E: 19 Top M&A Entrepreneurs - Sam Palazzolo Tip of the Spear

Hey, Welcome to the uh top M&A uh podcast. Opportunists podcast. I got Sam. Sam's a new friend of mine introduced me to uh a book just recently from written by a ranger and And then we're in the run in the same circles right now. Sam, welcome. Thanks, John. I appreciate it. Yeah. So, hey, I wanna go back to this book that you recommended it's uh by the Rain that was a great book, by the way. Yeah. Deliberate Discomfort by Jason Van Camp. Yeah. It's not as, it's not as good as leading at the tip of the spear, the leader of the book that I wrote. In 2018, but no, Jason's a good friend of mine. He's a uh retired, you know, Special Forces Green Beret, went to West Point, uh, and he is, I think, just an awesome dude. And, uh, he totally has changed my life for the better. Uh, so he, he wrote a book called Deliberate Discomfort. He does a 60-day deliberate discomfort challenge that you can Google and find him on, but, uh, he is just awesome people. And this book that you're referencing that I turned you on to, it was one that when I got it, I couldn't put it down. Uh, a lot of it is about the, the conflict obviously over in the Middle East and his interaction with it. But more importantly, it's written by the heroes who Went through these discomfort, these tremendously uncomfortable moments, and it's riveting the stories that they share, and they write it themselves. So each chapter after the book and opening and closing chapters by Jason are written by these heroes in the. Military who've gone through these tremendously uncomfortable moments. Yeah, it's a writer. I, I will tell you, I was in the process of like, you know, I, there's one area of my life I was trying to get better at and, you know, that's consulting, that's our business. And there was a, I was just trying to decide whether to hire a mentor or not. And then I wrote the book which said you always put yourself in deliberate discomfort areas and, you know, putting out that money for this mentor program was kind of discomforting, but I read the book and I like, you gotta do it to grow. So I did it. I, I agree, yeah, I, I agree, you know, I, my career has spanned and we'll talk about it wherever it is you want to go in the conversation, but You know, I, I've had the ebbs and the flows of a career path. It hasn't been quite the, just the ladder. It's been more of a rope that seems to have gone up and down. Uh, but I can tell you that the successful times, you know, I look around and I had really great mentors. I also had really great coaches, and And now, I have 3 coaches that work with me. Each one of them has me focused on a different clarity path. Uh, I'm a firm believer that, you know, if you think about a golfer, like a Tiger Woods, he probably has 12 coaches that work with him. Everything from the intricacies of his swing to his putts, to his clothing, to his diet, uh, nutrition, exercise, so on and so forth. I mean, he's got a coach for just about everything. Yeah, so you've got 3 coaches? Or what are the three coaching areas that they work on? I mean, I'm like it's just totally off the subject that M&A and work on that, but I'm very in because actually it's not, because everything you want to get better at, if you're not improving in 30 days, you need a coach. Yeah, so, so I have, I, I'll tell you what, yeah, uh, with comfort, I'll tell you two of them. Um, the, the first coach is for sales. He's the same sales mentor that I've had for the last 6 years. Uh, it's a gentleman named Anthony Enorino. He's based out of Columbus, Ohio. I plug him, I promote him, um, and him and I connected because if you think back, To selling, and if you've ever sold, you know the grind that it is. The, it was very popular about 67 years ago to only do referral selling. And you and I both know, and this is how it is that you and I came into contact with one another, at some point, you're gonna run out of your own network, your own referral network, and you're gonna have to go outside of that. Uh, maybe there's a deliberate discomfort moment in that, maybe there's not. But it is one of those things where sooner or later you're gonna run out of your own referral or your own circle of trust that you run out fast. And, and so with Anthony and I aligned really quick, not only is he a great Italian guy like me, but He also, from a sales methodology, he's very cerebral. He's very, uh, I wanna say, direct, and he believes in what it is that he presents with conviction. And, and that's kind of how it is that I am. Um, we, and we can talk about that in an M&A space. So that's one of the coaches. The other coach is, I, I would put him in, uh, I, I ask him to act more like my chief of staff. Um, someone who is familiar with business, someone who, um, has been there, done that, and someone that I can ask for advice and guidance and counsel on, and he can either share firsthand perspective on this is what I've done, Sam, and this is what if I had to do it over again, I would do the same or different, uh, or He also, because of his network, has the wherewithal to say, I never had what it is that you're facing, but I know someone who has, and here's how they went about coming up with and driving towards action plan and solution. And you can either follow them and do that, or, uh, it turned out to be a disaster and you shouldn't do this. So he's got those types of analogies. So, so those are, those are a couple of them. Uh, I'm a firm believer though that You know, if you have somebody who works with you. You can achieve a higher altitude. At that higher altitude, you'll take in a totally different perspective, and you've got to be able to take in that perspective with clarity, so that way you can act. And, and that's what I leverage these coaches for. And, uh, I have, I have mentors who obviously, you know, I come from big consulting. I come from Deloitte, I come from Aon's Change Management Group. I'm still great friends with the senior partners who are now retired, uh, one of whom I call monthly just to see or have him share with me that. You know, he's 900 steps from the beach in Jacksonville, Florida. Uh, and so it's a short commute to paradise for him, but it is one of those things where I'm, I'm really fortunate to have that type of a network to call on to get some perspective and bounce on. Multiplies your abilities. I, I got a question for you. My, my, uh, uh, friend, uh, one of my buddies from college used to say, you know, You can be in swimming and take, uh, you know, like in your middle school, you have your middle school coach for swimming and then you go to high school, you have your high school coach in the college, they all go up. How do you, and it's really easy to see the demarcation lines because you graduate college or you get, you recruited to college or you have the abilities to go to the Olympics. I mean, how do you decide, like, I'm not getting anything more out of that coach. I, I need to move up a little bit. Yeah, I'm not saying I'm doing with my coaches. I'm just curious how you doing. Um, So I, I'll start off by telling you, I, I'll