Acquiring Accounting Practices - Patrick Dichter Top M&A Entrepreneurs

Welcome to the top M&A entrepreneurs today. My guest is Patrick Dichter. Patrick, uh, is out of the Midwest, and over a year ago, he acquired Appletree Business Services. It's an accounting bookkeeping service for SMBs, and he's actually got two LOIs out right now on the same type of business. Welcome, Patrick to the show. Thanks for having me. I'm excited to be here and uh share my story. So, yeah, this is where I want to start because what were you doing before you decided to buy a small bookkeeping service? Yes, I'll give you the long answer. I am not an accountant by trade, so, um, my undergrad was international business and finance, and I got my MBA. I always enjoyed accounting classes. And then for 7 years I worked for a digital marketing startup serving small businesses, and I led sales teams there all over the country. And then for 3 years, I was doing small business consulting and we would help, you know, mainstream businesses grow their business faster, and most new clients who came in had terrible bookkeeping, and that's kind of where the genesis started. Um, and I was always referring the bookkeeping out, and I just saw how transformative it was to get good clean books. Yeah. I had the, I had the itch to go do my own thing and, um, you know, heard about people buying businesses and the more I explored buying a bookkeeping firm, the more excited I got. Let me ask you a question. When you, when you first got this uh uh little seed of buying a business, where did you head? I mean, there's a lot of coaches out there, a lot of directions, a lot of books. Where did you start digging into to find out, like, hey, this is a good viable option to go. There are a few conversations that came together. I had a friend who told me about this idea of search funds, and I'd never heard that term, and he said there's a website called Search Funder. It's a concept of, you know, people that go looking for one business to acquire, and it's a lot of, you know, MBAs and investment bankers and former private equity guys. Uh, and so I started to stumble into that community and then during COVID, I kind of found Small Business Twitter, and there's a lot of people in there who, you know, go after small businesses. Yeah, I, I gotta tell you, that's actually the 2nd time I've heard that because uh Michael Gurley uses that down out of Texas. Yeah, yeah. Gurley's Gurley's great and he's got a huge following on there, so yeah, he does, yeah. Um, and then there was a couple conversations that struck me when I was doing consulting, a guy came in who owned an accounting firm, and he had, he had bought a book of business, um, and he told me just how many accounting firms are stuck in between this like. You know, 400K to 750K in revenue. And um, You know, there's just thousands of those all over the country because they can't, they can't, you know, the scale and higher. Yeah, what, what is it? What is it the owner doesn't know how doesn't know marketing, doesn't. No, what? Why, why are they? It's like the classic, the classic myth story, you know, where like they're a technician, they're not a business owner or operator, right? So like they might not be good at delegating or they might not be good at hiring or they might not be good at marketing or creating systems beyond, you know, Bob the CPA, right? They're still doing books for business, yeah, yeah, and you know, still doing the books. Yeah, so, you know, Bob or Barb or whoever it is makes, you know. 75 to 200 grand and like they just don't get beyond that. Yeah, that was one conversation that opened my eyes, um. Another one that really got my wheels turning, I had a A consulting client who owned a drywall business, and I was living in Denver at the time, and he bought this like expensive lots side on scene in Denver, because he knew that he could scrape the house and build a house, and his, his unfair advantage was His ability to bring in other contractors and leverage his own drywall business, you know, and so he had this beautiful home like in Wash Park in Denver, and I was like, gosh, like, I wish I had some sort of advantage like that with real estate, and then this light bulb went off and I was like, well, I, I have an unfair advantage in that like I know small business really well and I know sales, and so that was the other thing is like, OK, where can I go? Leverage that so that I, you know, have my own unfair advantage. Yeah. And it's that's reinforcing your the QuickBooks or they have small business accounting, but when you started investigating this over all the other business models, you know, I talked to business guys, uh, acquisition entrepreneurs every day, and like