E:37 Top M&A Entrepreneurs Podcast - Daniel Sweet, Sweetwater Partners - 3 Acquisitions

Uh Welcome to the top M&A entrepreneurs today. My guest is Daniel Sweet. Daniel, welcome. Daniel is actually driving today, so we only have him audio. Welcome to the show, Daniel. Thanks, John. I really appreciate it. Uh, I apologize for taking this driving, but this is, uh, this is how 2021 works these days, right? Yeah, yeah, well, actually we're driving back in before everybody be home with COVID. Good point. Good point. Yeah. So what, tell me a little bit more about your history with, uh, buying, selling, acquiring businesses. Where are you in this? So what we do, we're a Texas-based company, uh, and we buy Texas-based companies. So what we did is we put together a group of myself and two others, uh, and we buy businesses within our backgrounds. So for instance, my background is 27 years in IT so we buy technology. Uh, one of the other partners has extensive experience and energy, so we buy within there and the other one in 30+ years in construction. And so we buy construction companies all within the state of Texas, and our reason for that is just that the the network that we've built up in the state of Texas for people to bring in as additional or replacement leadership positions is, is pretty vast. So it gives us an advantage as a small company, being able to put people we know in place to be in charge of these companies. Yeah. So how did you guys start this? Did you sit around, uh, you know, dinner table one day or you guys work together and say, hey, let's start buying companies, form a fund or what? So, uh, actually, while I was working for Mega Global Corp, uh, one of several, uh, I actually started to, I talked to some M&A guys that were there, and I, you know, it was really interesting to me. I like learning stuff. And, uh, so I asked them, is there any reason this couldn't be done on a smaller scale? Um, because I, you know, I had done a lot of different positions within technology. I started out as a giant nerd. I got dared into sales at one point, in sales and sales management, opened offices, did all that. And I understand, understood how we could build business within a small IT firm. Uh, and they, their answer was basically, well, there's no reason you couldn't except for, you know, it's not worth the time and effort, uh, because they were doing billion dollar deals. So, OK, well, I'm smaller than that. Uh, so I started it at a real small level with technology companies, uh, and then, you know, down the road, the company that I was working for invited myself and thousands of my closest friends to try something new, uh, but they gave a nice, uh, severance package. I decided I was going to pursue this full time, and two of my buddies that were in a similar situation uh joined with me in this and brought their experience levels and we were able to approach this together we're slightly larger businesses and, you know, after we, you know, got started, we just got hooked. It's, you know, this is so much better than living in the mega global corporation world for us and uh so and working for somebody else. Exactly, exactly. So what are you talking about the size of, let me go back to this. Did you guys have a fund, put your pool your money together and say, hey, 33, 33, 33, 3% or was it, how do we buy these companies with, you know, leveraged buyouts, let's say. So there were what we discovered was there's 1000 different ways to structure a deal so we did have our own money that we put into the deal. And we were just arranging what we would purchase based on each individual company that we bought. Uh, and so we, you know, the first company we ever bought the, uh, we did the thing that is probably the easiest to do on your first company, and that is we use an SBA loan. We all went in for the 10% piece that we had to put in, uh, and, uh, use the SBA 10 years and low interest to leverage that up and got our first company. Uh, and we learned, what was the company that was Technologies. Say that one more time sorry. I'm sorry, it's M Link Technologies. They're a uh e-learning company e-learning company, cool. What kind of revenue was that doing? Uh, so they were doing, uh, right over a million a year, give or take, 23, and nice margins because it was all, uh, in-house. Uh, it's just, it's a consultancy, so they're building interactive video training for Fortune 2000 companies. Oh, interesting. Uh, and how did you find that? Was that in your previous network of contacts? Well, so actually, there was one guy who we partnered with on this deal, who was in our previous network of contacts. Uh, he spent his career in the e-learning industry, learning and e-learning. Uh, and he had known the owner of this company for like 20 years. He was ready to retire. And he was looking for people to partner with who could bring the financial side of things. Uh, so that we could all, uh, approach it and uh take a company that was doing well through the pandemic because everybody has to do video training now. Uh, and expand that. So what were you, what were your thoughts when you first saw it, said this guy's been doing it for 20 years, it's only in a million bucks. Is it, is this a total addressable market, or is this just guy doesn't see how to take it to 2 to 5 to 10? So with almost all of our companies, including this one, it's usually the latter. So they get to a, a comfortable size for them that gives