tell you two things, 2, it reminds me of two things. The first one is, is that It's almost the equivalent of a mastermind group. If you've ever participated in a mastermind group where you're the only one who's going and providing or sharing, it's gonna, at some point probably leave you hollow or empty. In other words, you know, mastermind groups that work best when it's a give and take or provide and receive model, uh, because I've been in those types of mastermind groups where it's a, you know, I'm, I'm given all the time. And while this is really great and everybody else is kind of catching up, um, it's not benefiting me one bit. And, and so I kind of look at an executive coach as. Or a coach or a mentor as, you know, there's gotta be, and especially the ones that formerly that you pay for, right? There's gotta be a 5x return equation, you know, if you're gonna pay a coach $5000 a month, you'd need to get $25,000 at a minimum return on the investment. And that's the accounting side of me that comes out. I'm an accountant by training. But you've got to get that type of a multiple in return. And if you're not getting that, you're, you need to maybe introvert, look at yourself and in as much, are you asking the right questions or providing the right scenario for them to assist. And sometimes it comes down to are you asking for help, especially in those informal relationships, right? You know, a lot of us, you know, We want to be prideful, we want to have egos. You gotta check that at the door in those types of moments when you're meeting with, with people who can help you if you want to receive maximum help. Yeah. The other thing that I will share with you, besides that type of a 5x mastermind, you gotta give as well as take or provide to receive is, and I was recently reacquainted with it. And it's the theory of constraints. Uh, this theory, which is by a, a gentleman who taught at MIT. His name is Eli Goldrat. He wrote the book called The Goal, if you're familiar with that. And I worked at General Motors in the late 80s. Uh we had a bunch of senior leadership who was going to Harvard's MBA program, and they were going to MIT for advanced doctorate degrees and whatnot. But the, the theory of constraints that Ellie came up with. Has rule number one, if, if it's not working for you, stop doing it. So and, and I look at these mentors that You know, if in a coaching providing perspective, if, if it's not working for you, stop doing it. You know, gone are the days when we have the luxury of these ample time allotments. Uh, I mean, I don't even play golf anymore, which is something I was on a scratch tour when I lived in Texas. Really, it's, but it's one of those things, yeah. But it's one of those things where I don't even play anymore because I'm convinced of two things. One, Um, golf can be an old person sport, so I can play it when I retire, if I retire. And secondly, uh, the tremendous time suck that it is, I can't dedicate, you know, 6 hours to a round to go and play golf a couple of times a week, no matter how much I love it. Yeah. So, but the theory of constraints is the second thing that I'll share with you, John, and that is that if something's not working for you, stop doing it. Um, because time is too precious. It's the only commodity that we have that we can't get more of. Yeah, and negotiate for it, you can't do anything. It's just, uh, I, we've tried. I, I was, uh, I had a coach who was out of, uh, Toronto and Zurich, and he was awesome, and he was the inventor of the 5 a.m. club. And so, and I still get up at 5 a.m. and still work out and do all of those types of things. I don't necessarily always do it, so I probably violate his 5 a.m. club rules from that perspective. But I got to a certain point where it was just like, you know, there, what it is that he's referencing outside of that discipline or what to do with it with at that 5 a.m. mark. Um, it's just not resonating with me anymore. So it wasn't working. And so theory of constraint, rule number one, if it's not working, stop doing it. So you're not gonna pick up Jacko's 4 a.m. wake up time, you know. No, but there's a lot of good things to get, uh, from a Jacko relationship in addition to fancy coffee mugs, that's say get after it, um, and to get his tea and all the other energy and, uh, milk, protein shakes, uh, you know, there's a lot of good things that come out of a Jacko world, uh, one of which is that discipline equals freedom. You, the more disciplined you can become instructuring your day and the activities that you put yourself through with consistency. Um, they've got to drive in the right direction, obviously, but they can lead to some really successful moments. It's really like the Darren Hardy, the compound effect, what he's talking about. Just do the little things every day, you'll, you'll grind away at it. Yeah, as long as there are the things that are leading towards that, that moment, right? There, there's some things that you will perceive that you're spinning your wheels at some certain point, you need to check up on yourself, look back on the moment and say, We're still spinning our wheels here. Is this, is this going anywhere directionally or are we just flinging mud everywhere, right? Yeah, but you don't know if it's 20 year version and you're at year 10 and you've only made, you know, minute progress. And the bulk of it progress comes at the later times, like, I, I say this like if you look at Warren Buffett's, uh, you know, wealth in his 50s to 60, he was still a millionaire. It was after 60, he became the billionaire multi-billionaire. No, I, I agree. I, I think he's got some real long term. He has don't, don't, don't believe the hype though. He also has some short-term goals and in the event he's not achieving them, he makes those modifications or pivots as well. He'll make some trades. I, I think that the, the. Public persona of what it is that he wants to present is one of, you know, slow and steady wins the race. Well, not if you're getting lapped, OK, not if you got bills to pay. I think it's one of those types of moments. So, so, hey, uh, that's a great opening. Let's talk about tip of the spear. Yeah, mergers and acquisition business, and you've been doing this for almost 10 years. What exactly, what's the focus? What do you, what's the criteria and what's the purpose behind it? I mean, what is, tell me about it. Yeah, I, I, I'll give you the background about how we got there too. So, so I let a tech start up from 2010 to 2012. Prior to that, I had my own consultancy, and I come from big consulting, uh, Deloitte, Aon's Change Management Group. And so, I had a client who was in San Diego. He asked me to get together with him. He had a tech idea that he wanted to run past me. And I said, Sure, I, I'll help any way I can, which is my nature. We got together, I heard him out and, and I said, you know, I, I really like it. You know, how can I help? You know, would you like me to act as a mentor or an advisory board member or sit on the board of directors? And he said, I'm really glad you like it because I want you to help me run it. And I said, well, keep