they want to buy a laundromat or they want to buy landscaping business, you know, because it's reoccurring revenue. What what are the characteristics of a You know, bookkeeping, accounting business that you liked. Yeah, there's there's recurring revenue, right? Cause you're doing the books every month, yeah, it's a sticky client, right? Like once, once you're with one accountant, the switching costs are kind of high, you know, like it's a pain to go and switch over. Um, there's pretty solid margin there, um, what, what kind of margins are we talking about? What does solid mean to you, you know. Bookkeeping, you're, you're making like anywhere from like a 40 to 60% gross margin, right? Yeah, that's awesome. Like, you know, you, you, we don't bill hourly, but an easy, easy example would be, right, like you, you charge somebody $60 an hour and you pay your team member $30 an hour, right? So it's like 50% margin, right, um. The other, the other things that I liked was um You have this platform of businesses who trust you, so you can add additional services or you can, you know, create more offerings for those small business clients. Um, that attracted me to it and um. The The other was the existing operators, which we talked about a little bit, right? Like most most accounting firm owners just aren't. are great operators, um, and I had a background in marketing agencies and when I compare marketing agencies, I feel like those owners are sharper, the customer lifetime value isn't as long, the margin isn't as good. Your talent turns over more in marketing, and so when I compared that to an accounting firm, I just kept coming back to. Um, an accounting firm. Yeah, let me ask you about this. I, I, I can confirm the fact that it's very sticky, cause I used to work for Intuit myself and when somebody bought QuickBooks, they just didn't leave QuickBooks, you know, they just, you know, fresh books you come out, hey, we're better than QuickBooks. Yeah, but the switching costs are too painful to do that. Mhm. Yeah, but Let me ask you, how, how do you, now that you're bringing your digital agency skills to market new business, it's then you're running up against people like, well, I, you know, I've got this one accountant here that I already use, how do, why would I want to go to you? Right? Or do you go into a new business or or existing? That I'm not happy. Right. The thing I've noticed in the sales cycle is they're either in two buckets. They're like, hair is on fire, they're like, please help me. I hate my current account and I got this letter from the IRS like I'm ready to move now, like they're not price sensitive, right? That's bucket one. Bucket two is somebody who's like, oh OK, I kind of wanted to check you out, you know, I kind of like my tax guy, but I might need new bookkeeping, and they're just, they don't have a sense of urgency or You know, they're not ready to move, but they usually end up moving into the, the, the first category over time. So you have to stand in front of them, right? So you're either looking for somebody that's like ready to make a move quickly, and you have to decide like how much of a mess you want to deal with, or you, you know, try to nurture those other prospects and then inevitably when You know, I just had this today. A person who said their, uh, taxes still weren't done, and they're just like, I'm just tired of hearing about my extension not being finished. I'm ready to switch, right? Um, and somebody at our firm had talked to him two years ago, and he, he remembered who we were and now he's ready to make a move. Do you charge kind of like crisis PR, uh, cases where someone like, hey man, it's on fire. I got the IRS calling me like. You charge surge pricing for someone that's in trouble. We don't, maybe we should. We, we do a fixed monthly fee, you know, so we do a fixed monthly fee that includes their bookkeeping, their business taxes, and their personal taxes. Uh, might be anywhere from like 500 to 1500 per month. Now if there's a good amount of clean up or back work, you know, we'll have like a a fee for that, but we don't um. Yeah, we're not really like chasing somebody that's like. Under audit or like needs IRS representation. Oh there, there you go, just curious like Bill Clinton comes here he goes like, uh, uh, you know, I got Monica Lewinsky problems like, well you should have come to me yesterday. No, no, we're not on that level. So, fast forward, you decide to buy this business, like, where, where did you find it? That's that's another uh kind of hilarious story. I tried to work through the brokers in the accounting space, and they just wouldn't, they wouldn't take me seriously or they wouldn't put me in front of their clients because I'm not