them the lifestyle income they're looking for, and they maintain that size for a long period of time. And, and half of it is because Everything has to go through the owner so they have 0 time left, um, and so they can't expand it because it relies on them and half of it is because they're real comfortable at that size they don't want any more of a management burden, uh, frankly they're not very good at sales and marketing at all, uh, and so they, they do what they do so well that all these customers keep coming back to them so they stay in business. And they don't, they don't really want to grow it any larger because that would be too much of a pain. So they're basically a fortune, you know, Fortune 1000 companies doing e-learning, basically he had to be saying no to a lot of potential prospects. Well, so again, the only way he got new customers was if somebody left one of his current customers, went to a new place and said, Hey, these guys are great, and then they bring them along. So he wasn't doing any real prospecting for the last 20 years. Yeah. So, what type of ebi or multiple did you guys settle along with that and e-learning company? Uh, so in this particular case, uh, we were at a 2 and change, uh, multiple. Uh, and so it, it was a, uh, it was a real nice, uh, set up and it, uh, the, the company itself was again set up for operations, very tight operations, uh, but there was no real sales and marketing so we can see where it could grow pretty rapidly after that. Yeah, so, so 22 multiple, that's actually a very reasonable price in it. Uh, what kind of salary was he taking out of the business? It sounds like a family run business, like lifestyle business. Right, right. So he was actually uh taking uh just over 100 out of salary, and then, you know, obviously the rest of the distributions. He didn't stay with the business as a consulting or anything with the SBA. He did for we kept him on for 3 months. SBA has a limit of 12. If you're going to acquire through an SBA, you cannot keep the owner on longer than 12 months under any circumstances, so we kept him on for 3 months to do the transition over. Uh, and that, and, and you know, he was available by phone after that, but that that worked out really well. But by that time, you figured out how to run a million dollars business. There wasn't anything you exactly. So I mean it was the good news about businesses like this is that more or less it's business as usual. Um, because all of their business came from referrals and repeat customers. So if you stood around and did nothing, it would continue now obviously you've got debt payments and everything else to make, but it would be able to continue on on its own. Um, so if you, if you stood and stared at it, it wouldn't be bad, and then, you know, when you have the ability, you can apply the changes and, and the guy we had, uh, running the company was uh the, the person who had been the operations manager for 20 years basically. Yeah, did you guys, the three of you co-sign equally on the loan 33%? No, no, uh, we were primary. Uh, and uh we had uh the guy in, in Dallas who brought it to us and one of the other people that we partnered with, they were both small minority partners. Was he kind of more like a sponsor, uh, uh share? Did he get a sponsor share of 10%, 15%? Uh, so he ended up at 19% to stay under the SBA window there. If you're 20% or above your lifetime limit of $5 million or your concurrent limit of $5 million for SBA is eaten into for 100% of the loan regardless of what percentage you are. So he stayed under that limit at 19. and the other actually wanted to participate at 20. Uh, so they were both playing an active role, not a day to day role, but they were actively working with us to manage the company. Yeah. How did the books look when he turned them over to you? Were they, you know, ready to go? QuickBooks, produced them in 5 minutes, or was it? You know, it's a lifestyle business, and I'll put my spreadsheets together when I get a chance. What did you talk to the owner before this? I've seen it 100 times. That's exactly what it was, yes. And it worked for him, like I said, for, for forever. He did his books, uh, on spreadsheets. He was very, you know, detailed and meticulous because he was a tech guy at heart, uh, and he handed him off to his accountant and said, There it is, go do something with it. Uh, so it, that's ultimately there were no, there was no application really. There were no QuickBooks. There was nothing that was intended for financial transactions. Yeah, there's a, there's a business I'm looking at right now. It's a translation business, Spanish, uh, you know, teaches people Spanish, and it's been around for 10 years, so the H reps are great, SEO is great. The, the challenge is that you didn't keep any books over end of the year. So I said, look, we, I, I gotta get your bank statements. I mean, I, I don't know if you're making money or losing money. Like, and you're coming mingling with all your other, you know, your projects here. So I, I'm not making an offer. I'm not sending you any money until we see your bank statements, and that is being slow walked. Yeah, I can imagine. I can imagine. Yeah, the uh bank statements plus tax statements is the only way to validate that. Yeah, yeah. So what did you guys look at this business and say, hey, this could be a $5 million or $10 million dollar business and you knew exactly what to do? So, uh, the guy