talking because, you know, I, I like the thought of it. He talked, John, I listened. He talked some more, and he talked really well, cause the next thing you know, I was leaving this consulting firm that I've been running and led for 6 years. I, I was single shingle in it for the first year, and then I grew it to 20 folks. We were doing projects both domestically as well as internationally in a sales business development capacity. Um, but I ended up off ramping from it, jumping headfirst into a tech startup in 2010. We raised $8 million straight out of the chute. It gave us some great deep pocket funding to do some nice development. I would argue that we raised $6 million too much. We, we were, yeah, I, I, that happened with us at TurboSquare. We raised $5 million like oh man, this is, uh, it's, it's, it's $4 million too much, man. We, we don't, we have 21, it was a marketplace, we only had one side. That was the inventory. Yeah, we, we were, we were wasteful, I, I would say that with some of the money. Um, and lots of it to boot, but, but like I said, it looked great. It provided customers with exactly what it is that they were looking for. Anyway, long story short, Uh, I implemented the same sales biz dev, uh, blueprints that we've been helping organizations around the world architect and implement. We grew one of those true hockey stick graphs that are of legend. We had some private equity firms that became interested in us as we grew revenue at about the 18 month mark. Some got really interested at the 22 mark, one of them purchased us and I off ramped at 24. Uh, I looked around and I said, you know, that was kind of a, a wild ride. What do I want to do next? As a matter of fact, one of my old senior partners from the consulting firm that, that I had called me up and he asked, are we gonna put the band back together? And I said, you know, I think so. I said, but I want to do it different this time. Um, you know, I wanna have not only a consulting firm side, but I want to have this venture side of the firm. And so, here we are, 9.5 years later, we'll celebrate our 10-year anniversary in February. And we still to this day have two sides of the firm. We have a consulting side of the firm that uh Deloitte would call it business transformation Consulting. I would call it change consulting. It's a heavy focus on sales business development, but we go upstream and downstream from that department to get involved with marketing on one end and operations and fulfillment and customer service on the other. Uh, so that's our consulting business that works with the Fortune 500 through the SMB markets. On the other side of the firm, we do 3 things at the venture side of the house. Uh, one is we still do some early stage seed funding for entrepreneurs that are post revenue and post revenue at a million dollars plus. Um, we look at how it is that we can partner with them to help accelerate their growth, uh, with. With the, let me ask you on this one, if they have over a million dollars in revenue, is it tech related? Uh, you know, we, we've looked at, you know, tech obviously is one of, one of our favorite areas, um, from that perspective, but we've also done some biotech pharma. We've done a retail play as well. Uh, and so any, anything that really, I think it, it goes back to the You know, somebody asked me in another conversation, what do you like investing in? Is it the company, the idea, or the entrepreneur? And I think it really, when I look at company or entrepreneur, I think that's one and the same, because the entrepreneurs essentially dictate the culture of the company, and that's really what you're buying or investing in. Um, but, but it's also one of those things where, you know, the, the actual entrepreneur is crucial to it. The business idea. You know, you can get the business idea, um, but I've seen entrepreneurs who've had maybe not necessarily first to market, they've been second to market, uh, but because the entrepreneurs were awesome, it was like that's where we're gonna put our money and that's where we're gonna put our sweat equity, or smart money so we can work with them. So yeah, that's one of the aspects and uh uh seed money, uh, uh. What, what, I'm just curious. You're almost like a VC there, right? And you, you take a big percentage of the company and look for acquisition or IPO at some later date. Correct, yep, we'll, we'll look to either grow the firm. Towards some type of either a M&A itself or an IPO or something of that nature, uh, that's one aspect of the venture side of the house, venture funding. The other two real quick like John, are I mentioned earlier we were wasteful with the money that we raised, so we do a business funding type of a service where we'll either. Help capital raise or do customer funding type initiatives. Uh, the, the capital raise is obviously because of FINRA certifications and whatnot, you know, we have to be owners of the organization, board members, etc. so that way we draw that fiduciary line of response on the table somehow, right? Yeah, um, but in addition to that, then we're, what we're really here to talk about is the M&A space. That's the third leg within the venture stool, if you will. Um, it, we're late bloomers in the mark, I would say, uh, in as much. So I'm an adjunct faculty member at UNLV. I've taught at the higher ed level since 2008. And I had the fortunate situation to go to a conference at Harvard a couple of years ago. And, and I met the two gentlemen who wrote the entrepreneurship through acquisition Bible, if you will. Oh my God, most popular book. Everybody recommends that. Read that one first. That's your first book. Great. So, so I did, and I loved it, and I thought to myself, This is such a better way to be an entrepreneur, acquisition versus startup. Um, you're, you're going out and you're acquiring a business that already has its processes, procedures, and people in place, and all you're trying to do is identify what are the levers that you can flip up and drive this thing forward faster. And so, we're late bloomers to that market. We're, we're late entrance into it. Uh, but we're, we're making good progress therein. We look at tremendously unsexy industries. Um, we look at manufacturing firms, we look at construction firms, and specifically we look at in the market size anywhere from our sweet spot is about 1 million to 10 million in IEDA or annual revenue. We'll, we'll look at either one. but we love baby boomer owned organizations. Where the baby boomers looking to exit, and they don't have a clear succession plan. They don't have a heredity line, you know, sib, uh, son, daughter, uh, sibling, nephew. They don't have that type of, uh, who they want to turn the company over to. Yet, they're really proud of the legacy that they've been able to build, and they want the, the organization to continue on. Those are the types of organizations that we love. What's um What would you have in place to say, hey, the guy wants to leave real soon, or the guy wants to leave in a year? Do you have the resources in place to find people to replace them? Yeah, so, so we do two