trish higgins thank you for joining me today on acquiring minds thank you for having me trish you are a partner and co-founder at chenmark the well-known and widely respected firm in our world here of small business acquisition yeah indeed genmark has acquired since 2015 when you all really got started nine platform companies over 30 acquisitions total so that's the nine plus a couple dozen bolt-ons and and tuck-ins and now count 450 probably north of 450 employees across the chenmar family of companies so quite uh quite an active uh seven or so years um most of the listeners will probably already be familiar with both you personally and and chen mark um but indulge me and just give a quick bio on yourself and and on in on the chen mark operation please sure well i think probably the biggest uh addition i'd make to the overview of the stats is uh um nine platforms three plus acquisitions 450 plus employees and two kids during that period so we have been uh it's been a busy seven years uh yes but important clarification exactly exactly um but so um i started mark along with my husband james and and brother-in-law palmer um back in 2015. we had more of a traditional finance background um not really anything to do with evaluating companies oddly enough that you know so we weren't investment bankers we were not in private equity um so we're more in like the trading side of the market palmer did equity as an equity research analyst so he had the most sort of experience making models and things like that um but james was a currency trader uh and i was a research analyst at a global macro uh hedge fund so uh pretty different uh to what we're doing today but it actually really provided us with a really good sort of foundation and analytical thinking and um evaluating new ideas and all that sort of stuff and i went to business school um i did not take any classes in the search space while i was there i did basically none of my coursework was at all relevant to small business operations so i get a lot of phone calls from people in business school who are thinking about what to do and um i always tell them that they are way ahead of the game because when i was there i wasn't thinking asking those questions at all so a couple years post-business school um you know i think all in our different way we were all feeling like we wanted to do something a little different um both one um you know we had this sort of idea of buying small business came up through like a couple different ways and you know first and foremost um we we thought it had interesting um economic characteristics you know financial returns we thought it was a pretty interesting space very fragmented very inefficient ability to to buy companies um at relatively low valuations um hold them for the long term so so from a financial investment thesis perspective we thought this was an interesting space to sort of spend a career um certainly we don't think is a get rich quick space but it is an interesting space we think to build a career in um and then just on the personal side of things we all felt in our own way that we wanted to do something where we had a bit more of an impact um we wanted you know we felt that we had the privilege of going to some really great schools and working with some you know phenomenal bosses that we learned a lot from um but we sort of felt like we were just sitting at a desk and we wanted to get out and say like hey you know we have these ideas about things that might work um you know from a leadership perspective from a business perspective from an operations perspective um but how do we how would those translate in the real world and the idea of becoming more involved in small businesses made us it was really exciting to us just on a personal level and we've said many times that even if chen mark doesn't work out from a financial perspective because maybe it will maybe it won't you never know what's going to happen we have had so many interesting experiences both good and bad that uh our lives have been much more interesting than i think they would have been otherwise and uh you know we're very thankful for for the experiences we've had uh in all of the craziness of the small business world so um that's pretty much the the big picture stuff uh we've been sort of a couple of the kind of the big things about us that i think are important to our model is that we very focused on long-term ownership so when we buy companies we don't really think about an exit we just think you know is this company something that we think we can own for the long term can generate cash flow over the long term um and will it be around so sort of what's the long-term durability of demand for this business so that's a really big one for us the the second one is that you know our goal has been holding you know we're in a holding company structure that came around a couple years after we started and we have been using the cash flows from our businesses to to buy the next business and when we first got into the space um we really were committed to the idea of building a portfolio of small businesses and at the time that was not a popular idea and people you know really were focused on sort of the single searcher model and you know i think one of the benefits from not having gone through more of the traditional uh search uh education is that we sort of came at it with our own perspective and especially in the early days that idea can have um some challenges because it it takes some time to kind of get a couple you know to build a portfolio of companies you first have to start with one and then the next and then the next and it can take a while to to build it up i think at least in a sustainable way that made sort of sense for us but we um we have really focused on creating this portfolio using the cash flows from business one to buy business two then the cash flows from business one and two to buy third and so on and so forth and so we have not um you know we haven't raised a fund we don't really work with external capital providers and our growth really relies on the success of our businesses and so we're very invested in our businesses um in terms of how they do and um if they do well then overall denmark can grow and if they don't then we'll kind of uh you know spin our wheels for a little while so i'd say those are kind of the two really big important aspects of our approach and our model that you know as i mentioned before this is a very uh fragmented inefficient space so there are a lot of other people who have different models that kind of that work for them and for the three of us and what our objectives are the sort of long-term holding company internally cash flow generated funded growth kind of made sense for us and that has i think it's kind of cool for us because that was really our plan um you know at the very beginning when we were just putting this down on on paper when it was just an idea and uh that's pretty much um still very much our guiding vision so we've gotten a lot of other things wrong and had to adjust but those those big things have uh have have stayed true for um so far so that's encouraging the um if if i if i can distill kind of your three goals or the three themes of your thesis going into this were a financial one an interestingness one and an impact one and i and i know that uh i mean i think i know the answer to this question but for the benefit of the audience um i think you've said already that it's been very interesting um i know um palmer answered when uh palmer and james were on the pod in january palmer death was emphatic about the impact has been just working with people much more closely than from a cubicle on wall street um is just unquestioned there that the so the impact checked that box in a big way and then financially you know