E: 24 Top M&A Entrepreneurs - Mike Jamieson from USAF Pilot to M&A Entrepreneur

All right, recording in progress. Welcome to the top M&A Entrepreneurs podcast. My name is Jon Stoddard. I got a guest today is Mike Jamison. Mike and I met a couple months ago through Search Funder. Um, Mike just bought a company, uh, Personal Touch Landscaping. So, uh, welcome Mike to the show. Hi John, thanks for having me. Yeah, so tell, tell me, you know, you and I met on Search Funder, you had some uh financial Excel spreadsheets to do some modeling. And uh tell me about you guys, you just bought the business personal touch. Tell me landscaping. Tell me a little about that. Um, yeah, so, you know, about the business itself, um, I had been looking for businesses a little bit larger, um, But my wife came across this one which was in her hometown. And it seemed like the owners were Trying to put in place some of the things that Um, will lead to businesses being bigger. There's, there's kind of like a gulf between, you know, small businesses and, um, you know, which are under 500,000 EBITA and then those that start to get above a million dollars of IBETA and that basically means the difference between A mom and pop company where if you take out mom and pop, you don't really have a company. And companies that have some layer of professional management, so that if you were to take out mom and pop and replace them with a searcher or a new CEO things continue to run pretty well and so Even though this business was significantly smaller than my Uh, target It seemed like they were doing some of the things that would be necessary to get to that next level. So that interested me. Um, I ran the numbers, realized that it could work out, um, and, and then once my wife and I had the initial conversation with the sellers, um, we decided that we felt comfortable with with buying a business that was a little bit smaller, and in this case a lot smaller than we had been aiming for and Um, that, you know, as, as long as our assumptions were correct, um, as we did our diligence that we would be, that we would be good with this. So, so we decided to move forward with it and then we, we closed at the very end of May, um, and my first day on the job was the, the first day of June after Memorial Day. Yeah. Let let's uh rewind a little bit, a little about Mike. He is an air, been in the Air Force, and then you went to Harvard Business School and Now an entrepreneur just bought, bought a business. So how did you go from Harvard did you say, I don't want to work for a Fortune 500 company, I want to own my own business. I mean, I, I'm curious to learn about that process, the decision making. Yeah, it was um it was actually really straightforward. I I was a pilot in the Air Force, um, had decided that it was time to to separate and settle down, um. Decided that business school was the right route for, for me, um, got to business school, knew that I didn't want to go do investment banking or consulting like the majority of the graduates go do, um. And I was at a veterans club event and one of one of my uh fellow classmates was like, hey Mike, you should do search, you'd be a great searcher. I'm like, what the heck is that? Uh, they, he told me about it and I was like, that sounds amazing because that's exactly what I wanna do. Um, as I had been doing interviews for internships, the internships were all aimed at 27 somethings, um, you know, super top tier talent, but young inexperienced, couldn't lead their way out of a paper bag, um, and most of them were very Regimented. It'll be, it'll be 5 years, 7 years before you're a general manager of, before you're in charge of anything. And I just didn't like that. Uh, once I found out about searching I'm like, wait, you can just go buy a company. Uh, I didn't realize you could do that. OK. Um, so as I looked into it more, I decided I wanted to do it. I confirmed my hypothesis that I didn't want to work for a Fortune 500 company by um working for Danaher for the summer in between my first and 2nd year. Um, it's a great company. I super respect them and I learned a lot of really useful things, um, about change and improvement that I will continue to use forever, but I, I realized that if I wanted to be in a bureaucracy, I was better off in the Air Force. Um, I've been there. Yeah. And, and so then I dedicated my second year to Taking the classes that I would need in order to to round myself out. I took the private equity modeling class, the CFO class, um, basically anything that had to do with numbers that seemed relevant to buying a business, um, to the point that I could close my eyes and do a 10-year private equity model leverage buyout model right now and And by the time I actually, you know, started my search. I was extremely comfortable with that, and that's, I think you mentioned how we met is I had posted a couple of like, you know, blank models on on Search Funder or had mentioned it and and uh that's just how we kind of started talking. Yeah, and I did the last time we talked, there was, I want to queue on something that you mentioned, and I went out and bought it. It was that book, uh, the HBR guide to buying a small business. Think big, buy small, uh, it's like the granddaddy of all. Business buying books. Oh, absolutely. That was, that was our textbook for the entrepreneurship through acquisition class taught by, um, we call them Rick and Royce. So Rick for Richard and Royce and um if you notice, um if you've heard of the private equity firm Ari, um the RY in Ari is Royce Yudkov. He's one of the co-founders of Ari. Oh, interesting, yeah. So this is all like, you know, I, I was doing the M&A stuff before that, and then I, I didn't even know about a lot about the search funder stuff that you can get funded to search for businesses. Absolutely. And, but