things. We, uh, in, in the past, we have looked to see if the, if the president or the CEO, the owner of the company wants to depart. Do they have a second in command who could potentially step up into that leadership role? You know, typically, uh, a, a baby boomer owner who's in their late 60s, 70s, who's had an organization for 20+ years. They have a second in command who's essentially running the operation. They may not do the, the sales biz dev, but that's what we're really good at, right? They, and so it's a nice cleaner transition and we'll typically give that type of a second in command, well, an elevation to a president type title, give them an equity stake in the organization so that way they've got skin in the game. Um, and we recognize that we value their participation with the organization. We, we buy organizations, um, based on past performance. We pay on future potential though, and so there's a differentiation between those two. Uh, yeah, let me, uh, that's a, uh, good topic right there. Let me go back to that. Do you ask the second in command to put skin in the game or you just give them equity? We can. I mean, typically the way that it works is that we'll give them equity because we respect what it is that they've done and we want to recognize their contribution to the organization moving forward as well, right. Um, and what is your plan for that? I mean, you know, I was gonna say, what's that? I was gonna say I'll give you the second model because I think it's going where, where it is that you're going, but this is what, you know, I, I've looked at a lot of manufacturing plants and you can go to some of the broker sites that specialize in the local regional businesses. And you go, yeah, it's a lovely business, and you've been running for 20 years and you're, you know, all your employees have been there for 1415 years, but how do we grow it? Is it, can we grow it organically, or do we just put in a portfolio and set it over the side and do the same thing over again? I think it depends what your what your path is and what it is that you want to do, you know, I think. If you look at some of these tremendously unsexy industries where they've been endearingly profitable, I mean, right now we're looking at a, we're looking at a construction firm that is, I would put that them in the middle of nowhere. It's in a non-sexy geographic footprint, but it is one of those things where they do about. Um, they do about $2 million in annual sales, and they even figure is almost 2/3 of a million dollars. So it's, it's healthy from a from a ratio perspective. And so, so the business, when we look at it, we, we like what it does and we like the returns that it provides, and we also like the people that are there, uh, not only from an internal people, the cus the employees of the organization, but the people that the organization serves from a customer base perspective. So, I, I, I hope that answers your question, but we look at this. I, I have another friend who bought a business that makes toilets where you put a toilet anywhere, and it's totally unsexy. There's nothing sexy about taking shit, right. Yeah, but it's really profitable, good salt of the earth people, but there's no 50% growth per year. It's, you know, you just have to look for some other business if you want your whole portfolio to reach $10 million right? Right. Yeah, that, the business that I mentioned, it's never gonna fire your work off. It's Never gonna have a 200% growth year over year. I don't care how many levers it is that we identify in our due diligence as the potential that we can flip up and drive this thing forward. It's not gonna be that type of a firm. That's just, that's not the type of company that they are, and you can look at their past history too. You can look at 5 years' worth of financial. I think that the common mistake that most acquisition entrepreneurs make is that they're the smartest guys in the, in the room, or at least in this instance, and that they can run the organization better than the entrepreneur who's been owning and running the business for the previous. 3+ decades. The reality of the situation is, is that there's probably, yeah, maybe they're not great tech guys. And maybe they don't do a lot of the marketing, and they probably don't play social media nice. I mean, we have a construction firm where the owner was the sales business development individual or department. He was it. And when we asked him, you know, who does that and where is your CRM, he pulled out his flip phone and he said, right here, if somebody needs something, they call me. And so we looked at that from the perspective of, OK, great. So can we buy the number from you so that way we have it? And he says, now, he says, you can buy the flip phone, cause my daughter tells me I need to upgrade to one of them iPhones anyway. But you can't have the number cause I've had this number for, you know, 30+ years. And yeah, that is a great ask because if he calls those people, they recognize his number and they'll pick up the phone. And more importantly, we recognize that he gets the calls. So the sales methodology, the sales process wasn't he's making phone calls to drum up business. The, the sales process was his phone rings, he flips it open and answers it. And so what we, the deal we structured with him was. You know, you know, we asked, would you like to stay on in some type of a capacity? You know, we love, we love maintaining those figureheads as long as they can maintain some type of a, you know, we're now 100% in charge type of uh Marcus Lemonis from the profit moment, right? But it is one of those things where he wasn't interested in staying on. I mean, I can't blame the guy either. He wanted to go down to Arizona and golf, right? He wanted to be in your neck of the woods down there. Does he still get phone calls, like to his phone? So the deal we structured with him was that, well, can we structure this type of deal? When the phone rings, will you answer it? And then if it's a sales call or what we would determine an inbound sales call. Will you feel that, and then you don't have to sell it, just turn it over to us. And, and so that's kind of the arrangement that we've made with him. What's that? As a sales guy and a process guy, Deloitte guy, you feel uncomfortable not being in that process where, you know, I'm totally comfortable with it because it's one of those things where it's like, you know, we've probably, we've probably allowed him to pay for his Uh, a lifetime of country club membership dues, he'll run out of years before he runs out of the money we paid him to provide him with country club dues. So, so it's worked out financially for him. At some point, everybody wants to argue about is it all about money? And it's not about money always. He's just a guy who wanted to keep his phone number, and he, he likes getting those types of calls. And it makes him feel like he's still engaged with the organization, if that makes sense. Yeah. No, I get it. It's, uh, there's, you know, we're I'm part of a group called uh Roland Frasier's Epic course, and there's, you've just got to find what