we partnered with was the industry expert, and he was showing us the comparables for other companies. And it turns out e-learning industry is really fragmented, so there's no real 800 pound gorilla there. Uh, so the growth through a combination of actually adding a sales team, uh, and potential other acquisitions that we could add to it just from other regions. Uh, the potential was at least 10 million over our, our whole period is 5 years, so at least 10 million over 5 years. Did you, um, Is it, are you in the reinvestment stage? Everything, all cash flows go back into the business, or are you actually taking some kind of profits out where or distributions out for as the owner? Usually what happens is the first year all cash flows end up going back into the business because of the expansions that we do. We, we, we spend all that money on growth, um, after that we do a uh a uh fraction of profits paid out quarterly to the ownership. OK. Yeah, and is, are you seeing that right now? Uh, by the way, what was the profit margin on the e-learning company? I, and the reason I brought this up is 4 or 5 years ago I was trying to buy an e-learning company that had all his courses on Udemy, and he had, he was doing $2 million a year, 97% profit margin. Wow. Oh, it was just it was a cash machine. He put $5 million in his bank account. That's crazy. Well, so the, the difference with this company is that uh they're doing custom e-learning so everything they do is a new creation, so that's the downside. Oh, that's a coding OK yeah so IP is generally owned by their client, uh, so in that case, but it was still a 25% profit. No, that's great, yeah. Yeah. Where, so how long ago did you buy that and where are you at in the uh results, the planned results metrics. So we bought them, uh, so that one we bought a little of a year ago, roughly, and we have, we have spent all the money on growth, absolutely. Uh, so the, uh, but we, we've had a surge of sales as a result of that, uh, and so rolling into the new year, uh, you know, with, uh, with all these, uh, works in progress, you know, you've got billable milestones, uh, so as we get into the new year, there is a, uh, a huge amount of uh. Uh, outstanding AR that uh we are now beginning to collect so we're kicking it into gear for the 2nd real full year, 2nd calendar year anyway, um, and, uh, it, it, it's, it's shaping up really nicely. We've got a lot of new clients, um, and there were a lot of uh delays from 2020 that were that happened in 201. But among these Fortune 2000s there were, there were some of those projects that were delayed even further. Uh, so there's a number of projects that are coming up in 22 now, uh, that are really nice for us. Yeah, what are you trying to revenue 12 months later. Uh, so we're pushing 2 million, uh, and the, uh, uh, this coming year, we expect that to accelerate pretty nicely. Yeah. Have you guys figured out a system of like, you know, this is the best type of business, this rings the bell, let's not do that. So, uh, we found a lot of not do that, um, realistically. What we tend to. End up buying, I don't want to say we specialize in this, but that's what we end up buying seems to be mostly professional services firms, which I would not say are, you know, 1000 times uh growth in a few years. That's not them, uh, but we've gotten pretty good at getting the professional services firms up and running and with a sales and marketing system in place so that they can uh increase nicely, uh, over the period that we hold them. Yeah. I, I might not recommend professional services to most people, but it just has to be where our backgrounds are mostly. Yeah, where, what's your plan for this? I mean, is it to grow, you know, let's say 5 million, keep it, keep it hold, or what? Buy and hold? Uh, so for this particular one, because it's so, uh, well positioned for additional add-ons, we're probably going to hold this much longer than the 5 year period. Uh, we've already added an executive coaching and leadership training company to it that fits real nicely because they go after that same Fortune 2000 buyer of training. Uh, so where one side is looking at, uh, leadership training and improving the the leadership behaviors that make their teams more effective, the other side is focused on generating skills and improving the skills of a much larger population of workers. And is where did you find that? Was that in the ecosystem of this e-learning company? So it wasn't we we're constantly in acquisition mode so we look at a ton of companies we do a lot of networking, which is usually where we find these, um. And so we actually found this company that had been operating remotely for 4 years plus, so COVID was no big deal for them. They had already done that. And so we, it was a company based out of Ohio that we moved back to Texas and put underneath Eli. Yeah, what kind of was that revenue producing company profitable? Yeah, so they have been around, so Sherpa Sherpa coaching, uh, and they had been around for 24 years, I believe. Uh, and it was the same thing. The couple that owned them had fantastic at developing this training for Fortune 2000 companies. It had a process and a procedure and a methodology that worked every time. Uh, they were great about it and they had set a specific limit uh that they didn't want to grow beyond because again it's just those two running it and that's as much as they wanted, um, but it's a fantastic