Carl Hughes, welcome to Acquiring Minds. Good to be here, Will. Thanks for having me. Carl, you bought a podcast production agency. I am going to try to avoid using the word meta in this conversation, uh, which is happening on my podcast. We'll see how I do. Uh, but we're going to hear your story of buying this business. And we are going to explore the concept of productized services, which is a category of business that digital entrepreneurs know well, but people who are focused on more sweaty offline businesses may be less familiar with. Before we get into it, Carl, let's start off with some background on you, please. Sure. Yeah, um, so after college, I, uh, was a software engineer for a couple early-stage startups here in Chicago, where I moved to. Um, and in that process, I kind of got to I was the first employee, actually, like twice. Uh, and that was a really great insight into like what it takes to run a small business. These were These were companies that were raising angel and VC money, so it's a little different than, you know, starting your own your own business from scratch or bootstrapping, but certainly gave me a good insight into what founders deal with and and kind of got me on this track of entrepreneurship. And then, about 3 years ago now, I started my first business called draft.dev that does, um, technical content marketing aimed at software engineers. So, it's a super niche thing. Um, it obviously, like, my background in software engineering plus my I enjoy writing, that kind of like made it a good fit for me as a a first business. And then, uh, it took off really quickly. And so, the kind of backstory and how this fits into the podcast production agency, because they are two separate companies, we didn't like buy them and merge them together, um, but basically, uh, about a year and a half ago, I was starting to reflect, um, as the company was growing, my team was getting more mature and kind of taking on more of the day-to-day stuff. I was kind of thinking like, what do I want to do with myself? And I I was toying around with the idea of maybe selling the business and then figuring out something else or doing something completely different, like writing a book just for the heck of it and see you know take some time off and I kind of I realized though as I was thinking more and more like I really wanted to build something bigger than just this one you know very niche productized service or online service business but I wasn't sure exactly what to do and then I kind of got into the the ETA crowd through I I guest speak at Northwestern University every quarter with their MBA program and so I got to know some some people going through that and going to the ETA and I was like oh this sounds really cool maybe that's something I can look into and you know I'm I'm sure like a lot of your your listeners kind of snowballed I read build or buy then build and I I got to go to the the ETA conference last year and I started to to research and we can get into all that stuff. Cool. Yeah. Well, Northwestern and its neighbor University of Chicago Booth Business School there are two particularly Booth actually are two big names in the ETA space. The conference you were at was probably the joint conference of those two schools do right? Yeah. Yeah. Very cool and let me just um when you let's just hear a little bit on the on the business that you founded which is just to repeat again for the audience in a content um production agency written content SEO content uh but targeted at developers so this isn't your you know top five coffee machine content. This is this is content that does have to serve the purpose of SEO but not only it's got to actually you know have credibility with the the developer audience and anybody from the world of tech knows the developers are a finicky grumpy bunch and so they can sniff out BS. So it's really it's really you got to really be producing good stuff really good content and and really understanding your your audience well. Can you give us some bullet points on the size of this business today? Yeah so you know the first year I started it, was like a you know it was like half year and I was just doing it half time as I was transitioning out of the last job I had. Um, so we I don't know, we did 50k in revenue, something like that. And then the next year we did a million, started to hire a team, really started to like think about how this thing would grow, started to like hire sales person, get out of the day-to-day. And then last year in 22 we did 2 and 1/2 million revenue and um, so, you know, it's as it's not huge by any means as a service business goes, but because we've um, you know, we're we're online and what we offer is we're all remote and we're very process-driven and what we offer is very contained, this very specific service offering. It's not like a a a freestyle consulting, we do everything for everybody type business. It's a lot easier to sort of make that into a repeatable service that you can hire and put other people in place to run. So, my team now does most of the day-to-day work there and um, you know, I was able to to do that pretty quickly cuz I was very intentional about it. Um, just knowing myself, I I get bored quickly. So, I was really trying to build a business and that was one of my big constraints, like build a business that I can take a month off of and it wouldn't fall to ground. And so, I did that last year when my son was born and that was really a an awesome like kind of um, test of how the team has gelled, how the the company works without me. It was really great to see everybody kind of excel and and do their own thing without me having to be in every call or overseeing everybody on a daily basis. Well, Carl, that's uh, powerful for a number of reasons. First of all, congratulations on starting a successful business from scratch. Congratulations Congratulations on rapid growth, which I'm going to circle back to. Congratulations on having the foresight to make it something where you can step out of. Um, I I avoid the word passive income, but Right. Yeah, it's never Yeah. a systematic business where there's less, you know, every you know, every everything is Yeah, it's just more systematized. It's a it's a more um, less headache. I mean, there's there's countless benefits to that, all of which my audience is will will will already know. Um, and um there was something else I was going to say about that. Um How are margins in a business like this, by the way? Can you share that? Yeah. So, typically, you know, it can vary quite a bit in these kind of service businesses and draft.dev being going through that quick growth, I actually think our margins were worse like as we were growing fast than than they will be as we level out. Um Yeah. And so, I think last year it was really like a net margin around 15 to 20%, which isn't terrible. It's I mean it's not not bad at all, but a lot of that went reinvested into buying the new company. And so, you kind of like I didn't take home nearly as much as I could have if I had just said, "Well, I'm just going to own this one thing and hold it, right?" And that's one of the big tradeoffs and then one of the big things that I think a lot of small business owners like are afraid of when they think about expanding is how much it costs to reinvest into say buying another company, right? Or even starting another service line or whatever you do to to build up. So, you have to be willing to take that short-term hit to hopefully build something bigger in the long term. Well, that that's a great point, Carl, and it's it's one of the things when when when business buyers uh who are you know, younger are out there talk looking at businesses for sale and and talking to sellers and it's like, you know, the seller hasn't really done anything to grow their business in 10 or 15 years. And it's easy to kind of look down your nose at that when you're young and hungry and and not risk-averse and aren't putting kids through college. But yeah, the once once businesses get to you know, there are kind of stair steps and tiers in business and once you get to a certain tier and whatever, a plumbing business or a crew business, taking it to the next tier is not incremental. It requires a big investment Yes. and a lot of risk and a mindset shift and like being hiring people that cost six figures and more. You know, there's all these things that I I joined Entrepreneurs' Organization last year as well when I as the company was growing and EO, it's a it's a great group of people that have started small businesses. You have to be over a million in revenue. So, the nice thing there is you kind of get out the the the people who are just like wantrepreneurs who are just kind of just getting started. You get to people who have real companies. And a lot of the guys in there are 20, 30 years older than me with 20, 30-year-old businesses, you know? And it's learning from like hearing from them, you know, when they're taking home half a million, a million dollars a year in cash flow, and that's what they want to just like that's kind of their lifestyle they now support. They don't you know, they're not thinking about reinvesting in the same way somebody in their 30s is. And it makes sense, right? It's like logical. I don't fault them for that, right? But yeah, when you are young, it's it's really important to use the like leverage the energy and the timeline that you have. Like I got a long time to fix these companies if I buy something that screws it up and I screw it up. Whereas, you know, if you're 60, you you don't have that that luxury. Yeah, exactly. Exactly. Um Well, on this point about growth, Carl, let's let's let's shine the spotlight back on you on growth. You're growing this thing like crazy, 50 grand the first year, which is, you know, obviously not even a full-time salary, a million, and then two and a half million. Um You already said that you get bored, you know yourself you get bored. But when you're growing like that, Carl, I mean, is that already boring to you? I mean, you don't you didn't want to get get get it a few more years to get it to five and 10 million on that that trajectory? You know, that's a good question, Will. So, it's less that it is it's boring in the day-to-day and more that like the business doesn't I intentionally designed the business so it doesn't need me as a full-time player. And so, every time like what I do I have a system that I've always done since I was even a CTO at startups where I track my time, and I bucket it into different categories, and I see like when a any of those categories start to get large and it's not really essential for me to be doing it, how do I find someone to do that thing? Because that's now holding me back or holding the business back from growing. So, in other words, in the early days it was I track my time on marketing, on sales, on actual product delivery, and overseeing and eventually I got to this point where I'm like, "I'm spending like 4 hours a week on like or 4 hours a day on writing and editing, and I I don't want to do that. That's not the best use of my time, right?" So, I hired writers and I hired an editor. Now, I'm spending maybe, you know, 30 minutes checking over their work a day, but then I've got all this time freed up for sales and growth. So, I took that systematic approach. Every month or so, I kind of re-evaluate my time spent, and that's how I reinvested into hiring and figured out how to get myself out of things. Um and honestly, here's the the the thing about growth. A big part of it is getting out of your own way. Now, I'll say that like part of the reason for Draft.dev's rapid growth was just the market demand. I mean, you can't deny that. Like, nothing grows that fast in a service business without very like offset or there's a sort of like mismatched market demand and supply, right? So, there's just no way around that. That was a big part of the driver, and that's actually slowed down a lot this year. So, we're going to have a a lower or lower year because tech is just a little wonky at the moment, and VC funding is way down. So, you know, you've got to like you have to accept that the external like things in the market can really screw with your business, like it or not. Um but at the same time, you you do as an operator have to be able to step away and like delegate really effectively and just keep an eye on the the numbers um as they come in and and readjust as you go. So, that's where I got to. And so, it wasn't that I was bored with the company or couldn't have spent more time or couldn't spend more time on it now. It's just that I didn't want to design a job for myself. I wanted to design a a business that runs ideally without