a CPA. So, as much as I tried to explain, you know, my business acumen and that I could grow a business and that I can replace the owner's billable time, you know, there's a few brokers that control the space and there's only one that would kind of like be open-minded with me. And the others just wouldn't. So I ended up having to do my own outreach, so I, I had a list of 500 firms that felt like a fit and I created my own email marketing campaign and 500 emails turned into 20 phone calls turned into 6 letters of intent that I sent and um ultimately that's how I found the one that I. Yeah. Well, so it's easy to get the uh addresses of those. Did you, how did you get the emails of those individuals? I hired a hired a virtual assistant um that I knew from prior projects that is good at list building like that. Yeah, so he had. You know, you're, you're a digital marketing agency guy anyway, so you know how to do that, yeah, yeah, yeah. And when you started that outrage, uh, how, what was the letter like? I mean, it was very simple, we're interested in buying, we're we're interested. It's short, you know, the subject line said, uh, John, are you ready to retire? Or no, I said, John, are you retiring? And I think that got enough people curious to open the email and then I said, John, I've been looking for a firm to acquire, and you know, your firm looks like a good potential fit. If you have any interest in selling in the next, you know, year or two, I'd love to chat. Let's set up a call. And then that was it. It was short and sweet, you know, um. What what was the criteria, you know, $500 to a million dollars in bookings or, I don't think he, I don't think he had revenue per se, so he was looking on headcount, so I said, try to find somebody with at least 5 team members, you know. Uh-huh. And you estimate that to be what revenue? I mean, you might see like 100K per team member. Yeah, OK. Or or take. So I told him the states, the team members, kind of the parameters, um, and not everything was a perfect fit, but it, it worked well enough to, you know. Yeah, I, I have to, the reason I'm bringing this and so questioning because a lot of people get stuck on this part right here where you're talking about, like, OK, who do I go after? and how do I create a list of these people that I can go after and how do I outreach to them? Is it email, is it mail? Do I gotta drive by and talk to him? Do I hit them on LinkedIn? What do I do? Right? And then they just, they get overwhelmed and don't do anything. Yes, yeah, yeah. I think that's part of it is you, you just have to start somewhere and tinker, and there are some people that write handwritten letters and that works for them, that's pretty time intensive, you know, there's some people that, um, you know. Might do in person stops. I, I, frankly like. I know some email gets ignored, but it seemed the most time efficient and yeah, yeah. Did you do any direct mailing, just uh physical letters? I did not. Yeah, I know some people, yeah, yeah. So how many uh uh people responded is in the twenties and you had how many yellow eyes? So it it was funny because the first send. I'll get into the technical details, but the first send I got like 5 responses, and I was like holy holy shit, this is easy, you know, um, and then my next send of about 50 people, like one person flagged it as spam, so my My Email open rates and like my Drop because the IP, yeah. And so then for like a couple of months, I couldn't figure it out and I like hired somebody that helped me with cold email and, you know, I created another domain, I created another email. I warmed up that email that's what it's called, you warm it up so that the deliverability goes back up. Yeah. Um, but all in all, I, I usually get like a 20% open rate and I think like a 5%. Reply, right? Yeah, um. And how many, you said that to 500. How many conversations did you have? About 20 phone calls about 20 phone calls. And what did that kind of phone call look like? Was it asking you about or you started talking about, hey, we're just looking for a business choir, and then you. My, my goal on that was to really just let them know that I'm serious and that I am a, you know, a decent person. And so it's usually, you know, a 1015 minute phone call just They'd be like, all right, well you reach out to me, like, tell me your story and, and so I'd say like, you know, I'd say some I've been working in consulting and I've seen how important quality bookkeeping is, and your firm looked like a good firm. So I'm looking for an accounting firm to purchase and um you know, my plan is to grow it, and I know how to run professional service firms um and then I just say like, You know, tell me a little bit about your company. And