E: 41 Top M&A Entrepreneurs - Trish Higgins, 30+ Acquisitions Partner at Chenmark Capital Mgmt.

Welcome to the top M&A entrepreneurs. My name is John Stoddard, and I'm your host today, and uh I wanna open this up by just telling you that I got my first sponsor, and that is Duilio at DU D I L Io.com. It's an M&A diligence marketplace of service providers for acquisition entrepreneurs. It's free to use, free to sign up, and you only pay when you engage with the service provider. What I'd like to say is there's no, no deal is better than a bad deal. I'm not the first one to say that. Uh, and prices range from anywhere from 5 to $59 up, and it's online for online businesses and offline businesses. So I would suggest using somebody in due diligence, if you're gonna borrow money, many will require that you have a due diligence uh package run on the business. So, With that, I'd like to introduce you to my guest is Trish Higgins. She is a partner at Chenmark. Chenmark is a, it's like it's a private equity fund investor that's a team uh that acquires small business, excuse me, a team that has acquired small businesses committed to each other and to the constant pursuit of better, but I'm gonna let her explain a little bit more about what Chenmark is. Hi, Tris, welcome to the show. Hello, thanks so much for having me. Yeah. So how, tell me a little bit more about what Chenmark is and uh what they do. Sure, so Chenmark was founded in 2015 by myself, uh, my husband, and my brother-in-law. So we are a strange founding, uh, team, uh, but we are a family business and uh for us it, it works, uh, we wouldn't have it any other way. Um, the, the three of us all sort of got our start in more traditional finance. Um, in New York City, so kind of did the New York City finance thing for a little bit. I went to business school, went back into finance afterwards, and we're sort of, that was our track. We weren't in private equity, we were more in the market, stocks, bonds, currency trading, things like that. And Uh, we sort of came to a point where we felt like we wanted to do something a little different, and that came from a couple of different things. First was just an investment thesis, you know, we were trained to be constantly looking for interesting investments and this idea of buying up smaller businesses and holding them for the long term uh started off as something that was a compelling investment opportunity just because there's so much more supply. Um, of small businesses coming to market than, um, organized capital to purchase those businesses. So you tend to be able to purchase them for fairly attractive valuations relative to sort of, uh, large big boy, private equity and things like that. Um, and, uh, also we felt like we were sort of just sitting behind a desk not really doing anything and we'd had the privilege of going to some really um good schools and, uh, worked in really great jobs. Um, but we want to take some of those experiences and see how they, uh, how they fared out in the real world, um, which, uh, sometimes they fare well and sometimes they, uh, ideas, uh, that are hashed around a conference table fare very poorly, uh, when you're working in the real world and that's something that we felt that we were missing and we wanted to get more, um, more of that, uh, in our life. So that was kind of the the foundation of Chenmark, um. So basically, the idea from the beginning by small businesses from retiring owners. For us, a small business is defined as about 1 to 3 million of earnings. Um, so not really, you know, typically your local pizzeria shop, but smaller than a traditional private equity firm would, uh, would care about, um, take over the business, um, either promote somebody internally to run it or bring in our own person to run it, um. And build a portfolio of uh cash flowing businesses that we could own for the long term. So, uh, something that's sort of unique about our model is that We didn't raise a fund or anything. Our goal had always been to use the cash flows from the first business to buy the second business and the cash flows from the first two companies to buy the third business and so on and so forth. So we don't really have any um external capital that's fueled our growth. Uh, we've been internally funded and as a holding company structure we intend to own our businesses for the long term and really just Focus on um sort of optimizing cash flow and we can really only grow as, as uh quickly as our companies can generate cash. So if we perform well, we can grow and if we don't, we can't. So, uh today we have a collection of businesses in new, um, sort of in New England and Western Canada, which is where I'm from originally, but we look all over uh the US and Canada and our we have a couple of things in the pipeline that are in completely different geography which is exciting for us and Yeah, it's been a fun ride so far. Beautiful. I, I love that. By the way, uh, she does have a pretty nice, uh, scholastic pedigree, uh, Yale University political science and Harvard Business School. So that's pretty impressive right there. I tell most small business owners to not hold that against me. Yeah, you're not gonna see a lot of small business owners doing 3 million. Yeah, I know. Um, let me make sure that the 1 to $3 million in earnings, and is that either or net income, just to clarify. Yeah, so for us that's usually EIA. There's most of the businesses we look at have some sort of uh CapE requirements. So we're always looking at sort of the conversion of IEA to uh cash flow, but, uh, that 1 to 3 million is, is EEA range. Um, but we wouldn't, we wouldn't really look at anything that had less than a million of, of cash flow and unless it was a, a tuck in or something like that. Why is that? Is that something that you learned by purchasing somebody or just you made that like, hey, let's sit around the table and this, this is our criteria because Less than 3 million. They don't have processes in place, they're working 90 hours, etc. Yeah, it was that it certainly was something that was uh That, uh, many, many people told us when we, before we started that we were, um, you know, that when you have a company that has less than a million, it tends to just be one person, there tends not to be a team and a lot of processes, um, and so it's a very difficult thing to acquire cause you're really more Um, you know, buying somebody's life as opposed to a business. Uh, so obviously there could be exceptions to that, but it's just a general kind of rule of thumb, um, that we have certainly found plays out. Now, that said, just because you have 3 million of earnings doesn't, you, you could also have a business that has very poor processes and is really one run by, you know, one guy who's running around like crazy that has 3 million earnings, that could happen too. It's just less likely. Uh, cause, so, so that's, that's why that that