much input from a leader. Now, eventually, I think we will hire like a GM or a chief operating officer to kind of run all the day-to-day, and I'll get to a point where I can just look at a monthly sort of spreadsheet of metrics and just keep up with that person maybe on a weekly and monthly basis. But, um yeah, in the short term, I mean, you know, you don't need a full-time 40-hour week visionary in a small business like that. It's just not There's not 40 hours of work cuz I could dream up a million ideas, but I don't have the people and the the size to justify pursuing 30 million different things. Really interesting, Carl. Well, you you you talk about your kind of the the supply-demand imbalance being Yes, what we what we what private equity types call tailwinds, right? Uh so, incredibly these incredible tailwinds, but you deserve credit for perceiving them and jumping on the opportunity. So, yeah. Yeah, I mean, it's not to take away from the fact that you built something fast. It's you you got out there in in front of a tailwind and let it and let it scootch you along. Yeah. Uh good good for you on that. Um the But also, I do have to So, but did you have an audience or anything to to that you were able to market this to or a network to to get that initial revenue? Or was it pure I mean, still with strong tailwinds, etc. etc. etc. Like to get to get to get a million dollars in your first full year, like that's And and a lot of a lot of misses. Right. And not even if you even to take out the revenue numbers, just look at the the kind of brands we work with now. We've worked with like huge publicly traded companies in just two three year you know, three years of of operating to get to that level where we get enough trust and credibility to work with them is like it's really tough. Like honestly, that I was most nervous about that when I was thinking about how do we go up market and kind of get our prices up and get like our our margins better and stuff. Anyway, um Yeah, so my I I did not have like a a ton of like connections in this space, but I did have a couple things going for me. One was I was a developer who could write. And so, I went out to all the companies that I knew had programs where they would let guest writers come in and write on their engineering blog, and I started reaching out to them just listening to what they do. So, for example, I got on the phone with the company and they were this guy was super transparent. He walks me through like the whole model and the margins and the way it works for them. He's like, "You know, we pay a writer 700 bucks to write a blog post. We pay an editor two $300 to to edit it at most, maybe less. And then, we get it published and a typical blog post brings us $10,000 worth of business over its lifetime. And I'm like, well, that's an incredible ROI, right? But like, so once a company figures that out, they scale this stuff as much as they can afford. But what they had also told me was there's a lot more room for margin there that, you know, some companies are will be willing to pay. And so, as I kind of launched, I figured out like, all right, there's there's room here. And now we charge close to $2,000 a blog post. And that's just because, again, there's there's a lot of room in that that market to to play with. Yeah. Now, that may not last forever, right? Like that's one of the the challenging things because And I I like this market This is something in general I've come to like in in service markets is like, I like markets there's no dominant player. There's a lot of small players. Cuz that means there's room for you to carve a little toehold, and you don't have to go in and be the winner-take-all. Like, you know, it's not the Uber versus Lyft thing where you've got a these huge behemoths that are going to own the whole market. Now, you can come in as like just one of a lot of under $5 million companies. And that's a like that's exactly why the Podcast Consultant, the the business which I just bought, appealed to me, too. Well, Carl, now that you have Now that you've wet your appetite with buying businesses, you are going to love fragmented markets for a completely different reason. Um which everyone knows where I'm going with that. That's That's really cool. Okay. And before we get to your story of buying the Podcast Consultant, let's um let's go ahead and define productized service, which I which I teased at the beginning, because I think it's it's so relevant It's relevant to the business you bought and the current business. Yeah. So So So you touched on it when you were like when you were like the way you designed this business was such that you're basically not you're not selling hours. Right. You're selling flat fee Yeah. like an article for X, two articles for Y, 10 articles for Z, I I assume. I assume. So it's kind of like you're picking, you know, the the the client is like picking things off a menu, very well defined, no scope creep, no you you know how long things so you can really like you said make it very systematized. Um, is that right so far? Yeah. Yeah, that's exactly right. It's like basically the quick and easy way to say this is like it's it is what it sounds like. It's taking a service offering and packaging it up like it's a product that people could theoretically go to your website and click buy now, it's in their cart and they submit their spec and they get their results back at some time. Now, I'll say that there's degrees of productizing a service. So in other words, there's some that are literally like you can go into the site, you never talk to a human, it's like buying a SaaS product and you've just bought access to this service, right? And then there's ours ours which is a lot more done with you and hands-on and there's a lot of back and forth. Um, part of it's the nature of our content, part of the nature of the clients we work with, they're big companies that want to have real conversations with people on the phone. Um, and whereas, you know, some again, some productized services are very hands-off. But I think the the big lesson is like it's just a fancy word. At the end of the day, almost every service business would benefit from some degree of productization like standardization. It's why nobody buys like general purpose consulting firms. Like if I had made this Carl's developer marketing consulting firm and it was all just branded to me and it was all about my smart brain get you getting to hire me for hours, there's no way this would have been something I could step away from this quickly, right? Just that's not a it it wouldn't happen and it's the reason those companies don't get bought or if they do, it's like for for pennies on the dollar compared to a company that has actually sort of built a repeatable product uh service offering. You know, but what I let me push on that a little bit because fundamentally a productized service, is it just marketing? Is it just positioning? Is it just positioning or is it or is there something under the under the hood that actually is different than, you know, Carl's SEO agency? I I mean, it is just a it's a word. It's just a marketing a way to describe, um, you know, a type like a a service business that is not quite so bespoke. Part of it is like giving instead of branding the company around like we are like we will go in and give you the best bespoke solution for everything you do. We kind of brand it as like this is a repeatable turn on the knob, turn off the knob kind of turnkey thing that you can implement. So it appeals to that kind of buyer, the person who wants that. Other people it doesn't appeal to. I mean we get people all the time asking us to send them custom proposals for whole, you know, marketing packages and we just don't do that. So we just tell them here's somebody else that you should do that with. Um and that's that's totally fine. You have to be willing to say no to business. Like that's that's also one of the big things that again service businesses and consulting marketing agencies really struggle with is saying no to the wrong business. You know, when I started draft.dev, um people were always like, well, why don't you write content for other kinds of companies too? You know, you guys have obviously figured something out and I'm like, yeah, but our whole brand, our whole like defining feature is very specific. We're just going to be very specific and it makes us we immediately win more trust and more business because we only do the one specific thing. Um whereas I think it's a lot harder to stand out when you do everything for everybody. Sure. Sure. Well, Carl, I at the risk of flattering you, I do I really feel like you you had a lot of kind of you made some wise decisions in in when when you went into draft.dev that you know, you didn't make a lot of the beginner mistakes. But I think that was you know, like to be honest and this is what people ask me about this a lot like your first business you actually started actually took off really quickly. How did that happen? I'm like, well, I was the first employee twice. I have really I mean as much as this was my first one I technically owned 100% of going into day one, I had been right there as companies went from zero to 30 people and like raised $5 million in funding. Like lots of stuff I got to see. So that I think that's one cheat code you can kind of like take away from this is like if you're interested in entrepreneurship, but you're not quite sure you want to buy something or start something like go be the first 10 employees, like one of the first 10 employees. It's a super interesting experience. You get a ton of insight into how things really work and the like the goods and bads, the ups and downs, the like the grind and the like the awesome times. It's It's a really a good experience. Mhm. Um I said we were last question on Draft Deck, but I have one more. If If and when you do get and you I I guess you you will get to a point where you hire in a an operator of some kind, uh will you expect that person to also grow the business? I mean, can you step out of this business that's doing two two and a half million dollars a year of revenue, step out of it, put somebody else in charge, and expect it to continue growing? Also That's a good question. I I I do think yes, but it may not be I mean I don't think even if I were running the business full time, I would grow it as quickly like as it did these last couple of years forever, right? That's just unrealistic. It's It's not that big of a market to be perfectly honest. Yeah. So, what Here's what I the way I look at growth though. Let's pick any industry or service for an industry and say and I ask myself in 10 years will be the will the will there be more demand for this than there is today? And if so, do we think that's going to outpace the general like, you know, market return like if I put it in the S&P 500, right? And I think when you asked me the question about developer content, is there going to be more content that helps software developers build more software in 10 years than today? Absolutely. Like I don't know what format that content will take. Maybe it'll be more video and maybe it'll be a mixed mixed medium. Maybe AI will partially write some of it, but either way, there's going to be more content because humans are going to be writing software and more software in 10 years than they are today. So, Mhm. I I just think like it's an inevitability that it will grow as long as we stay in the market and and have a like a a presence there. The same with the podcasting company. It's like I think there'll be more B2B podcasts in 10 years than there are today. They might be video, they might be short form on TikTok, but there's going to be more of them and so I just want to be in that market and experience that growth. Mhm. Well, beautiful beautiful segue. Okay, so you you decide that you kind of have the itch to do something else um after draft.dev as you've grown it nicely and but it can also now kind of operate without you or without your full-time attention. So, what next? So, you as you went to the Sorry, you went to the ETA conferences. You read the books. Then, what next? So, I got Yeah, I got really interested in this whole like search fund model. And I I you know, I realized that there's a name for what I'm doing. It's a self-funded search. And you know, that's I got I got to know I got into the you know, search funder community, which I'm sure lots of people here know, and you know, get get in there and start asking questions and answering questions and and just kind of seeing what people are doing. Um you know, what happened the the story was I I started to to come up with this vision of like buying a portfolio of niche companies