the model came from this guy, Royce, because, I mean, tell me this story again because he was looking for deal sourcing and it wasn't working, so he changed it to the search funder business model. Uh yeah, so basically the, the story of the search fund goes back to the early 80s, um when private equity was in its Wolf of Wall Street days kind of stuff, um and So private equity was this new amazing thing. There were a few people, um, there was a specific Stanford professor, I forget his name, realized that the same model could work with um top tier and top tier at that point meant Harvard and Stanford only. um. Graduates, um, MBA graduates, so He basically said to a couple of his, you know, outstanding students, hey, look, I'll give you the money that you need to search for 2 years, right? You'll basically become a one person private equity firm. You'll look for a small business to buy, um, recurring revenue, stable customers, all the kinds of things that that are now baked in like that it's the traditional model, and then that gives me first crack at um. You know, whatever business you buy and There are some amazing stories, um, Iron Mountain. was a search fund. Yeah, that document storage, right? Yep, absolutely. It was, you know, guy bought a small little location in upstate New York, um, named Iron Mountain and grew it into a many, many billions of dollars, you know, worldwide business. Um, the cell phone, uh, insurance company, you know, they say, hey, do you want insurance with that purchase? Um, that was a search fund. Yes, get it for 9 months. Anyway, that's off the subject, but get it at least for 9 months. Yeah, and so, um. Those were the model, the model worked. Basically, it, it proved that with with um smart investors and a smart CEO you could buy a small company and grow it. So the, the difference though, um, that's so that's the traditional or funded search, uh, story. Uh, Rick and Royce basically realized that there was room in the market for something slightly different. Because the, the traditional search fund will get conventional debt. So Rick and Royce realized that if you, as a student, purchased a smaller business that was within the SBA rules, And kept your investors below the 20% minimum or the 20% maximum, sorry, um, then you could effectively own 80 to 100% of your business. You just have to have a smaller business, um, and instead of flipping it and selling it after 5 to 7 years or growing it into a public company, um, you can just continue to grow it, um, and the economics work out quite similarly for the searcher, um, and they actually work pretty well for the investors. Um, the IRRs are similar, the uh the multiples on invested capital are similar. Uh, it's just that it's a smaller business. You have a little bit less of a safety net in the form of a board and investors, but you also can't be fired by your board who are actually the owners of the company. And so, um, it's a different take. We call it the self-funded model, um, and, and they, they effectively invented that and have been teaching that for about 20 years at Harvard. And so then some people will say you have the Stanford model, which is the traditional or funded model, and then you have the Harvard model which is the self-funded model, um, and both of them work quite well, um just for different people with different personalities. Yeah, now what did you, you did, did the search model or the self-funded model? So I did, I I had decided to do a traditional funded search. I had lined up my 15 investors. I was ready to write my PPM. And then the CFO of Jackson Hewitt came by campus. Um, fishing for new franchisees, and long story short, I kept stiff arming my investors saying, I'll write my PPM next month. OK, I'll write it next month. And by the summer after I graduated, I had signed an LOY with Jackson Hewitt, um, to purchase 11 full markets or about 360 units stores um of their of their tax business. I would have been the largest franchisee by double on day one. And COVID kind of um killed that because the CARES Act meant that all of the banks that did SBA loans were just completely swamped with CARES Act stuff. And the timing of the tax season meant that we just had to close by the middle of October or I wouldn't be ready for tax season. Well, end of September rolls around, we've been working on this deal for 3 months. We're hoping to close soon and then both of my bankers who are ready and willing and want to do the deal they got it. We can close you by end of November, mid December latest. So that deal just blew up in my face, um. I said to my wife, OK, that's fine. I'll just call up my investors and they'll, they'll give me the 600 to $700,000 that we need to last for 2, 2.5 years, uh, in this market as a searcher, and, and then we'll be good. And she said, well, Let's just see what we find on like biz by cell and Trans World and other stuff and. We did that for a couple weeks, found enough stuff to be interested. Yeah, kept me busy for about a month, and when that stuff, when I, when I finished tracking through all those dead ends. I was like, OK, I'm gonna go now, and she's like, no, just try it another two weeks. And so we just kind of rolled that uh by the end of November, almost had an LOY with a Christmas light company up in Steamboat in Colorado Spring or in in Colorado, then um. Got got beat up by a strategic with an all cash offer, um, ended up signing an LOI with a software company in New York City, um, worked on that deal for 3.5, 4 months when that one finally fell through. Um, why, why did that fall through? That one fell through because the business was too good and the banks couldn't understand it. Um, yeah, so the business was doing 1.2 million of IITA off of 1.6 million in revenue. Oh my God, really? 