When Buying an Unsexy Business Becomes Sexy

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week instead of a conversation with our regulars we talked to two people who walked away from promising careers to buy bluecollar businesses long before search funds and sweaty startups became All the Rage Bob Schwarz left a Wall Street Investment Banking career to buy a chain of laundromats supersuds which operates in Delaware Maryland Pennsylvania and Virginia more recently mil Snell left a prominent private Equity Firm to buy a roofing contractor Aqua seal manufacturing and Roofing which is based in Columbia South Carolina in this conversation Schwarz and Snell talk about what they were thinking what they learned about buying a business what they've learned about operating a business and whether they're looking for an exit even at Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they Are Not Alone In facing challenges same thing with our daily newsletter the 21 hats Morning Report which highlights the most important news of the day for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews the episode is titled when buying a non-sexy business becomes sexy bob let me start with you you were working for Solomon Brothers as an investment banker when you decided to to take this sleep what were you thinking my wife would ask me that the same the same time so uh I can totally appreciate that question you know fast forward 20 some years it was the best decision I ever made but when you're in the middle of it and you start out you you ask yourself that a lot so I was I was in Chicago working for Solomon this was in the 90s um and uh you know I I just guess intuitively knew um that I really wanted to own my own business of some sort and this was I guess before the whole acquisition entrepreneurship through acquisition model that's been so I think awesome right now and popular it was more for me to get my feet wet um I had fortunately the safety net of my wife who who had a career we were newly married no kids so we we we were living on peanut butter jelly sandwiches and and we could do that for several years why I got this business off off the ground so it was a matter of whether I want to build this groundup uh opportunity in the laundry industry or I wanted to buy an existing store chain which is what I ultimately ended up doing I looked at the industry I had exposure to that industry while I was at salmon Brothers coincidentally it was an it was a very old line MIP pop hyperlysinemia and so all those things kind of lined up and I was like you know I can take I can make this work but I learned about it at Solomon Brothers and yes I uh I acquired a chain of stores in Virginia we moved back East um uh my wife uh supported us for the first few years and you know We're Off to the Races since then all right we're going to pick that up but uh first Mills uh you're much closer it's only been seven months now uh so I'm not sure how you're feeling but you take us back seven months what were you thinking when you decided to buy your roofing contractor still in the honeymoon phase so it's it's going great no problems I'm just kidding um I've been in the uh the m&a space for a little over a decade and had done I owned a salside m&a advisory firm and uh helped small business owners kind of hold their hand and transition from hey I own this business I don't necessarily have kids or employees who want to take it over how do I land the plane without crashing it did that for a number of years had a lot of fun had really great clients uh we kind of served this segment in between business broker and Investment Bank kind of that no man's land in the middle usually kind of a five to 20 or 25 million business Enterprise Value range sold that firm to my partners and went and joined a really unique um private Equity Fund who Lauren you've interviewed Brent bore that firm's based in Missouri kind of the it's called permanent Equity it's not your typical private Equity Firm kind of the antithesis of traditional private Equity it's Buy and Hold buy with no intention of selling and using no debt Brent's a good friend we worked together for a number of years and then this opportunity came up uh for me to buy into Aqua seal Roofing uh we actually looked at it at permanent equity and it was in my hometown while I was there and leading the deal team we looked at about 5,500 companies for sale and we bought four so a very kind of tight filtration process very picky if you will we we bought things that were boring kind of non-sexy things that are going to be around for decades and we looked at a handful of commercial roofing contractors and that's what really started to um be a recurring theme for me I mean what I like about Commercial Roofing is that every building has a roof and no roof lasts forever and so it's you're kind of in a nice sweet spot in terms of the demand usually whenever somebody's roof's leaking they want it fixed right away price is important but you know your customer experience matters a lot right when you're dealing with somebody's office or their industrial building or Warehouse or you know hospital or whatever it may be um so I guess I've always owned things you know whether it's real estate or operating businesses and I knew I wanted to continue to optimize for that and I got very very comfortable from the RIS side of things underwriting a deal and working on a transaction because that's kind of where I lived and then I was more and more familiar you're increasingly more familiar with operations