[00:00:00 - 00:04:43]

Will Smith: I joke with today's guest about how much went right on his journey of business acquisition. The business had over a million dollars of earnings. The entry multiple was good. The sellers wanted Adam Vandermyde so badly that they agreed to a purchase price and to hire him as CEO so he could de risk the opportunity in his own mind before committing to close. Adam liked what he saw as CEO and did commit, then proceeded to improve the company's revenue, mix and professionalize operations over the next few years.

As owner himself.

When PE took an interest in the category, the big regional footprint of Adam's business made it strategically desirable. He ran a process and exited for $14.5 million. He owned 80% of the business, so a lot did go right for Adam. But of course it wasn't all roses.

On the contrary, there were months on the knife's edge. We spend time on what was the most dire stretch of his ownership when the company had to completely rip up and redo a multi month project. The ensuing cash crunch led to five separate instances of Adam's CFO sounding the alarm that there were only two weeks of cash left. It was the scariest, toughest, hardest thing.

I've ever done, without a doubt, says Adam.

This interview is a great study in de risking on the way in to your acquisition, adding value to a B2B blue collar business and recognizing a good time to sell. Here's Adam Vandermyde, former owner of Petro West Good SBA deals are often delayed or declined outright for reasons that the business buyer never actually understands. Today, Thursday, January 8th leading SBA loan broker Heather Anderson will host a webinar revealing how SBA lenders really think and decide whether they'll grant you the debt financing you need to buy your business. Heather will cover how SBA lenders actually evaluate risk, what buyer behaviors raise or lower approval odds, how deal presentation influences terms and timing, and which narratives quietly kill otherwise good deals. This is not a basic SBA 101 session, but a webinar for sophisticated, first time and experienced acquisition entrepreneurs.

It is today, Thursday, January 8th, noon Eastern. Link to register is right at the top of this episode's show notes or on the Acquiring Minds homepage.

Acquiringminds co.

Welcome to Acquiring Minds, a podcast about buying businesses.

My name is Will Smith.

Acquiring an existing business is an awesome.

Opportunity for many entrepreneurs, and on this podcast I talk to the people who do it.

Running payroll, paying your bills, closing your books, and producing financials.

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Mention Acquiring Minds and they'll provide a free review of your books and financial ops, a $500 value. Check out system6.com, link in the show notes or email helloystems6.com.

Adam Vandermyde welcome to Acquiring Minds.

[00:04:44 - 00:04:46]

Adam Vandermyde: Thank you. Happy to be here Adam.

[00:04:46 - 00:05:09]

Will Smith: Today we're going to be treated to.

The story, your story of a small business acquisition that started with an SBA loan and a generous dose of seller financing and ended with a fantastic exit to a private equity backed strategic. Some background on you please Adam, to kick us off.

[00:05:09 - 00:06:54]

Adam Vandermyde: Absolutely. So after my mba, I went into strategy consulting.

I was in two different firms and I was about two months away from becoming a partner and I, I kind of put my head above water and said I'm not sure that this is what I want to do forever. Although there was fantastic, it was a fantastic time. So I ended up going into private equity plucked me and put me into a private equity backed portfolio company that they just acquired. So I was on the executive team there. I led the value creation plan, led corporate development and then ended up becoming the coo.

So on the corporate development side I had, I started to get a taste of buying businesses. I bought it for somebody else, right? And during that time I read a few HBR books on buying small business. So I always kind of had it in the back of my mind that this would be something that I'd be interested in doing. But I didn't frankly pursue it on my own until I got a phone call from someone in my network, actually a brother in law who is a business broker and said hey, I've got this business that you've probably never heard of the industry, but what they need is what you do.

And so over the course of about a year after saying no three or four times for various reasons and I'm sure we can get into that, ended up pulling the trigger on a company called Petro west that if you think of when you go to the gas station, will and Fill up your car. We are the infrastructure that brings that fuel to your car. So all of the pumps, the tanks, the piping, everything outside the station, outside the store, we'll sell it, sell the equipment, we'll install it and we'll fix it when it breaks. And then owned the company for five years and then sold it about three months ago.

[00:06:54 - 00:07:02]

Will Smith: Great.

Adam. Yeah. So we're, we're fresh off of the exit and into your next chapter which is exciting.

[00:07:02 - 00:07:02]

Adam Vandermyde: Right.

[00:07:03 - 00:07:11]

Will Smith: So back to what your brother in law business broker said.

What this business needs is what you got. What did he mean?