threshold for us. I, I've got a question about now, and, and I love this that you've done it just by uh the cash flow, the first business, and that's your limit to growth. I mean, that's beautiful. Uh, at this point though, are, are banks, hedge funds, or any private equity coming to you and say, hey, here, please take my money and purchase faster? Yeah, so it's always an interesting tension between Do we want to work with uh a provider of external capital and, and grow a lot faster, um, or do we want to retain ownership, um, and, uh, you know, grow a little bit slower. And to be honest, it was actually a little bit more of a discussion a couple of years ago, um, when we were a little bit smaller and, and, and, and the appeal of raising sort of a, a fund from people meant, hey, we could kind of accelerate growth by 5 years or something and And go out, um, And every time we sort of had some of those conversations, you know, we found them to be a little bit of a distraction, um, and realized we could probably just generate more equity if we just or value, um, if we just focus on operating our businesses well and, and growing them that way. And I think that The lessons that we've learned about how we want to actually operate our businesses and what sort of owners we want to be and, you know, how our compensation plans work and our, you know, what our values are and all those sorts of things have really been gelled and informed by our experiences, having to grow ourselves over the past five-ish years. And I think that if we had um Raise capital. I'm not sure we would, those, those lessons would have had as much of an impact. So, um, for us, it sort of worked, but you know, I won't lie, you know, it sounds very, very appealing to, um, you know, if somebody emails us in, you know, we get cold emails quite often saying, hey, are you looking for capital? Are you looking for capital? Um, yeah, it's at 6%. I know somebody's offering at 6%, and then I go, uh, OK. Yeah. Um, so yeah, right now, it just seems like we'd rather, um, we'd rather retain ownership and, and grow a little bit slower because we're thinking of this as a, a, you know, a 2030 year endeavor. Um, and if we sort of think out that long, uh, for us, it's worthwhile growing a little bit slower in the early days so that we can, um, maintain ownership. Yeah, that, that's amazing you guys set those that value system up. I mean, who did you look to, I mean, it's easy to say, hey, we love what Warren Buffett's doing, right? Yeah, or Charlie Munger, and those guys is it was who's your inspiration for looking at a 20 year road? Um, so one, I think the fact that we're family and Um, you know, family is probably the most enduring thing that there is. Um, so the fact that we're family sort of made this, uh, you know, this isn't something we wanted to do for, you know, 5, 10 years and then sell and move on to our next thing, you know, James Palmer and I were really thinking about what did we want to do, kind of full stop, what did we want to spend our days doing, what did we want to build, um, and To us that just naturally came to be something that was, you know, a multi-decade long thing. And so then, when you look at, you know, obviously, uh, you know, Warren Buffett and Berkshire is, you know, probably the biggest model, um, out there, but there are numerous companies, um, that have grown over time, um. That, you know, we take inspiration from. So there would be kind of all the, you know, sort of normal names like, um, like Constellation Software and Berkshire and you know, yeah, yeah. 500 businesses or something in software? Yeah, I don't know. It's incredible what they, it's incredible what they've done and their model is certainly very inspirational to us, um, because they acquire much smaller businesses, you know, you know, Warren Buffett's buying Geico and things of that nature and Um, that requires a little bit of a different management model than if you're buying, you know, you know, Constellation will buy a $1 million business, so it's a little more similar and we've taken a lot of inspiration, uh, from what they've done, um. And I'd love to talk to that. I got, it's like, I'd love to talk to that guy and ask him about that 1 million mark and just understand what the business model is. Is he just taking the product and fit it into his platform, or what's he doing? Yeah, so it seems like they have different business lines. I'm not an expert at this, but it seems like they have different business lines, um, and it's all software, so there obviously are kind of um You know, a lot of similarities in in what they're doing, um, and then a, a business gets put into the business line and but then they have just individual people, you know, that continue to run those businesses, um, but within that business line. Um, so it becomes almost like in my mind it's like I have friends who went to like Kraft, but they ran a business within Kraft like some whatever pet food product or whatever it might be, um, to me it's a little bit like macaroni and yeah, the kids love, yeah, something like that, yeah. Yeah. So where are you guys at now? I mean, I looked at Pitchbook and I see that uh you guys purchased a business called uh uh where's my notes here, uh, Seabreeze Properties. I mean, what, how many businesses have you purchased? Sure. So, Pitchbook emails us all the time. I don't think we've ever responded, so, uh, uh, their information's a little off, um, but we did buy Sea Breeze. That was our first company that, that, um, and, uh, the one thing I'll just kind of, I think important to mention that the business, the type of businesses we buy our businesses we feel comfortable owning for the long term. Uh, so that kind of leads us towards certain types of businesses. Um, Seabreeze is a commercial landscape, um, as the removal business, uh, up here in Maine, so that's something that we feel, uh, confident will be around for a long period of time, that sort of demand for those services. So that's, you know, why that particular company and we don't do anything that You know, has a lot of, um, you know, it's based in technology or has a lot of legislative risk or things that we can't really see ourselves owning for, for a long period of time. Um, so that's just kind of a A preamble. So right now we own 7 sort of what we would call platform businesses. Um, platform is, is a business, uh, that is, you know, has its own CEO, has done it, you know, it's own management team that keeps its own name, like sort of all those sorts of things. Um, and we have a sort of a collection of those that are in what I call quote unquote like the green space. So, um, lawn care, to mosquito control, uh, property services, snow removal, sort of different companies kind of under that banner that all operate independently. Um, we have a tourism business here in Maine. Um, we have a food manufacturing company, um, out in