from from those of us on the outside it sure seems like uh financially it's it's working out is it no i know it's not yeah the story isn't over yet but it you continue to make acquisitions and we're gonna get into that here in a minute um does it look good financially yeah you know it probably depends on your perspective a little bit on like what's your definition of financial success um and i would say that it is being internally funded in um and having a long-term vision kind of means you know i think none of us feel that we're financially successful because we feel that we still have an incredibly long ways to go um in in our journey because we we intend to do this kind of for for decades and so you know seven years in is is still relatively early and we still feel very much like we're just starting also when you're you know internally funding deals you know there is a zero-sum game between the owners cash compensation and the amount of cash that's in the business uh to fund growth you know so every dollar that i take out you know james palmer and i take out to you know whatever fund our own personal lives is is a dollar that could stay in the business and compound and be available for the next level of growth so i would say from a increase in the equity value of of chen mark i we've been you know i would say quite successful um but if you're looking at it from a it may be like a business school classmate perspective where people talk about you know how much income do they make um you know candidly james palmer and i make very little income because we prefer to keep most of it in in the in the business and and that's a choice um but it would depend if you're talking about you know financial success from a you know personal income statement perspective i would say probably not that great from a personal balance sheet perspective i would say it's very attractive so it kind of depends on what your definition is and what you're trying to maximize yeah our definition is definitely net worth perspective not income since that since that is as you said discretionary you can choose to capture a lot of the more a lot of that cash flow more than you do because you reinvest yeah well i the thing that i i think that's important to highlight though because um a lot of people that i speak with are interested in the the holding company structure um in this space and i think that you know they're comping it against their opportunities to go work at a private equity fund or something like that and i think that if you're thinking about that as your alternative you know you're gonna make more cash compensation in the next five years going down that path i would say like no doubt if you're looking at it in terms of maximizing the potential for your net worth the next 20 years then i would say a chen mark-esque model is is more relevant or or has a higher upside but those differences can be meaningful depending on you know your lifestyle choices and needs and potentially what your classmates are making and all that sort of stuff so i think some people realistically don't want to make that off in the in the near term and so it's just i i like to highlight that point because for people who are interested in getting into space um they have to feel comfortable knowing that especially in the beginning of getting your flywheel uh started um you're essentially the last to get paid and um if you have expensive tastes it's uh could be challenging for you sure you know when i hear you say all of that trish i i fee and you just said this yourself i feel like you're talking very much to a business school audience people who are considering investment banking or private equity um but if you're talking to you know an entrepreneur who might be considering this path of entrepreneurship versus another one they're like well obviously in the first few years you know i'm just trying to be ramen profitable so that doesn't sound so bad in fact that sounds kind of like expected um and i and i like to think and hope that a lot of the acquiring minds audience isn't i know a lot of my listeners are in the business school crowd but i also try to um have a have a wider listener base as well so maybe some mid-career professional who's not in the finance world who's maybe in tech or any other walk of life in considering buying a small business and if they learn about what you've done and are doing uh and they're not you know their their um comparison is not a private equity career it's almost almost anything else yeah yeah uh it probably looks um quite attractive even sooner than 10 or 20 years out yeah would you would you agree absolutely again it kind of goes back to what your comps are and and how you're defining success and all that sort of stuff um so yeah i would certainly agree with you it depends on you know what your um you know what your alternatives are for sure yeah yeah okay um i want to ask one more follow-up question on the history of checkmark then um then we'll get into the story i'm really burying the lead here but um the the fact that you all have the model that you're referring to the the chinamark holding holdco permanent equity style model um is not really what's taught in business schools uh and and you're kind of thankful that you didn't take those classes because maybe it would have oriented you in a different direction versus kind of just looking at things from your own perspective your own kind of first principles perspective why do you think there is that divergence between what's taught and the way you guys have done it and because the way you guys i mean you guys are really held out as this exemplar of this really cool path of of buying small businesses and yet um yeah and yeah and yet it's not what's taught why why the why did why the disparity there yeah um well i think that the small business space whenever you have a space that's super fragmented you know hundreds of thousands of these small businesses um the you know the traditional mental model that you know was the first to come up was a person goes out buys one business and that's kind of has worked and and that's been the traditional path um and so i think that when it comes to you know a lot of the business school professors are also investors and they also went down that path themselves before they became professors um and there's nothing wrong with that path but you know essentially you know they're being you know they're teaching what they know and they're teaching a model that you know has worked for a lot of people and they're familiar with and you know it might also be a model that you know people want to you know they want to invest in themselves and so i think that you know part of it is just where are the most available models coming from and and that's what's being taught you know which is totally fine and totally legitimate you know nothing wrong with that um i also think and i don't know that this is a specifically a business school thing but from an investor standpoint you know we were very lucky in that we didn't rely on traditional search investors um partly because none of them were interested in us when we started um but you know i think that those investors a lot of them like to think that they're the ones doing the diversifying so if i'm a search fund investor you know i might invest in 30 searches and in my portfolio is diversified i don't need somebody else to diversify for me and actually we're first starting and talking about this holding company concept we actually did get that feedback from other people you know from potential investors saying i don't want you to diversify you know i i that's my job as as the allocator and like your job is to go find a company and try to make money for me um and so i think there's a little bit of uh attention and kind of