like this. And then I talked to a friend about it, and he had been He and I have gone way back, but we were we've never really done a a big project together like start a business together, but we've been talking about that for the last year. And I said I just kind of pitched him on this idea really casually, and he's like, "Dude, that sounds awesome. I want to do it. Let's let's make it happen." So, uh this guy's in Austria. He uh sold a business a startup a few years back, so he had some money he'd been doing angel investments with and was kind of ready to do some like to get into something new. So, we went in and started the search process. Um I I guess it that's a good breakpoint. Do you like I can hop into the all the details of how we ran the search and why we did it that way, but I'm happy to answer other questions if you got anything else first. No, no. That that's great. Let's Let's Let's hear about this and before you jump in, I'll I'll plug your article. You wrote a great kind of postmortem of this whole process, laid it out really nicely. For a lot of my audience, a lot of it's going to already feel familiar if they've read Buy Then Build, certainly. It's really the anatomy of a search, but it was still it's you know, nicely condensed in a single article and and so So, anyway, um let's kind of bang through the chronology and I'll and I'll stop you at points. So yeah, what happened next? So and I wrote that because I got so many people asking to book a meeting with me after I did this they knew I bought this company. I was like I'm sick of taking these 30-minute meetings where I tell them the same thing every time. I was like you read this article and then tell me if you have specific questions then we can do a meeting, you know, like let's let's get beyond the basics. Yeah, so but I'm happy to walk through that. The Initially we were trying to we sort of started like looking at all service businesses that were productized or could be productized, right? And so we just had this like we went to brokers, we went to all the little marketplaces for small businesses. We knew we wanted something under a couple million in total price because we were going to be putting our own down payment on it. So like we didn't want to bring in investors for this one just because I like the idea of holding control and holding equity. Again, I'm I'm thinking of this long-term not like I want to get a return in 5 years. This is about like building up a legacy forever. So I I So Carl, let me let me jump in it. I'm going to I'm going to be interrupting you all the while. So $2 million, let's call it $2 million is your ceiling. So as I know cuz I cuz I know your story, you do an SBA loan. So you so you guys are basically kind of bringing call it two to $400,000 of your own money to the table. Sort of thing. Okay. that's what we were assuming and then we would do the SBA loan and a seller's note to kind of make up for any difference and have some like, you know, sort of tie into the seller for longer to make sure they're kind of incentivized for the business to keep keep going. Right. One more question. Give us examples. So we've talked about productized services in the abstract. Give us examples of other Yeah, that's a good other other examples. Yeah. Yeah, so we looked at things like other article writing services that did like maybe more general purpose business or consumer content. We looked at um uh uh unlimited design services are really popular right now. That's where you pay like a fixed monthly fee, like $500 a month, and you can submit as many requests for a a little custom design or um avatar or whatever you want online. And a lot of businesses use this to help like augment their blog posts, right? So, it's like every week and I can go submit a new request to get new blog post cover image or social media images or whatever. Uh those are really popular and they're easy like they're easy to start the I I yeah, I have thoughts about the downsides to them, but like anyway, we looked at some of those. I do, too. I used one of those for acquiring lines, but go ahead. Yeah, yeah. I Yeah, we that's an aside, but um but there there there are some interesting things like that. And then we looked at just random things that would come up, like um one guy did What was it? It was like um Product Hunt Launches for people, where you know, he takes your product and helps you get it launched on Product Hunt. Um again, that's got some problems with that kind of business model because a lot of what he was doing was kind of gaming the system. It's like very short-term, not going to work forever, but you know, interesting business anyway. Made good money doing it, great margins, and super you know, super uh easy to run. Um so, anyway, we looked at all those, and then we were like, "Okay, this is too much." Like there's honestly just so many options there that it was hard to compare. There it was like every business was apples and oranges because like an unlimited design business with a uh subscription fee is way different than these one-off Product Hunt businesses, where you just get single, you know, customers at a time. So, I was like, "Let's just make a rubric and start to figure out like what industry we want to to focus in on." So, we both really like audio and video both as a medium because we already are both familiar with written content, especially working with Draft.dev. And I was like, "So many of our clients ask for audio or visual versions of this content." Like maybe there's a chance to like cross-sell there, or we can figure out ways to like make these businesses interact down the line. But in the short-term, we just both looked at podcasting and said, "There will be more businesses doing B2B podcasting in 10 years than there are today." I'm I'm very confident in that. Now, will it be, you know, a hundred times more? Probably not. But, will it be two to three times more? Probably. I could see that. Um because it is a really good way to build up trust with your audience. And the I mean, I'm this is very meta, right, Will? Like we're doing it right here on the show. Um but it's a good way to like get in front of that audience. It doesn't cost nearly as much time for the the the host or the guest as writing an article would. Um and it's a it's a more personal message, to be honest. Again, as AI starts to write more content, people will wonder, you know, is this just a robot writing this piece or is this actually what the CEO thinks? Um whereas, I mean, you could probably fake my voice through AI, too. But, like I think there's a lot it's a lot harder and it's a lot more personal when you you can kind of hear the person talking. So, um anyway, we like the industry and we're like, let's just focus there. So, we built up a list. We went through LinkedIn and found like a hundred or a hundred twenty, I don't remember, like maybe even more, even. Um podcast production and editing agencies that were in the US that had the potential to be as big as we wanted, like big enough and and not too big. Um and just started like reaching out to them cold. So, um we used LinkedIn Sales Nav almost exclusively. I sent a few emails, those never went through, and LinkedIn Sales Nav worked like a fairly high bit at the time. I think we were probably getting like five to ten percent response rates. Now, not all of those were positive, a lot of them were, yeah, not right now. But, um it was definitely getting through to people's inboxes. And my my assumption there is this this particular target demographic of they're relatively young business owners, uh you know, maybe in their forties, not in their seventies, so they're on LinkedIn. They're a digital business, so they they get clients through LinkedIn as well. So, they have to have a presence there. So, they're in there checking it. Um and so, I think I think it makes sense for that audience. I don't think this is something you'd replicate if you're going to buy a plumbing business, you know, as we we've pointed out here, it's just it's a different it's apples and oranges type businesses. But, well well it's Carl, it's it's a good um point for the audience to this is one of the benefits of product I services because they're generally digitally or digitally delivered businesses and so the owners of these businesses and and potential sellers of these businesses are going to be much easier easier to reach via online channels versus the 75-year-old owner of a plumbing company for sure. And that you know, finding deal flow is is important and it and it's enough for somebody to like want to take a look at an industry. I mean just the access to deals and so this represents you know, product I services represent you know, kind of better easier to drum up deal flow than plumbing businesses. Than some, yeah. And you're not geographically constrained. I mean other than being in the US because we wanted the SBA loan, there was no real like they could be in Oklahoma, they could be in California and we don't have to we haven't we've never shook the hands of the guy like in person that we bought the business from yet. I may go out there this August though so I'm going to try to actually meet him in person. But like it's funny to like have transferred this the biggest purchase I've ever made in my life and I've never met the guy in person. Yeah, yeah, yeah, yeah, yeah. I should have asked this earlier Carl but what about e-commerce or SaaS? Why did you why did you not consider all those other digital types of businesses? Actually, I make the error of often talking about like the basket of potential digital businesses is e-com, SaaS, like affiliate content and lead gen kind of a distant fourth and but really product I services they're not explicitly digital but everything can be done online so they're kind of quasi. But they should really be in that in that bucket. But anyway, why did you not consider these other four possibilities especially that you're actually a technical person. Yeah, I mean I right. Yeah, we were actually we talked about this and you know, first of all e-commerce we neither one of us had any experience with. I like I mean it's cool but like to go into you know, I think a lot of searchers face this challenge when they are looking or buy a business. When you don't have any industry experience, it can be really hard to actually see like what is going on in those businesses. So, I felt like there was just too many landmines that we would hit if we bought something that was a little too far afield. So, e-commerce out. We did talk about SaaS cuz my my partner had built and sold a SaaS like he knew what that was and I had been with SaaS company so like I knew what that would look like. The downside to SaaS is because the multiples are so high relative to service business, we would have to buy something where we would be very in the weeds. Like I would probably have to be writing code or at least overseeing engineers who wrote code. Unless we did it a big fundraise and you know bought a $10 million company which case they might have a whole team but yeah, I don't know what SaaS multiples are now but at the time they were I mean they we were seeing stuff that was eight to 10 times EBITDA or SDE which is just like I mean it just puts a lot of things out of reach. Um So, yeah so that was that was our thought on SaaS. Um And then what about content businesses? Yeah, I mean that's really your your right. It definitely would have been that's not a wouldn't have been a bad idea. I mean we we talked about buying like a developer content type site and trying to maybe just amp it up. Um I think content is is interesting. It's going to get harder and harder to monetize content as more and more gets created. There's kind of one of the downsides to content getting easier to create is that monetization is super hard. I think a lot of the best content monetization is just pushing a specific SaaS or product that you sell. And so you end up building a content business that really has to support an e-commerce business as well or a SaaS business as well in order to get the most margin. Now, I'm not saying you can't obviously there's plenty of people with good content businesses. It's just a it's a different model. Yeah. Yeah. And and maybe is another way of saying what you just said so I make sure I understand that essentially content marketing is that what you describe as content marketing like so the kind of you know that 10-year-old version of content marketing when it was first coming into inception from HubSpot and the rest where where the the best marketing is going to be content. And so companies that could afford it would have develop entire content up like HubSpot entire entire content