[00:07:12 - 00:08:13]

Adam Vandermyde: So at the time it was owned by and I can quote them because they, they use this term, they were, it's, it was started about 30 years ago by salesmen who happen to run a business. So as such there's a lot of focus on the top line but far as operations and processes and really how to take it to, to the next level. Just it wasn't there.

No fault to theirs. They just didn't have that, that depth and experience. And so it was a large enough company but at that about that time about 60 employees where it starting to, to turn it over into really looking to what it could be next. They just, they didn't have the chops to do it and frankly they were ready to retire. They were done and ready to kind of pass baton on to somebody else.

And so I had, I had been in larger companies and know what good looks like and know how to professionalize and, and polish things up a little bit and so really just it meant taking it to the next step is, was in my wheelhouse.

[00:08:13 - 00:08:20]

Will Smith: Great. Well we're going to hear about that. But curious, was this the first opportunity that your brother in law had brought you?

[00:08:20 - 00:08:32]

Adam Vandermyde: It is, it was the first and only.

I mean we had had conversations about they do commercial real estate as well. So we've had conversations about that. But as far as businesses, this was, this was the first.

[00:08:33 - 00:08:42]

Will Smith: And tell us a little bit about your declining the opportunity multiple times before finally saying yes.

[00:08:42 - 00:10:26]

Adam Vandermyde: Yeah, kind of an interesting thought process going into it.

I thought okay, I lead corp dev for private equity. I've bought several businesses successfully. I know what I'm doing. I realized I didn't know what I was doing when it came to buying something for myself. I didn't know the first thing of how to fund a small business.

Historically on corp dev I say daddy, private equity, I need some money to buy a business. Okay, here you go. And they take care of the financing and back end and equity whatever they do there. So how do I fund it? And okay, now it's real.

The risk is significantly higher on my shoulders that, that I'm, I'm putting myself in front of this. So. And I don't have a team of people or I didn't at that point hire a team of people necessarily at first to do due diligence, which you do in private equity deals. So there was that aspect of it. There was the other aspect of it.

I want to say I was happy where I was. So what is it that's going to make me jump ship into this risk, highly risky venture? And then probably the last. Well, two other pieces. One, I was new to the industry.

Would I be able to do it? And then number four, it was during COVID after the first discussion I had with the owners that day, they canceled the NCAA basketball tournament. So I'm like, why would I do this? Why would I jump in and buy something during COVID that I don't know how to run, that I don't know how to finance? So it was several different times of saying no until I could really get comfortable with it.

[00:10:26 - 00:10:51]

Will Smith: So it sounds like all of those many times that you declined the opportunity had more to do with kind of risk aversion than the opportunity itself. You weren't ready, didn't feel ready, didn't know, you know, too risky. Covid hits, which naturally, I mean, who's going to make a big move then? So, so it was more kind of for personal reasons than it was for reasons that. About the opportunity itself.

[00:10:51 - 00:11:32]

Adam Vandermyde: I think that's well summed up. And because what, what kept me semi, what kept me interested was the opportunity itself. I convinced myself early on with some of the tire kicking that I did, that there was opportunity here. And then each time I, I met with the owners or learned more about the business, it really established that I could, that I really could do some damage here, that I, I do have the expertise to, to provide what they need, although I didn't have that in the industry. So I knew I would need to, to hire people around me who had the, the chops in the industry to keep me, keep me sane and smart.

But the more I learned, the, the, the more interesting the opportunity came, for sure.

[00:11:33 - 00:11:37]

Will Smith: And by do some damage here, you mean that in a positive sense.

[00:11:37 - 00:11:40]

Adam Vandermyde: I made it in a very positive sense. Yes. Yes.

[00:11:40 - 00:11:54]

Will Smith: How old were you at this time, Adam? Did you have a family and actually give it, give us a little bit more of your background? You, you said you started with coming out of your MBA but just give us 30 seconds on your whole kind of going back to, you know, whatever. College.

[00:11:54 - 00:13:18]

Adam Vandermyde: Yeah, happy to do that.

So, yes, my, I, I played sports in college. I played football and baseball and where I, where I met my wife and we were married, I think, my sophomore year, so fairly young in school. And at that time, I mean, my wife and I have moved around. We've lived in four different states in our marriage. And we like change.

We're not afraid of change. And at that time, I was about 41, I think, and had four kids. In fact, going to a senior in high school was my oldest. So we were living in Dallas, Texas at the time. So it required a move to southern Utah, where the company was headquartered, incidentally, where my wife is from as well.