2 founders, 2 employees. And they wanted to sell it for how much? 6 million. That's still a deal, it sounds like to me. That is a steel of a deal. The problem was is that the founders had in 2017 founded the company, made no money. 2018 made 300 to $400,000 of profit, 2019. No, I'm I'm, I'm off by a year. Um, so in 2020 they made 1.2 million. So trailing 12 months is 1.2 million. The, the 12 months before that was $300,000. The 12 months before that was $500,000. So first year they made no money. Second year, they made a pretty good amount. Third year, They took a year off the business and left their two employees hanging by themselves, no supervision, just left them alone for 2 years, started another company. Actually they purchased another company, tried running that for a year, realized that their first business was better. Came back to it with even the slightest bit of attention grew from 300,000 of profit to 1.2 million. Yeah. And just not enough history to it. Yep, and so the banks just didn't understand it. I got a 100 different stories about why they didn't like it, you know, the worst one was you we think you're overpaying, um, and that made me know that they had no idea what they were doing. Um, yeah, that's a 6x multiple for a software company that's not unheard of. Yeah, it's, well, it's 4X4X on the profit and it was, and I only need I had 2 million of um. Capital that was coming in of equity. I only needed $2.5 million from the bank and I had a $2 million seller note. Um, you know, that those numbers are slightly off, but it was, it was right about there and Um, the bank said you're just, you're paying too much. So when we finally ran out at the end of our exclusivity period, the owner shopped it around. Within 2 weeks was under contract, $7 million all cash, no strings. Holy crap! Yeah, what kind of, what kind of software were they doing? Um, I don't want to get too much in detail, but What they did was help fulfilled by Amazon sellers. So for example, uh, not, not an old. Uh, you know, dinosaur industry, but a growing industry. Absolutely, yeah, absolutely. So, yep. So, hey, I gotta ask you about the uh the the investors you had. Now were these people that you knew from Harvard that Some, yes. But the typical Funded search fund investor. It's very sophisticated, um. Exacts very clear terms from the searcher, you know, if you make these hurdles, you'll get this much carry, if you make these hurdles, you'll get that much carry, etc. etc. Um, they're generally sophisticated and if they're not doing it professionally, they did something um like private equity, um, or hedge funds or something and so that they, they're very. Aware of the market. Yeah, not the first rodeo. Exactly. Now. If you compare that to the average self-funded investor, The average self-funded investor looks a lot more like a well-to do business person, but not with many multiples of millions of dollars, um, or a doctor or lawyer or banker. If, for example, You wanted to invest in alternates or private equity, you need to have at least a million dollars to be a limited partner, and the rule of thumb is you only want to have 10% of your net worth or your investable assets in in alternates. And so then you have to have at least $10 million to your name before you're gonna be able to play in private equity, and that's just to be the bottom end of the smallest fund. Mhm. With a self-funded investor, maybe you've got $2 to $4 million which means you have, you know, $200 to $400,000 that you that you can invest. And so then what you'll do is you'll write a check of 25 to 100,000 typically um to a searcher. And so then a searcher, someone like me who, um, but if I was buying a bigger business, I would have needed this, but I actually was able to fund the the 5% from my own personal savings. Um, but if I was buying a business for $4 million right, and I need a million dollars. I don't have a million dollars, so I'm gonna put in my 50,000 to $100,000 so the banker is happy with me that I've got skin in the game, and then my Uh, my investors are gonna make up the rest, so I'm gonna get 10 people to chip in $100,000. And the way the model works is I will give them a small uh prep, so I have to give them their money back before I make anything other than my salary. Um, I'm gonna give them a small coupon. You know, in the range of 4 to 6, maybe 8%, depending on how risky it is, um, and then I will offer them. Say, you know, 150, well 10% really market is closer to 10% right now, 10 to 20, 25% of the common equity of the company um after they've gotten their preferred return back and that's called the equity step up and What that effectively means is that if you do well, um, and just pay your loan off, you'll be able to pay back your equity investors generally in the 3 to 5 year range, making 2 to 3 times their money, 2 to 5 times really. um. And that's a, that's a tidy little IRR much better than the stock market, and that's Yeah, uh, riskless isn't the right term, but it is much lower in risk because it's based off of paying off the loan. If the searcher is able to pay off the loan and grow the company a little bit, then that equity portion starts to mean a little bit more and You know, these folks can get closer to 10x returns, um, you know, so that means you would have chipped in $100,000 and if I, you know, to buy a $5 million company and if I grow the company to $20 million company, but I've paid off all the debt, you know, my $1 million has gone to, well, you don't even have to do that. If you buy a $5 million it's a million dollars, yeah. Well, if you buy a $5 million company with $1 million of equity, right? And then you pay off the debt and grow it to a $10 million company. Then the $1 million of equity has multiplied by 10, right? Now, as the searcher, I'm gonna take 75% of of the common equity