I've never run a roofing business before never run a service related business or a labor focused business before um but yeah I'm having having a ton of fun doing it and learning a lot you're unusual and that you had a lot of experience on both sides both helping people buy and helping people sell did you know enough uh going in did the transaction go the way you expected it to well I I think there's a few Nuance differences I mean one is that you know when it's your own deal it's hard to be emotionally detached you know as a buyer really as a seller too you have to maintain the ability to walk away you know otherwise you know you're kind of up the creek without a paddle when I was doing deals you know when we were deploying other people's money and my you know my paycheck so to speak didn't depend on whether or not I closed that transaction I was working on it was a lot easier to say hey we don't want to burn a bridge but it doesn't seem like you're ready to sell or it seems like we're too far apart or whatever may be we're not going anywhere come back at some time well I left permanent equity in order to work on this transaction full-time so it my wife going into it was like you know how long does this kind of take and I was like you know the average transaction I don't know six to n to 12 months and she's like what are you talking about you know this is crazy uh it took us 10 months you know to the day from when I left permanent Equity to when we closed and um it was it was the right amount of time I mean it depends on the size business how prepared the sellers are all those things but it um you learn something if if you've done a hundred transactions you still learn something with every transaction you do whether you're buying or selling and so yeah continue to learn a lot I'm learning a lot right now but if you kind of wait I'm I'm of the mindset you know that if you wait until you're ready you'll never do it it's like getting married or having kids or buying you know buying your first house or whatever uh you have to get comfortable right with mitigating risk in certain areas and and then at least Define hey here's the things that I don't know at least that I know I don't know and uh am I comfortable with those and I get ultimately I get really comfortable I was buying a business in my hometown and so there was a lot of due diligence I was able to do the search fund model that Bob mentioned or the entrepre you know the um entrepreneurship through acquisition I wouldn't say that I'm a Searcher but a lot of folks who fit that mold they're kind of hey I'll buy a business anywhere in the Southeast or anywhere in the east coast and uh I had a lot of roots here I owned property here and it was not something that I wanted to move for so um I had some advantages that I think were maybe a little bit unique to me Bob how about you you've told us that you got familiar with the industry uh in your previous job uh were you as familiar with the the buying and selling of businesses was that comfortable no I hadn't done I hadn't done all that you know I was prior to Wall Street and prior to business school I was in commercial real estate side so I was very familiar with acquiring real estate um and that was about it um had never bought a business so no it it was it was all new to me um again this was a long time ago uh in a sense where I think things have changed since then but uh yeah like like like mill said I think it comes down to taking a leap of faith you're not going to get it all right um there's so many things I didn't know um had I known I maybe would have gotten cold feet I'm glad I didn't um you kind of have to jump in and just make it work you know there's things that uh you can't plan for but at the end of the day I I I I understood the industry I understood the opportunity um I understood the risks and we were at a time in our life where we could take those risks so I think that has a lot to do with it too you know can I ask a question sure and you don't have to go into detail if you don't want to get too specific but just generally what what size was the you know was the number of you know units or I don't know how you would Quant ify it in the laundry space but about what size acquisition was it and and how did you get comfortable with that relative to the amount of risk you were taking yeah I mean that's that's one of the things that I wish I did differently I'll answer it this way the industry is highly highly fragmented so it's it's a six OR7 billion dollar industry there's like 50,000 laats out there um so each one is is is not a big transaction at the time this was a five store deal which was probably just over a million dollars in value um you know in if in hindsight I wish I went bigger sooner that's what you would do differently in some respects it's it's it's easier as much work to manage something a little bigger than smaller but you know you you you'd go with what's given to you and that was the that was the opportunity that I I had I did know that there was a big Runway of scale in this business or in this industry so um it was just a matter of a lot a bolt on Acquisitions and adding more stores we literally just closed a deal uh in September that was um pushing you know eight figures so you know they they're out there that was a deal to buy uh a chain stores in the real estate with it so you know it's it can get it can get up there when you made that acquisition was your intention to be here 20 plus years later running the operation what was the what was the plan