operations not to monetize the content directly but indirectly as a form of of you know pushing people ultimately to their brand. It's a very kind of top of funnel way of bringing people in. Is that still as relevant and and does it work as well or you have to say yes cuz that's what draft.dev is. Is it I mean I obviously I I think that because of podcasting is a form of content marketing as well. So I I believe very strongly that content and that personal relationship you get with an audience through content is the way that B2B like sales will go. I mean not to say no industry will ever benefit from cold outreach there's absolutely good cases for it and I think that's an interesting model too but the truth is you need content to support cold outreach as well. So like it never becomes less important. Um Yeah I mean I think too part of it well as we were talking through it we were like okay if we buy a bunch of businesses that are like all just totally different then we have to figure out different operational models for each of them. And I'm not saying that's impossible or just something I'd never want to do but like why not for the first one make it as easy on ourselves as possible buy something with a pretty similar operational model so that we understand how to look at it versus the other company and so that maybe we can start to share some of the back office resources cuz as we've we've you know sort of modeled this out we're like well we know what you know gross margins and net margins are for these businesses and that net margin part you lose a lot on like part-time accounting part-time HR part-time marketing part-time there's a bunch of part-time roles that all these small businesses need that don't need to be like in that small business necessarily. So I think what we'll end up doing is sort of building those into their own back office organizational unit that kind of serves all the companies and helps improve those margins across the board. That's the theory at least you know we'll talk to me in 5 years, tell me if we got I'll tell you if we got there. Well, well, that that that debate between a centralized services model and a decentralized services model is a debate that is ongoing and and holdcos are kind of battling internally with themselves as to what makes sense all the time. Right. Okay. So, we're getting the sense here that like this is this first acquisition you're wanting to like learn how to buy a business, what it's like, what it feels like, presumably, with the idea that this maybe becomes the model and you do this again with bigger and bigger. So, so kind of building a holdco of sorts. Is Was that an explicit mission? Yeah. Once we started looking at buying a business, we were like I I mean it it it became the explicit mission pretty quickly. Like we both are We're again, we're both young enough and concerned with like long-term want to build something meaningful. So, to buy a small business that's, you know, like under 2 million in revenue and then just say, "Well, we just want to hold that and run it forever." It's just not exciting enough, like to be honest. Like I I I think there's still plenty of time for me to like figure things out and go a little bigger. So, it was definitely the explicit thing. And the other thing is is that, you know, there is more talk about these like mini hold com holding companies or mini private equity funds where you raise some money and you buy a bunch of companies and you kind of either roll them together and sell them or just roll them together and keep the cash flow. So, it's kind of becoming more popular. I don't want to like I'm not a like a trend chaser per se, but I like seeing other people do it makes me think, "Oh, well, that's something you can do." It's like it just helps to know there's guys like an Andrew Wilkinson who's buying a bunch of small companies and like doing this kind of thing and be like, "Okay, I can listen to him for some advice and some like forethought, but I can do things my own way as well." Yep. Well, I think you just articulated why Acquiring Minds, this podcast, exists. So, That's right. So, we're on the same page. I've I've always loved listen listening to this show and just the variety of uh businesses and guests and the types of things they buy. It's just so interesting to hear just because, you know, that I think a lot of people step into entrepreneurship and they want a template. I think this is this to me was one of the hardest things about the first 6 months of the business was there's no answers. There's no right way to do this. I can look at my competitors, I can try to deep, you know, deconstruct what they do, but like none of that matters. You have to go make your own path and that's super like fun, but also really challenging. One thing I've noticed Carl in my own with acquiring minds itself is that I my own interest and kind of where I was at home was digital businesses. And so I covered more acquiring digital business stories in the early days and I just over time it's become less and less for whatever reason. More probably just cuz my own eyes were opened to the whole world of offline sweaty traditional businesses and so they're so rich and varied and interesting. Um But any all of that is just to ask you when you you're kind of like me you and I have kind of similar backgrounds at least in the ecosystem that we come from. Um when you went to the ETA conference at Booth and Kellogg you were probably similarly exposed to people who were buying more traditional businesses not digital. Did you feel like a a fish out of water and and and And how do you and just how do you think about that? For a lot of reasons. Like like for a lot of reasons cuz well like I'm a I'm a pretty like dressed down casual guy and these are, you know, a little more formal MBA types and finance types. You know, you got a lot of suits in there and I'm like a t-shirt and jeans everyday person. That's just that's I'm never going to I'm not going to be, you know, something different for for them. Um but and and you know, it was fine. Everybody was great. I met a lot of great people and I I'm not saying this in a negative way like I couldn't go to that like I was looked down on or anything at all cuz like the truth is I honestly a lot of them were super interested in the fact that I was doing something different from the typical model and the fact that I actually already ran a business and was looking to buy, you know, something else too and like started to like put that out there and people were like, that's really, you know, just a lot of the people in the ETA world have never actually run a business, right? That's the typical background is more either finance or like maybe they've done operations, but they've never actually been a CEO. So, you know, that that's that's one thing that's kind of fun about being in that like being a little different in the crowd is you get a lot of conversations going cuz people want to hear the different story. You know, no one wants to hear the same like same story over and over again. Um yeah, it was it was definitely eye-opening though because um there's a lot of things that are fundamentally different about digital businesses, I think. One is like they can and this maybe this isn't always true, but they can be very small um and still be a little more hands-off if you do them right um because I think there's less of that need for like a CEO who's in the office every day, like, you know, showing a face. Um the in-person businesses too, like, I mean, location like having a physical location I would need to go to every day is kind of a non-starter. It just wasn't interesting to me. I mean, it was it not a thing. I haven't haven't had to like go to an office in a long time and I didn't want to start just, you know, I've got two young kids too, so I was like really appealed to to staying remote. Um so yeah, I mean, there's a lot of things practically that I wasn't interested in there. Plus, I think that personally, I I want to do things that where I get the best leverage on my time and skills that's possible. So, buying digital businesses that I kind of know how to run fundamentally, I know the things that they're going to run into as far as cash flow, invoicing, um receivables. I know how the finances work. I know roughly what the gross and net margins should kind of look like cuz I've got a ton of like insight into that. Plus, I kind of know how to do the sales on these sorts of companies. I mean, I led sales at Draft Dev for the first year and like figured out a model that kind of works and same with this company. I came in and just kind of picked it up really quickly because it's the same thing. It's just selling a different service to a slightly different audience, but they're not that different um fundamentally. So, so many things there that just transferred that I was like, I don't want to give that up and start all the way back to like you know, I buy a let's say auto repair shop or something. And now I have no idea how to grow an auto repair shop. I mean, maybe I just try to like survive, but that would be the best case would be survival. Whereas I feel like coming into a digital business that has been run well, but could be run a little better, I think we'll come in and grow the first year. I mean, it's it's looking that way so far, but like you know, time will tell, right? There's probably going to be some I'm sure there'll be rockiness cuz that's just what small business ownership is, but yeah, I feel like you get a lot quicker like up time like time to actual effectiveness. I can't the that book first 90 days has some uh word they use for this and you know, I've just read that as I was getting into this the buying new company, too. And they use a phrase that describes like how quickly can you get to effectiveness or doing something effective that shows your team I'm actually useful. So like for me, it's coming as a new CEO, how quickly could I get the new payroll system implemented and rolled out so that everybody's getting paid cuz that looks really good. Like Carl could actually do something here. Um and that's the kind of thing like that really if you can make that metric faster by use like buying a business you already have skills in that area or knowledge in that area, I think it goes a long way to just building credibility and the team seeing like, oh, this is why Carl's in here buying this business and it's not like Carl's just like that who doesn't know a thing about podcasting. Yeah, yeah. No, I mean, when as you as you articulate all of this, Carl, it's very compelling and convincing. Um now, a lot of my audience is is considering buying businesses in industries they don't know at all and that and that's not a I I I don't think and I would hope that that's not a challenge that they're underestimating. They recognize. And in fact, a theme of the podcast often is like, what do you say how do you build credibility quickly? And and and you do need to be confident yourself that you are actually going to be delivering value. And and oftentimes the answer is simply that you know, the seller might have been kind of a technician themselves and grown crews around them and they find themselves in a in a seat after growing your business for a number of years and they're just they don't have the business savvy or the appetite or whatever or the systematic thinking and so a person who comes from a background where they really think about business in kind of an abstract way can deliver value at that kind of at that layer at that level. Um, but of course you need to communicate that to to to your employees who are going to see you as like a you know, a What's the what's the word from Whatever, an outsider, an interloper. Um, yeah. So it's it's it's very it's really interesting. But but but but to your point, certainly if you have a resume that like speaks to the actual service being provided uh, by the business that you're acquiring, that may that just like neutralizes this whole point of friction. So that's that's easier if you can do that. So that's great. So you okay, so you guys have this thesis, this kind of industry thesis you develop around B2B podcasting. You're reaching out on LinkedIn. It's actually really quite successful. These people are easy to find. They're pretty responsive. Um Plop us back into your search. Yeah, a lot of them were just what you described, Will. They were operators who'd started the businesses almost as freelance audio engineers and then kind of accidentally grew to a point where they sort of hit the limits of what they could handle. Um, you know, where growth meant more hours in the business and they didn't want that. So they you kind of like hit some