I would have read their bio on their website, and, you know, I try to Some people would open up more and some people would say like revenue numbers on an initial call. And if I couldn't get that, I'd try to get, you know, team count so I'd say like, how many team members do you have? And if they said 2, I knew that it was too small, you know, but if they said anywhere from 5 to 15, like, OK, OK. So then after that I would, I would have a short initial call. And um and then I was trying to set up a Zoom call next. Yeah, to look at financials. So phone call first and then Zoom. Yeah. OK. And after that initial phone call, I'd also send them an email that reiterated the points I said of why I'd be a good buyer. And I tell him this on the phone, I'd say. I'm serious. I have the financials to close, and I'll leave your team in place and take care of your clients, you know. So yeah, so let's go back to this, uh, you have finance in place. What did you have in place? Would you a search fund? No, it is for you. It's my own money and SBA, right? And I knew that with my own cash and SBA I can. Buy up to like probably 2 million comfortably, you know, by putting 10% of my own money down and you were, you didn't think about bringing either in any investors in this 10% that it was. No, I, I wanted it to be my own for the first one, and I was like, maybe if I get good at this and I want to acquire more, I might raise investor money later, um, and Honestly, that was, that would just really stress me out to take friends and family money. um It's got an NFL club, no friends, no family left. Yeah, so, um, yeah, I wanted to kind of just be me and control my own destiny, if you will. So I know there's a lot of people that feel differently or they'd rather go out for a bigger deal with investors, but. Yeah. Yeah, so this SBA Bank, did you go with some kind of national SBA or was it a local? The one deal that I had that fell apart, uh, it fell apart at the very end because the SBA lender. So then when I had Appletree on the line, I courted 5 banks, and I was just like, I'm not going to make the mistake again of like having the financing fell through fall through. With just one SBA guy said, hey, yeah, yeah, so I had 5 commitment letters and then I narrowed it down to 2, and then I went with Bank Prof, who's a New England. I know that, yeah, I've heard of them, yeah, and um. They seemed like they would move quickly. They seemed like they would close, and they offered me a bigger line of credit than the other banks. So, and it's, it's been a good. What what was the what did they like about the business versus the others that didn't want to do it? Oh, so the, the other, I, I got 5. Oh, you got 5 commitments, commitments, yeah, yeah. You had the money, you had a good credit score, you had a personal guarantee in place, uh, the business looked good cash flow wise, right? Um, how many members, uh, people on the Apple Tree services? When I bought it, there were probably 12 team members. 12, so you're looking at a million, if it was 100,000, you're looking at it at a top line at 1.2 million, sort of. Yes, yeah, you got it, yeah, it was 1.2% the year before, yeah. OK, and then they, they like that, every bank liked that, and the guy, the seller was, what was the reason for selling? He was uh He's he's still a part of our team, but he was tired of being the owner. So he was like getting close to retirement, and he was like, I want to sell to maybe retire or maybe just to work less and not have to have the owner. So. Oh, so he's an employee now? Yeah, so our purchase agreement, we closed in December. Our purchase agreement was that he was down on through May basically through the tax season. And we get along well, and he adds a lot of value and he enjoys the work, he's healthy and so we said we'd reevaluate in May, and so we're taking it year to year, so he's staying on another year, um, and, you know. Yeah. We, we didn't know that it would go that way. We were both like, we'll see if we just, I'm like, you don't know what's gonna happen in '98, we'll reevaluate it, like that's what I tell very. Why not sign for a year contract? Well, I, I don't know what's gonna happen in 90 days. Yeah, I don't even know if you're gonna like me. Yeah, how did the uh the SBA bank process when you said it was timely, what do you mean by like it usually it's 90 to 120 days. Um, Let's see, I I probably waited like 4 or 5 weeks for commitment letters, um, and then We had I think, you know, we're basically on the same page with like purchase agreement and everything. Um, like 8 weeks before it closed. But he wanted to close December 31st, so the bank actually had a good amount of like lead time. Whereas I wanted to close in November