at the time yeah no that's that's that's a good that's a really that's boy I could talk for hours on that um you know one of the mistakes I I I guess I in hindsight I made was is you know they always say well you should look with the exit in mind right and I did not do that I didn't have a clear exit strategy I was young I was I was you know in my early 30s and um I considered myself more of a deal person I was good with numbers good with Finance structuring the deal and and so it involved doing a lot of deals to get some scale so I liked all that but at the end of the day 10 years go down and you're like okay how do I get out of this thing or what is the exit strategy and uh now 20 years later I I'm still answering that question as I you know keep growing so I think there is an exit strategy if I want to take it well let me let me interrupt you I'm sorry but has that been a pain Point have you wanted that exit strategy or did you find that you enjoyed operating the business you know here's the thing and this is this is um this is what happened with me Lauren is you know the first whatever number of years five 10 years it was fun because we were doing deals we were buying Stores um but at the end of the day business is about people and I think um that you you add a tremendous amount of value by operating the business well and in order to do that you have to lead you have to manage you have to have people you know business is people and I was never taught that I was taught finance and deal structure I was never taught the bricks and mortar of managing people managing a structure motivating culture all that stuff that's so hugely important I learned it years later and it was the best thing that I ever did and I I learned it from our friend Jack Stack you know great game of business and it it really helped our business and it made it to the point where I enjoy doing what I'm doing now for those who don't know you're talking about uh open book management open book management the great game of business and and and we've created a structure that you know it's really kind of escalated the you know the playing field for us and so I'm having fun doing what I'm doing and you know if it's a good business why exit right so that's that's kind of where my heads space is right now Mills is that where you are too are you adopting that philosophy that you saw at permanent Equity of Buy and Hold or are you looking to to flip the business at some point yeah I mean very very congruent with what Bob's saying and what you're what you're asking I mean I would have just major alarm Bells going off right if or or you should right or The Listener should if I said no this is a platform acquisition I'm doing three bolt-ons in the next three years we're going to Triple you know we're going to double revenue and triple eidon and then we're going to sell up market like there's so many things that can wrong in that scenario scenario it's so fragile right so and not to mention it's highly levered relies on you know incredibly onerous amounts of senior debt or or Junior mezzanine debt and uh there's a lot that could go wrong so to me you know I I'm content you know owning and operating Aqua seal for the next few decades and finding ways to to build a team that can continue to do that and we have we just have tons of opportunities to grow organically um and may maybe via acquisition right I'm not taking that off the table it's just usually when people want to do a roll up or a consolidation or grow via Acquisitions it only works if if they can grow under that model because it's so funded by debt and they have they have to basically exit before that debt really matures and I'm I'm not interested in a model like that Bob have you grown mostly through acquisition yes but as we got you know one one thing I did do right and it was probably more by luck than anything is is when we acquired our our first Tron of stores we learned the business and then we could take the cash flow allowed us to take chances and for us chances were finding virgin sites building stores ground up and I would not have done that in the beginning right that's really for me that was too risky that's that's putting all the chips on the table later on with the cash flow I could I could innovate more and take more risk and and I think that was for us new builds new site selection type stuff and we were glad it worked out there Mills did you um did you have the same kind of uh learning curve in terms of managing people and sort of the the non-number soft side of the business that Bob was referring to I'm in it right now I can give you a list of you know just the flavor of the week what's the flavor of this week uh it's people right it's normal people stuff so um I my my deal is very uh unique and probably different than most in that um the the two sellers the two founders of Aqua Roofing are are still involved they're still employees they're still um very you know significant owners of the business and they're going to phase out over time they didn't have you know uh children or kind of you know managers or anybody who was going to take over and so we found a a structure that was win-win where they were able to phase out over time continue to have upside as the business grows and and it was as much drisking for me as was for them um so more I think of the you know kind of people related um you know challenges or opportunities whatever you want to call them um have to do with just different styles of management different philosophies of doing business um