Canada and a Pete. Uh, distribution business out in Western Canada. So collection of businesses, um, and I'd say probably our total number of acquisitions is Uh, I don't know the exact number, but probably somewhere around 30, I'd say, um, because, uh, some of our companies have grown, um, significantly through sort of smaller tuckin acquisitions. Um, the landscaping and long care space is much more, um, ripe for opportunity with a sort of smaller tuck in, uh, growth strategy. So, uh, certainly a number of, um, sort of smaller deals on, on that side of things, and those would range anywhere from Uh, I don't know, a couple 100,000 of revenue to, you know, maybe 1 or 23 million of revenues would be uh sort of the range there, and it's interesting that the smaller ones are always the ones that take the most work. Oh yeah. Hey, let's go back to the Sea Breeze properties, um. Because that's the first one, and the first one is kind of always toughest and always takes the expectations. It's like driving to a new place. Like, it takes, it seems like it takes forever, you know, and they're, they're, you're just roller coaster. How did you guys find that business and tell me the story about, you know, your first, uh, you know, communication with the seller and how that go, how long it took, and You know how you made that transaction, what the financing look like? Sure, so let's see, so we first met the company, it was probably like early 2015, we closed on it in Sep end of September 2015. We were all still working at the time, um, living in Connecticut, sort of New York suburbs, um, this company is up in Portland, Maine. We, it was actually through a broker. We had first met the broker through another deal that was in a similar space in a different geography. Um, and he, we kind of kept in touch and he let us know, hey, I have this other one that's coming to market, wasn't sort of officially on the market yet. Um, would this be interesting? Um, so it's a little bit, uh, I'd say it was a brokered search, but it wasn't sort of a, a widely marketed deal. I think just because we kind of got in a little bit early. Um, we also were, I think a little lucky that in 2015, um, the, the landscaping space wasn't as interesting to, um, Yeah, as it is now. It's like the 5th time I've, you know, interviewed somebody goes I love it because it's reoccurring revenue and it's never going away. Yeah. Exactly. In 2015 we faced a lot more questions about it, um, than, than now, but on the, you know, collars there wasn't any, you know, much demand for, for, uh, for the business, so it kind of worked out, um. And so, uh, brothers founded the company. We're looking to kind of move on. They've been running it for, I don't know, 2020 plus years. Um, they were in their, uh, the older one was in his, uh, late or mid to late 50s, and the younger one was sort of, I think just turned 50s or something like that. Um, so they weren't they both want out like, oh, they both wanted out, yeah. They, well, so, so let me rephrase that. At the time of the deal, they did not want out. Uh, they were supposed to stay on to run the business very quickly thereafter it became apparent they did not want to run the business, so, uh, they wanted out. So. Uh, you know, 5 years down the road, it all worked out. That 1st, 12 months, uh, there was a fair amount of, uh, volatility I'd say. Um, so yeah, so we Uh, worked on the deal. It was a 50% equity. Um, the owners ruled some equity, um, and then the rest was seller financing, so we didn't use a bank which, you know, I think I actually worked out well because in the original, like, again, back in 2015, 1st of all, we had no operating or even private equity experience. We were this weird husband, wife, brother-in-law team, and at the time, landscaping was considered, you know, was not an interesting space, um, and sort of dismissed by a lot of people. So I don't need, maybe we could have gotten bank financing, but I, I don't really know what the terms would have been like, and I think it would have, would have been harder for us at that time, it's a lot easier now. Um, so the sell of financing really worked. Um, we ended up purchasing, I, I forget the exact timeline, but we ended up purchasing, uh, the, the remaining, uh, equity out and refinancing the whole deal, I think like a year or so afterwards, um. And So you put some cash down for 50% of it, right? Yeah, because at that time, 5 years ago, landscaping um was a multiple lower than it is today. Now people value it more. Yeah. Yeah, yeah, yeah, so at the time it was more, I'd say like, Around like 4 times was like a a full multiple. Now I think it's more like 5 to 8 times for a landscaping business. Yeah, wow. Yeah. So, yeah. Got in before it got expensive, I guess. Yeah, and how did that uh negotiations go back and forth, so you started at the beginning of the year and then in September it closed, right? Is that what you said? So how did that negotiations goes like you We'd like to buy your business. We're gonna present you in the LOI and here are the terms. Did they accept the first terms or did they say no? Yeah. Yeah, well, I'm gonna have to think back my memory a little bit here and just, uh, remember the specifics because it's kind of when it's happening, it all feels very, very important. And then like 6 months later, you kind of forget all the specifics like 30, 30 years later go like, wow, why did that take so long? Why did it cause so much stress on me? 30 acquisitions like. Yeah, um, so I, it was sometime in the first quarter, um, when we first met them, um, a little bit of it was, I think, yeah, I think we went back and forth a couple times on the offer and the structure and and those sorts of things, um. A big part of it was, um, because they were staying on kind of what their compensation agreements would be like when they stayed on and all that sort of stuff. That was certainly a stumbling block. And, uh, I remember a meeting where, um, we'd gone up to Portland to, to meet with them to go over the proposals and all that stuff, and they went very poorly and we sort of thought, the deal was dead, um. Uh, because they, they, you're kind of like kind of like most owners, like they had primarily been paying themselves off of the distributions of the company and had like a modest salary and, you know, I think for an owner who's been living off of distributions, then to have someone come and say, hey, this is what your salary should be, there can sometimes be a mismatch between what they, their perception of their, their value is and what. Uh, our perception of their values. I've never you've never seen that, yeah, of course, um, I think we've seen that in every, every deal, uh, every instance, yeah, uh, so, but it was our first time, so it felt, you know, really it felt worse, um. Uh, but we kind of got the, the deal back on track. I would say that the broker in this situation, I know