company. Um, they do all sorts of amazing training for these Fortune 2000 companies that keep coming back because it works. Uh, it's just that they also didn't ever really do any, uh, real sales and marketing. So do the customers overlap between the, the, the company, the first company you bought and this Sherpa consulting? So beautifully they do not, so there's a lot of cross selling going on now. Yeah, what kind of revenue was that do? Almost the same. I mean, they were at. I think 1.3 when we acquired them, uh, that was in August um so it we're we're doing a number of things to increase the sales implement the systems. But it's they're doing really nicely. There's a lot of Untapped, uh, fruit there. Um, so, for instance, one of the largest automakers in the world uses them and has for 10 years for all of their leadership every year. Um, and they keep coming back and so what we bring on a fractional sales manager. And the fractional sales manager, one of his first questions is, so when you went to all the other auto manufacturers with this, what did they say? And the answer was, well, yeah, we didn't do that. We don't, we don't go out and do sales. We, we sales come to us. OK, fair enough. So there's a lot of, a lot of room for growth there that we're starting to tap into now. Yeah, what was it, were there dangers like the risk of having, you know, too much concentration of customers that usually happens when you have contracts with Fortune 500 companies. It's like, you know, 50% of my business comes from GM. So there there was a concentration a concern in that their top customer was I believe it was I've seen a lot of companies since then, but I believe it was 30% of their business, but when you combined it with uh Min, uh, that diluted out and it wasn't a big deal anymore. Interesting. Now you've got uh uh what, how long have you owned Sherpa coaching? Uh, so that's been since August. Since August. How many of you, uh, how many businesses have you acquired? So right now we have acquired this year those two and one other. Uh, and we are scheduled to acquire one more business. Uh, it'll be in December, before the end of the year. Yeah, how did you, how did you finance the Sherpa acquisition? So Sherpa was a combination of uh uh lending and uh traditional lending and seller financing uh primarily, um, so we did a uh a structure that worked for everybody uh with those two factors, uh, and the owners were happy and certainly the, uh, the, so what we found is a lot of these employees that have aging owners, um, in the back of their mind. They're always saying, OK, what happens next? They can't do this forever. Uh, so when we come in and buy the company and put in a new leadership, uh, they're actually relatively relieved because they can now see, well, OK, my job's going to continue. Uh, this thing can go on for a long time and they get pretty excited about the, uh, the growth uh changes that we're planning on making. Yeah, did they, what was important to that Sherpa coaching owner? I mean, it was getting the right valuation from it, you know, they want money up front or do they want, you know, $100,000 a year for the next 5 years? What, what, what were they looking for? So it was a combination for them. Uh, really what was important to them, and this is, we find this to be true in a lot of our acquisitions. What was really important to them is that they find people who understand their industry. Who are going to keep their employees on, keep the company name going. Uh, and be able to take what they've done and grow that to the next level. So, you know, they, they want somebody to look after their baby, as I've heard it say, because they've spent so much time with this. They don't want it to just be dissolved or absorbed and just taking the customer list or they're looking for people to really take care of their business as one of the most important qualifications for somebody who's going to buy them. Yeah, yeah, that doesn't change from a million dollar company to a $500 million dollar company. Well, I haven't done that deal yet, so that's good to be neither have I, but uh that's what I've read. Yeah, so what was the, now, what was the 3rd company that you purchased? So a third company is a scata company, so they do oil and gas pipeline networking. Uh, so they, they are primarily an engineering firm where they do the design and consulting around, uh, scata systems, which, you know, I don't know how so so a scater system is think of it as a network for uh machines. So it factories, pipelines, uh, power lines, they all operate on a a what they call OT network that is separate from the network that you get email and everything else on because if something goes wrong with OT, well then you get the colonial pipeline situation. Uh, so it's specifically kept separate from major networks and even the Internet, uh, so that, you know, in this case for pipelines, it can see where the oil is flowing, what the temperature is, specific gravity, they can control the valves all throughout miles of pipeline, uh, so it, it's a control system specifically for, uh, think of it as a uh computerized devices. Yeah, so it's a software solution. Yeah, basically, um, and what, what was the, how big was that in revenue? So in revenue they were doing uh so we just acquired them and they'll be at like 1.6% this year. 1.6, wow, you guys, uh, interesting that uh I think your, uh your partner step up and goes, hey