really motivates. Uh, why they want to sell, and then there's a lot of little unique intricacies of what they may want that you have to uncover to make sure they're comfortable and earn their trust, right? Yeah, yeah, no, you're, you're exactly right. Um, I was gonna tell you the second, the second program when it comes to, you know, how is it that we're You know, if we don't have a good promote from within strategy available to us, like there's no second in command, there's no general manager that we can elevate, what do we do, what do we do then? And so in the past, we've, we have a relationship with an executive recruiter who'll go out and find a CEO or president in our instance, someone who can be the owner operator of the facility or the the business. And, and we like that model. Where I think we're going though, I like even better, and we're about to launch an entrepreneur and residence program. We look at this entrepreneur and residence program as somebody who already is familiar with acquisition entrepreneurship. They want to run a business, they just haven't found one. We'll work with them, we'll help them find it. They put their money in, we'll put our money in, or we'll buy the organization, they'll get an equity stake, we'll get an equity stake, obviously, and then we'll run the business together. And that's really what an entrepreneurship or an entrepreneur in residence program from my perspective consists of. And we look at this path, this EIR, we call it for short, the acronym, as how it is that we're going to grow the firm through this M&A practice. You know, I look at these, uh, there's, I went to University of Chicago booths entrepreneurship through acquisition conference earlier this year in March, and there are so many smart people out there that are looking for businesses to run. And, and I look at it from the perspective of they, they have brilliant backgrounds, right? How is it that we can put ourselves or join forces with them, which is a different type of a, a slant, and maybe there's a leadership moment in here. You know, I used to have the mentality of I wanted to go fast and I wanted to go alone. Now I want to go big and I wanna bring others with me. I wanna bring the group. And, and I look at this as a way that we're gonna grow the M&A practice specifically. We're gonna bring in other owner operators into the fold through this entrepreneurship and residence. We're gonna structure it just like Deloitte structures their partnership program where each partner is responsible for their own vertical, but then they're also going to be able to network and brainstorm mastermind like we talked about earlier with each other on a monthly basis and then. At the end of the year, there'll be a partner pool where they'll be able to get a revenue share from their peers as well. So they'll have some, some reason to want to share. Uh, that's a nice way of saying it. This is the, the DC model in Silicon Valley, entrepreneur's residents, you know, they make an exit and then they sit in Kleiner Perkins for a while until, uh, they find a new company that needs adult supervision. Correct. Yeah. Yeah. I, I, and I love it, um. You know, it's, it's a matter of, you know, and I've had those, I've had entrepreneurs who've come to me who've said, you know, I wanna run a company. And it's like, great. Do you want to run a company in what geographic area and what type of company specifically? Because, you know, sometimes like this one that I was mentioning earlier, it's, it's extremely unsexy. The, the revenue is good, the Ebi is fantastic for the revenue from a ratio perspective. It's in a Uh tremendously unsexy geographic location. I mean, like next to if nowhere is here, it's right next to it. You not to ask somebody that's been around doing something for a long time ago to live in a town, you know, with two population, 2000 and, uh, 2 stop lights. Yeah, yeah, this, this one I think has less than 1000 people. And so, you know, how do you, how do you get a guy to leave, uh, Phoenix, Chicago, LA to go over there? It's probably not gonna happen, but that's OK. Um, you know, there's, it's the right opportunity for the right person and sometimes it's finding that right person. But more times than not, what we're structuring this entrepreneur and residence program, the entrepreneurs gonna have a say in geographically the footprint of where it is that they wanna go. I mean, and, and I've, I've talked with enough entrepreneurs now, and I've talked with enough guys who like NextGen is a group, an incubator out of Chicago, led by a bunch of University of Chicago booth MBA guys, and they have this type of an entrepreneur and residence program. We've talked about the ups and the downs, the highs and the lows of it. And, and I think it's a winner. And, and so we're gonna launch it. My mentality is, you know, let's, let's fire it out there and let's see what happens. Because, you know, in one way or the other, this is kind of our innovation moment and how it is that we're gonna continue to grow and adapt and overcome. Yeah, it's uh it's interesting. I was having a conversation with a guy in my mastermind. They, they purchased like an average like 16 businesses a year, and I go, well, wait a minute. How do you, half of those businesses, you, the CEO wants to leave, leave, like, how are you replacing those people, cause that's another skill in itself. And he goes, well, the, uh, my partner, uh, you know, 10 years ago built an HR company, uh, recruiting company, and then sold it. So he's got some really good, uh, special skills in that area. Yeah. And he probably, he might have a deep bench worth of, you know, shortlist contacts or candidates that he can outreach, uh, in front of a friend like that. Yeah. Yeah, I, I know exactly what you're talking about cause that's, that's a great model and that's, he's fortunate to have that type of a bench, um, so, yeah. So when you go to these companies, um, how are you finding these companies that want to sell, you know, they, everybody goes, the first thing they do is they go, let's go to the broker sites like, uh, website clothes. or Murphy's or something like that. Um, are, are you doing direct mail pieces, emailing, LinkedIn, or all of that? We, we've done everything. We started out initially as, let's just test the waters and let's see what's happening on Bizyell.com. Uh, I think that the, the information that's there is probably, you know, How do I say it nicely? It's, it's got organizations that are for sale that are represented. uh, yeah, half of it's true. Yes. And, and so we, I, we looked there exclusively for probably the 1st 8 months. And, and then it was one of those things where we were talking with other guys who were in the space and they were like, you know. The sooner you can swim upstream from that type of broker listing agency relationship, the better off you're gonna be. Yeah, yeah. And so, so we've, we've chosen to do that. And, you know, we've swam upstream, we've identified organizations and geographic friendly locations that we want to outreach and connect with. Um, you know, we've also outreach