labor to other product lines and so there were many months that a couple of these product Lines Just were not getting built and so the backlog kept going out and out and out meanwhile Holland was not getting deliveries so that's kind of where we recognize the opportunity we approached them and said hey look I think the solution here is that we acquire these we move them to Columbus Ohio where there's a better labor market and we become the manufacturer We Begin manufacturing and selling and that ultimately being ended up being the rights solution but you know part of that was the opportunity and the other part was survival because we saw we saw a situation where product lines that our distributor relied on and needed to sell to the market in order to remain profitable were not readily available and there was there was a potential outcome here where you know these product lines either were going to become unmarketable because the lead times would become so long or they could be they could be so immaterial to the manufacturing partner that they discontinue them or maybe they divest them to uh a different acquirer who already has their own distribution Channel and and turns off haul and supply and so it was this combination of opportunity mixed with survival um and that's what led us to you know the same realization with the remainder of the product lines we just acquired in October it was still kind of the same thing we we couldn't afford for them to turn them off or or divest them to someone else well with all of that in mind and and Steve you're you know you're saying the business hasn't grown as much as you would have liked on the other hand you know who who's what entrepreneur is growing as fast as he or she would like net net it out for the audience though I mean is are you guys feeling how are you feeling about this whole project at this moment in time we're really excited for this project um that's that's me thinking to the Future at this moment in time to answer your specific question it's it's major project we relocated seven product lines into a new um you know 14,000 foot facility and we've expanded the team rapidly and it is it's a big project and so uh there have been a lot of hours put in and we've it it's also exciting at the same time right like it's a lot of work and it's stressful but if I remember back to my Army days there were some times where I realized like the people I had were way better at their jobs than I could have been at that job and it created inspiration for me even though I was the leader and we're seeing that a lot these days I mean you know we've we've now got a HR department we've got an engineering department we've got a supply chain team um we've got a maintenance department and these people are doing pretty incredible things that that Danny and I don't have the skill sets to do but it was about building the right team so it's stressful it's a lot but that's the upside of it and then um I think in in the near future 6 9 12 months from now as the production is really rolling um we're going to we're going to see a very large piece of growth from doing this Danny anything to add about how you guys feel about the this immediate project in front of you or really the entire story here the entire Holland Adventure yeah I think it's just it it kind of goes back to being at the right place the right time I mean you you said earlier you probably said in a better way than I did that you know um you end up working enough and the the luck ends up happening but um you know I I I think these these two Acquisitions we just did for the manufacturing company you know part of that was just being at the right place the right time um having a relationship with the manufacturer and it's been a lot of work but you know I Echo Steve's excitement about the future I think um you know not only do we have will we potentially have two businesses that are doing you know well but we're contributing to an industry that that we're we're passionate about and that we've both uh built relationships in and um being a part of that and and now having kind of a platform in a thesis that we can take into other markets you know maybe this means that um maybe the next step is we we we expand out of the gas market Into Water and Electric I'm not saying that's definitely going to happen but I think what this gives us is the option to potentially do that we'll we'll reevaluate here in a year or so kind of see what things look like but I think um having that option on the table is certainly something that wouldn't have been possible otherwise and that's exciting MH my sense guys is that you're a little bruised maybe from from how hard this has been but very very bullish on the next two and three years yeah I think that that's sum yeah I think it's a great summary yeah okay okay well don't want to over I had the impression that this was nothing but but you know growth and success so I'm glad I'm glad we've kind of clarified here that this is um you know that these Acquisitions for example were were not just offensive but also partly defensive and that there's there's uh it it's not been without some some real pain here and uh that the best is yet to come if people would like to ask uh one of you one or both of you questions what's the best way for people to to reach out do you like LinkedIn do you like email yeah either work yeah linkedin's great I I get a lot of requests on there I've actually got my email um if you click the little contact info button on LinkedIn you can find my information there okay we will link to both of your LinkedIn profiles in the notes Steve Reese Danny Fields thank you guys both very much for for taking the time to share your story congratulations despite the fact Danny that it's a Daily Grind you seem to be gr grinding in the right direction these last five years so uh pretty pretty interesting business and really interesting that you kind of have two businesses going now uh manufacturing and distribution so congratulations to you both thanks for inviting us well really appreciate it 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