after I've paid you guys back your $1 million. Um, but say I grow the company to $20 million which isn't unreasonable, that's only 4 times, then you as an investor might get, you know, 789 times the money you put in. Um, and so it's a, it's a nice little model, I mean, and, and kudos to Rick and Royce for, for coming up with it as a variation on the, the funded search. I get to keep the ownership and control of the company. Um, it allows people who are a little bit too small to play in private equity to, to have some alternates and do private markets, um, and all around it works quite well. Yeah, how many, how many, uh, if an investor says, uh, you know, they're not just gonna put it into one entrepreneur usually how many they do they invest in to spread their risk. So there are a good number of Investors who have started to do it semi-professionally, yeah, invest in search funds. They will. Trying or in Self-funded searches, right? They will, they seem to fund 5 to 10, you know, a small enough number that they can keep track of it, um, but I would say the average investor. Gets presented with this opportunity once in their lifetime. Oh wow. Oh, because your, your doctor, lawyer have 3 or 4 million bucks, you know, somebody is buying um a business in your community, and they say to the seller, hey, I need some equity investors. Is there anyone that you'd like to refer me to, right? Otherwise I'll go drum up my own, um, and for most. Upper middle class folks in the United States, they don't have opportunities like this more than once ever, if ever. And then to turn on $100,000 into a million dollars or 10X in a company. No, no. And just, you know, just to be clear, the 10X, that's not typical. Typical is more like your 100,000 becomes 200 to 300. Right, right, but, but, you know, 2 to 3x return within 3 to 4 years, where else are you gonna find that? You don't, you don't find it in an index fund. No, that's gonna take a lot longer. What do you, what do you think about, I'm just curious your opinion about the, uh, you know, being, uh, uh, funded by a search funder because I ran into another guy reached out to me on Search Funder, and he said, hey, I got a ton of deal flow, deals. I just haven't found anything I want. I go, Well, how many do you have? And he said, 1000. I said, what do you mean? You went through a 1000 businesses and And he told me, he goes, well, and I got 300,000. If I don't find a business in the next month, I'm gonna lose it. Cause his term, whatever it was, came to an end. It sounds like he was doing, I mean, it's just specific to him, but it sounds like he was doing too particular about what business he was looking for. I actually think that That sounds about right. I would say that in the year that I searched, I looked at 40,000 businesses. Holy crap, 40,000. There you go. And, and the thing is, is that the average amount of time that I spent on those was 5 seconds or less. Yeah. So if you take biz by cell, um, which is what I would do, I would run out of leads, um, I would give the internet a couple of weeks to to backfill stuff that I hadn't looked at yet. I would take everything new. In the last 2 or 3 weeks, which is in the entire country, which is maybe 10,000, right? Maybe, maybe not quite that, maybe 7000. But I would, I would filter out anything over $20 million asking price. I can't afford that as a self-funded searcher. Filter out anything below. 50 600,000 of IEA. Because it's not gonna be able to afford the the business won't be able to pay me a salary that I can live off of with 4 kids and pay back my student loans and pay off the loan. So those were effectively my my minims, and then what I would do is I would say I need a business that's asking price is less than 5X. I need a business where the margins are 20% or better. Um, I need a business that's noncyclical, so I would eliminate things like, um, construction or things that I don't understand, manufacturing, things that don't, I don't want to be in restaurants, um. And And then if it met those three hurdles or those three filters, which is very few, you know, so out of 7000, you know, I'm spending a few seconds like You know, single digit seconds on each on each listing on biz by cell, finding the ones that meet those three filters. If it does, then what I do is I open up my model, um, and I will plug in the purchase, the asking price, the um ebita. And an estimate for working capital, um, FF and EAE, that kind of stuff just based off of the industry and this by cell will usually say that, um, and I plug it in and Out of 100, so say, say there's 1000 that I've looked at, there's 100 that meet the 1st 5 or those 1st 3 filters. Of those 100, 50 to 80 will will not make it through my first hack model. The point of the first hack model is to get to know quickly. So this won't make enough money for me after 10 years, right? If I'm gonna do this for 10 years and come out with $1.2 million I would have been better off being a consultant, right? I should have just done that, um. Is it gonna work for my investors? Like, am I gonna be able to pay them off within 5 years, um, under reasonable conditions? Are they gonna get You know, 25 or greater IRR and then does it work for banks? Like is my debt service coverage ratio above 1.25% better if it's above 1.5. So by the time you impose those three constraints, is it good for me, investors, if any, and the bank. Um, that eliminates. 