point wherever that is for them and they're like, "I don't want to grow because it's just going to hurt more." So we were looking for those kind of people, that that that uh, profile of somebody who likes the operator like I like to be in there editing the audio but shouldn't be anymore. Um, and so we started having calls. I probably had I don't know, between 20 and 50 calls last summer when I was doing this, you know, just a ton of um, interest and some were way off base. I tried all sorts of things like I think one thing I learned was being very direct in my messaging instead of trying to beat around the bush and be like, uh, "I just want to have a chat and hear about your business." You know, nothing I don't do anything like that like anymore. Um what worked was just being very direct and upfront and saying, "I own a small business right now. I don't want to buy another company like a podcast production agency. Looks like you guys have built a good thing. You want to talk?" And that is like that simple sort of messaging that really appealed, I think, to other business owners cuz they were like, "Oh, this Carl guy's not that different from me. He's a small business owner, too." And like he's You know, so I use again using the credibility to to get whatever you can leveraged out of that. Uh so, we start to have conversations. We get down to probably three to five who were interesting and interested in us. And then we sort of just tried to figure out how do we start to to whittle that down even further. And eventually after, you know, a month or so of conversations with with all them, we got down to one who signed an actual LOI. Uh and that's the company we bought. So, we we signed the LOI um probably three to five months into our searching process. It's pretty quick like to be honest. And I assumed that something would happen to kill the deal. The whole I mean, it's like cuz I just hear the numbers and I'm like, "This is just not going to We're not going to get our first LOI. Let's just like don't get married to it. Just, you know, let's just try." So, we start to do due diligence. Um pretty simple on a deal this small. So, you know, that it's under a million in total value. So, it like right under a million. So, like that it's not that complicated to look at the books of a company like this. That was another thing, too. I'm not a finance background person. So, like I not that I'm lost in books. I know how to look at my books at draft.dev very well. And I know what things mean. And I know how to like, you know, all that. So, when I looked at this company, it wasn't that different. And I was like, "Great." So, I kind of know what this looks like. Like it wasn't like I was out of water there. Um you know, we weren't dealing like the nice thing, too, about digital businesses when you're not a super savvy finance person is they don't deal with a lot of the complicated stuff like um having equipment that you have to, you know, like yeah, CapEx every Right. So, all the different stuff that like goes into the complicated accounting of like evaluating that stuff and then drawing it down over time, and all amortizing amortizing like expenses and and uh and in income. This This guy's a cash-basis business. Cash in, or he, you know, his people invoice him for the work they do every month, and he invoices clients every month. It's very simple to look at those books and be like, here's money in, money out. Um no other costs other than people, basically. It's just a little bit of software, so super lean. Um so, anyway, diligence was not complicated. We just verified that a lot like all the things he sent us was correct by looking at contracts, looking at actual work done, and um talking to customers, things like that. So, um got a good feel there, and then unfortunately, we made the mistake of kind of engaging the bank after as we were closing up our our diligence. We felt good, and we were like, okay, let's talk to the bank now. And I should have started that earlier. Again, hindsight. Now I Now I know this, like the bank just takes a long time. And I think part of it, we got kind of caught through the holidays, too. So, we we we started to engage the bank around November, I think. And then the holidays hit, and everybody was out on their side for half the month, and so nothing got done until January, really. Um we finally started to make some movement in January, but then I I think, honestly, like the a couple things were happening. There was the um banking sort of wobbles that were happening. Interest rates kept going up, and then um what was the bank that closed? Silicon Valley Bank, right? Or the Yeah, so Silicon Yeah, SVB closing kind of happened towards the like in What was that? February or March, maybe? Sounds right. either way, yeah, that got like the bank a little nervous, too. And I think their credit team put a little extra onus for that. Um yeah, so it it was a it was way longer. It took 6 months with the bank after our like month or so of like quick diligence, you know? So, they they asked for a lot of things that um I would say were somewhat unnecessary given the size and scope of the deal, but, you know, they got to do They're They're all covering their downside. I get it. I understand. So. And was your seller amenable to all all this uh stuff because it it could be kind of onerous on on the the demands of the bank can be onerous on the seller. I I felt bad for how long it dragged on cuz I mean he wanted it to be closed up by the end of 2022 as well. Like of course that would have been great, you know, but just realistically that wasn't going to happen. Um he was great though. He was super communicative and like stayed with us. We kept meeting with him every week or two just to kind of keep the communication going, be very transparent about where we were at. I've always favored just transparency. Like, you know, we told him up front this our first time buying and dealing with this kind of loan. We're not going to do it right, I'm sure, you know, like we're going to have to go back and we're going to screw things up. Um but that humility kind of like again, I I think this is something that I I think benefits a searcher, but I don't know if you know, maybe this isn't everybody's style, but just being real and being like humble to these other business owners, like why not, you know, they're they're they're small business owners. They've screwed things up too. They know it's hard and to just go in and say like, oh yeah, I'm going to come in and buy your business and know exactly what I'm doing. It's like that's just you don't. Just don't say that. Like that's be be honest about what you do know and don't. Um yeah, so he was great through the process. The the bank eventually we got things going and done with them and wrapped up and um all was good there. Let's just circle back a little bit to to to your search. Why some of the others that you got on the phone and looked at their businesses, why did you decide why was this guy the winner, the podcast consultant? Why was he the winner? yeah, some were too small, like under 500k in revenue and it's just really hard to it's really hard to justify the work that goes into it, the sale for that. I wanted I mean, I would have would have been great to get something maybe around a million, million and a half, but you know, 750k which we we this is what this one came in for, um was not bad. I mean that's really within a ballpark. I think because this is again based on my draft.dev experience, business like this doesn't usually have the margin to hire sales person till they get towards like a million, million and a half in revenue. Um there's probably exceptions, but like just generally speaking when you want to really like a good sales person, you're going to need to pay six figures and the only way to do that is get to a certain size. So, that was kind of one of my thoughts was like how quickly could we get it to that point, right? Don't have to be running sales calls cuz I love doing the sales calls. It's a great learning experience, but obviously it's a huge time investment. And so, yeah, we'll get there. But yeah, so that was the a lot of it was size. Some of it was like sellers just kind of realizing we were very up front about our numbers, too. We were like, "We're going to take your SDE. We'll figure out what it is with you." You know, kind of go through your books and and we'd tell them what SDE means cuz a lot of them didn't even know what that meant really, which you know, that's fair. And then we'll give you about a 3x multiple. There's just That was it. We didn't say like we might give you four, we might give you a two. Like we were just like it's going to be around three and it there's kind of no way we're going to pay more than that. Just the economics don't make sense and your size business doesn't. And we might pay a little less if you have reasons we need a discount. So, and once people look at those numbers, that's really where the business owner's like, "Ooh, interesting." So, you know, say it's a million dollar business with 30% margins. They've been getting 300k a year for you know, this small business they run, which is pretty good money for anybody, but for a small business owner, you know, who does their own thing, it's great. And then they're going to get you know, 900k and then you take out taxes and you think about like you're going to get you know, 65 to 70% of that maybe or whatever, you know, whatever it is per you. It ends up getting less appealing as people look at that and they're like, "Oh, I'm not going to get a million bucks for this business." And so, I think there's something there where like mentally once they do the math, they're kind of like, "Oh, yeah, maybe this isn't right to sell yet." Like I like the 300k a year, which I totally is totally fair. Yeah. Yeah. This is great, Carl. And the just going back to the high response rates you were getting. I know I'm going back a few steps here, but but the you know, the other thing to call out about that is which you kind of already have, you already have a business and so many of my guests after they buy their first deal, they find proprietary outreach, like subsequent proprietary outreach to go and buy an add-on, um so much easier and often deal flow comes to them. I mean, you have so much credibility if you are already a business owner. You're talking business owner to business owner. So so we have to acknowledge that those high response rates you were getting on LinkedIn, part of that was almost certainly they like looked at your LinkedIn profile and they're like, "Oh, this guy already has a business." And oh, by the way, the business is really complementary. So it feels really natural that a guy doing written content would now want to be diversifying or adding on podcast content. So there was there was a whole narrative they were building around you before they decided to even respond. Um so that that helped. But I think that's that's like a key thing of any good cold outreach is it that that it is it has a narrative that makes sense to people. The same is true if you're going to do cold outreach for a business to grow it. Like if you're just the spray and pray stuff doesn't work anymore. I mean, it's just it's too done and you get immediately like clipped by spam filters. You got to figure out a way to draw a line between what you're offering and what the person's doing and it making sense to them. So I I think, you know, whether you have the I had the advantage of being a business owner, but there's again, you could have industry experience. That would be a great advantage to be like, "Yeah, I worked at this really big competitor of yours and I want to buy a business like this cuz I love this kind of industry or whatever." You know, like that kind of thing is huge, too. So whatever you've got, use that personal connection. Even going to the same college with somebody or like you grew up in the same small town. Like there's got to be something there that you can build a connection with. Um and I would just say, I mean, that's that's the way I would always lean into any kind of cold outreach to people. Yeah. Yeah. Um one tactic that that you used to try to get these folks on the phone in the early part of your efforts was was the was sales calls? Was kind of faux sales calls? Um and I'm sharing this cuz it's in it's in it's in your article. But tell people how that went and then yeah. It didn't it It work. No, so what I was thinking is you know the small businesses like most of the time the founder's going to be the one doing the sales cuz like I said they have to get to a certain size for a sales person to make sense. So I figured I'll just book a sales call. It's