a lot of people kind of look down on brokered searches, um, and, and we've done some proprietary, some brokered, um, this was certainly a situation where the broker really helped, um, because he had a good relationship with the owners, he was good at communicating, and he was good at, you know, telling us like, hey, this is gonna work for them, but he was also on whatever particular. Issue was coming up, but, uh, there was also, you know, he had the ability to go back to the owners and say, hey, you know, what they're asking for is not ridiculous. Like, I've seen a lot of deals, this seems like this is normal. If you want a deal to happen with these people or anyone else, this is, this is the reality of what a deal looks like. So, I, I think he was fair, um. And certainly earned his, uh, commission, uh, cause I don't think a deal would have happened if he hadn't been able to be that bridge and communicating between us. Um, and we certainly have had deals, proprietary deals where you said it would be really helpful to have a broker figure right now because, you know, there's something in the legal terms that we think is perfectly standard and normal and the owner is, you know, freaking out about and there's nobody to say like, hey, you know, If you don't want to accept these terms, like that's fine, but everybody else is gonna ask for the same thing. Uh, you know, you made a really good point there, cause that's very valuable. It's like making a big sale into a a big company. You gotta have a champion to manage the expectations of the people like, hey, brokers saying these are legitimate people, they got the financing, and this is a, you know, a good deal. It's not a bad deal, it's not uh irrational deal, it's a good deal. Right, and having that voice is very important, and we found that sometimes, you know, obviously sellers will have a lawyer, but we found that very often the lawyer. One often doesn't actually have that much experience with transactions, or this is the largest transaction they've ever done, um. So, uh, sometimes, you know, the lawyers seem to be more about kind of like winning the argument as opposed to, to like getting the deal closed. Um, and so it, it, yeah, the, the broker role or somebody, uh, playing that role could be uh very helpful. So, uh, anyways, we went through that a bunch, um, and we ended up, I forget exactly why, but we came to a bit of an impasse, um. But since it was our first deal, we wanted to be close to the operations because we're very aware we had no operational experience. Um, we actually ended up, uh, James and I sold our house in Connecticut, and, and we moved up to Maine. Um, and that actually, I think that like symbolic act of us. Actually moving there, um, and being committed and all that stuff, I think showed them that like we were really serious about doing the transaction. Um, because I think before we sort of been like these people from Connecticut that Like they weren't really sure if people are gonna owners, and then I'm just gonna answer somebody telling me what to do, right? Exactly. And I think that when we sort of made the show showed how committed we were to this, it wasn't just a side project, this is what we wanted to do. Um, I think that kind of helped emotionally get them more comfortable with, um, with the transaction. And, uh, it was a little bit of a leap of faith from our perspective, but It all worked out, um, and now we are. Um, the seller financing, how many years was that over 1 year, 2 or 3 years, or? Uh, so our standard, I forget exactly what theirs was at the beginning, but, um, our seller, standard seller financing is 5 years, 5 years interest only 5 years is fast, right? So that you guys are finished, yeah, yeah, yeah, yeah, 5 years, um, usually, uh. Uh interest only with a bullet payment at the end. Yeah, what was that, uh, what was that payment at the end? What kind of? In terms of like dollar value or uh compared to what the seller financing, you know, I mean you have to give a number was it bigger than the Um, I can't give the number just because I, I know that I'm kind of bound by charity with them. Um, but no, it was, it was a site. Well, we ended up actually just refinancing it. So, you know, yeah, yeah, yeah. So that's, that's kind of what we tend to do with our seller notes is we have a facility with the bank and we end up, as they come due, we just, uh, refinance them out. And by that time, so 5 years later, uh, now you're running the business. Uh, but you said like, I don't have operation experience and it, and I had this, uh, I, I didn't have this conversation. A friend had this conversation with a billionaire, and he goes like, hey, you need 3 superstars. You need 1 for acquisition, you need 2 delivery, and you need one for operations. Uh, and 3 superstars and you'll have a billion dollars dollar business. And where were you guys at? Did, did you guys able to grow the business over 5 years? Did you do more tuckins for this guy or what this business or what happened? Yeah, so for this, this business now is larger than when we purchased it. It's certainly, I, I, it was not a straight line up. I would say there was a couple of, of um dips as. You know, in the first business that we bought. We didn't really know what we were looking for and I think that this company didn't have Sort of as much there in terms of processes, like we were talking about at the beginning of the conversation, like, didn't have quite as much there as we probably would want in a company if we purchased it today. And I think we were a little naive in coming in and being like, oh, well, all these things are so easy, like, it'll be very easy to implement these changes. Um, Digitizing, uh, you know, like putting everything onto, uh, an ERP system and, you know, cleaning up billing practices and all these things and those things are all very doable and we've certainly done them a number of times, uh, but It is, uh, takes longer than you might think, um, when you haven't done it before. So, uh, that kind of took up the first couple of years of, of a lot of those types of projects and, and now that those have kind of happened, the company has certainly grown, it's bought a lot of its competitors, it's grown into a lot of geographies, um. Yeah, and it, it's, it's doing, it's doing very well now, um, but the first, uh, I'd say the 1st 12 to 24 months, it was a little, uh, a little up and down there. Yeah. And uh so these guys, did they, they, did they stay the whole period of the earnout or did they want to get out sooner? No, there was no technical earnout or anything like that. So, excuse me, a seller financing. Did they stay seller financing? Yeah. No, um, they left, I forget, it was probably a little over a year, and we're just like, you guys don't want to do this. They were like, no, we don't want to do it. So, uh, so we, uh. Uh, they, they exited. We found somebody else to