50 to 80 out of the 100, which were out of the 7000. So now I'm down to 20 to 30 maybe that I send emails to the brokers um requesting a SIM. Now on those. Most Regional, like local and regional brokers. Don't have a lock on good stuff. They stumble upon it once in a while, they know it's good. And there are people waiting in the wings, telling those brokers, hey, if you see something that looks like this. That meets these criteria. Tell me right away. So of the 20 or 30 emails I would send, things that meet all my criteria, the basic criteria to look at the SIM. Half of them at least are already under contract by the time I even see it. Yeah, yeah, OK. The other half, I get the same. I opened up, so now out of 7000, I'm opening 7 to 10 Sims. Well, 2/3 of those I reject immediately. Yeah, cause it's crap. Uh, one of the things I saw was $1.2 million of asking 3x, open up the SIM. It's a million dollars of about backs. The, the guy was putting every single personal expense he had through the business, and I was like, look, That's, you know, that's his choice, but if he'll lie to the IRS that bad, he'll lie to me. So, yeah, I like that rule. I don't even, I don't even want to know like, OK, it's a million dollars be it done, there's 100 $150,000 of ad backs. That's totally reasonable. Those are justifiable business expenses. I got a fancy um 401k and healthcare plan. OK, got it. I don't have to have that stuff that counts, but you know, 3 family members on payroll, no, I don't, I don't buy it. Yeah. So then I end up with out of 7000 things that I've gone through and this is like in 3 days, I end up with a small handful, you know, 2 to 10 that are actually still for sale and I'm actually interested in. So then I'll schedule a broker call, um, then that almost always goes well as long as the broker doesn't say like, oh actually I think they're lying. They usually say they don't think they are. Talk to the owner and, and then, you know, my conversion from owner conversation to um IOI submitted or just like a hey, I think that your company might be worth this much. Let me know if I'm in the right ballpark. And if it's worth continuing the conversation, it was almost 100%. I would submit an offer almost every time I spoke to an owner, um, except for a few owners that didn't have brokers to compile a SIM, and so I spoke with them and I'm like, oh, no way, this is not the right business for me as soon as I found out the basics. Yeah. Well, how, how much of, did you do any direct um to mailings to or reach out to directly to business at the same time with the brokers? You know, all of my buddies are, and I think that that's a very important and valid way to do things for most searchers, whether it be funded or self-funded. However, I didn't because I was just busy enough that I didn't need that. You know you weren't looking for any specific industry that, hey, I love working in the landscape industry. You just look for whatever matched your financial criteria. Exactly, exactly. My, my general leadership skills in the Air Force, um, were not going to make the SBA happy about any industry, um, and so there was no reason to focus on an industry, I mean. Yeah, it's just that they're agnostic as as long as the numbers look right, yep, exactly, as long as and and the thing is is that. I mean, I, I The you can have a good recurring revenue, high margin B2B business in any industry. Right, um, You know, you find that a lot in software, but it's other stuff too. This, this business, this landscaping business that I'm in, um, it's B2C, most all of our customers are residential, but The majority of them are on. Automatically renewing one year contracts. Yeah, this is beautiful. So where did you find this one? This was on BizBu or? Um, I don't remember which website my my intern slash wife. I used to joke that she's my intern, um, you know, we, we would both cruise the websites. I don't remember which one she found it on, but she sent it over to me, might have been biz by cell or or touched on or whatever it was, but Um, when we initially contacted, it was actually gone. It was, it was, uh, under contract, and, but, you know, the, the broker sent me the same anyway. I looked and I was like, actually I really like this. It's very small, but it gives us the chance to live near my wife's family, so we're willing to, we're willing to deal with the the smallness, um. And a couple weeks later, the broker sent out an email blast. Hey, everyone on this email previously expressed interest in this business, um, give me a call back, and I, I probably call back within 10 minutes and within a day or two had the owner conversation with the sellers and my wife and The next day submitted an IOI and went under contract right away. We skipped the LOI, went straight to the asset purchase agreement. Which maybe is, I don't know, I don't have an opinion on whether that's right or wrong, but to each his own, that's what the broker wanted and within a couple of weeks we were, we had a signed asset purchase agreement. That's amazing. I, I gotta go back to the conversation, you met your wife. She sounds like a go-getter. I mean, she's like pushing you a little bit farther than you think you can go sometimes. Um, I mean, I wanted the, I wanted the safety net of the funded search. Yeah. You know, I was, you know, concerned about health care for the kids and that kind of stuff and legitimate care, yeah, yeah, I mean we were on Medicaid, or yeah, Medicare, no Medicaid, yeah, Medicaid is the one for poor people. That's where we were, um, for that year, like I, I called up the county and was like, my income is 0, my assets weren't 0, so we didn't get food stamps or anything like that, but they put the kids on on state Medicaid so we could take him to the hospital if we needed to and And she was like, my wife, um, was like, well, let's just give it a try. Let's give it two weeks. Um, I guess maybe she just felt, uh, you know, prompting or a pull to give it a shot, and she was obviously right because, you know, less than 9 months later, here we are. Yeah, so this business. You skip the LOI, went all the way to the asset purchase agreement, did anything turn out different than what you saw