a free way to get on their calendar, right? And then try to like twist it into something else. It was super freaking awkward and just not like not like it was not genuine. You know this is again this comes back to like I'm I'm I was learning my style and I'm like okay, I'm just a I'm just going to be straight up with these people like I I would rather someone be straight up with me. So I'm going to treat them the same way. So as simple as it is to get on the phone with people by booking sales calls it's probably a very low conversion and I also realized it takes a lot of time and this is kind of again where like I'm always tracking my time and optimizing like what do I actually need to be doing versus what is kind of like fluff and I realized a lot of these calls were just fluff. Now I did I will say we went through after we had an LOI and we started booking calls like sales calls with competitors before we officially owned the business as a way to understand how they work and some of their like get some insight into their pricing their process their whatever their sales process etc. That was super helpful and I would you know before you've got on your LinkedIn profile that I own this competing business like go book sales calls with the the people that are like you know in in that are competitors cuz it's a great insight into how the industry works. Yeah, totally. Shop them. Shop the competition. Yeah. Yeah, yeah. I mean and these were not companies that we were going to buy so they were just it was just a matter of like we want to know how they operate especially the ones that are bigger like you know if you think about it we're going to buy one in a million like total value but what are the ones that are at five or 10 million? What do they do? What do they look like? What do they how do they act? Because that's where we want to go and it's like we don't like I said with draft.dev we don't want to copy verbatim what a competitor does because that's just not it's probably not going to work but we want to think about the the best practices they've learned and how we can apply that to our own style. Sure. Sure. And and going back to your industry thesis or or if you quote unquote um running a podcast production agency, there are players in this space that you saw that have gotten to 5 and 10 million. So so there is a a path to to those kind of numbers. Yeah, very few, but there are. Um I think it's it's so hard to say again like cuz this industry is growing and and also a lot of them they do a mixture of things. So yes, podcast production editing, but also maybe they do podcast launch services or um auditing which we we do as well. Or maybe they do video stuff which ends up getting more complicated and video production can get really expensive. So part of it too can be like their numbers can be um really high because maybe they're the video service provider for Adobe or some huge company that pays them a million bucks a year to like run their whole video operations. So like it you know, looking at the raw numbers is less important like as far as like how huge could you get and more about like in this little piece of the market we have, do we have a good foothold and can it get bigger and that's really what we care about. So yeah, I do think there's a pathway for this business to get well over 5 million in revenue in the next few years. Um how quickly that happens will kind of depend on how well we operate, I guess. Well, and also going back to your your point about fragmentation and how there's so many so many small players out there, maybe you get to you know, 5 million by acquiring 10 $500,000 you know, one one man shows, one woman shows. Your your head is right where mine is well. Yep. Uh one one other thing to call out, a huge thing to call out for especially for anybody listening who um works in uh offline sweaty businesses, the the nature of these productized services is their work their working capital um the cash conversion cycle is positive. So you take the money first and then you pay it out to deliver the service after the fact. And you know, coming from the digital world, this is always what I like this is was my normal, but Yeah. now that I've been exposed to all of these, you know, the traditional businesses, it is not that way. And so cash flow management is this theme that comes up again and again and even very smart people really struggle with it. It's a skill you you have to learn and often um people will will really get will really get squeezed you know, in their first 6 months at this. So these businesses generally, of course it, you know, varies, but but um as a general rule you take a credit card payment um or or or maybe it's an invoice if it's a big enough if it's a big enough spend, but you probably demand payment up front and then you deliver the service, which yeah, so that that's a fantastic characteristic that I had, you know, historically underestimated. Yeah, absolutely. And it it does I'll put the asterisks there cuz again like having run a couple of these now, there are exceptions to that. Especially as you move up market. So draft.dev for example, we now work with a lot of publicly traded companies and we normally would take full like at least half but usually full price up front and then, you know, we deliver the service over the next three or four months. Now with a really big company, you may not have the weight to do that. If their payables department says, "Nope, that's not the way we do things." you may just have to to deal with it. So Okay. think about like know what that is if you're buying a digital service business cuz some agencies are more um back weighted where they they charge for um you know, work after it's done because of the the nature of the companies they're with or like just the way they do. But either way, if they have a frequent billing um setup, that's definitely better than like long long term, right? Cuz again cash flow like this guy was invoicing weekly and some like weekly and monthly depending on the client um which is great. It means we're getting fast cash in, you know, and most people are paying within 20 days. So it's like really fast. Like it's a to your point, yes, great for cash flow. We did get a little extra on our loan just to make sure that we had some cash in the bank on day one cuz we we bought the receivables, but we kept letting him keep the cash. So, um you know, we we want some cash in there. But, either way, like it's it's been great cuz we've immediately like got positive cash flow going and like it's it's kind of stayed consistent. Mhm. Great. And but, to be clear, I was wrong to suggest that he gets that he was taking payment up front. He is actually invoicing. Yeah, he actually bills yeah, yeah, afterwards. And that's one of the areas I think we could improve. Um you know, again, this is like that we bought a business knowing that there's some things easy levers to improve. Um we actually I I experienced this this challenge first hand with draft.dev the first year when we were growing really quickly and and second, too. Um we the very first part of the year we had a negative cash cycle. We billed clients afterwards. Um and we were growing like doubling every 3 months and yet we were running out of money and had no line of credit cuz it was a brand new business. Like I had no idea what I was doing, either. So, had nothing to draw on. We get down to like, you know, we've added 10 clients last month, but yet we have got $5,000 in the bank and can't make you know, you're not going to make payroll unless we do something quick. So, that was a a good lesson to like move everything to up front billing and that's again, it helps a ton when you're growing quickly cuz like it growth sucks cash is like the the phrase that people will tell you. It's totally true. So, yeah, if if you see a business and you buy it and it's got this negative cash cycle, if there's any way you can turn any of it positive, it's going to be a huge win from like a especially as you start to really move the growth growth levers up. Mhm. Excellent. That's great, Carl. Okay. Okay. So, back to the story and the structure of the deal. What did what did it finally look like? Yeah, so we did the kind of what they describe in buy then build um where it's 10% cash, 75% SBA loan, and then a 15% seller's note um over 5 years at a fixed interest rate that we set early in the process. So, we actually got a really in hindsight good deal on that because interest rates have kept going up. Um whereas the SBA loan obviously is is going to be dependent on I think it's Wall Street Journal plus whatever their their markup is, right? So, it's a a little higher. Mhm. Great. Um Okay, and it was basically a 3x-ish multiple that you paid? Yeah, a little under 3x. We had a couple discounts for some key people like one key person who was kind of transitioning out and we knew it and he seller was very up front about it, so we were kind of like, okay, what's that's something we're going to have to deal with and step in to figure out on the first few days. Um and then the other big concern we had was the client attachment to the seller. And this is obviously like a big one for any really small business like this is like clients are really they're still on sales calls and on regular support calls with the actual founder, right? And they develop a personal relationship. Like every client we talked to for doing background research, we we called several of his clients just to to hear what their experience was and all of them had this very like they they talked very positively about Matthew, the seller, and the business a little less so. Not that they didn't like the business, they just they thought of him as the the figurehead. So, we knew that was going to be a risk, so we got a we did, you know, a little discounting for that because we we thought, you know, it's going to have to be something we overcome. But, the seller's, you know, hanging out with us for 6 months to do the to to kind of hand everything off and so he's got a contract with us and he's been super great. And honestly, the clients have been very receptive to. I They they had very low client concentration about 80 customers that were active. And so, the good thing there is even if we lose a couple because they really liked the seller and they don't like us, it's not going to we're not going to lose, you know, like four clients wouldn't kill us. It's it's not the end of the world. I think that's really important, too, for um for me at least with any service business I'm going to take over. I want to see a like very low concentration and a high volume of clients even if each one is very small. Yeah, for sure. For sure. Uh and part of the reason that he was kind of the face of the business at least at least from the perspective maybe not the brand but actually I think of the brand as well but but certainly in the in the sales relationships and the client relationships was because of the way he started which was he was an audio engineer tell the 30 second history of the business. Yeah, yeah. So he's he was an audio editor engineer at the Wall Street Journal. So had a a great network in that finance space and then kind of went off and and started doing this basically freelance and then eventually hiring editors. He actually had I mean we we inherited now 24 editor audio editors behind the scenes. So it's not like a tiny operation. He just made it look like it was by kind of being that point person. Um so yeah the the other good thing about his background was that it attracted a lot of financial service providers who want shows. So we work with a lot of VC PE and uh you know financial advisors insurance company and podcasting is a really great medium for them because um they're they they you know it's a long sales cycle and it's very trust based right? So like nobody go like nobody goes and switches to a new financial advisor cuz they got a cold email at least nobody with any money that's smart. So you really need to be in their ears constantly or at least every week or month or whatever to like remind them how smart you are for months or years before they actually convert. And so for those kind of companies it's a super great medium cuz you're you're really building that trust and you can do that consistently. So anyway he had good concentration within this industry which I liked but low concentration on a single client basis which I also liked. Yeah. Yeah that's great. And and and what a niche you know the money niche. Yeah. Um so so VCs PE VCs PE and financial advisors financial advisors are definitely not VCs and PE. So what's the connection? it's the the connection is just the shows are talking about financial and