come in, run the business, um, and, uh, does that take that process? I mean, this is great because I, when I, when I do get to talk to Andrew Wilkinson, I said he said that, uh, my job is to hire and fire CEOs. Yeah, he said that in the shortest amount of words possible what his job is. Yeah. Yeah, yeah, uh, essentially that is, um, well, primarily right now that's James, my husband's job, um, cause he's kind of taken on that role, but that, that's his job, um. Your question of finding the person, um, yeah, how long did that take to find oh hey, I, I need somebody to take over this landscaping business doing, you know, 1 to 3 million and Ibida, uh, can you grow it too? Yeah, so that's an interesting question. Um, it's very easy to find the wrong person, I'd say, it doesn't take much time at all. Um, and we certainly, uh, learned that lesson, um, and, and, and. In these small businesses who's running them is really the most important thing. Um, it, it, it makes or breaks it. It, it's, this is not, you know. Nestle and whoever CEO. It doesn't matter because there's, you know, a lot of momentum and there's a machine that's just working there and, uh, you can create people in an alley into a little bucket right there in a large corporation. I just want you to do these three things. You go home, get your paycheck. But when you become CEO, they've got so many things going on that. It's a very unique job. It's very demanding. I think it can be very lonely, uh, and It's um it it is hard to, to hire for and so, uh, you know, we Certainly had a couple of false starts on that front, not with Sea Breeze specifically, but just in general with the companies, um, and, and, and came to a realization probably about 2 years ago that, you know, if we, first of all, at the time I was, I was leading up our, our deal, um, sourcing, and we had so many deals that we said this would be really interesting, but we don't have anybody to run it that Both has the skill set and that we trust and they, and that we trust part of that is, you know, the most important aspect, uh, because we run a pretty decentralized system. Um, you know, when people become the leader of one of our businesses, they're, you know, they're in charge of the business. They have a lot of uh autonomy, we're not looking over their shoulder, telling them what to do. So, Isn't that frustrating like to find a great deal because I look at software companies and very profitable. But the guy who wants to leave doesn't want anything to do with it. It's like, like, I don't have anybody to replace him and I'm not gonna do it. Exactly. So we really felt like we were sort of stagnating and we're like, well, we can't. Achieve, you know, what we want to achieve with Chenmark if we don't solve this problem, and I'll give uh the credit all to James, uh, cause he really kind of masterminded this. Um, program, uh, but we started it's called the generalist vice president program or GDP program to start. It's like a rolling hiring that we do and we hire people who are sort of interested in, a lot of them are interested in doing a search fund, um, but or maybe. want something a little bit different. Um, some of them are, you know, people who are sort of call them like disaffected private equity or investment banking, uh, associates, uh, things like that. Um, hold on one second there. Oh, there we go, yeah, um, I just got another call, um. And so the program is they come in, they work in Portland, Maine, uh, with us for a period of time and that's more of like a um doing uh deal sourcing, uh, due diligence, all that sort of stuff, and then working on supporting our, our businesses, uh. And then Uh, they go from there into an operating role in one of our businesses, so there's a CFO, head of sales, branch manager, whatever, something comes up. Um, and from there when we have a new deal, uh, that opens up, we send out a note to all of the people who are eligible to say, hey, we have this business, it looks like it is, um, you know, at a point now where we be thinking about leadership. This is what the business does, this is where it is, all that sort of stuff, and then either somebody in that group raises their hand and says, yeah, I want to do that. Um, or they don't, uh, and we don't, you know, we don't proceed with the deal. So it's kind of contingent on that group of people, um, and for us the, the benefit is by the time somebody is one of our CEOs, we know them very well, we trust their decision making capabilities, they understand what we're trying to do at Chenmark, uh, which is maximize free cash flow like we don't really care about revenue. Um, we want to own businesses for the long term. We want to treat people well, like all of these things are important to us. They understand it because they've been living it for a period of time, um, and, uh, then they become the CEO. So that so far has worked out very well, um, for us and has allowed us to be a bit more aggressive, um, in looking for deals and uh this uh uh uh production, uh. Nurturing of CEOs kind of like McDonald's University just a just a mini mini Chenmark version. Yeah, that's very cool. I like that. I mean if you go backwards like that, what's the problem we're having? What's the bottleneck? Well, we need to produce, you know, CEOs. Yeah, and it's even CEOs, but then we also find that, um, you know, somebody. Yeah, we, we, we can attract some really interesting talented people into the program who are saying, hey, you know what, like, I just graduated from business school. I don't want to do consulting. Like, I want to go and are having the exact same feeling that I had a year out of graduating business school, which was like, I'm sitting at a desk and I don't feel like I'm doing anything. Like, I want to have an impact. I want to interact with people. I want to lead a team. I wanna, you know, I actually wanna do something, um, and are feeling a little restless in a more traditional role. Um, so by a lot, you know, those people then coming in and, you know, being CFO at a small landscaping company, you know, they can be really effective at that role, but they also learn a ton. Um, and so then it's both the CEO but then in a lot of other sort of more executive roles, I feel like we've been able to bring in a lot of really talented people to those roles who otherwise would never be in those roles. So it ends up making our, our companies overall stronger even though, you know, the goal for those people is very similar to um The military assignment is to like, you know, leave it better than where you found it and document everything. So that, you know, an opportunity comes up, you could go do that, new opportunity and a new person could step in and, and, and kind of take over your role and then their job is to make it a little better. So we're excited about the program. I'm sorry, what, what are you seeing as far as people that are coming out