like whose role is it to do the diversification uh and from our perspective that was something we wanted to own was the diversification um but i think a lot of traditional investors they like they're the asset allocators you know and they're looking for they're looking for executors more than investors and you all are this kind of funky hybrid i mean you're definitely executors yeah and operators yeah but i think we started from very much an investment capital allocator mindset and we still are very mindful of that and so we've kind of blended both of those roles but um you know most people who are going into search aren't thinking about asset allocation and do you think how important do you think that orientation is hold codes are hotter and hotter there's going to be the hold code conf i assume you're speaking there or you'll you'll be getting it okay uh and so it's just um more and more appealing to people and and and part of the reason the attention is come more and more to chen mark um but i don't think all of the folks interested in hold code necessarily are um first and foremost investors or have that investor mindset as much as you all do how import how important do you think that is to the model that somebody be investor first operator second honestly i don't think that's that important because we kind of came up with our investment thesis you know basically in 2014 and it stayed the same so we certainly get you know in down from more sort of like wall street analyst types um who want to come work at quote unquote hq which would be very disappointed if they saw and um and and you know and help us with quote unquote asset allocation and and it's like you know we don't we don't really need that there's actually not that much work to be done in that area at least at our scale at our size now like that is not a full-time job that's just you know we have some guiding principles that that hold true and then we execute within those guiding principles so i would say you know if a person has i'd say that being an executor is much much more important and if a person can kind of figure out their again their guiding principles for how they want to you know allocate the capital that's either given to them by investors or that their company has generated um you know they they they'll be fine i don't think it's necessarily that important as long as you know we had we had no experience being operators or executors and you know we learned you know and are learning how to do that and um if something can pick up so i assume people can pick it up the other way as well yeah yeah excellent well let's get into the story for today which is where we're gonna talk about a particular acquisition um one that was uh challenging in a lot of different ways a real i think a really um interesting class just kind of classic classic small scrappy business so i'm i'm i think this will just be a really fun conversation and that business is captainfish's cruises which is a tourism business two apostrophes and one name is tricky but that's what we got are hard to spell i mean yeah clearly they never hired a marketing agency which is which is you know part of the magic of all of this you acquire the business in february 2020 we all know what happened a month later so this is going to be a roller coaster of australia it's in tourism so of course tourism was one of the first industries to be hammered the hardest um so tell us first about captain what is captain fish captain fishes well captain fish is actually a person we literally bought the business from captain fish so fish yeah cap and fish so a very literally named uh company um but it was um it was actually a business boat tour business in midcoast maine that had been in that family for three generations um taken different forms but you know it was pretty pretty uh long history in the area which which is pretty neat uh i think they trace it back to starting in 1936 which is pretty pretty cool oh that's awesome yeah and so um you know uh captain fish was running it um his children weren't you know had grown up and just weren't interested in in taking over operational role and he was looking to retire um it actually was listed with you know a local business broker um somebody that that we'd met and sort of saw the uh the listing and you know kind of it fit our kind of roughly our valuation metrics and you know called the broker who we knew and say you know what's more about this he's like well it's actually you know boat tour and whale watches and sightseeing and we're like huh like never had thought about that industry before um and it was you know it's right in our backyard if it had been further away we would have never looked at it um but you know it was an hour away from our house so like you know why not go up and take a look and then dig in a little deeper and at the time um i was running our search process um so i kind of had the discretion to to take more of a look at it um and i personally had been in that role but i found myself every time we were looking at a business saying like oh i'd like to run that or i wouldn't like to run that or that'd be interesting and a one company we'd been looking at previously i'd been seriously considering stepping into the ceo role for that one which um unfortunately that deal fell apart so it didn't happen but it was certainly something that was kind of top of mind and in this business it is it is not really a great search business um and that it doesn't really fit a lot of the characteristics searchers are looking for um you know no recur you know no contracted revenue um highly seasonal a lot of staff turnover um you know those are all things that would probably make you know if you were going to a traditional search fund or an accelerator or something they would be like absolutely not um yeah which is fine because that's what's great about this space something that's interesting to me is not interesting to you and uh vice versa and so we uh let's see so we met the owner you know came came to um agreement on the terms he he was honestly one of the best um owners that we've worked with in terms of you know everyone has their little things but he was very um professional and um reasonable and whenever we had just you know differing opinions we kind of figured it out so you know honestly it was it was actually a really great probably the easiest transactional experience we've had um which i mean i i have to say from the outside i would a guy who's selling his family business yes the third generation owner his name is captain fish so you know it is i would assume he's a he's cut he's colorful he's got his name on it yeah how give us some um some metrics on the business how many employees is it when in season and then out of season is there a management layer give me some you know and then what does it do day to day how many how many boats does it have how many um tickets does it sell all that stuff so um we have two boats and a parking lot um so if you ever need to get uh some thick skin go work in the parking lot for a day never had people swear at you more than when i've worked in a parking lot um and uh and so two boats um 149 passengers each and in the season we'll run kind of anywhere in a normal season 30 to 40 000 passengers in season now highly seasonal so we're open mid may through mid-october with the big months probably over 50 percent of revenue or july and august so highly seasonal and the business really shuts down in the winter time so when we uh purchased it it had one full-time employee who was a captain who was also um did you know boat maintenance and helped out with stuff in the winter time so you know another thing that probably wouldn't make a searcher feel that great uh with like no employees essentially and i think that it was our let