in the reps and warranties or anything else in the business? Not really. I personally would have preferred to have an alibi. I think that's a valid step, but the broker had had his own preconceived notions. And had convinced the sellers that that was the right way to do things. Yeah, that sounds kind of odd. I mean, that's, you know, this it's a conceptual agreement to say, hey, you know, we're gonna be ethical towards each other. Uh, it's a non-binding, it's just like, can we work together? Yeah, and, and I like it as a one of the issues I had with the asset purchase agreement was getting the non-binding part from and they wanted $10,000 in earnest money too, um. The broker obviously came from a real estate background. That's kind of the way that Real estate functions is you, you don't have a And Ly is What you do is you negotiate an LOI and it sets the structure for the asset purchase agreement or Well, that's the thing, you don't even know if you want an asset purchase agreement or a stock purchase agreement yet, right? You haven't opened up the hoods of the financial and that kind of stuff, and LOI usually gets you exclusivity so that um You, you You know that you're not going to get undercut by somebody else while you, while you're doing the super basic stuff. Um, but it basically says like, hey, these are the general terms that we want in an asset purchase agreement. This is the price, this is the multiple, this is how much time you'll work after we close, that kind of stuff. Um, are we all in agreement? Yeah, yes or no? Yeah, yeah, exactly like, is this about right and and You know, that can take a couple weeks to negotiate, um. And And the thing is, is that we basically just skipped that, went straight to the asset purchase agreement, um, but I had to, I had to get the clauses, the protections for me that are baked into an LOI because it's non-binding, and get those put into the asset purchase agreement. But in an LOI you have, you know, 30, 60, 90 days to do your diligence and you haven't given them any money, and so if you decide not to buy it for any reason or no reason. That's just the end of it. Um, with the asset purchase agreement, I had to give them $10,000 and so I had to say, look, you have to give me. At least 20 days, right? And I can kill the deal for any reason or no reason. I had to get my lawyer because I had, I had a good draft of an LOI but I had to get my lawyer in on this one, like, how can I protect myself cause I'm gonna give them $10,000 and I have to make sure that they're going to give it back to me if I don't like this, because the vast majority of the businesses that I look at the financials, you don't like. Yeah, yeah. Why was the guy selling? Um, the husband and wife, um, both of them were working in the business for 30 years, and they decided, uh, that it was time to retire. And was there any, did, how did you, I mean, was this an emotional rapport connection with them like, hey, we like this guy the best cause he's got 4 kids, he's in the Air Force and something or was it just financially, they didn't care who was sitting on their side. Um, they very much cared about who was on the other side. I think I also had the highest offer. I offered 25,000 over asking. Yeah, which in, you know, realistically is a very small percent over, but I wanted to get it off the market right away and so I said, look, I will give you everything you're asking for plus 25,000, um, but they didn't want a seller note and I said, I'm not gonna do a deal without a seller note, so that's one of the reasons I'll give you, I'll give you a higher purchase price. In exchange for a seller note, and What that effectively meant is they're gonna get pretty close to the same cash out at clothes that they would have gotten with no seller note, but the lower purchase price, but it still means that I owe them money, um. Which, which means that they still retain an incentive for me not to go bankrupt. Do they, yeah, it's uh curious. How long was this seller now? 2 to 3 years or uh no, I, I negotiated that it would be fully subordinated to the 10 year SBA term. Oh wow, wow. Do they, the real, the reality of that isn't, I'm not going to wait 10 years to pay them back because what will happen is, Uh, in most, in most cases, or I guess the average SBA, um, loan is, they're all for 10 years, but the average one gets paid back before 7 years, 5 to 7 years, and so, um, I will either have it paid off or refinanced by about the 5th year, which means that, you know, in reality they're they're 5%. Um, is only on, on the hook for 5 years. Yeah, do they have any covenants or conditions about being able to see the books to make sure you're paying, or is it just sending them a paycheck? Um, for a loan repayment debt. Yeah, exactly. So they did ask for quarterly financials, which is one of the reasons that I specifically I'm going to try and get it repaid as quick as possible because I'd like to grow the company and, you know, 23 years from now, I don't think it's their business how much money I'm making anymore. Right, right, they don't need to know that. Exactly, yeah. So how is it going so far? I mean, uh, Consistently cash flow, met your debt obligations, uh, paying back, how are you planning on growing it? What can, what can you see there? So, um, The cash flow is not as consistent as I was hoping. Yeah. But that was because of a couple of management missteps by me in the month of July, um. And we've, we've got those hopefully fixed and we're back on track, um, but yeah, you don't have to be specific about those errors cause we all make mistakes. What kind of, what, what kind of what error do you think you mean? Unforced error? Um, no, I think it might have been something that we had to do, but effectively the, the mom was the garden manager and she had a