of your program are are disaffected Wall Street or actual people from, you know, Uh, Bangor, Portland, Maine. I, I've been to Portland, Maine. It was freaking cold in July. Yeah, it is not a warm place, um, uh, but I grew up in Canada, so it's relatively warmer here than where my parents are right now. So, um, Uh, it's, it's a lot of um people who who are graduating from business school, so, um, We've got a couple of one, Harvard guy, some Yale guys, a tech guy, like, you know, they're kind of business school is a natural recruiting ground for us because people are looking for jobs, um, and they're aware of what a search fund is and that sort of thing. Um, but that's not really like a prerequisite to being in the program by any stretch of the imagination. Uh, it's just something, it's, it's an area for, um, that we have interested people, um, and then it is a lot of um. Uh, you know, people who are in, um, you know, we have, we have one guy, uh, who was sort of mid-career private equity, I just want to do something a little different. I had a family, um. Uh, a family who was involved with small business, so kind of understood that and liked it and and was drawn towards more of that space. Um, and so I, I'd say a common thread is most people who come to work with us have some sort of prior personal exposure to small business, um, and are find that appealing. How, how did, is this an official program or you have to go through Chenmark or did it, the reason I brought this up is, uh, I, I had a guy from Search Funder reached out to me and said, hey, look, uh, I got a ton of businesses, and I got on the phone with him and he goes, yeah, I've got, I'm a search funder, and, you know, uh, I've gone through 1000 businesses and I just can't find anything I want. I go, well, that's a lot of businesses. What do you really want? I, I, I, I just want to work for like a CEO or president of the company and help them grow, and I go, he sounds like a perfect guy for a program like this. Yeah, cause he doesn't really want to acquire something because he doesn't know how, he needs somebody else to teach him how to do it like you guys do, and then maybe do it later. Yeah, that's kind of what, when we talk to people who are interested in search funds, like some people just want to do their own search funds and, you know, that's fine. I think for us when we talk to people. It's sort of, hey, you know, you can come and instead of doing a spending 12 to 24 months doing a search, you could come in, you could spend some time doing. Deal related stuff, you could set some time actually working in a business and then when a company comes up for you to run, you know, if you fast forward 2 years from now, you'll likely be in the CEO seat anyways, um, but you'll have spent your 12 to 24 months getting more tangible experience that's not just can you close the deal, um, so and then you're kind of part of. The Chenmark network. Yeah, how many times does the CEO talk to you guys? Do they, you know, uh, Warren Buffett would say, look, I, I just want you to send the numbers at the end of month and, uh, or I, you know, no problem, come to me before it gets too big, something. So, so that's something that it, you know, it's certainly something we've had to think a lot about. So when we first started, you know, being informed by Buffett and whatnot, but, you know, it was certainly the sort of Oh, you know, more hands off the better. Send me the financial statements, like, all's good. And like we very quickly came to realize, like, you know, we don't own Geico, right? Like we own small landscaping business and things are different. And so, um, what we needed to kind of like, Orient ourselves or like, what are the controls we have in place to make sure that everything in the company is working well because things can go. Bad quickly in a small business setting. So what are the controls that we have in place to make sure that, you know, there's not accounting fraud going on, that, um, you know, the financial performance is like within the realm of what we think it should be that, you know, all of these things are kind of happening, um. In, in a sort of sustainable way, um, well, not actually being the ones who are, are, are running the business, which, which is tricky and is a little bit of what I think we learned. In a, in a much more um comprehensive way than we would have learned if we'd actually had a lot of external capital and then just focusing on deals and then like think about the, the, the um the operations later. So, um. Yeah, I guess what I can go a lot more into this. One of the tricky parts is is you, you're running a $3 million even a business and it's a trendy like profit margin or gross margin. Or net income, it starts trending down and you're not seeing that. I mean it's like boiling some, uh, you know, like a a a crab, you know, you don't know what's happening it's still way it's way too late. Right, then you have a crisis and there's something structural and so um what what we kind of do is, you know, when the company is first purchased, it's like, OK, the first thing we need is reliable and accurate financial data reporting, which Can take a little while to get up, get up and running, so operational and financial performance. Is that standardized through all your companies now? It's standardized that they have it. It's not standardized. Like it's not because they're different businesses, like what would be standardized is like every week, at the end of the week we get a cash dashboard and it tells us how much cash we've got, AR, AP, kind of like. Cash conversion cycle things because from a cash management perspective like you can see problems coming like if a company has like way more AP than AR and that's trending in the wrong direction, like the cash balance might be fine right now, but you can see that it's you're going to have a problem in whatever a month um and so kind of the system over 30 businesses or acquisitions, uh, are you using like QuickBooks or White Plains or something. So everybody has their own, everybody, most people are on QuickBooks, but some are on different platforms. We've got one on Sage, um, some on Xero. It's all different, um, but the, the reports that come out of them with the information is standardized. So we say, hey, you know what, you've been, you've been on stage for whatever 10 years, like, I don't care what program you use as long as it provides the outputs that we need it to, um, so. Uh, so the cash dashboard, um, is, is like a weekly thing, um, and then financial reporting happens monthly, uh, and what we have is just like export systems and we have somebody who basically like aggregates those into reports for us and uh because they're all coming from different systems and so the reports we get are standardized and I'd say that. Um, when things are going well, we're, we're fairly hands off. Um, we kind of