and connect with a professional team, uh, you know, like attorneys. Forensic accountants, um, some brokers, you kinda of bankers, yeah, these are, you know, attorneys are difficult to ask them to give you, uh, referrals on, you know, I have to develop a relationship like, uh, you know, I was thinking about it like you write a book and you mention them in a book and say, hey, I have to do this, and there's our quid pro quo kind of. It can be. I mean, every, you know, I, I guess it's one of those things where. You know, so we're We're a couple of years into this M&A practice. I've got some good relationships with some brokers, but it's not the same as like a realtor. You know, a realtor, if you, you know, you can kind of get on their good side and they'll give you the pocket listing, you know, before this goes on the market and I plug it into the MLS. I want to let you know about it, or, and you know that they're letting us select few people real estate brokers no need to go, don't need to go to an auction unless it's a Uh, seller's market, uh, uh, so yeah, brokers, brokers kind of, you know, some of them will tell you that they, you know, hey, I want to let you know this before it goes live, but you and I both know that they're gonna let it go live anyway and You know, it's not necessarily erased a letter of intent as much as it is. They're, they're just looking to be strategic about it. You know, our, our best plan is to outreach, connect with entrepreneur or entrepreneurs who own their own facility, their own business, uh, see if we can strike up a conversation with them regarding, you know, what their, what their business is like, and then sooner or later it turns into a. You know, we, we can help you in a couple of different ways. Um, one, we've got a consulting firm side, don't forget that does business transformation. So if you want to grow your business, um, we, we can work with you in that capacity. And the other side sell, right? If they say, well, I'm just not interested in that, right? Maybe down in the future you could come in and do that. Yeah, correct. Yeah, on, on the other side, on the venture side of the house, you know, hey, look, what if What if we could, uh, I don't know what your exit plan looks like or succession plan is, but, you know, if you'd be interested, we work with a number of evaluation experts who could tell you how much your business is worth today. Do you go to a business valuation expert, or do you just say, you, you know, you're a manufacturing company in Cleveland and the multiple is 3.5 to Uh, 3.9. Yeah, you can do that back of the cocktail math, uh, with them, if a cocktail napkin math with them, if, if that's, most of the guys pretty much understand that that's the average of the range. Um, but it could be one of those things where maybe they're in a geographic, you know, hot location, you know, at the end of last year, we started looking at property, excuse me, down or I should say facilities own businesses down in South Florida. Uh, and the whole Florida peninsula was just on fire. I mean, it still is, is just going gangbuster. But it's one of those things where it's like, you know, yeah, yeah, the multiples, the 3 to 5 multiples don't necessarily apply. So we can do the back of the cocktail napkin math with them. Uh, but it is one of those things where from a comfort perspective, if they feel more comfortable having a business valuation expert get involved, we'll do that too. Yeah, and do you, how do you come in with, you know, uh, your structure of the financing? Is it your money and then some seller financing, or, you know, what is that? What's your sweet spot there? Yeah, we've we've looked at We've looked at every deal, and I am, I'm a person that believes that if there's a deal to be had in there, we're gonna, we're gonna flip over all of the stones. We're not gonna leave any unturned to attempt to identify structure. And so we've, we'll look at it from the, depending on the cost of it, you know, we'll break off a portion of the balance sheet and acquire the company. Uh, at a higher level though, you know, and depending on the circumstances, we've done. We've done the financing in and of ourselves, right? It's always nice to have some seller financing. Most sellers, you know, they feel uncomfortable with second position, and our response is great. I don't wanna be a thing. I mean, great, then be first position, OK? Do the whole, do the whole thing 100% owner financing, um. You know, we've also had some organizations who've outreached to us and have said, you know, look, we're just, we're just need to get rid of it and, you know, take it over. And that's been a rarity. It's not in this seller's market today. You had a couple of those where they just said, I, I had a conversation with a uh Uh, a guy that owns a number of e-commerce businesses, and he just, he said, look, this is out of the blue. A guy calls me and said, just take it over, right? And we built it up to a 2 to $3 million dollar business. It was still under 7 figures at the time, but she said, oh my God, this has got potential. OK, I'll take it. 100%. Yeah, it's, it's one of those situations where, you know, what, what's what's scarier, the business who is selling and what's the reasoning behind the selling. Or the business where they want to give it to you. Why do they want to give it to you? Why do they want to get out of it? You know, it causes some different due diligence strategies to be deployed, uh, but, but in the end, if, if it's something that we like, uh, we'll, we'll see if we can absorb it within the, you know, the portfolio. And you, how many, you say you find, let's say you find a deal and it looks good, the numbers on pieces of paper, you take it to the rest of your committee or your partners and They're gonna give it up or down, and they're gonna try to rip holes in it and ask you questions and Yeah, our, our process is pretty simple and pretty straightforward. You know, if, if the organization is broker represented, we'll interview the broker. We'll ask them for all of the, all the information that we need. And sometimes that's a cleaner route, right? Uh, but then again, it's one of those things where it can be complicated because of the broker relationship. And don't forget, brokers are seller brokers. Unless you're hiring a buyside broker, the broker really works for the seller, and they have their vested best interest in it, and they want it done. Because they're already moved on, uh, once they a transaction business, so that's our job is to get the sale to the next one. Yeah, for non-broker represented businesses, you know, attempting sometimes to get financials, you know, we looked at a construction firm that they didn't have any financials available because the gentleman who owned it, you know, he doesn't do that until the end of the year. And it's like, well, and this was at, and I remember it was in March. I was like, well, it's first quarter and the end of 1st quarter of the following year. So why wouldn't they have their last year financials available? Cause I'm gonna ask for, how's 1st quarter going? And they were