the founder has grown an incredibly successful business I mean just wildly successful business through command and control style leadership and that's not that's not my style of leadership and so figuring out right at what point does the pendulum kind of tip change so you took over a successful business that was being operated by the people who started it and with the idea that you would change the way it's operated despite its success yes and no I mean I I knew going in um there's nothing broken here right this is I mean I have friends who do turnaround work this is not turnaround right this this company isn't insolvent the balance sheet isn't underwater the income statement is profitable all those things but they were knowingly and acknowledging the fact that hey if we grow we can't keep doing the things the way that we've been doing them our infrastructure is half the size of our Revenue right if it were right size we would be growing our infastructure we would be professionalizing certain things we would be adopting Systems and Technology and you know Etc and so they were saying look something has to change we can't keep doing what we're doing um but the devil's in the details right of how all that gets meted out and and it's been good I mean it's been phenomenally great so far uh and you know seven eight months in it should it should be right we we've due diligence and we you know we've hashed a lot of these things out but um there will be areas where I'm saying hey look in order to grow in order to standardize this thing we do 52 pay periods a year we're still on paper time sheets you know running about $5 million a year in payroll so there's a lot of room for improvement but my mentality coming in was I don't want to uh I don't want to change anything for the first six months let me just get in learn the business build relationships build trust and then I'll be in a better place because people will be telling me hey I've been here a long time this is my issue what can we do to fix it I wanna I want to help them fix it not come in there and say hey I've been studying this business for 10 months and I've been here two weeks let me tell you what's wrong with it you it's just the Fool's ER now I was curious M so is is there planed slowly are you g to buy them out or is that is that yes yeah so it's all basically what took us a long time in in our actual transaction itself was documenting all that and I mean I've I've been involved in a number of deals so I I was very you know curious and very um fastidious about these specific details but yeah so they they'll continue to get bought down over time based on a schedule and based on EV valuation formula nice Mills you hit on something that I find really interesting you you're talking about um you know kind of operations and that there's room for improvement and professionalization and maybe you know up the technology a little bit and I think that's a common thing that people look for they look for opportunities where the business is basically healthy but there's room for improvement but there's kind of an interesting tension between people who do that looking for ways to professionalize an operation versus people who really know the industry I don't think either of you were expert in the particular industry you went into to what extent do you think one is more important than the other the knowledge of the industry versus uh being able to professionalize operations well my my two cents worth is you know I guess it depends on the industry um you know I I personally I couldn't get into the high-tech World software or something I would have no clue and I think I would probably fail miserably but if it's a basic service business kind of the Ser the businesses we're talking about I think you know regardless of the business we could figure out how to how to value ultimately if you give us enough time and that's where the patience comes in right if you're in this for the long term and can set it up to give youself a long Runway um with maybe without investors saying when am I to get it paid then you can figure this thing out things take longer than you plan you know it's just But ultimately you got to figure it out and and so I think you can do it it's just I wouldn't do it in a business that you know is so foreign to me like software medical or something unrelated it depends on the size of business too right so I mean Bob you probably could have you know stepped in and run let's just say a $10 million laundry because it didn't it probably wouldn't rely on much knowledge about laundry itself you would have managers and layers of middle management who would be overseeing that that that's the way Aqua is they didn't need the foremost Roofing expert in the Southeast to come step in and help them they've got that covered right what they needed is they needed somebody to come in and say Hey how do we do more of what we're good at how do we increase our yield on labor right how do we estimate better how do we make sure from a customer service perspective that we're actually just calling people back and you know they aren't falling through the cracks um if you buy uh let's just say if you buy a million-dollar Plumbing business for one in Most states you have to be a licensed plumber but two you need to know something about Plumbing because there's not enough Revenue to account for you know management that can help insulate you from that but if you're at $30 million of Revenue in a plumbing business you really don't need to know that much about Plumbing