me think about this our sixth business our second six or seventh business that we bought and so it's actually one thing that's nice about the holding company is um concept is that yes there were all these things that you know highly concentrated revenue from a seasonality perspective lack of middle management um like no contracted revenue like all of these things kind of build up and if it had been a first deal we looked at we probably wouldn't have gotten comfortable with those risks but given that we had other businesses we felt comfortable taking more risk on some of these things because we felt some of the other dynamics kind of um made up for it um and so uh you know it kind of allowed us to take a bit more risk um so so so for the the individual acquisition entrepreneur out there not the searcher necessary maybe a searcher but maybe not excuse me maybe kind of a search fund business business school type but maybe just you know a searcher who's going to get an sba loan this this has maybe a riskier profile than maybe they want to take off right exactly exactly um and so then uh it i think i answered all the you know the big questions um in terms of metrics of of of the business um you know it's really about you know we hire a lot of college kids seasonal summer work um so yeah we will thankfully have some people come back year after year either like you know they worked for us between freshman and sophomore year and kind of work up that way or people who live locally and are looking for a summer job for a couple days a week things like that so um in the first year though we had pretty much like full turnover um so uh yeah some some challenges with having to train everybody like from brand you know from for no no experience um we'd also change the ticketing system so um you know a lot of a big learning curve in that in that first year and so uh we bought the business in the end of february of 2020 um like one week before coped hit um and so you know that was unfortunate um the nice thing about the business from a financial perspective is that you know one nice thing about not having a you know a management team is that you really don't have much payroll uh so yeah that is good and you don't have a lot of operating expenses uh when you are uh not open um and so you know you do you do burn cash um throughout the season and then typically the month before you open up so april may you do burn quite a lot of cash in terms of getting the boat ready so boat expenses um if anyone's owned a boat you know that they're not cheap and so you know you have to painting and maintenance work and all sorts of stuff like that and for us we're coast guard inspected via a vessel so we have to have coast guard inspections and dry docks and all these things so that is uh you know kind of certainly burns cash before you start to make money again um and so we you know you know candidly we you know if it had just been that company again in in 2020 we would have had a fair number of issues with um you know bank compliance and and things like that but again being part of a larger entity we could kind of buffer some of that and so when coveted hit my goal was to really not lose money um and so i we sort of had to well first we were just closed so we missed the beginning of our season so in the state of maine we were just shut down um and then we had a in our state we had a restriction of 50 people um as a gathering sort of hard stop which to be honest was quite frustrating because um that's a third of our capacity of the boat and there were other boats in our area that had like a 59 person capacity limit and they could still also have 50 people which like didn't really make any sense to us um because obviously those 50 people were much closer together we said okay you know thankfully we'll be allowed to open basically late june and what can we so how can we be profitable at a 50 person max and so at first we were saying well is anyone going to show up and so that was a big question mark um but actually people were so desperate to get outside and do stuff that we actually you know really had a lot of sold out trips that season at that 50 person capacity which was which was really great and you know we could still turn a profit at 50 and so um which is just great um i didn't know that going in but oh i kind of knew what break evens were so uh that was good but the one thing we really did and focused on as a team was saying okay what's our break even by trip type because we run a number of different types of trips um and so you know what's the fuel expense by trip um what are the labor costs by trip all those sorts of things and um being very disciplined on you know if we just don't have enough people to to break even on a certain trip you know it's got to come down it's got to be canceled or we have to merge it into a different trip or be very very proactive with essentially like per trip unit economics um and so i figured we would track per trip down to the gross profit and i'd say okay you know this trip made some some you know what's whatever it made 800 of gross profit for us and that's you know some contribution to our overhead and um we were able to keep overhead very very lean you know we essentially spent nothing on marketing you know really anything that wasn't an essential expense we we just was done and i myself worked a lot in the business in terms of parking lot a booth you know all that stuff and you know in a way that first season was um you know sort of stressful i guess or challenging from like the covert perspective in retrospect it was from operationally it was sort of a gift in that i was brand new to the business and it wasn't as busy as it usually is so i had more time post acquisition to season start to get up to speed on on how everything um you know ran and all that sort of stuff and then in season we weren't as busy so we also had a lot of new hires and so we sort of it was kind of like a training wheels season um and that's how we kind of um tried to think of it and it also um for so i hired a general manager um so that was my first hire the captain who had been the full-time employee he stayed on has been wonderful and then also hired a woman who'd been working in the ticket booth previously to come on and help us with a lot more sort of guest services policies website stuff things like that um and i think that the covet experience kind of helped us um come together more as a team because we went through this sort of weird uh you know situation together and so i think that was great so yeah that was basically our our first season um and and the the um transaction uh overview and so if you were give me a sense of the profitability of the business i mean you you made an important point that like when it's not operating there's not a lot of fixed cost so um there there is that but it still strikes me that for a tourism business that all but you know ceases operations right as you're coming into season um it still strikes me that the fact you were able to even not only survive but be profitable um says something about the profitability of the business or the yeah just how kind of how attractive the financials are of the business am i am i right in that intuition what is in a normal year how profitable is the business yeah in a normal year um i'm not going to get into like the specific numbers uh because that's all um confidential with the um old owner and whatnot um but it certainly is a profitable business um it's it's really it's like an airline in that your you know once you're we think about it in terms of load factor so if you have 149 people on a boat um and uh you know it only takes 20 or so to break even from a gross profit perspective then you know every single one on on top of that um uh is essentially you know once