man, why do we need to get a uh ONG uh software solution so I can have some contribution. Well, I mean, everybody's got to play, right? So there's no overlapping ONG with the ML League or the Sherpa coaching, but what's the potential with that? So there we're in a, in my opinion, and a lot of people do disagreement with me on this one, but in my opinion, we're about to see a massive expansion of oil and gas related projects. Now that's not exploration and production because that is, they're very nervous on that side right now. It's that's not what the Biden administration says. Well, so what the every time the Biden administration speaks, I love it because the price of oil goes up. And they released 50 million barrels of, uh, from the reserve and the price goes up to $82. Well, that's because now you've taken the reserves we have that, that are uh several days' usage, and you've gotten rid of them. So now you've got nobody's drilling new wells, you've got more demand than supply. You have regulatorily uh constrained people who want to develop more oil. And you've gotten rid of the last that we had in the tank. So now there is no control on price, and it's going to rise for a long time to come. Gosh, you would just think that somebody who knew a little bit more about that law called the law of supply and demand. Is that, is that still something? Is that still something we observed today? I heard it was a law, not a theory. So in the oil and gas world, if you're doing oil and gas services, the biggest determinant of how well you're going to do that year is what the price of oil is. Uh, and with the price of oil regularly rising, it's great for those businesses. Uh, in order for the price to go down, more supply has to come online. Uh, OPEC has said, you know what, we've had enough of your sale nonsense. We've been spending out of our reserves for 5 or 6 years. We're going to go ahead and reap the rewards while we can. And in the shale world in the US, The uh the drillers out there do not feel comfortable drilling because they feel like, not without good reason, that they're being targeted. So now, now you've got these operating wells that you've got to make live as long as possible, and you've got all these pipelines that must work because the other option is you can truck out the oil or you can put it on a train. Either way has larger environmental concerns. And so all of the oil field services companies that have survived 2020. Um, competition is reduced because there's few of them, and now that the oil prices are over $80 and going to spike from here, they're in great shape. So this uh uh $1.6 million dollar acquisition, what did the, uh, was that profitable? Oh yeah, yeah, what was the, uh, and the guy that owned that, was he around for 20 years also, or 36, 36. Interesting how you're finding all these companies where the guy is probably stagnant or just exhausted. Exactly, exactly. And we can breathe a little new life into that. Yeah, what was the uh uh financing deal stack there? What did that look like? What, how did you present that offer? Uh, so we, we went through a lot of things. Uh, this owner was blessed with two lawyers to help advise him. And uh that created a lot of complexity over time uh we signed, we signed a uh LOI with him and after his lawyers got through with it, it was uh it it it got more and more complicated uh so in the end we just said, OK, let's assume we just do an as is deal right here. What's the price on that? And so it now that ended up being a combination of our money and bank financing just. Uh, effectively one single payment at a nice discount because we're just doing all up front, but also the other half of that is this owner is going to stick with the company for 3 years to ease into retirement, and he's also going to effectively be mentoring his replacement for the next 3 years. Did he keep a percentage of the company or was this some kind of uh uh seller financing or what? So he in this particular case, he didn't retain any percentage of the company. He is being paid on salary still, but again, his main concern is that it gets handed off smoothly and the company continues to operate. So we found a really qualified uh number 2 for him, a lieutenant, uh, who he is going to be mentoring for the next 3 years and offloading a lot of the stuff where he's the bottleneck, like statements to work. So that we can grow the business. He was, was this person #2 in the company or outside the company? This is, again, this is somebody that was in our network because we have connections within the oil and gas world. We can pull him in and he is much younger and is the perfect replacement over time. Yeah, what kind of multiple did you get on him? Before, what he was asking before the cash discount and what was it a different multiple like, you know, a point or a whole point or 2 points or something? So in the end, the uh what he was looking for was really, again, it's so, uh, to back up a second, a lot of professional services companies where there's no ongoing contract, so there's no ARR effectively at all. Uh, they'll go for between 1 and 2 times, uh, IIA or some version of EIA. Let me ask you about this. uh, that is really low, uh, and I used to be in software, so how old was this code at 36 years old. Well, so again, they don't, so they're not developing code per se. What they're doing is, um, they design networks. So they stay up to date on what the