because you're going to have multiple master plumbers you're going to have guys who've been in the field for decades who are on staff who aren't in the field who can be supervisors superintendant forming those kind of things so the size really matters a lot I think in on whether or not you you need specific technical knowledge and and experience Mills can you tell us something about the roofing industry that you didn't know going in that you figured out and now is important to the success of a roofing contractor the big one right now which is a little bit idiosyncratic is that uh material availability has gone just berserk um so you know all all supply chain is really bad right now roofing for a handful of different reasons is kind of on the on the on the on the most suffering kind of segments um we have you know materials that used to take one to two weeks to get in that now have a 40 to 50 we lead time and it's like do not go do not collect $200 you can't do this roofing project without these types of materials where are they coming from it's mainly internationally sourced raw ingredients and then locally manufactured or handled you know finished finished goods so for example you know if you looked at what was happening in the timber industry right not all not all that long ago lumber prices were Skyhigh in almost all cases Lumber just has one ingredient right for example Roofing you look at a roof system it may have dozen of different components that go into it you've got you know for example just Fasteners right Roofing Fasteners we use screws that could cost you know a dollar to$ two dollar a piece and a large roof might have 80,000 of them um but you have the raw ingredient which is a um a rod you know raw you know raw steel that's comes in a rod that gets threaded in a specific way heat treated in another way and then gets coated most of those Coatings are you know a an oil derivative a petroleum derivative so lots of different you know people have to touch it along the process and that has contributed to longer and longer lead times and most people are used to right thinking hey I need to put my roof under contract as a part of this new construction or this you know this renovation project and it might be two to three months out I mean you're having to plan Roofing you know before you plan site work right now or before you order a steel package which is just kind of unheard of do you guys do new construction as well as as yeah we do both part of part of reason that I like OA seal is that we're probably 60 to 70% R roof um and a lot of that is you know we still do like large Municipal like schools you know hospitals bigger bigger square footage projects but it's a mix of R roof and new construction and so it's so you're so you're bidding on jobs that may not like you said it could be months out before you get to them exactly so typically what we would do is we' go to a supply house and we'd say hey we need prices and they'd say great we're going to guarantee these prices for for you know 3 to six months which usually is completely irrelevant because they have them and you're going to get them in time or it may take a little while you you know you get awarded the job and they say we still are going to honor the prices now what's happening is we go to the supply house and they say look we can't give you a firm price uh it's going to be whatever the price is on delivery date and we don't know when the delivery date's going to be but for example we know that fasteners for example have a 25% increase in the first quarter of 2022 and 35% increase in the second quarter of 2022 we have to try and educate and communicate with uh you know a customer an in user or a GC to say hey these prices are are high and they may seem high but you know we're not going to come back and give you a change order that's going to you know you know make your head explode in six months when it's actually time to do the project or we're gonna try and minimize that as much as possible but tell us uh about your industry what did you learn that you didn't know going in two things Happened One More currently and one I guess from day one was I un underestimated the importance of employees and stores again I'm kind of coming from a numbers perspective and I always felt like hey if you got the right great shiny location with brand new equipment and you know on the corner of Fifth and Main and all that stuff lines up that you're gonna you're G to kill it and most times that that has a big effect but I underestimated the importance of employees and at least in a a a you know a BTO C world how important um customer service is even in a laundry self-served laundry operation it's is huge so I had to learn that um and it it's really made a huge difference um the the whole again in the b b Toc world how important employees are to driving Revenue uh it's dramatic second thing is which is exciting for us is the technology um when I got into the industry I knew it was an Antiquated kind of Old Line industry which I was fine with but finally technology is caught up to this industry so now there's so much interest in it because of the scalability and the different features that we can do now basically pick up and delivery to people's homes uh it's all app based you know there's now SAS programs that control everything from your machines to the point of sale to pickup and delivery to your route drivers none of that existed five seven eight 10 years ago so um that's exciting for me um that uh we're bringing a whole another level