like, oh, they, there's no way they don't even have that. That's not odd. I mean, I looked at a long time ago when I first started my M&A kind of journey. I, I saw a janitorial business doing about like a million a year. And so I went to their place and they wrote the stuff on a napkin, their financials before I got there, and I go, you're kidding me, right? Yeah, I, I'm like, am I supposed to trust you on this, or yeah, you know, if you've ever seen Marcus Limonis in that profit show where he asked for the financials and he's reviewing them, sometimes the financials are really nice. They're, they're in a bounded or a binder. They've got Real professional. This is the balance sheet, this is profit and loss, so on and so forth. Sometimes they look like, uh, the other side of my desk here, which looks like a, a packet of paper exploded, you know. So you, you never know what it is that you're gonna get, but sometimes that's the beauty of a small business. Um, you know, from an accounting and a, and a former accountant perspective, it makes me kind of uncomfortable, uh, because, you know, how are you possibly gonna manage by metrics and numbers, which is what we do. Uh, I mean, that's what we're really great at is taking a look at, at the numbers. And if the numbers are garbage, then you're probably not gonna make your best management or leadership calls. Yeah, so just curious, if you found a business that had great numbers, let's say he said on the face of it, has great numbers, but they're not in a clean slate, quick books or fresh books or anything else. Uh, and you said, well, uh, we like it, but we need to get to your bank statements. We need all of that information. Yeah. And we'll also, you talked earlier about structuring the deal. We'll have some type of an earn out based on the comfort level that we have, you know, we, and obviously, the more discomfort the um More reserve we hold uh for the owner who departs receiving equity over a multiple year stair step type of a fashion. You know, we've structured deals like that because You know, it's just, it just is one of those things where, you know, we, we wanna believe everybody, but we know that believing everybody probably leaves us the only one with faith and belief. And, you know, not that I think someone would purposely want to take advantage of us. You don't want to be that guy where if you walk in a card game and it's like, uh, you can't cite the patsy, you are the patsy. Right. Exactly. You know, I, I, so I think that we put, we put those types of financial controls into the deal structure. So that way we can, you know, and we've actually put it into the letter of intent too, so that way we can do the proper analysis and whatnot. At the beginning of this year, the end of the first quarter, we had 4 letters of intent out simultaneously and Two of them, uh, were accepted. Uh, one of the one we never heard back from, and the other one was a broker who wanted to counteroffer, um, which is a, a difficult story still. But the two that did go to letter of intent, um, and this is where the, the, the craziness of the business, you know, our goal is to buy a company every quarter. That's our goal. And in order to do that, you've got to have X number of companies or balls that get dropped into the top of the sales funnel or the prospecting M&I funnel, right? And that's how we look at it, and that's how we run it. We had two that went to letter of intent, one of which blew up about 2 weeks into the due diligence on letter of intent, and we informed the owner that we're, we're not gonna go to purchase agreement. The other one, lasted about 8 weeks out of 12 and under due diligence and letter of intent. And, and, and they both kind of had similar, you know, reasons for why it is that we didn't go to purchase agreement. Um, and primarily it's surrounded not necessarily having accuracy in the numbers, but just an overly optimistic number presented. Uh, these were organizations that, like a lot of them last year in 2020, the pandemic caused them to really have a, a difficult year. Um, lending institutions really don't want to lend money on organizations that are not showing some sort of growth or progress, right? Especially if there's a dip, they're probably out. Um, the thing that drove us not to go to purchase agreement and both of them was that, I won't say it was a misrepresentation, but overly optimistic sales pipeline or book a business for the future and the backlog therein. Um, I'm, I'm a former sales leader. I've had, you know, a couple 100 folks report to me in a sales capacity. I know what sales pipelines look like, and I know what overly optimistic sales pipelines are. Yeah, that's a, you know, that's a something that benefits being in M&A or, uh, having your background as a sales background helps you in M&A. Unless you say, because I know that how many needs to be in the top of the funnel, and they're moving through the funnel to be able to to make that shot and make the basket. You've got to have that. If you don't have that, you're not getting better at any of those skills, right? Yeah, yeah. No, you're you're exactly right. I, I think it's one of those things where The, the background, you know, from an accountancy perspective helps me out tremendously. I don't have the personality of an accountant, so there's probably, there was a rub when I was an accountant from that uh discomfort moment. Uh, back to that. But it, but it is one of those things where it helps me out. But I'm, I'm also a student of the game too. Last year, you gotta love it. Everything, yeah, last year we were, I was bent, I was hell bent, I, I'll say on finding a digital ad agency. And we, we have a 501c3 nonprofit at the firm called the Javelin Institute that provides executive education, and we were doing a big project with Kellogg at Northwestern. In their leadership program. And I was telling one of the gentlemen who's a former Silicon Valley guy who's now an adjunct faculty at Kellogg about, you know, gosh, I'm looking for a digital ad agency, and he says, you know, Northwestern has the best, best marketing department in the world, and we've got a digital strategy course that's online, it's a MOOC. Why don't you take it? I, I'll introduce you to the professor, and I was like, that'd be great. And so I did. And going through this program, John, I was able to really firm up the due diligence process that I was putting these digital ad agencies through. And it gave me a greater insight than I would have ever imagined, uh, and it's benefited us, I wanna say. Tenfold, uh, for what the investment was. Did you buy that digital ad agency or did you just say no, we acquired the skills to be so, so we, we had, uh, 3 of them that were finalists. One of the difficult ones that didn't go to letter of intent where the broker got involved was one of the 3 finalists. Uh, the other one we really liked a lot, but couldn't come to terms with to go to letter of intent. The third one. Uh, I wanna say it was more of a merger, so it was a It was more of an entrepreneur startup than it was an entrepreneur acquisition type of, uh, an