you cover your overhead you know drops you know directly to the bottom line we also um have been um pretty i think focused on pricing um especially in 2020 as soon as i realized like hey like all of the trips are selling out like prices have to go up i was probably actually a little slow on that side of things but we've been increasing prices which also you know basically drops you know directly to the bottom line but you know the business has you know essentially you know of the you know of the you know we look for businesses between one to three million um aviva da and look to buy them between three and five times and this certainly fits in that range so it's a it's a good business from that perspective and when we were talking earlier about how this probably felt a little riskier than maybe somebody's first acquisition or from a certain from a traditional search fund perspective or kind of mba you know search investors perspective it wouldn't be appealing you know as you just talk about the seasonality and how that works like why is seasonality necessarily so unappealing at least academically that's a great question i don't have really any issues with seasonality um but i'm also i think i'm quite good at budgeting so i don't have a problem with it um i think that you know other people get concerned banks get concerned with seasonality um because they feel like hey you know you have all of these months of of negative cash flow and so that makes them feel uncomfortable um and you know if you're not good at managing your cash balance so let's say you know you go through the season and come october save a million dollars of cash sitting in the bank you know some people might pay themselves out you know a huge dividend or they might buy something and they can you might i think people get concerned that you can in october or november you might think you can afford things that you actually can't uh because you have six months of all of your various payments um to to make and that come you know sort of march you're gonna have no cash and then you're not gonna make your payments or you're not gonna make your distributions to investors or whatever you need to have so i feel that it's really if you can manage cash appropriately i feel like who cares if you make it all in one day versus 365. like i don't care but i think people get concerned that that cash it that's g well two things that cash is generated is gonna be managed well and then if something happens you know god forbid you know one of our boats you know knock on wood goes down you know with some mechanical issue for three weeks in august you know that would be a huge hit to our financial performance for that year and so you are taking operational risk and like condensing it into a short period of time and uh you know that's just an additional risk factor you know i certainly we had an issue last year where um one of the our captains unfortunately left us you know right before the july 4th holiday and so finding a captain on short notice right heading into busy season is a very very hard thing to do and we ended up having to pull down a bunch of trips until we could find the right person to um to fill that role and you know that is a financial hit if that had carried on you know that could really have ruined our season and um yeah so so i think that it again it's just a it's a risk factor and uh is something that other people you know might not feel as comfortable with and and in this business in particular the other obvious risk that jumps out at me is the one you just mentioned you're precisely because you have such low overhead and to have so few full-time employees uh and you have the one really the one full-time employee um you know yeah that that's obviously a a screaming vulnerability um and you know that strikes me is actually enough to scare even chen mark off um just because it's you know so much yeah it's just like all of your eggs in this in this i mean if he had walked on the first day or said you know triple my salary on the first day um so yeah you know how did you wrap your head around that yeah um to be honest on that side of things that was probably just uh a bit of uh being naive um i felt that well first of all again we had a really good experience with the owner to the level where i trusted him um and he told me that the the guy who was staying on was good was great and to be honest he has been wonderful and great and you know it worked out really really well and i've said many times i'm very lucky that that was the situation um if it hadn't been uh you know i would have certainly been in a bind and had to find you know probably somebody else or you know it just it would have been a lot harder for sure um so i mean honestly on that side of things like a little bit of luck combined with kind of feeling out you know hey um you know it seems like even though i haven't met this person um it seems like a a sort of decent risk to take but still was you know a little nerve-wracking in that first yeah a couple months i i like that you the first thing you answered was essentially that the trust that you had in the seller because that's the theme that comes up so often is like a lot of the risk we're taking is is that um yep and if he's vouching for this guy you know you you're really kind of banking on that um right the the just um the financial characteristics of this business that you all liked is do you think they are particular to cat captain fish or do you think boat tour businesses in general can you extrapolate from cat and fish that these are attractive these are attractive businesses and um would would you know our opportunities that that we acquisition entrepreneurs should look at um well don't look at them unless i've looked at them first so yes and no so certainly we've looked at other companies in the space um a lot of them have boats that are worth more than the business um and so we we will see that sometimes in landscaping things like that people will have more equipment like the equipment is worth more than the multiple on the business so you know you we might you know i've certainly looked at somewhere it's like hey you've got 300 000 of ebitda so what am i gonna pay for that like at most three times right but your boat is worth two million dollars yeah like so so i would say a large amount of companies in the space have that problem and there are other people i know who have bought businesses in the space where they have not they've gotten around that by not buying the boat they've leased the boat um from the owners um and that's not really something that we have explored or wanted to do because the boat is so essential to the business that we really want to feel like we we own that and own our destiny um on that side i think so it hasn't really been something that we've been interested um or like gone down that path at all the other thing that can be very difficult in the boat space is dockage so you know some boat tours own their docks which this one did which means you know you really have control over your destiny um a lot of boat tour operators um lease and um don't have particularly favorable releases and they don't have long leases and so that's really hard from our perspectives to get around because it could be like hey man like this is a great buzz boat business makes a million dollars a year or whatever um but you know it's a year-to-year lease i i've seen some boat companies have month to month leases um or in some regions it's really the people who own the peers who have the control so they might do year to year leases but take 20 of the revenue things like that um and so we certainly have become a lot more familiar with different geographies and the norms and what's you know interesting and i think that you can certainly find