business issues I would say. It's so So a little broader than like you know I I understand they're not the same business, but like the way they kind of like think about their branding and marketing is actually not dissimilar because, you know, with financial advisors it's all about again long-term relationship with potential clients and and current clients. With PE funds or VC fund it's long-term positive relationship with both the entrepreneurs for companies you want to buy and the limited partners you want to raise money from in the future or have already raised money from. So, say even though like it's it's they're different fundamentally as businesses, they can they do a lot of the same things for marketing and brand building. Yeah. Yeah. Yeah. Great. And what what was the seller doing day-to-day? What what are you going to have to replace when he leaves? Was he all sales or was he actually still doing some production work himself or what did it look that look like? Yeah, so sales for sure. Um, you know, he had never done a ton in the way of marketing or like outreach. It was just all very organic like word of mouth client referrals, which is great and cuz those have kept steady pretty steady since he um since he sold it. Um, and then uh the he was he was pretty active in the like seeing the production queue of what's going out and what's working. He wasn't necessarily doing the audio editing much, but when a client would have a question or a hot issue often went to him. So, we've had to kind of refocus that and shift that over to other team members, which we've already done. So, like he's out of most of those those hot issues. Every now and then he'll step in when it makes sense, but very rarely. Um, and then we do a couple like kind of entry point services. So, like a launch package where we get you from zero to your show first episode's out live and that's a whole like process. Um I've taken over that with another audio engineer and so uh the seller's stepping out of that this month. And then um audits, which are very similar. It's like look at your existing show, tell you what you could do better, and then um you get like we can also do your ongoing editing if you want. Um and that's another one where I just am taking over those with another of of audio engineers on the team. So, it's they were he had pretty good processes in place. He just was doing them himself. I think partly because he likes those things, right? Like that's he he likes to analyze podcasts. That's like part of what he does. So, we may remove also some other There's some services like he had he would do one-off consulting for people where he just book an hour of his time for X dollars and you know, do it right from the website. We've removed that because that just doesn't make as much sense with the model we're moving towards and financially that was not big part of the business. So, we we sort of knew that that was going to go. But yeah, otherwise we've pretty much tried to keep things the same as they they were because he he did a good job building up a team and having some good processes in place. Mhm. And you said the business was doing 7 to 800,000 dollars in revenue. Was it Was Was that right? Yeah, I think that is right. I was just pulling up my numbers. The the way it kind of shook out the SDE is around 250k and then the total sales price was right around 700k after, you know, kind of where we landed. So, you can kind of divide up the percentages and figure out how much that was cash versus you know, seller note and SBA loan. Yeah. Well, so if it's 200 if it's doing 250 SDE and let's say for easy math half of that's going to go to your loan. So, that leaves you with 125 SDE, which is basically you live in Chicago. That's basically a full-time salary or less, but you've got a partner and you want to reinvest in the business. So, I assume you guys are not taking any money out of the business for yourselves. You're reinvesting all of that 125 back in because you both your partner had an exit and you have income from Draft.dev sort of thing. Yeah, yeah, yeah, exactly. So, yeah, our goal is not to take cash out yet. You know, what we're going to plan on doing is the the economic shakeout roughly to what you said and then what we're going to do is every quarter look at what's like the you know what we have in the bank that's extra and see do we want to pay down more of the loan? Do we want to invest in some big growth project or do we want to pay ourselves some little bonus or some combination of those three things? So we'll I think at first we'll probably be more aggressive on the loan payments just to get more progress chipped away at that but if we see some opportunities for growth like hiring a sales person will be one of the first things I think would be great to do. We're going to wait till we know we can sustain that for a while but um I think uh I think there's going to be a lot of opportunities like that. And when you said you have the 80 customers and so so and let's marry this now with a productized service. So what what is the actual what are these contracts? What is this revenue? How is it packaged? Are you do you have a recurring contracts with these these VC firms or private equity investors who that you're doing like their their total outsourced their kind of their podcast every month or is one-offs or give us a picture? Yeah, good question. So it's there's no there's no long-term commitment or lock-in with it which is a little risky. I mean I I could totally see why that would turn uh some buyers off of a a company like this. Um the contracts basically just say we will do whenever you submit work to us we will invoice you this much for this kind of work, you know, it's a very like come as you will sort of thing. Um that may change over time like obviously I think there's room for improvement there but at the same time it's worked and what I liked about even though that's that's a slight risk what I liked about the company as a whole is it's been steadily either growing or or flat consistently for 5 years. It's not like you know he's got all these fly-by-night clients that are coming in for one and done. The history shows us that these clients stick around for 5 years. So there's no reason to think that because we come in as new owners that's going to dramatically change, right? I at least that's I I don't believe that there's any reason that we would think that. So I know that everybody wants you to have you know subscription revenue or recurring revenue and all that and it's totally true that would make this way more appealing but at the same time, when you look at like service providers get a lot of momentum with a client. And what I mean is the client knows how to work with us. They know our processes, they've built processes internally around our processes. So switching us out is not like a just drop in anybody else cuz they don't know if the quality's going to be consistent, they don't know if it's going to be somebody they can trust. There's so many variables that go into that. So honestly, I think that um and you know, this was something I'd seen in the other business, too. It's just like once you get in with like good with companies, like they they keep you around unless something dramatically changes in their environment or they they stop doing the show or whatever. Yeah. Yeah, and and I just think it's important when you when considering recurring revenue, which everyone wants for obvious reasons, versus one-off revenue is if you have a a business that you're analyzing that's quote-unquote one-off revenue, you if you have repeat business, so or reoccurring business, not recurring, then you know, the analysis you should do is what is the lifetime value, the LTV of your customers. Cuz you may I mean, that's ultimately what this what it's what it's really about. Because you could have a SaaS business that's recurring but with high churn and there you know, so if so if if they're technically recurring business, but everyone only lasts all your customers only last for 4 months then churn out, the LTV, the lifetime value is is low. So who cares that it's recurring? But ultimately, like the metric, kind of the KPI is the lifetime value of your customers. And if if if you can demonstrate that it's relatively high um it matters it'll get you a lot more comfortable with the fact that it that it might be you know, it's reoccurring repeat business as opposed to pure recurring. So and it it says like you you guys have great LTVs. And it's really sticky really sticky repeat business. Yeah. Yeah, that's what we felt like. I mean, cuz companies who see success with a podcast, why would you stop? And and you know, honestly, like our our rates are very reasonable in the market. So like why would you go try to find a new provider? Like it's just it's not something that's worth tackling. Um partly, too, you think about the opportunity cost, right? Like if you're a if it's a relatively small financial advisory firm, like for the founder or even the chief marketing officer to go work through finding a new provider is is significant. Like it's going to be a big project. So, what are you losing out on marketing wise when you have to do that instead of grow the business? It's just not a priority for people to go swap out unless we start screwing things up, in which case that's a different story. Yeah. Yeah. I got a handful of more questions here. A handful questions for you. Um, but I know we're bumping up against time, Carl, so I'm going to I'm going to go quickly. Um, let's talk about the the nature of labor in your business. You've got the 24 editors. Um, so one of the things that is a struggle that even people outside of the world of buying businesses have seen headlines about or experienced directly is how tight the labor market is and and certainly in like blue collar businesses and and sweaty offline businesses that many of my the audience will be considering. Um, it's very acute. Um, Yeah. So, in your business, however, where the entire world is your labor pool, up, you know, Upwork, the magic of Upwork. Um, my own uh, my own podcast editor, shout out to Pam, I found on Upwork and love her. She crushes. Um, do you find that it's like is there a is there a a um, a shortage there or is it like if you needed to bring in five five more people, like you could you could do that pretty readily? Yeah, it's it especially at the um, the hands-on level of editing, it's very relatively easy. I don't want to say very easy. We actually get a lot of inbound interest, too, because we've been around and we've got, you know, people know the business, so they apply all the time. Um, so we're always getting new applicants. Plus, a lot of these people are connected to other editors. So, the great thing about, I mean, working with a company that's all digital, when you think about like the perks, it's not just the money, So, like you could you could be in We are all our editors are in Canada, US, and UK. But, so that's a Oh, so it's not even It's not Philippines style. No, no, yeah, we don't we don't at this point. And it's it's a good thing for them because a lot of them live in like more rural communities in these big countries. So, like if you live in middle of nowhere Nebraska, right? Like and you're an audio person. You're A lot of these guys are musicians. They they do this on the side for good side income or for the the main income and then the music is the side thing. That's a It's a really appealing job. You can do it anytime you want. You can do it at night, in the morning, middle of the It doesn't matter. Nobody's going to check in on you. Super easy, very straightforward rate. We pay competitively for the again for these markets where it's a lower cost of living areas, it's great. So, it's all just like it is geo arbitrage but not as extreme maybe as you might see like going over to Philippines. And the advantage there is time zones and cultural sort of norms. I At Draft At Dev, we work with writers, software engineers in 53 countries, I think. So, like we're extremely global there. And we have lots of people in uh other parts of the world, totally different time zones. But, the nature of that work is different. Podcast editing, we're a little tighter on our timelines. Like we usually need things like within 48 hours. And so, you lose 5 hours or 8 hours on time zones, you start to run into trouble. I I could see a world where if we want to offer some kind of like overnight delivery, we could have a team in India that did like, you know, or Philippines or something that did the overnight stuff and everything else went through our regular pool. I don't know. But, like that's not something we're looking at doing anytime