sophistication to um to where we're at so I'm just thinking about you know you've been in at 20 years you kind of inherited it as it was analog and youve made those upgrades and and probably started to reap the benefits of it with where you are right now how do you make how do you make the decision about the kind of cost right which is probably very substantial cost of that reinvestment to modernize facilities or to kind of take that next new upgrade how do you balance that against your time Horizon and I mean you're you're not an old guy by any means but I'm just thinking right it's it's not like those upgrades are going to last the next 20 years they're probably going to continue to be you know increasingly Obsolete and I'm just curious how you balance that when they're Capital intensive yeah no that's that's that's a great question I mean that's where for me I I'm I'm at the point where I'm not looking to sell the business um and create kind of a legacy asset potentially so if you have that mindset I think it makes the decision if it's a really good location and equipment's 10 or 12 years old you know you got to put in new equipment and the the reinvestment at one location is easily you know half a million to three4 of a million dollars so you know if you said I want to exit in five years you're going to start to think about that right yeah yeah so for me it's it's made it easier if I know that I'm I potentially want to keep a legacy asset here for for my family um how all that shakes out is to be determined but it's one less decision I need to make and it makes the decision easier to reinvest which ironically is better for the customer which then creates more value to the business Bob you referred to it before as a self-served laundromat but then you were talking about the app and uh customer relations what what percentages uh people come in and doing their own L yeah our our I mean any store that we're buying or building now is is I would say you know it's it's more than fully staed by one person all the time 24 hours a day and we offer you know pickup and delivery and drop off laundry and Commercial laundry applications so it's a it's a full Suite of services where the industry is called the self-served LA industry but really that's just maybe 75% of it the growth the the trajectory the industry is a very Flatline stable decent margin business good margin business but as Mills knows it's leverageable and it's heavily Capital intensive but the growth is actually in the very non Capital intensive side that's where everybody that's the that's the Holy Grail in this industry is cracking the code on all the pick up and delivery I mean our whole world now is pickup and delivery whether it's Amazon or Uber door Dash or everything else and so we the industry knows that people's laundry is going to eventually outsourced potentially outsourced and we're seeing those Trends dramatically impact our industry how you monetize it that's that's what we're figuring out we're now in the route business we're in the logistics business we were in a capital intensive business now we're all about you know optimizing trucks and delivery and all that stuff which you know we read about in restaurants and all that so you know we're trying to figure it out did the pandemic accelerate that yeah it did it did and it's and it's uh it's it's it's increasing month over month yeah so orders are going up everywhere on that pickup and delivery side how have you both done in terms of Labor during this difficult period how about you Mills has it been an issue we could always use more people we have about a 100 full-time employees um we proba have enough demand if we have materials we have enough demand for probably 150 to 175 but our we just don't have the infrastructure to support that much production right now but we have really good people uh we I mean we have people who've been with aqua seal for almost 30 years since the company's been around um we pay higher than average wages our starting wage I mean you know in South Carolina I don't know how it compares to other parts of the country necessarily but you know you could probably make n $10 an hour working in a fast food restaurant we pay 1450 an hour starting out for somebody who has no construction experience no high school diploma GED anything like that and then we are a US Department of Labor registered apprenticeship provider is one of the first things I did and um we we you know the two requirements of that are wage progression and on the job training and it allows us to take advantage of a state tax credit but also we get scholarship funds to our Technical College network so we can um basically completely subsidize continuing education around like OSHA certification to put people on a faster track to increase their skills um but we don't lose People based on pay the folks we lose they just don't want to come to work you know they they kind of stopped coming to work right yeah I guess you weren't there but uh was the business able to keep operating at full speed during the pandemic yeah some some you know kind of smaller hiccups like job site related safety for a little while OSHA was wasn't clear on kind of what what guidelines they wanted people what precautions they wanted people to take on job sites but yeah we we've been largely uninterrupted how about you Bob did you have Labor issues yeah we we um we had a a scare I would say in mid 2020 right when when covid you know Ground Zero when everything was hitting um I remember distinctly because if