supervisor that worked under her, and the pop. Uh, was the landscape manager, and he had a supervisor that worked under him. OK, on day one, we fired the landscape supervisor. Uh, because he stole a truck and drove it halfway across the state. It's part of part funny, but it's part, yep, being a small business, yeah. So then we took one of our foremen and we promoted him to supervisor. He did great. Um, after the truck, did you get the truck back? Yeah, we got the truck back. He, he pulled out the tracker and smashed it on the ground in the parking lot before he left, um, but whatever. So he got fired and, and took no accountability, but So, one of the foremen stepped up to the supervisor role and was not all the way trained as supervisor before the end of the 30-day period. Um, where mom and pop are still working for the business. I mean, the first two weeks were a whirlwind. I have no idea what happened. I got a question for you about that because you're still paying the uh you have a seller note, and he's still kind of out there like available for advice. This happens. Was he any help or was he just totally out of it? Well, it wasn't. I don't think he would have recognized that it was an error because I told him what I was doing. So I'll I'll I'll get to the error itself here, um. At the end of the 30 days, I needed to have So I guess the the two sellers. For each Um, we're each doing two full-time jobs. So the mom. was she ran all the finances of the company, and she was in charge of all the gardening and the gardening sales. The pop was in charge of all of landscaping, um, a lot of the HR and marketing and landscape sales. So between the two of them, they were doing 3.5 to 4 people's worth of work. Never took a vacation in 20 years during the summertime, all that kind of stuff. Yeah. I just, that's, that's too much for me, and they were doing that with the experience. So what I did was I took that landscape supervisor who was brand new, and I elevated him to a landscape manager position and had him start training a supervisor below him. And in hindsight, that was too much for him to handle. Um, because a lot of balls got dropped, um, and a lot of balls that cost us a lot of money, got dropped. And, and so by the end of July, when I realized that the cash flow had gone from 120,000 in the month of June to 0, We, we had to fix some stuff. So my salesperson had previously been the landscape supervisor. Had been elevated to sales. So I took him Put him back in charge of landscaping, so he's the landscape manager, took the guy um who is still on track for his promotion to landscape manager, made him back a supervisor, um, and kind of retrenched in let's make sure that we get this right and have the person who is more qualified to define the ambiguous what a what a landscape manager does, have him do it. And then the guy below him can come up um once it's been defined. So that I think will help uh quite a bit. Things have already gotten better in the last 2 or 3 weeks, um, moving in this direction. Um, so we will, we're definitely gonna be fine going forward. You know, but that kind of misstep early on can certainly cost you. Oh yeah, yeah. Was your wife or did were you panicked about it, you're like, oh crap, this is not turn out to be? I mean, a couple of nights of very little sleep, um, but, you know, at the same time. That's kind of I at first I was like super stressed and I was like, how can this be more stressful than flying a giant cargo plane into Afghanistan with people shooting at you? Yeah. And then I realized it's not. I'm letting it stress me out more. Worse I was like, look, worst case scenario, I go bankrupt. Everybody's healthy, everybody's happy. Everyone that works for me will go find another job. Nobody died. Nobody will die. Oh, you know who also told me that it's like it, uh, he said, I, you know, I never done entrepreneurs stuff before, this Navy SEALs like, oh my God, I've been in, I've been in the uh Iraq 3 times, man. That there's not losing a business and going clothes and going bankrupt, not half as scary as being in Iraq. Yeah, absolutely, absolutely. Um, and the thing was, is I let it, I let it freak me out. And as soon as I made the decision that it wasn't stressful, this is not like once I decided, no, this isn't a stressful situation, like the worst that can happen here is not that bad for anyone involved. It's, it can be bad, but it's not life or limb, it's not health. And those kinds of things. And so once I stopped letting the stress run me, which it did for a couple of days. Um, I was able to say, you know what? I have the right person for this job. He's already on staff. I'll just have him take over the landscaping, um, have him teach the supervisor, um, how to do these things, because when he was in charge, he was running it just fine. It was a profitable division of the company, um, and so I just put him back in charge and have been mentoring, um, my two new managers, um, and the supervisors that are coming up behind them. Um, And so you asked earlier about what the plan for growth for the company is the plan. Um, is to, I've realized that this is the right size for this business, the, the square footage, the number of trucks, the number of managers that we have. I, I feel confident that this is the right size, we can fill it out a little bit. Uh, but the plan is to get a good structure in place where we have a general manager, 2 division managers, and 2 supervisors under each of those division managers, um. With a bookkeeper and a salesperson, and then that will be the template that gets replicated. So once we get enough customers, um, in this case we're aiming for the north end of town. That's where we have a nice little concentration of customers. The plan is to try and build that neighborhood out um to the