soon. Great. Well, um and just to to kind of emphasize the larger point here that this is often true of digital ser- digital productized services where the labor shortage is really I don't I don't want to overstate it, but it really hasn't been felt Yeah, it doesn't No, we don't feel the same way. I mean, there's the very skilled jobs like management jobs are tough sometimes and that's just true of any company, it doesn't matter if you're local or not. Like hiring good managers is always hard whether you're bringing them outside or or promoting. But again, we usually have enough pool of applicants that we can find some good ones in that stack. So Carl, sorry, when did you close? Yeah, when did you close? How long have you been in business? end of end of April, like basically the first week of May we took over. Oh wow, okay. So it's just been a month and a half, okay. Kind of a two-part question but related, what you bought would be considered {quote} small for this audience and and I think you and I when we talked offline you acknowledged as much like you you you have felt that that it's small now that now that you're in the business. Yeah. Well right, yeah, yeah. So so kind of talk about that and then just more broadly how does it feel? Like how how have these first six weeks gone? What what what are what are the takeaways? How would you distill your experience so far? Yeah, I think I think for us going small was the right move. You know again, I think everybody's experience and what you're doing is different. For us, knowing we were going to self-fund it and we wanted this to be the first of many, we know that this is just a stepping stone and it was I don't want to say it's I'm not going to be as flipping as to say it's practice but it was like let's get experience. Let's get an at-bat with something that is relatively small and therefore the downside risk is relatively low. Like if this goes out of business, we could still conceivably pay off that loan from our personal income or like we could figure out a way to get jobs to pay off. Like it wouldn't be the end of our our careers. Now that said, it stepping in it is very hands-on work. I mean, I'm on sales calls, I'm managing team members directly. There's not a lot of existing management structure, not a ton of super established thing. There's some processes but it's not like you know there's a lot of room for improvement there. So like you have to be willing like obviously my partner and I are, to get in there and get in the weeds and, you know, roll up your sleeves. So, again, we came into this knowing fairly well that that was going to be the case, so it wasn't a surprise, and it's been all good so far. Honestly, I think we've we've brought in some really quick wins that, like I mentioned, like, the team has seen and we've seen that have helped us close some, you know, some deals that may not have closed otherwise, and some uh improve some things on the back end of like production that may have have fallen through the cracks otherwise. So, I think we're making good progress already. Um there's some little things with like invoicing we've already kind of like cut down to just doing once a month, so it's more efficient. We don't have to have somebody going through every week to do that. We similarly with payroll, he was we were running payroll daily up until we took over and we were like, "Okay, let's go to once a week. It just doesn't make sense to pay out every single day." Um so, some just little things like that that really up our efficiency. I think it's going to help a lot. Um but we'll we'll see. I mean, this is like you said, it's very early, so it's going to be like um yeah, probably 6 months before we really know how the how things have gone. Yeah. Yeah. Well, then my final question for you, Carl, uh prob- might need to be answered in 6 months, but um after 6 weeks in the business, is your vision of a holdco uh stronger or or weaker in in terms of, you know, Stronger, but but I think the shape of it has changed a bit or how it might happen. So, um some things I've been thinking about, like, the one of the big challenges now is how do we get these companies big enough to where they can have their own little operators, like, CEOs or GMs or whatever you want to call that title, cuz you do have to be a certain size before that role really makes sense. Um and how do we want to structure that? Do you want to have one CEO who runs multiple of these companies or do you want to have one who runs the each business unit? Um so, we've been thinking a lot through that. And one thing I've I think a pathway I've started to explore more is what if we went and bought, let's say, another podcast production agency, we tack it on, we keep the owner, and we give them a little piece to help grow it. Almost like a traditional PE fund would do when they buy a company they keep one of the operators at least to kind of be the the the head and grow along with it. So that's been entering our thoughts of like maybe this there's a path there that would allow us to avoid more debt which would be nice because it also it's it's not necessarily easy to go back to the SBA and take a whole another loan to buy a whole another business what when you are still operating that one and still paying off that loan, right? I think I think it's technically possible but I also hear that a lot of resistance to that. So like you know we may be able to skirt away from that and do something a little more creative. Um but either way it just means that like there's there's lots of paths. Again this is why it's what's fun about entrepreneurship to me is like there's no right answer and either way we're getting a little one little step closer to the goal. Um so I feel very encouraged by it. I think also just seeing a business like this that's this small um but actually is has lots of little things to improve really quickly and just knowing that that's going to help it grow is like it's really exciting. It's like something fun that you feel like you can get your your fingers into and and and make real improvements. Um so anyway I don't know. It's a there's still a lot of fuzziness once you get more than a year out in my plan but uh I feel like the next year's pretty I got a pretty good road ahead. Mhm. Well your point about doing add-on acquisitions um partly with the goal of bringing on the owners of those businesses to to be the GM or operator uh is um something that you see in the offline traditional business acquisitions space as well. Effectively what you know it's effectively an aqua-hire which we associate with like you know Google and Facebook acquiring like a little startup but it's kind of effectively the same thing. Buying small add-on acquisitions sometimes is just worth it just to get access to the crew or or the leadership there um and and and fold them into your operation. So um definitely something you see a lot. Carl anything I didn't ask you that you would want to share with the audience? This was a a great conversation. Uh we you know, we didn't get into like kind of getting to know the team and building trust with them and all that that stuff. That's something that's I think is always interesting and challenging um especially coming from the outside and I not having I was nervous about this not having a background in audio engineering, you know, am I going to be credible or like are they going to be like who's this, you know, jerk off. Um and so far that has not been that I mean everybody's been great. The interesting thing about it like again this goes back to the digital businesses. In a remote culture like this there's not a lot of meetings and need for like in-person interaction and a lot of the employees relationship with us is a lot more I'll say like light and hands-off than you might think in a traditional business because they kind of treat it as and this is not a negative. This is just how it it is is like they clock in, they do their work, they go out and do whatever the hell they love to do, right? They're they're with their families, they're just, you know, living life. And it's a a huge perk for them and they don't need to have a bunch of culture building at work. Work is work. It stays at work and they don't want to, you know, and do a bunch. So, we are going to start doing some of that with the core team the like more full-time people, but our like huge base of editors there it's like they don't really want us to go in and mess with things. They're like as long as things stay the same and I'm getting paid. Whatever, you guys good new owners. That's fine. You know, it hasn't been very uh no negatives there. So, I think that's really interesting and and something to think about as you uh amalgamate into the new company is like what is the culture that was already there and do you fit with that style or are you going to come in and try to like force a square peg into a round hole like if we, you know, all of a sudden tell all the editors we're going to make you, you know, zoom in every Friday at 3:00 like that would totally break the the the the good thing they have going. Totally. What what a great point, Carl. And and and just two things to add to that. First of all, you know, you had said earlier about folks in in maybe in the your editors are in expensive countries, um but they're maybe in more rural areas and so they so so these this is a job for them that they might not otherwise be able to get and it's a great job, but part of it being a great job is that they can live kind of far away and and they don't have to commute into a business or whatever. And so the appeal of the job and part of the reason they're working for you is precisely so they don't have to do meetings. There isn't a lot of overhead to their to their to their day-to-day. Um yep. And then just the kind of the larger point about not coming in to a business and all gung-ho about anything really. Come in to listen into into really and learn and really get a sense of what the the existing culture is because if you come in with preconceived notions, you you really risk disrupting what what's already there and the reason there's value baked into the business in the first place. So um you know, you got to be a little bit more reactive than than some people who have the initiative and and have the wherewithal to go out and buy a business naturally you know, are are go-getters and and probably want to put their imprint on things. But it so and and and so actually I'm just as I think this through it's like all this energy, all this willpower, all this like walking through walls to get a deal done and then you got to pump your own brakes to be like, okay, now I got now I got to bring bring forward my beta self, not my alpha self, my beta self and be like a listener and be calm and like and react to what's there. it's like you bought the business because it was a good business, right? And that's what I say to everybody when they ask are you going to come in and change things? I'm like, I bought it cuz it's a good business. It on paper should keep working the way it did before we bought it. You know what I mean? Like I didn't buy it cuz it had all these big problems I need to go fix. Yeah. Um there's some little things like, you know, again the you can try the little quick wins just to help build some trust and credibility. But yeah, there's no need to go in and try to change the model or the pricing or the the big stuff on day one. I mean I like sit back and learn the customers, learn what's important and then you You start to roll that stuff out as it makes sense. Yeah. Yeah. I'm I'm really glad you brought that up, Carl. Carl, how can people get in touch? How do you prefer people reach out? Yeah, so I'm I'm pretty active on Twitter and LinkedIn at Carl L Hughes and you can always put that in the It's Carl with a K, so that'll probably trip you up if you're listening. And then I write about this stuff at least once a month or so on my blog and newsletter there. So if you ever want to, you know, just follow along, that's a fun way to keep up. But I'm also happy to answer emails. You can you can email Carl at draft.dev or Carl at the podcastconsultant.com and both those go to me because I always I always like talking to other searchers or people out here in the acquisition world that are just like learning cuz, you know, I learned a ton from the people who like on the show and people I talk to one-on-one. So I'm always happy to give that back. Appreciate the offer, Carl. Thank you very much for coming on. What a fun conversation and story and I'm so eager to see what next year looks like. Thanks, Will. I hope you enjoyed that interview. 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