you recall remember the term essential services and if you were considered essential business and it was done state by state and the governor would imp you know would determine if your business and I remember we have stores in Pennsylvania and I remember the governor overnight woke up and said you know everything's shut down and I mean everything every single business and unless you were you know health care or hospital or whatever and so we had to shut our stores down it lasted about a maybe less than a week and you know they woke up and they said okay laundre is an essential service so that that was amazing and that helped us out but that was scary I mean we were like like just literally shut so I have complete respect for all these restaurants and I mean that's just brutal I I just don't know how these folks have you know God bless them to getting through it but just all of them have you know just shutting your door and just closing it down was just ridiculous but anyway uh we got through that um um labor is is a little what Mill said you know our core 80% have been with us a while and and I think we're we provide a what I hope to be think is a great culture and they don't turn over we have about 125 employees so you know we're looking for about five positions right now which is in a dramatic amount we could add another five on top of that um but what ends up happening is when we build or Buy stores that's when we have to kind of get in there and do a culture fit with the people that we're acquiring and if and hopefully they'll they'll be with us but if not that's where we have to kind of go out and put the pedal to the metal and and kind of upgrade the the employees at the stores depending upon what we're getting there a mechanism that you use for that that kind of cultural assimilation yeah it's tough I mean we we have a game plan a little Playbook uh again it's it's it's fundamentally the great game of business and open book management is how we kind of structure it um and so we have a we have a deck that we go through with all new hires and it's a we have a buddy system kind of a mentorship inside their stores and we have area managers that are indoctrinated and how we do it it's not easy you know it's not perfect but uh you know it works it just takes time in that uh great game Playbook kind of the the ultimate last step of it for many companies is employee ownership is is that something that you've considered as yeah you know I've looked at that really deeply in the last couple years and it it you know I'm never I'm not going to say no um but um you know I've I've heard pros and cons right I've heard both sides I'm not I'm not committed to it right now answer your question um I'm not sold on it you know what's the biggest concern just the complexity and sometimes you're adding a level of complexity that is not necessarily valued by you know you you can achieve the same end result with less complexity doing other things whether it's a better bonus ship structure or another plan that they have out there that has is less involved and less complex than ESOP now you know I know a lot of ESOP owners that love it so you know I could be persuaded either way but I'm not I'm not I'm not completely sold on it yet with both employee ownership and open book management which you have adopted one of the interesting things I've learned through the years is that oftentimes the most difficult people to sell on that uh are the employees themselves they right don't necessarily want to have the added burden of understanding the way what drives the business and how the books are looking and they wonder why management wants them to take over that responsibility instead of doing their job the way they supposed to yeah did you have that you're have kind of an interesting business to to implement this and I'm wondering what kind of reaction you got from your employees when you told them you wanted to open the book and involv yeah you know it was it's a learning curve it's taken us three four years of hard work but it but it paid off um I think I think the misnomer you can create an ownership culture without necessarily having to go to ESOP and I think we've done that what the great game and open book has done for us is it creates a high level of trust and transparency so our employees can trust us the owners so to speak you know or that we're all in this together and it's a very shared wisdom it's it's um it's the collective wisdom of the crowd so I think there's a lot of buying it takes time it's a lot of work it's very rewarding um it's very worth it but um you don't have to you know you're right at the end of the day some employees don't want the B you know necessarily the burden of that but they like the idea that you're transparent you're open with them we know where everything stands it's very easy you know um you know there's a lot of value to that there's a lot of value to that from emotional standpoint from the culture you're trying to create Bob you mentioned software before uh we pay so much attention to venture back companies and Silicon Valley you guys chose to take a uh a different route and you know I guess I'm curious about two things one uh did you do that because you saw it as kind of an unappreciated area where people didn't realize how much value there is uh that's one question and the other question is was that difficult psychologically was it hard to explain to people in your lives why you were choosing to buy laundromats or or a roofing business no I mean I you know I'm wearing