pockets of opportunity um but i wouldn't say that it's like oh you know every boat tour that's out there is is attractive because there's a lot of those sorts of things there's also a lot of boats out there that um might look good financially but the boat owner um has not taken care of the boat particularly well so you know again maybe it's a you know let's say it makes five hundred thousand dollars um but you can kind of tell like hey it's gonna need an entirely new engine or it's gonna need all this stuff you know that it's it's just you're gonna have to spend so much getting the boat up to speak because if you don't spend you know the amount you should be spending annually it really catches up with you and you're gonna have a boat that's in poor condition and um that's certainly not something that we wanna um face and so that that's another thing so it's kind of it's a like they're i think i think it's a little bit more bait and tackley um than some other like maybe landscaping for instance like you can find some of these hidden gems but i'm not sure like anyone's going to be going out and doing like a huge boat tour like roll up or anything like that because it is very um more it's much more like case dependent than it seems i think yeah yeah so owning the boat or releasing the boat owning the dock or leasing the dock and then condition of the boat and then of course uh demand sustained demand uh is is always always a huge question in every business the good thing about a consumer business is you can look online at reviews in the case of captain fish as of two hours ago there were 2 341 reviews on tripadvisor solid five stars so that's awesome um did you do you use that as a proxy for anything uh yeah and how did you get and how did you i mean a three generation year old business i mean there's you got so much history there to to get comfortable with demand but tell me how you did diligence and get comfortable with the fact that they're every season there would be um you know those people would be lining up and booking and booking tours well so i'd say to your point um i mean competition is a huge one so if you're going to go down to i don't know the florida keys or somewhere in hawaii or something you know you might have 20 operators that are all going to do the same trip right and so that's very difficult um dynamic um from pricing perspective and you know it's it's kind of a double whammy because it's one you're probably not going to have full boats and it's sort of your load factor is the driver of profitability in this industry and you're also probably not going to have pricing power because you have all this other competition around and so the the areas that are probably come to mind as like boating areas that have a lot of competition i would say are from our perspective less likely to have interesting operations unless they're very very differentiated um in our case in the market that we're in it's it's it's a small enough space that there aren't a lot of other competitors particularly not with large boats because there's just not enough dockage space available in that area for large boats um and you for whale watching you need a large boat to be able to go out far enough to see the whales um so can't really do it on a small boat and you know what if someone wants to take six people out on a super fancy small boat like go for it like that's that's really not our competition um in terms of sustainability demand you know one is just looking at the historical you know numbers and seeing you know how how those have trended um you know partly for us this was really you know how do we feel about maine tourism in general because you know you know maine has a little over a million your time resident year-round full-time residents um and well over 30 million tour like visitors um and so you can sort of and and the state of maine i think has done a pretty good job of marketing itself as a tourist destination and you know the tourism numbers you know covet aside continue to go up and up as a lot of people view maine as a desirable place for for summer vacation and so a lot of it was sort of understanding the tourism dynamics in maine understanding our regional dynamics we're kind of right in the middle of portland and bar harbor which are kind of if you're going to go to maine you're probably going to go to one of those two places most people for a main vacation um we'll sort of start in portland and drive up the coast to bar harbor um and then back down again and we're right on the way so that's sort of a you know we're kind of the mid-week stop for people um there are some other tourist attractions in our area so it kind of makes it a hub where it's not just like a random place out in the middle of nowhere it's um you know got other attractions that bring people in um and in terms of the whale watching and puffing tours um you know we're right in an area that i don't know if you know anything about birding or anybody listen to this podcast as a birder but puffins are a very special bird that a lot of people have on their bucket list to see and will travel from great distances to come see um the atlantic puffins and we just happen to be close to where uh pretty much the southernmost part of the atlantic puffin rehabilitation um and so we're we're able to get there um in a reasonable amount of time from our location um can't really do that from portland or bar harbor it's too far and uh whale watching we're pretty much there are three providers in maine you know one in portland one in the mid coast and one in bar harbor so if you think you're going to come to maine and go whale watching you've really got three options and we're one of them um and so that made us feel pretty comfortable that you know people you know some people would funnel our way and continue to do that so kind of all those different factors made us feel comfortable with with the um with the demand yeah well it does to sound like to your headline point that really you know that what makes a business a tourism business appealing is probably going to be pretty idiosyncratic if you if you go to a big tourist destination and offer what you know 20 other operators are offering i mean my audience is sophisticated to realize that that's probably probably doesn't add up to a good business not a great idea but um yeah so you guys it sounds like there were three or four factors uh really particular to to captain fish that um and did you did you recognize curious did you recognize all of those in your analysis prior to acquisition yeah i mean the previous owner recognized that you know and and he was like this is just a good location it's not huge it's not too small it's a you know it's it you know and he was really the one who brought all of those things to our attention because when we first went to visit him you know we had no idea even how to think about it um and i think he was totally right um and he was right that um you know tourists will pay more than um locals because from uh from what if you're going to maine for a vacation for a week uh you know that is going to cost you i don't know thousands of dollars and so you know your boat tour is a very small percentage of your overall trip spend and so you need to be thinking about pricing from the the traveler's perspective not from the locals perspective who might say hey you know what i've never paid more than 15 to go on a sightseeing trip where you know a person who's coming from wisconsin who's never been to maine before and is on their you know august vacation you know they might be willing to pay 25 or 30 and not and think it's a great deal and so um to be a bit more global in your perspective about what people think is a reasonable price um and not just be looking kind of like in your local market for