interact, standing, kind of like check in call with the CEO once a week, see how things are going. If, you know, somebody, let's say they're going through a pricing increase, they want a lot more, you know, help, and you might be talking to them every single day cause they want someone to talk to about how they're communicating their price increase. And then, uh, that goes through and then you kind of go back to, you know, a check-in call, um, once a week and sometimes that might be. 10 minutes, you know, hey, how are the kids? You know, the pets lost and I don't know what how are things at work. they they gotta come to you for tuckins, like, say, hey man, I, this guy's got this nice route, and it's, he's won 35 people doing that and it really high profile customer list. Yeah, they'd be, we would be involved with uh Tkens, uh, so like capital allocation decisions. So we would be involved with Tuckens, not necessarily doing the negotiations or anything like that, but certainly, um, Yeah, we actually never had a situation where someone we really wanted to attack it and we didn't think it was a good idea. Um, but, um, you know, we, we would be helping, uh, probably with diligence, because a lot of our companies don't have that capability in-house. So, um, one of our people would help with, um, and in that GDP program, that's what somebody would be helping with. So an example is right now one of our businesses is looking at a tuck in, so one of our GDP people who eventually will be CEO is is working with a current CEO to, you know, do all the diligence and the analysis for this tuck. So it's not somebody in his company that's helping him, it's um something uh. Uh, somebody at sort of Chenmark HQ that that's helping him with that analysis. So, um, but you know, when you start to see the data go the wrong way, then the the conversation is. Um, you know, really trying to understand why is that, you know, why is that happening? Um, and When do you raise the red flag on, I mean, not, you know, small businesses, it's not uncommon to see trends going down 5% and go, but don't panic. 5%'s no big deal. That's why it's a great thing we're not public, um. You know, things are volatile in small business. It's more about understanding. You know, it's not so much when something's down, it's, it's, it's understanding your business. So can the person who's leading it or on the management team talk about, hey, you know, we thought we were going to make $100 this month, but we actually made $300 that would be Honestly, somewhat surprising as well if you couldn't really articulate why that happened, um, because it also means that if then you made $50 instead of $100 you also don't really understand that. So for us it's One, does the person understand the drivers of their business and what's causing variability either year over year or relative to their budget, everybody has to put together a budget once a year. And the budget is really also a way to say, do you understand the drivers in your business, um, and you have a way of tracking whether you're, of knowing whether you're on track or off track. So, Um, like in the landscape business, being able to track your gross profit is super important. So right now, like our CEOs would all be looking at like gross profit by job, gross profit by business line, all those sorts of things. Um, so. Uh We would basically be understanding like what the drivers are and then if there is a problem, it's, let's say landscaping business, hey, like, You know, it turns out that we're down. What are the drivers of that? So what part of, you know, the income, like what division is causing it, you know, and maybe an example could be, hey, we dove into it, we're really starting to underperform and it turns out it's because last season we had a new estimator come in, he actually like drastically underpriced. Uh, all of our mo contracts, I'm just making this example up Mo contracts, whatever systems we had in place didn't catch it and now we're seeing the results because he basically like gave away um our Uh, gave away our profit and all mo accounts for the next 12 months. Clearly that's a problem. It could 100% happen, uh, in, in one of our businesses, but at least then we know what it is and we say, OK, well, what do we do to fix it? We have to wait for those contracts to roll off. Are there any we can renegotiate? Can we change the scope, you know, and then you kind of go into those conversations. So for us, it's not so much about the performance is declining, it's about understanding the drivers for that decline and then being able to say, OK, These are the things that we need to do to fix it, and then actually seeing the person who's in a leadership position. Actually go and fix it and work towards it and all those sorts of things. Cause obviously in a small business setting, like it, you know, crazy stuff happens, you know, mistakes, yeah, mistakes happen. You might have a little bit of underperformance sometime. It's not like freaking out. It's more like, do you understand the driver and are you actually fixing that problem? And then do you not make that mistake again? That's really kind of how we think about it. But you'd be having a lot more interaction with us if you were performing poorly. Oh yeah, I bet. Uh, hey, it is, you got a program for finding hiring CEOs, uh, now that you've got, uh, you know, 30 plus acquisitions, through all these CEOs, do they still come to you guys or is that kind of a mass? Mine that you created. The reason I bring this up is I had this great conversation with this, you know, uh, company doing $5 million digital marketing and, you know, he wants to retire, but he also wants to grow, but the thinking that got you to $5 million is not gonna get you to 10. You got to work with people that have built 50 million $100 million businesses. They just give you ideas that go, holy crap, I didn't really think that way. I mean, what do you guys have for CEOs in the place to, to, for them to see, here's how I grow my business. Um, so a couple of things. First, um, if any of our business, our CEOs want to be, uh, there are a lot of like industry peer groups, um, and so if anybody wants to be an industry peer group, we're fully supportive of that. Um. Internally, I think one of the things we're excited about and something that we feel that we can build, um, it, it, it will have more value as we get larger, um, is basically building that within trend mark. So right now, um, you know, COVID put a little bit of a hamper on this, but we're starting to kind of kick it back up again over the past year, um. Because we have monthly CEO meetings, um, and so that's a forum for our CEOs to come together that's sort of like a guided conversation that, um, I don't know if you're familiar with, uh, YPO, but um we're part of YPO. We've basically taken a lot of their like forum structure discussions um about kind of checking