just to like, you know, get it done and like have some time before the busy season. So all in all I think most SBA lenders, I think they want like 90 or 100, they probably want 120 days from like. You know, when they start to work on the deal to when it closes. Yeah, so, uh, You had to borrow right around $900,000 80% of 1.2%, um, and the business definitely could support a, what was the interest rate at that like 6% over a 10 year loan? Yeah, OK. Yes, I did 10% seller note. OK, 10, yeah, 15% seller note. Um, 10% down and then 75%. OK, cool. Yeah, so the business on the 1.2 million was doing about $330,000 in, you know, cash flow to the owner. That's pretty nice. Yeah. You can see what happens to owners when they that happens, like, hey man, this is a great lifestyle. Why would I want to do anything else? You just, you stay on the merry go round until so you want to sell the business to Patrick Dichter. Right. Yeah, so how is it going? It's gone well. At the end of the day, I feel like I bought a very small business, you know, we've had, we've had challenges with, you know, being a little understaffed and like. Some change management, but Revenue is up 25% year over year, EBA is up probably 30%. Um, Or now, so, and you are, you brought your digital marketing skills to the business. And what did you change about that? Did you change anything in the business for 9000 days, or did you wait? or did you start immediately? I didn't change anything early on, you know, we We closed and went right into tax season. So that kind of forced me to just like sit there and not change anything, right? Yeah, so. After that, You know, I just updated the branding a little bit. I changed our sales process to Move a little faster. I also Um, was willing to take on clients in other states outside of just the one state that we serve, previously, um. And um, I added consulting services. And then, you know, we, we staffed up properly, so we've hired 5 people since. What was the uh consulting services that you added on? I, I love these like, can we add on additional upsell, cross sell down sell products? Yeah, yeah, yeah, so there's, there's 3 of us now who do the consulting services. And you know, it might be like a little bit of like what a fractional CFO might do or like a fractional VP of sales, right? So we'll help with like sales and marketing strategy, we'll help with improving profitability, forecasting, budgeting, like. Overall business strategy, um, and typically they pay, you know, 1500 to $2000 per month. Oh, that's nice. Yeah, yeah, yeah, um. Did you have to have a CPA accreditation or was it a bookkeeping service or, you know, in the, in the, you know, state of New Hampshire where I bought it, um, it wasn't, uh, you know, like branded and a CPA firm, right? So that would have made it different, uh, in some states, but you would have had to have the new owner had to be accredited, yeah, or like a partial owner, I think uh would have to be a CPA, but because it's, you know, just business services, um, and he was very intentional about that. I didn't have to have my have a CPA. So you've had this almost a year. Yeah. Are you enjoying it, doing what you expected, thought it was gonna be like, Yes, very much so. I'm, I'm happy that I did it. I, uh. I enjoy all the challenges that I'm working on. I feel like. I feel like there are a lot of people that really like criticize like some of my plan or thought I was crazy and I'm just like. You know, like Told you so, you know, like, yeah, and what were these anonymous voices that were saying you got plans crazy. Yeah, I mean, even some of the brokers, right in the accounting space they're like you can't do this on your own, like you need to go partner with the CPA, um, that's not true. I know that's not true because you can buy a bookkeeping, yeah, in there or there were, there were, you know, they were even like accountants in the space that were like, do not buy an accounting firm, you don't want to be in this industry. Or, um, what would they say in the reasons for don't buy any accounting firm? I mean, why is that? Yes, yeah. Are you legally bound to have perfect tax returns and you're responsible for them if that happens or what? I don't think that's what they're stressed about. I think they're just like working and working too much, you know. Yeah, um. You know, the other criticism I heard from some people was Um, like, why would you add on consulting services like that should be a separate business, you know, um, why wouldn't you? What do you think Deloitte does and all the other big guys, right? Yeah, like KPMG, why wouldn't you? Yeah. So, um, yeah, it's, it's going well, and there's definitely, you know, I, I still have days where I'm like just