for pricing queues trish a couple minutes ago you said bait and tackly um no i i know what that means and it's a theme that chen mark writes about a lot please share with the audience what you mean by that sure so it's this concept of a bait and tackle shop so um this idea that you know you've got drive down a super long windy road to an amazing local fishing um spot um or maybe even nationally recognized fishing spot and let's say there's one family that owns land that's right by the entrance to this amazing um fishing location and they have you know a bait tackle shop there and because of their location they are able to um basically capture all of the demand and um have uh pricing power um you know as long as they're still being reasonable um you know for that area and so the the concept is that um you know bait and tackle shops or that concept um can generate um outsized returns or abnormal returns relative to the universe of bait and tackle shops now the problem and why a lot of people don't like to invest in that bait and tackle shop is that you know at a certain point in time um there you don't have an ability to reinvest in the business um and so um you can't really you can it has no growth opportunities are very very limited um and so a lot of people particularly in today's age although that seems to be changing a little bit rapidly in the last couple months um you know people are very very focused on value is equated to growth potential right and uh so um one thing that we really focus on is we really really like bait and tackle shops because we in the holding company structure have the ability to say hey you know what bait and tackle shop you generated you know you have excess of a million dollars you know if it was just you maybe the owners would take that there's no ability to invest it back in the business and have it grow but we have the ability to use that to make another acquisition that might be in that space it might be in something else entirely unrelated and so we talk a lot about how we like bait and tackle shops whereas you know some other types of investors might view those as uninteresting and i think that this boat tour business is abnormal relative to the universe of boat tour businesses um and has the ability to produce outsized uh returns because of that so you do consider this a pretty solid potent uh bait and tackle example yeah boat and tackle as the case may be exactly yeah exactly having said all that about growth and and bait and tackle shops in fact you all have made another boat tourism business acquisition so can you tell me about that sure so um i would also call this other one very much bait and tackley as well um but we we recently did an acquisition of of um i'd say a semi local competitor um so somebody you know husband wife team looking to retire um they were um about 40 minutes away from us um and in a different harbor very very small but had a lot of overlap in the types of trips that we um provide um and so i spoke with our team um so we now have basically three year-round employees which is very exciting um and our huge management team um we talked about you know do we want to do this or not and um a couple things one we thought that it would be a good complement to the offerings that we have um two um we have it it's hard to have um sort of consistent captain and crew staffing with just two um it's actually a lot easier with three boats because you can share captains between the locate and um and crew between the locations so having a bit more scale actually we felt would allow us to have more continuity and opportunity for our staff members which was a huge sort of positive factor for us and essentially we could acquire it without incurring any additional or very little additional incremental cost overhead cost because our team our existing team could manage it and so it wouldn't be something that would work for a lot of other businesses but this would probably be one of our like top competitors and so it made sense for us uh and yeah so i guess we can we we didn't go into this thinking this would be an opportunity at all but it just kind of happened this way and i think we were a natural acquirer for um that business and yeah so i mean we're only whatever five weeks six weeks in so uh still still learning a lot about the business um and you said it was smaller but what so what percentage uh it only has one boat yeah okay so it only has one boat and it has a smaller number of people who can be on the boat um so it is um yeah it's just it's just yeah less than half the size of our current operation so a hundred seats each seats yeah a little bit of 300 that you have yeah right yeah great um just tell me quickly about how despite captain fish being a great guy uh in fact he didn't forewarn this one employee where so much so much of your risk was that this was happening until what day one tell that story yeah that was a very unfortunate beginning and i think it you know who knows what what the rationale is um but it essentially was you know one full-time employee very important employee to me especially since i really didn't and still really don't know a lot about boats especially from the perspective of somebody who's been in the boating industry for 20-plus years you know i'm very much a novice and so i kind of need to rely on the people around me for for expertise um and so uh the the owner didn't tell um this individual that the business was up for sale which is really too bad and then really just told him the day after the sale that um it was you know the business had been sold and this person will be calling you at some point um which isn't like the best way to get off the ground with your like new most important person in your life um but his credit i know it caused you know i think clearly a lot of anxiety because he'd been in the business since college you know so um uh so 20 plus years so um it clearly you know was a huge change and um you know i certainly have a different approach to the business um that than the captain fish did and you know and to be fair to him i think he's taken a lot of it um in stride and really adapted and i think we now have a very good good working relationship which which is great again a lot of um uh some luck luck there could have gone much much worse he could have said like i don't like you i'm out of here and that would have really sucked um but thankfully so far it's worked out okay okay um and and then trish how involved in the business are you uh and and and kind of talk about that with respect uh to all of chen mark and how because you're you're one of the three partners of chen mark and you and it seems like you're giving this particular business a lot of your attention whereas the chen mark you know there are there are eight other platform businesses that could be getting your attention so how is all that working yeah so um you know it's a small business and from a a leader like a you know people perspective whatever so i was there you know a lot the first year slightly less the next year and even less this year and that is because the team there um i think is uh very capable and and wants more leadership opportunities and so i have you know been giving them more and more um responsibility and autonomy as they've sort of shown that they have the ability to do that um and step back sort of more you know more and more so um to be honest i don't even really know what to call myself with regards to the business right now because i am very involved in certain ways um but in other ways um i'm really not involved at all so i'm sort of i'd say slowly um handing over um sort of management of the company and and the team has done a wonderful job there and sort of they have expressed me that they want that role which which is great um i have