in, everybody sharing, picking a topic. Um, diving into that topic. So we've kind of taken the, the forum structure with both that both James and I have experience with and tweaked it a little bit, but used, I'd say 80% of it as kind of the, the framework for our CEO uh meetings, which I think has been really, uh, effective and had a, a positive impact, um. On everybody both in terms of their own personal and professional development, but also in terms of building um connections uh between the, the, the teams because people need to be a little bit um Uh, vulnerable, uh, in those settings to be able to, to make those connections. So when we just kind of get together and just talk business, I feel and like, oh, everything's great, blah blah blah, um. It, we don't really have the break. Yeah. Yeah. And so when somebody comes and says, Hey, I'm, I'm here and it, you know, whatever. My, my grandmother is ill and I'm having trouble with this employee that's, I've been with her a long time, but they're really not performing. And like, we're trying to create and facilitate a forum where people have that type of relationship where they can go with the real things that are happening and, and help each other through. Um, whatever struggles, uh, they might be going through, um, at the time, but then also have somebody like celebrate, you know, a group that celebrates all the wins and all that sort of stuff. And so we're excited about that and and are excited about kind of what we can, um, that can become over time. Yeah, I, I, I love that because what happens is, and you go back to my working in startup days, like the, the red flag started when they stopped being transparent about what was happening. Because you knew something bad was happening because they were afraid to show, share bad news. Um, creating an environment, a nurturing environment, was like, hey, it's OK. Like this happens in business, it's not, you're not the first person to see a dip in sales ever. So don't worry about it, right? OK, but the thing is, what can we do about it? Right. Exactly. Yeah, we're one of our um Uh, Uh, core values is what we call like to chase better, which is that we kind of believe that like wherever you are, it's like a snapshot in time, it's not like a judgment for you for the rest of your life. It's just Something that like, this is where you are at right now. And then like, what can you do to improve on that wherever you are. And that's kind of one of our, our core values that, um, you know, we always believe that kind of no matter what, we can work to improve, like we, we have the ability to improve um. And so that's kind of core to how we think about the performance of our businesses. Yeah, I, I, I love that because actually it's one of mine is chasing my better self. And if I'm gonna be a better husband to my wife, I actually have to be a better person, more transparent to myself. So I, I love that. So let me, let me ask you a couple questions. So we're kind of running out of time here. Um, so what do you know now that you didn't know then? I mean, how, how It's like I wish it was like a measure. I'm so much more wiser on a scale of 10, but you know, what, what would you summarize and say it's like if uh your daughter or son came to you or, you know, somebody wanted to work with you, it's like, hey, here's the golden rules like Warren Buffett has golden rules. He's like, you know, don't lose money and, you know, fall number rules number 2, like, don't forget the rule number 1, right? Yeah, yeah. Yeah. Um, so I, we kind of touched on this, but I mean, the one thing that has really hammered home is in small business, whoever is running your business. Is the very, like it is the most important thing. Um, if, if, if James Palmer and I make the wrong decision on that, the company is gonna struggle. And if, you know, we have the right people in place, like a lot of things just go a lot easier. Even when the company has poor performance, if you have the right person in place, you can work through it. If you, if you have the wrong person in place, things can, can kind of go sideways. And so, It sounds obvious, but having lived it, I think that if I had to choose one thing, um, getting that CEO spot is, um, you know, kind of, uh, betting on the jockey and identifying the jockey and all that stuff is, is the by far the most important. Thing, um, that I've realized. I always knew it was important, but I think what I've learned is the, uh, the, the amount of importance is the number one thing as opposed to kind of a list of 10 or 20 things. I, I got a question for that because then I'm running out of time with you, but, uh, so do you guys interview the CEO together or independently and then Like, uh, you know, you got a veto vote and so, I got a weird feeling about that guy, you know, he looks clean on social media. He's not talking about Nazis or he's not doing like anything like that, but I just got a weird vibe about it. Yeah. Yeah, so, well, the benefit of our new program is that anybody who's in a CEO role, we've all worked with and know, um, so that helps. Um, we, between the three of us, um, Uh, we all have like a veto, so on deals and people. So if somebody's just like, you know what, like, Person looks great, but I just have a bad feeling about it. I can't articulate it, and I just can't move forward with it, then, then we don't. So that's been pretty, uh, and, and then the other two don't hold it against, uh, them for, you know, forever. Um, so that's how we kind of make that decision internally is just How can we, you know, if we either all are all in or we're all out, and if one person's kind of like uh a little bit like not sure, then we do something which is called disagree but commit, which is, hey, you know what, I kind of disagree. I'm not sure. But I'm going to commit to this decision, uh, and I'm not going to bring up like 3 months from now how I didn't want to do it and you guys wanted to, you know, that kind of like snide comment of like, oh, I never want to do this anyways, uh, that, that doesn't fly in our group. Yeah, so that really doesn't fly in our group. So it's either I'm fully out and we can't move forward, or, uh, you know, if somebody's a little bit unsure, then they're, they don't have super strong feelings about it, they'll just say like, you know, I Kind of disagree slightly, but I'll commit and, and, and I'm, I'm behind, um, the others on this decision. So it's, uh, it's not an easy thing. It's not easy. No, no. Trish, I wanna thank you. I've taken an hour's worth of your time and I hope this is valuable to whoever's watching this. Trish Higgins, partner at Chenmark Capital Management, definitely a top M&A entrepreneur. So thank you so much, Trish, for this time. Thank you, appreciate it. Uh, it was enjoyable, great conversation, and uh thanks for uh for doing this. All right, well, take care of right. Thanks. You too. Bye.