industry is doing. They do a full design on a network that may go over like 1/3 of a country. Uh, and they just stay up to date on what the latest standards are so that they can put in place this design for a network. And so for the last, as an aside, for the last 20 years, they've been doing um pipeline cybersecurity, which was, you know, piece of what they did because you got to protect the networks so that, you know, ever since Stuxnet, it turns out there's countries trying to get control of our infrastructure. So. Um, they, they have done a pipeline cybersecurity for 20 years, which now is a very hot commodity since the Department of Energy and the Department of Transportation has told all pipeline owners, you need a cybersecurity plan, you need a remediation plan, and you need to tabletop this thing, and it all needs to be done in the next 90 days. Now, there's no way that's going to happen. Is that a requirement? And do you get any tax deductions on that put that in place or it's just a new cap expense? So all of that is a requirement of the pipeline owners, so that means a ton of business for this company because there aren't many companies that have cybersecurity, specifically pipeline cybersecurity skills. Um, but the Department of Energy is forcing every pipeline owner since colonial to put these plans in place, so it means a ton of new business for this company. Yeah, so it's more like an IT services firm to design a network. It's not a software like, you know, pay monthly kind of deal. It's a, no, no, no. So they'll go in, they'll do a design for. You know, the super majors, the majors, uh, they'll go in and they will even write the specs for the RFP and sometimes write the RFP for the hardware firms that are going to bid on this thing. So there's lots of, uh, uh, there's lots of scata-based hardware that controls all the pipeline and valves and everything along the pipeline that are going to bid for this business from a, you know, super major oil firm. And so this company does the design for the network to make sure it's secure, and then they do the RFP and set up the specifications and then they'll also project manage the implementation if that's what the customer wants. Yeah, and your partner has the domain expertise in this particular niche. What does he think the company can be? Oh, so, so the biggest limitation on the growth of this company is really the skill set. Uh, there are a lot of folks who know, um, uh, pieces of scata networking. Uh, this company has some guys that have immense backgrounds in this area. And what the biggest limitation is we're going to have to bring in younger guys or gals who have this skill set, but it won't be nearly as mature, and we have to train them up in everything they need to know. So that's the growth limitation is just the number of people with that skill set we can bring in. Gotcha. So you've got, uh, now a $2 million Mling company. You got a Sherpa coaching company and then uh it's got an ONG networking company, you're doing about Do about $5 million in revenue now, um, and all profitable. Exactly, that's what that's how we buy it. Yeah. Yeah, what's next? Are you gonna stick with the million dollar average age 20 years old or or look that's not the intention, that's what comes to us. It's like that's what I love that boring stuff because that you know that they're really tired, they're looking for a transition, and they're exhausted and they're stagnant. Exactly, exactly. Uh, so next, we were actually approached by somebody in Houston that has 20 years of experience in HVAC and wanted to acquire his own company. Uh, so we've worked with him and some, uh, finance partners, and we, uh, before the end of December we'll have closed the first, uh, HVAC plumbing company for him. And then we're going to, the plan is to do about a $10 million roll up of additional small HVAC companies around Houston and tack them on for this guy. Yeah, so he's going to do the operations because he's our domain expert. We're going to identify and negotiate and buy the companies that tack on and we're going to grow this thing to a significant size. Yeah, interesting. I did an interview with Adam Coffey, who, you know, buys 10 to 2010 to $50 million HVAC companies around the country. Yep. Yeah, um, how is this, go ahead, sorry. I'm sorry, the HVAC in Houston, it's just a no-brainer. They're always profitable. Yeah, yeah, well, it's hot and humid. All the time, yeah. So what's the structure of this? You have a holding incorporation company at the top, and are these LLCs, each separate LLCs or something different? So most of the uh HVAC companies are S corps and then we have a holding company above them, yes, yeah. What about the other software company? How do you have that set up? Uh, so we have, uh, both software companies are a S corp with an S corp holding company above them. So the idea is eventually when we do sell them, they'll all be combined together in the single holding company and we'll sell the holding company. Interesting. What are you trying to get this to? Do you have a vision for what size of revenue you want this to be? So we don't have a regular vision so much as we have an annual uh acquisitions goal. Uh, because there are rules for our acquisitions, as in they must be profitable, we have to be able to get them at a reasonable rate so that when we step into them they're still making money, um, they have to have a customer base and all