totally exhausted or, you know, I think every Every night at 3:30 or 4 a.m. my brain turns on and thinks about all the stuff that I got to get done or. Things you should do. Yeah, yeah, yeah. There's, there's times where I feel like we're not hitting our goals fast enough or I don't have enough resources, um. Oh, that's every every owner thinks like should be growing faster, more people should respond to that email, blah blah, yeah. Yes. But all in all, I'm, I'm happy that I did it and I'm Yeah, I mean. How's your wife been with this journey? I see, I see you're married, but how's your wife been with the journey? She, she encouraged you, she was frightened, or she was what? She's, she's great, she's supportive, you know, she told me. She said the first, you know, once we started dating, you always struck me as somebody that would own their own business and like do their own thing, um, and I think So my, my wife is a veterinarian, she's like, she's brilliant and like works really hard and like very medical minded, but when it comes to like business or numbers, that's just not, that's just not her thing. Do you do the books for her business? She doesn't own yet, so like I, OK, she's an employee at a practice, but As we got towards the end of like closing I was like, you should really understand what what is going on here cause I'm I'm signing our life away, you know, like if this, if this doesn't go well, like we're, you know. We're screwed like we're. We have this debt that, you know, will follow us for a very long time. Did you weigh those risk of how often a CPA or uh accounting firm goes out of business and that personal guarantee and say, I, you know, I, I didn't, I didn't try to look at the data on like how often TVBA firms go out of business, but I did think about like, OK, what is the worst case scenario here? And so the way I structured the deal, I think mitigated that. So, You know, the seller note is tied to retention, so like, if, if the revenue dropped, you know, past a certain point. The seller note would go away. So, let's just say for example, hypothetically. I totally messed it up and the business catered from like 1.2 million to like. 500,000 yeah, 500K, right? And I can't pay back the SBA, right, on that, right? So so goes away, but I could still. I could still sell that accounting firm, right? It'd be a shell of its former self, but I could still sell it, and then maybe I have like 200 or 300K. To pay back to the SBA still, yeah, I was like that would suck, that would take a long time to pay that back, but I could do it, you know, it's not gonna like. You know, totally ruin our lives, so. Yeah. Um, and I'm, uh, you know, I'm just like, I think the other thing that's important when you're gonna go acquire a business, you gotta have a little bit of crazy in you or like. Um, a little bit of like, I'm gonna go prove people wrong and like, I was hell bent on finding a deal and closing it and growing the business, and I just like I just like there there's no question in my mind that I'm gonna like. Go do this and make it happen and grow it, you know, and I think My wife knows when I get that look in my eye, it's like what is it, the crazy look? Yeah, just like. Yeah. So what is it, uh, let me ask you about the employees are, are, do you have employees or are they now people prefer to be contract? They're all employees? Yeah, yeah. Um, that's been a big challenge or interesting to me is like leading accountants because like, If I change the color of a pen, they're like. You know, uneasy because it. Something, something changed in the office, right? So I definitely this is who brought the wrong coffee in? Yeah, yeah. I have to be very mindful of like the way I communicate and give them a heads up on things and like try not to make them feel like. I'm rocking the boat in their world too much, you know, so how do you like being uh schooled or learning these new schools, like, because these people look like they're they're different, maybe they're like engineers and then they're like, you need to be transparent and, you know, tell people about what's gonna happen, what they may expect, etc. Yeah, it's been a big learning curve for me. I'm used to leading like sales teams, right? So it's like. OK, we're gonna go run up that hill and sales reps are just like, all right, let's see who can do the fast. What's the commission on that? Yeah, what's the commission who can do the fastest, right? And the accountant is like, well, did you, you know, measure the slope of the hill and like, what's the, you know, what's the moisture on the grass, right? It's like, OK, OK, we're gonna deliberate this for the next week or what? Yeah, yes. So, um, but I, I, I, I do feel like we have a very