a number of other responsibilities within the kind of the chedmark ecosystem um and so it's kind of worked well and and i foresee us kind of continuing to have that sort of slow transition um with with me taking on other things you know this this acquisition i would have been less involved this year if not for this acquisition where i was obviously really involved with you know getting that closed and transitioned and helping the team through sort of the the adjustment that they need to make um from operating two locations um versus just having one um and the leadership challenges that arise for them and their teams that are reporting to them so um you know it's um yeah so that's a little bit of a unclear answer but that's sort of the world i'm living in right now um so it's sort of if anything bad happens it's my fault but if it does well this season it's all the teams the team's doing great music that's leadership yeah trish one last last question for you you had talked about how you don't really know anything about boats even three years in you're still very much a novice and you rely on the gentleman who's the main operator to for that um so one of the things in our world is how much do you need to know about an industry where you might acquire a business and i think the conventional wisdom uh there's a lot of nuance to this is that the more the better so you know if you if you know something about that industry great um but if you don't depending on how complex the business is like it it can be okay uh but it's a con like if you're doing your pros and cons of buying a particular business if you know nothing about that industry it's definitely the solidly in the con column you all are buying across a wide cross-section of businesses and captainfish is a great example of that um how do you think about this question um well first of all we try not to buy businesses that are like aerospace manufacturing or you know something highly highly specialized um and you know and somebody even might say whatever landscaping is you know do you really need to know anything about that and i feel like i mean i kind of go back and forth on this like part of our model is buying businesses we don't have a lot of experience in and putting people in place and kind of having them focus on sort of a general management role and relying on the people around them to together to speed on kind of how the business really works and you know to you know be candid you know we have made some hires to run some businesses um based on that framework that have not worked out well um and we have to make changes and then we've had others that have worked out very very well and so i think it ultimately comes down to like a judgment call on the type of business that we're buying you know what industry is it in what sort of structure does it have what does it have in place all that sort of stuff and then um who are we bringing in to to run the business and do we think they have the ability as well as the humility to kind of figure out um what do they know what do they not know so you know i came into it being very aware and up front saying like listen like i am new to this i don't know i don't even know how to turn a boat on right like i um i don't even like driving my car really so um like you know like like that's who i am and and saying like these are the skills i bring like i have a very strong financial background i have an ability to um i think my primary job is to identify talent and and train it um and give people opportunity and hold them accountable and you know like these are the things i am good at and in my situation was literally one other person saying like these are the things you're good at and i'm going to need you to do them and this is what i expect from you and can you do that and then if the person couldn't do that then that's my job to figure out like how do i um you know what do i do then um and and so that's kind of i think it's about understanding what your job is and being humble enough to come in and say like hey i don't know these things i'm gonna need your help and in most cases i feel like as long as you don't come in with you know a huge ego and start talking about things you like know nothing about and actually try to like listen to people and and learn and all that sort of stuff i feel like people are generally pretty willing to help you out um again it is helpful for us to have a long-term time horizon so you know if you're looking to do something and have a really good you know come in make some changes and sell in five years like it's probably helpful to know something about the industry before you do that but you know we come in we say like the first year is really a learning year you know come in don't try to make any big changes try to learn the industry a lot of our ceos that we place we you know we really focus on making emphasis on trying to learn the industry um and the driver the economic drivers of the industry the people that we've had that haven't worked out have not really wanted to spend a lot of time truly understanding what drives their business and that's where we've really um struggled but as long as people come in with that attitude i feel like it's doable as long as you pick the right businesses not something too specialized namely yeah yep trish this is great it's always uh awesome to talk to you hear from you hear about chen mark generally um weekly is it weekly thoughts what is the channel newsletter weekly thoughts everybody should sign up it's one of the few things that i opened essentially the moment it hits my my inbox it's fri late week friday usually and it's it's just a short essay on you know what you're thinking about what you've learned a lesson from the chen mark experience and it's it's written in the first person um it's it's just great do you write that or does one of one of the other partners i write most of them yeah it's it's a team effort i am james writes a internal um sunday note and palmer writes a sunday note for his team as well so if i don't have any content i very often steal their topics which i might be doing this week but i take lead on writing it and then james and palmer edit it so if it has typos that's because it's just the three of us usually doing it james and i are usually doing that after our kids go to bed and it's friday night so sometimes the standard goes down a little bit my mother-in-law is always very nice to email me with my uh errors oh it's great when i see the email from her at like eight o'clock on saturday morning i'm like damn it there were typos um so you just reply yeah well that was your son-in-law not editing properly yeah sorry your son that was your son yeah well both of them actually yeah um uh so yeah but it's it's great we really enjoy doing it um it's been a great way to kind of build a community around it and um as well as um time to focus on uh reading things and um thinking about things that are kind of outside of the day-to-day which is actually really valuable yeah it's it's right it's um it's sort of philosophical which which as an operator you don't always get the chance to do if you don't carve out time for that and so recommend people get that chedmark.com you'll see a link for for um for it and then how can people reach you directly trish and we push weekly thoughts to twitter but basically i don't even know how to check it so that's not a great way of getting in touch with us okay yeah great trish this has been so great um i'm going to see what i can find on biz by cell in terms of uh a boat boat tourism companies recognizing that probably most of them are not something i want to buy but still intriguing i'm very intrigued by the category so thank you so much for sharing and giving your time of course happy too thanks for having me on