that so we've got rules behind what we do. We, we just set a goal for acquisitions for the year. So this year 2021, our goal was 4 we're gonna hit 4, so good news there. Um, with some, uh, new people and techniques that we're looking at, we're actually looking at 8 for next year. Yeah, why is this? Are you bringing a new partner is or is you just got better deal flow? So we have definitely have better deal flow, uh, and we're going to bring on additional analysts and sales people to be able to uh go through that deal flow in a much more rapid pace. Let me go back to this, how you guys are paying yourselves, uh, uh, a distribution of profits, uh, or are you an employee of the corporation at the top, or is it? You guys just, you know, hey, here's the cash flow out of this business or it's not cash flowing, here's, here's your share. So I am an employee of Sweet View Partners. And so as we put together each of these deals, it's, it's a In a lot of ways, it's a lot of a law firm model, but it's um uh you know, you, you eat what you kill. Uh, so we all have the opportunity to participate in on whatever acquisitions we bring on. Uh, usually we each are buying in with our own funds. Uh, and the, uh, funds that come back, uh, are based on that profitability, uh, that we that we pay out quarterly. Yeah, and are you looking for a specific number, uh IRR number? Uh, so for our own company or for, uh, the, uh, the portfolio in general? Yeah, portfolio in general. So again there's no specific number we're looking for uh we know that if we acquire healthy companies that have no idea how to do sales and marketing. And we apply additional leadership and infrastructure and a fractional sales manager fractional marketing manager to each of these. When we buy them, we know they'll grow. So it's just a matter of time as to how much money they'll produce. So that's not a pressing concern for us. Well, I mean, certainly profitability is a concern for us, but we know if we do the right things for these companies, they're perfectly situated to grow. So again, we focus on the number of acquisitions we can do and since all of our acquisitions have to be self-supporting and healthy. Uh, each one we acquire will mean IRR down the road, and we don't worry about what that specific target is for the portfolio as a whole. We look at these as individual companies and we have individual profitability targets, uh, which will in the end bring us the money we need to keep things running, keep us fed. You know, going on cruises, all that fun stuff. Yeah, yeah. No, it makes sense. I mean, I, some funds or some groups that acquire companies, you know, their criteria weigh their require the, the IRR that they need, so they work backwards about what that profitability takes and maybe growth from a 1.6 to 5 is not as big as a deal, uh, uh, to do that. um So, generally speaking, Again, we have Each company uh has to meet certain requirements and certain profitability goals uh so the the targets take care of themselves uh what we look for is we look for focus on the key items that we can best produce profitability right now with this company. Uh, and those obviously keep changing over time, so we implement things, we relook, you know, it's, it's using operating systems of various sorts. We relook at what's out there, what's the best opportunity for us. We get involved with those next few items. Uh, there's always a, uh, just way too much uh low hanging fruit for us to go for when we first get in. So it's a matter of prioritizing low hanging fruit, and we know if we go after it profit will result. Did you guys, uh, your partners, uh, did you learn anything about, new about your partners that, you know, only, uh, shows up after the crucible of fire about something going right, something going wrong, uh, that you didn't see before, or you guys old enough and been around long enough to say, You know, Yeah, we're, you know, any partnership you're always learning about each other, um, you know, you learn, you know, what people's uh real risk talents are. You, you learn how they approach hardship, you learn all these sorts of things, but, uh, in the end, uh, the three of us have a really good mixture of skill sets and views, so we get a whole lot more out of the 3 of us looking at any given company whether it's pre-purchase or post-purchase. than you do with any individual, and you know, sure, do we sit around and argue about them? Yeah, we do. But in the end, you know, we're not, you know, we have a good enough relationship that we're not looking to attack each other or we don't distrust each other, so you do have to have that trust, um, so that when the argument is over, we go, OK, well, that's how we're going forward. Let's move on. Yeah. Does each one have a veto power over that, or, you know, and somebody's ever stood up and said, hey, you know, we gotta go for this one because I know we can do this, and two other guys say, no, I don't think that's possible to do, but it, you know, they don't have any experience in that industry. So right, so we We don't get involved in deals that we don't agree on. Um, we haven't specifically, again, we're a small company, so we haven't put together a list of rules that says any anyone veto means we don't do it. But in the end, if we can't convince the other partners to do it, then there's enough opportunities out there that we're all going to agree on, and it's not worth creating the uh the