good team and they, they love the small businesses that we serve and they do a great job and um. You know, I take ownership that maybe sometimes I like, I need to include them more and communicate why we're doing certain things, um, to make sure that I have their buy in, you know, it's on me. So we talked about in the, uh, when I first introduced you, you have LOIs on two more businesses. Are those accounting firms? Correct, yeah. So, uh, one's kind of a smaller accounting firm, um, and then one's maybe like 80% of our size. Um, and those deals, here we are kind of late August-ish, those should close within the next 4 to 6 weeks. Yeah. And are those deals in New Hampshire, are you gonna roll those into or are you gonna keep those separate? I'd roll them in. One is nearby and then the other one is a virtual firm, so, you know, staff works remotely, the clients are nationwide. Yeah, and so it's got a big online presence. Uh, yeah, they, they have a niche certain industry, um, and they've done well in that niche, but so that's a little bit of a different business model because your New Hampshire is kind of addressing local businesses there, but what is that? Well, yeah, so even before these acquisitions, I started to change uh the types of clients that we bring on. So I've started to, you know, just say like we'll service clients nationwide versus only catering to New Hampshire. So initially some of the team was like unsure about that, but I think people have come around more to the idea, um, and then this acquisition will definitely accelerate that as we, you know, pick up more clients nationwide. What what was the resistance to picking up somebody that's in California and, you know, getting on a Zoom and talking about their QuickBooks. Yeah, I don't, I don't think it was the communication as much as their thought was like, OK, we don't know those states and like tax codes, what if we make a mistake? Which is a fair concern, right? So for 3 or 4 months, I talked to a lot of other accounting firm owners who served other states. I'm like, OK, what's your thought on this? How do you approach it? And they said, well, we have, you know, software that helps us, we have research tools, and if you're serving service-based companies, You're OK, you know, like once you learn a new state, it's, it's fine. Where it can get hairy is if you, you know, get into like, uh, sales tax in all these different states, right? Uh, if you're serving like e-commerce or retail. So, um, and I, I, frankly, I think that's just the way the world is going is like. More and more companies become remote or people create nexus and all these different states where they, you know, yeah, operate, um, I don't think uh those walls or or or walls are definitely coming down. Yeah, yeah. And I, I think the other thing was that New Hampshire is a very unique state with tax and so they were used to looking at it through the lens of like, well all these other people come to us with like Massachusetts strategy that doesn't work. And so they, you know, because we'd always served this like kind of quirky state, they thought all the other states were gonna be, you know, similarly weird to learn and it's, it's not like that, you know, so. let me ask you about the, how you're going to pay for the other two acquisitions. I assume those are SBA loans also, or from cash flow from the business or the both, so a smaller one is just like, you know, cash and seller note. Uh, OK, cash and seller now, right? And then the other one is, uh, yet another mix of SBA loans and cash. And what, what's the, is there any uh restrictions on having a couple of SBA loans? Uh, no, it's through the same bank. You can borrow up to $5 million with the SBA, um, you know, so whether you do that through one big deal or through multiple deals, but that's the, that's the legal limit. And so after your first one, you know, there's some banks that won't lend you again for a year, they'll say like, OK, you have to. Right, that's what I said. Um, but my bank was willing to lend again, and so they reevaluate each deal, um, and then, you know, it's collateralized. The second acquisition is collateralized with the assets of the first business. Yeah. What did they, after what you've done to the business, what did they value that at just 30% higher or they didn't run a value on the, you know, original business, but they asked for, you know, our up to date financials and Yeah, he liked it. It's healthy, yeah. Yeah, that's good for you. So what's the plan? What do you, what do you want to grow this too? So my mid-term goal is to grow to 5 million within 5 years, and really get to know like a few industries well. And then start to acquire other types of small businesses. So