opportunity, and I just don't want to do a startup, you know I mean I, I don't want. Don't talk to me about it. I'm from ground zero anyway. I mean, if it's, if it's a million revenue plus, um, that's traction. That's fine. Uh, there's something to work with there. So what do you think of micro acquire cause he's just, he's just listing, you know, charging companies like $300 and they're all a bunch of companies out there, tech companies that are, a lot of them are doing over a million dollars, and it's like, I wanna sell, I want out, it's for whatever reason, yeah. So Andrew runs a great platform there at Micro choir, and, and I think a lot of him, and I think a lot of that platform, um, and the thing that I like about it is that there's not a lot of broker affiliation or representation there yeah you're right. For the bigger deals their broker represented, um, but, but I will say this much also that, you know, it, it. For the most part, I, I don't know that it necessarily fits our model. Um, you know, traditionally, we, I love tech startups. Um, it's a, it's the sexy aspect of the venture business, right? Uh, if the primary M&A is through unsexy manufacturing and construction firms, the tech businesses that we look at are very sexy. The thing I don't like about it though is that it breaks our, our, our rule about these should be baby boomer led organizations and they should have a second in command who can potentially step up into the leadership seat. Most of the time these are. These are, we talked with a young guy who in the 30 years old, man, they're all young. In the owner interview, um, he was on a beach in Tulum, Mexico, and the only thing between him and another Corona was us. And I remember looking at my analyst on the on the Zoom session. And I was like, this is not gonna go well. Yeah. What are we doing wrong here? He's on a beach and we're trying to acquire him and what I would I be paying for that corona? Or I, I think it's one of those things though where, you know, so there's, there's some, I, I would much rather acquire a tech firm, and this is where that early stage startup, um, million dollar post revenue. Where, where that fits more into that type of model, because those entrepreneurs are looking for, they're looking for some capital, but more importantly, they, we've had some who've outreached to us and asked us if they could bring us on as consultants to help them through some of the either process, procedure, operational moments that they're experiencing as they go from 1 million on the road to 10 million. Um, so they brought us on as consultants. Some have asked us, uh, if they can compensate us not only in cash, but in equity or 100% equity. We, we shy away from the 100% equity deals because that's taking 100% equity in a bunch of startups, right? I, I've got, I've got enough stock certificates already that are bird cage liner. I don't need more. 0. Yeah, exactly sell too. Um, I, I got a question. I don't have. A lot of time left, uh, because I have you for an hour. But I want to ask you about LOIs. I don't know if you were on Patch Baker. He's a mutual friend of ours. His discussion on LOIs and how important they are. Um, and I, I, I, I love it, man, cause you're really, I'm also a student, Alan Weiss, a Million Dollar consultant. It's like a conceptual agreement. Have that conceptual agreement in place first, like every point you agree on. On the phone, whether you're face to face or on a Zoom call, uh, and then then you send it off to your attorney. You don't send a boilerplate out this like to lock it up like a private equity firm said, hey, here's a we'll accept you on these terms, terms, terms like what what's your position on LOIs? So, so we want an LOI that is going to be fairly represented of, of the purchase agreement. So we want the details in there regarding what it is that we Uh, we want the deal structure to look like. I think that's the gist of how we structure our LOIs. My partner is also an attorney, full disclosure, so we kind of got home cooking or home field advantage on that one anyway. Yeah, there you go. But it is one of those things where, um, you know, we want, we want that LOI and the seriousness of it. We want it to be an easy transition from that to the purchase agreement. Yeah, gotcha. I mean, I, I. I, uh, there's another guy in my mastermind, Vinny Fisher, and he, he, he just does like how serious the LOI is to make sure because if you leave it. Open for interpretation, it's open for renegotiation. So, make sure everything's like point point point point point in there. Yeah, yeah. Yeah, I think, I think the more detailed you can make it, the better off you'll be. I think the areas where you don't have the details, your desired end state is probably something that would be important to share. You know, we, we've, I, I've done LOIs and I've had, I've had some sellers come back and say that they wanted to have Uh, this type of terminology put within it, and it's like, OK, great. If that's what you'd like to have, then let's, let's put that in if it's reasonable. Yeah. It, it doesn't a lot of times it's just a verbiage type of a moment where, you know, depending upon where it is that they're at within the country or the industry, they wanna have something specific in there, um, and as long as it doesn't materially alter the contract or the, you know, what it is that we could potentially put into the purchase agreement, you know, and don't forget. You know, as the buyer, you get to conduct due diligence and you get to drive that due diligence bus wherever it is that you want to go. If you don't like the way that it's coming out. Um, then you don't have to go to purchase agreement and don't do it. You know, it doesn't mean that just because you have a detailed out LOI doesn't mean that everything that's detailed out on it is gonna play itself out under due diligence. All of your findings are gonna fall in alignment with what it is that you structure within the LOI for the transition from LOI over the purchase agreement. Your purchase agreement can be dramatically different, and it should be, if you even go that far. Well, uh, I am running out of time and I wanna say a couple of things first. Uh, look, if, uh, you know, my audience loves this contact, please subscribe to this deal. So Sam, where do you wanna go with this? I mean, how can my audience, whoever sees this, help you? I mean, are you doing looking for deal flow? Are you looking for partners? Yeah, constantly looking for deal flow as well as partners. You can find us at tip of thespear ventures.com. Um, if you visit our site here, we're, we're putting up a special offer for acquisition entrepreneurs. It's a, what we would call an assessment or a workbook on how it is that you can go about achieving business transformation, a free download, uh, so we'll have that up by the end of this week or by the time this podcast launches. Yeah, I'll put it up next week. The podcast will go live next week, so great. Sam, thank you so much for the time. I really appreciate that, and I hope to see you Thursday again. Sounds great. Thank you, John. Cheers then.