infighting among the partnership to go after a deal that we don't all want to do. There's lots of companies out there. Yeah, and you're just kind of look. Looking in the Texas area. Well, you bought one from Ohio back down, yeah. Right, so we'll bring them back to Texas if we already have a headquarters here, but we're looking for all of our companies to be uh based in and uh the companies are uh. A seated in Texas, yes, yeah. Are you gonna look at any B2C companies or all B2B type of companies? So our focus is B2B companies generally now. There is always a, uh, uh, an exception, and usually it involves uh guns these days. So lots of our people, uh, really like gun stores and shooting ranges and that sort of thing. So if we do get involved in B2C, it's probably going to be something around that. But our focus is really B2B. We, we, you know, I trained in 6 Sigma and, you know, we try and lay out our rails and say, listen, if we stay within these guardrails, we know what we're doing and we will stay within enough of a lane that we won't get ourselves into such a bad situation that it will crater any given thing. Yeah, circle of competence, yeah, exactly, yeah. Because have you changed any, learned anything from when you started and where you are today about, you know, who you are like. We are harder today or what or just happier because I what I, the risks I'm taking. So we, we are constantly learning and changing that that's, uh, without that I don't know that we would uh be able to keep doing this. Uh, but the reality is, uh, one thing that one of the partners keeps Um, saying that people were interviewing or doing some interviews right now is, uh, you know, we are there stressful situations? Sure, is there trouble? Absolutely. Uh, is it potentially multiplied the more companies you get? Potentially, yes. But I would never trade this for any regular job ever again. I don't feel like I'm working here. We're just having fun. Yeah. Yeah, there's you're never going back to the ordinary world. No, I don't think they would take me. No, unemployable, pretty much. Good. So you've got another HVAC closing, uh, 5 deals in the hopper, or, or even more than that next year. What, what's next? I mean, Are you thinking about raising some capital to help you acquire these companies faster? Not really, um, so in looking into that, uh, having your own fund is a special layer of hell apparently. Uh, so what we tend to do is we tend to partner with those companies. Uh, so we, uh, we're talking to a guy who has a fund. He spent the last year putting it together. I think it's a $20 million fund now, and he cannot find a company to buy that meets their requirements, uh, for, to save his life. So they're looking. And they have a real difficulty finding companies that aren't either way overpriced. Or falling apart. Yeah, and would he owe you the money or is he talking about acquiring the company for you? So we would become equity partners with them. Yeah. Uh, so we've, uh, the next. I'm sorry. Controlling interest, he would become a controlling interest. I mean, sometimes the funds mandates that say, hey, we got own 51%. So we don't do that. um, uh, our, our basic set up is that uh the money will never control the, the, uh, company. Um, so we, we develop, you know, very amenable arrangements, the, the, uh, agreements that we have, make sure that their rights are protected, but, uh, we don't do 51% funded deals, um. So, but, you know, in this environment, it turns out that they've been good at raising money in a fund, which they have to deploy. Uh, it turns out that we've kind of lurched into being good at finding companies that are for sale that haven't been, you know, misled through advisors at this stage. And so the partnership works really nicely. Yeah, it's like like two matches right there. I mean, he needs company and you may need money, yeah. Does he have to return the money if he doesn't find investments, or is there some kind of a sense of urgency? There's always a sense of urgency when you can't find something to buy, because the people who gave you money said, I could have put it in the bank on my own. You better do something with it soon or I'm going to take it back. Exactly, yeah. That's Daniel, I mean, this is a great conversation. I really appreciate you uh sharing details about your deals and your deal flow. I, I, I really wish you the best of success on this. Thank you. I appreciate it so much. I appreciate you having me on. Uh, we always love talking to people about this and frankly, we spend more time uh talking to investors and actually individual companies who we won't end up doing business with in the end, not because we don't like them, just our situations don't match. And half of the fun we get to have now that we're not part of big companies is we get to help everybody we talk to. We get to push companies, you know, I know an investor that does what you want. They're over there, or I know of a company that you're looking to buy, it's over here, uh, and we just create a community that really serves each other, and that's half the fun. Yeah, you're less compartmentalized, um, an entrepreneur versus being, you know, inside a company. Exactly. Yeah. Well, jeez, I, I wanna say thank you very much. Uh, we've come to the end of our time, and I really appreciate you being a guest on the top M&A entrepreneurs. I appreciate it, John. Thank you so much. OK, take care. All right, bye bye bye.