we'd have this accounting firm that like gives us cash flow and know-how and relationships, and then if we want to go buy an HVAC company over here or an e-commerce company over there, or like a commercial maintenance company there. Then, you know, the, the accounting firm kind of serves as like the mothership and like the whole you would be doing their books for them and just kind of insert in their head it's at some point would you like to sell, let me know. You got it. Yeah, um. Yeah, very interesting, uh, plan there. What's kind of what's like, what's next for the, uh, for next year? Um. You know, I think the big thing is next year is continuing to improve our in-house technology. So we have a practice management software that's OK right now, we probably need to replace that next year. Why is that? I mean, what's the the the I gotta tell you, it's systems in place. People say they talk about the operational excellence, and the only way you can grow is because you have that operational and great systems in place. Right. Yeah. Yeah, you know, it's just to be the next level of like tracking client communications and automating some of the Admin and chasing that we have to do with clients. Yeah, so that's a big thing I'd probably Hire somebody to do sales. I do sales now, so I'd probably hire somebody else to do that. And then just continuing to, um, you know, pour more marketing in and, you know, yeah, add capacity with our team. So help me out on this like the what is the multiple, uh, how does multiple sale for accounting firms? Is it it's like a one time sale or? You got it, yeah. So most, most trade for between 0.9 and 1.5 times annual revenue. Annual revenue, right, so a million dollar revenue firm generally is gonna trade for one time, right? I have, uh, I got a CPA buddy. Why did they do that versus even? I don't know. I truly don't know. I don't know if it's cause like. Accounting is accounting. I don't know, it doesn't make sense to me because like every other service business is on a multiple profit, which like fair, but where it can get bigger, the, the virtual um bookkeeping firms, they'll they'll trade for like a 2x sometimes, uh, 2x sales, yeah, because they're very transportable and um they tend to be more scalable and just You know, yeah, there we go. So 10 million is your number. Well, I don't want to sell the original firm. That's not my plan right now. Yeah. The plan is to keep it and, you know, have it for Intel and cash flow and kind of a base. And then yeah, I, I, I'm just guessing, but I think that because accounting firms are so consistent from one firm to the next on their profits, they just do it on uh sales. Yeah, it could be, yeah. Yeah, because everybody other business, you say, hey, what's the retail or what's this business, and it's a, you know, 10% margin or it's a 20% margin. Inconsistent, right? Interesting. Well, man, I, uh, I, I wish you the best of success in the future. I mean, this is great detailed information because people get started. What, what do you recommend? Let me go back to this. I didn't ask this. Do you have any mentors or you join any masterminds to keep the big ideas coming? Yeah, I, you know, there's a lot of people I connect with on Twitter and look up to, and I went to, uh, a conference, the Holdco conference earlier this year. What's it called? Holdco. So, OK, yeah, people who are aspiring to build holding companies, um, so that, you know, helps me think bigger, um. I'm in an association for our industry, so there's an association for accounting firms that serve small business, and I'm in that. There's some bigger practices in there that, um, are you a Quick solutions provider? A what? A QuickBooks solutions provider, yes, yeah, I thought you said quick fix. I I was like, I don't know quick fix is, yes, yes, um, and, uh. Mentor, I mean, there's, there's definitely people that I've connected with that, you know, I kind of consider informal mentors, um, of mine, so that keeps you going. That's great. Yeah. Patrick, uh, uh, look, we're almost, yeah, 45 minutes, but I really, really appreciate the time with this cause, you know, I, I, I like to hear your story, so other people can hear and go, hey man, let's go buy a business. There's, you know, baby boomers are retiring, and they're looking for somebody to take it over. Yes. Yeah, I think, you know, it's a, it's a great strategy to go do your own thing and it's lower risk and you don't need to create the next Instagram or WhatsApp. You can go buy a very profitable mainstream business and that's that's already flying, that's already cash flow positive. Yeah, yeah, lovely. Patrick, thank you so much for the time today and happy Friday. Yeah, enjoy the weekend. You too, cheers.