I'm wearing car heart right now and you know work boots and I'm driving you know our our most beat up truck in our Fleet um you know I think it depends on what you want to optimize for I mean I would you know I'm married I have four kids I wasn't you know trying to like find the most interesting thing to talk about you know at the bar with people or something like that although maybe you did yeah well ironically I guess it does kind of trend that way but I what was important for me was drisking right so I wanted to invest in something and put my time and energy and capital into something that I could understand and that wasn't subject to whims of change every building has a roof no roof lasts forever uh I you know my kids are much more likely to pick and invest in the next hot app than I am right I just have no I I bring no Edge to the table I do happen to know a bunch of property owners in South Carolina that's an edge that I bring to Roofing so to me it it was just logical and and it drisk based on my criteria but but we talk about you know a lot um in some of the circles I run in buyer business fit is so critical like I I can't stress that enough buyer business fit because you could get sideways really fast buying the wrong type of business for you how about you Bob it was it was interesting at the first going from a you know an investment banking world to the coin laundry industry um but here's what I would say you know at the end of the day a couple things one as I'm getting older is is it's more as well as the business fit you have to create a life plan or you know a personal plan right my dad wasn't the most uh how should I say this he wasn't uh he was he was a workaholic who was more absentee and I did not want to do that with my two boys and my wife right so I wanted to create a structure and a in a company or an environment that fit my life versus having my life fit the business so that was number one and that was very were you able to do that 100% yeah you know it's ironic because I've had a a you know we offices now but I had a home office for the first five six seven years when our kids were young right and I was around I went to every single baseball game soccer lacrosse you name it I was at you know I I had the flexibility to do that when I was at Wall Street no way and let me tell you the other thing when you go when at least in my world when I was at Wall Street you look to the right you look to the left everybody's smart everybody's hardworking there was no Edge like what Mill said you have to find I felt like I needed an edge and I'd rather go into a basic service business that was a little had a had a bigger upside as far as professionalism versus competing head-to-head with everybody else who had a great college degree and all that so I tried to why compete on a Level Playing Field right so and I wanted that business to fit my lifestyle so that that's What mattered to me and that's how I looked at it those are great answers Mills would you have any specific advice at this point for somebody who's interested in sting down a a similar path you know there's kind of no substitute for you know to use Warren Buffett's analogy like standing at the plate and watching pitches come by um you know if you're like wanting to buy rental homes you can sit on Zillow all day long and you know analyze those deals to death but at the end of the day like you got to walk inside a house you got to make an offer you got to write a contract you got to get burned you know somewhere along the way so putting yourself on a learning curve I think you know ultimately is probably uh it seems unappealing right in in this kind of vein of conversation but I think it's critically important how about you Bob any ADV I would second that I would I would I wanted to add though that for me what I think is personally what I think is really important is if you if a person could under uncover what their unique ability is you know I I've had some great coaches that I look up to mentors one is a fellow named Dan Sullivan um who runs a strategic coach and years and years ago he helped me work through what my unique ability is and everybody has a unique ability right it's it's what you do that's just really really good and everybody has one it's where you operate five you know you're in the top 95% right so I think it would be very helpful to understand what each person's unique ability is and you can bring that to any operating business the key is you operate in that unique ability and then offload everything else as best you can and when you can do that then you're in your sweet spot and then it really becomes fun was it always fun or did you have a moment when you really questioned why you'd done this the first few years was a lot of fun and then when I got into the management side it became work because that I would say wasn't my unique ability and as we got scale I could hire people who are really good at it and I could put the open book structure around them and I could get back to doing what I was really good at and now it's fun so I've kind of come full circle my thanks to Bob Schwarz of Super Suds and Mill Snell of aquael really appreciate you taking the time guys and uh and sharing your experiences wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21 hats.com that's l r n at21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think you can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess thubron founder of blank word Productions okay now you can leave thanks for listening everyone [Music]