point where it can support another location. Then what we'll do is make like a bacteria and split in two, take half of our employees and trucks and move them up there to a new location. And then, and then backfill, then train the next generation below them until we have two fully operating locations and Maybe by that time, you know, and then after that, those two locations hopefully grow and then we we split one or both of them again and, and that's the way that we'll grow. And I, I suspect you've run some modeling numbers on when that split in your bacteria will be. I haven't yet, uh, but again, you know, we're not even 3 months into owning the company, so we're still getting a handle on day to day operations and making sure that we're profitable each day, um, but I I feel confident, well, I know for sure that it won't be next season that we're able to do this, but I feel confident that The following spring, so that'll be spring of 2023, that will be to the point where we're considering, you know, where and if to, to go ahead and open a new location. Yeah. How how's your wife feel? Does she feel comfortable, confident, or is it, uh, you know, the life of an entrepreneur watching the bank account go up and down sometimes. It can be kind of a, you know, nice roller coaster. Yeah, so she, she solves part of that by not watching it. I, I had an entrepreneur friend of mine. He's owned two businesses, 20 million. He goes, you know, my therapist told me to take my wife off my business account. Yeah, I mean she knows like she could log, she could log in with my credentials whenever she wants, but um she doesn't. We, she she works in the business uh part time, uh, she's getting an MBA um herself, um, and, you know, she, she's got a lot of about input, but she tries to Stay off the highs and lows by staying out of the bank account because like you said, it varies wildly. Very, very wildly, yeah, and, and you have to just, you have to be OK with that. I, I'm just curious how you centered yourself back, you know, when it's a stressful, hey, I made a mistake, how do I correct the air and it looks like instead of like the world falling apart to like, oh my God, this is not as bad as I thought. I mean, how did you resend it yourself, uh, like what, what was your inspiration to like to Get your head out of that fear, worry and doubt stage. Well, I mean, I walk in my office every day and I've got all my leftover military paraphernalia, um, you know, my academy plaque, you know, I've got a, um, I don't know if you ever saw the the movie Tuskegee Airmen, but I have a signed litho from one of the Tuskegee Airmen on the wall and, you know, it's literally one plane shooting down another like life and death, you know, and You know, you just realize you're like, wait a minute, like. I've had people shoot missiles at my airplane in Afghanistan. Like, that's scary, and I wasn't scared then. And so I, I'm like, I tell myself, look. I, how can I be more stressed now than I ever was in the Air Force, you know, and then I'm like, wait, I shouldn't be. It's just life and death. I'm not killing anybody. Nobody's killing me. We're not crashing any airplanes in the mountains, no bombs dropping like. And, and as soon as I literally the second I was like, wait, this isn't life and death. And I said to myself, well, what's the worst case? And I described it, I described it all the way out, like, what happens? Like, OK, my bookkeeper goes and gets another job, um, the bank takes the keys to the building, they get all the pickup trucks and have to deal with disposing of those they're like 1994 pickup trucks, some of them, and all of my employees are great. They'll all go get other jobs like I will give them all great recommendations. I will go get a job at a Fortune 500 company and I'll never be a multi-millionaire, but we'll be fine. And once I described out what would happen. In a worst case scenario, I was like, that is not so bad. Why am I scared of that? Yeah, and it's like it's a great tool uh to shrink that time the next time it will come again, but to shrink that time you're in that stage, just like, Yeah, absolutely. Yeah. Well, do you have any plans to acquire other businesses to add on to it, you know? Um, I don't know yet. I, I know myself. So I suspect. That this will not be the first time I purchased a business. Um, well, I'm certain that this will not be the first time I purchase a business, um, or rather the last. This won't be the last time I purchase a business, but whether that is we start to grow and then we grow through acquisition to a certain point, or whether that is, I get this business operating well, 23 locations. Um, hire an MBA from a local good but not, you know, top 7 MBA school, um, to be CEO and start building out the management, and then that frees up my time. I get bored and I go buy another business. I don't know what that looks like, but I'm relatively certain. That if this venture is successful, I will be buying other businesses in the future. Yeah, I want to wish you the best of luck and uh we're almost out of the time, so Mike, thank you so much for your time, especially thanks for your service, and uh I wanna wish you the best in your business. Yeah, thanks so much for having me on, John, and uh anybody who hears this and is interested, you know, you can probably find me on Search Funder. I like to comment on stuff um or on LinkedIn and you know, I, I love chatting with people and helping them out. Oh, by the way, and uh Mike has, uh, you'll have to ask him. I'm not gonna afford it, but he has some great uh financial spreadsheet models that you can run your business through, so, but you need to reach out to Mike on uh search funder or LinkedIn. So thank you, Mike. Thank you very much. Have a great day. Thanks for having me. You too. Cheers. Bye.