So in many ways that made it easier. But yeah, it was a life move. It was a life change moving. My son, who's great basketball player, plays in college now, but it was going to be his senior year, his team at a large 6A school in Texas, and we're moving to a smaller town in St. George, Utah. So it was definitely a family, a family decision.

And I think we can get into what finally pushed me over the edge. But there was, I, I, we found a way with the current owners to sort of de. Risk it for me, which, which ultimately gave me the, the, the, the shove that I needed to get over the line.

[00:13:18 - 00:13:43]

Will Smith: Yeah. And we are going to want to unpack that, Adam.

But yeah, so I'm glad we got that picture from you because, because your risk aversion. Well, first of all, that, that sounds judgy. Anybody going down this path, it would be very natural to say, no, thank you, no matter how good it looked. There's a lot of inherent risk. But anyway, in your case, your aversion to taking risk seems all the more prudent with four kids.

[00:13:44 - 00:13:44]

Adam Vandermyde: That's right.

[00:13:45 - 00:14:04]

Will Smith: And you know, a family and, and as you said, you know, one of those kids is going to be a senior. Just curious, the, the family conversations there, when you made the decision as a family, I guess, was there pushback from the rising senior or other kids or your wife? How did, how did that, how did those conversations go?

[00:14:05 - 00:15:04]

Adam Vandermyde: The, the, the pot of gold at the end of that rainbow at the time was we have not lived by family for A long, for 20 years.

And we had the opportunity then to move closer to family. My wife's family again lives in that area. So everyone was excited for the opportunity and on board, except for at that time, my daughter, who was a freshman Going into her sophomore year in high school, who was a drill team dancer and had a great, great, great group of friends. And so it was, it was a little harder for her. She, after six or seven months after we did make the jump, it was a good transition for her as well.

But for the most part, people were ready to go on this ride and including my senior and who actually turned out to be great for. And they had a great basketball team, they played in the state championship and he had a great year. So it turned out well for everyone. But at the time there was, it was, you know, heavy conversations for sure.

[00:15:04 - 00:15:55]

Will Smith: Yeah.

Yeah, great. Okay, Adam, let's hear more about the opportunity about Petra west. So it is a distributor and construction business in that the how did you put it to me on the pre call, Everything from the tank underground to your car, everything that sits between those two things is equipment and infrastructure that you are distributors of and installers of. And if you, if you imagine yourself pumping gas, that, you know, structure, there is true construction to put one of those up. So by installing, installing this equipment that you're distributing, there's actually a true construction piece here.

It's not just kind of installation in the traditional sense. So far so good.

[00:15:55 - 00:16:37]

Adam Vandermyde: So far so good. I will push back slightly because that the way that you just described it is the way that the former owners viewed the company was a construction company that also did service. Because if something breaks on the station after it's built, we also have a team that provides service later on and we'll get into this, I'm sure.

But we flipped it on its head and we became a service company that also did construction. So we changed how we manage the company. But all of those aspects, selling the equipment, doing the full construction and it is full construction with full excavation and buildup and then the service side, those are the three large components that make up the business.

[00:16:39 - 00:17:40]

Will Smith: Great. And so in some sense the business, when you looked at it and yes, we are going to spend a lot of time on how you shifted the revenue mix.

But in some sense when you first got it, it was one of these business models that we actually hear. We see a lot in small business land of distribute, sales and service. You were a channel, a distributor for the, the manufacturers of this equipment and then you would install it or in, as, as the case is here, kind of do the construction necessary to install it and then also service that equipment. This, this business model of sales and service. What often savvy buyers want to do in such a case is make that service Piece more of the revenue, not less because that's the recurring or reoccurring high quality revenue, non project based revenue.

And so that, that really was your strategy. I'm jumping ahead a little bit. Can you give us some numbers of this business?

[00:17:41 - 00:18:12]

Adam Vandermyde: Yeah, sure. At the time I believe top line revenue was, was right around $15 million with an EBITDA about 1.2, 1.3 depending on you know, we, the conversations about add backs.

So it was a healthy profitable business. Been around at that time. They didn't have really any debt, they had a line of credit but it was, it was boot bootstrapped from the, the, the two partners that, that started it and has had owned it for, for 25 years.

[00:18:13 - 00:18:15]

Will Smith: Great. And you said 60 employees earlier.

[00:18:15 - 00:18:16]

Adam Vandermyde: Okay, that's right.

[00:18:16 - 00:18:25]

Will Smith: And what was it selling for? Talk talk to us about the how kind of where it started and where it ended up. Your actual deal to buy it.

[00:18:26 - 00:19:41]

Adam Vandermyde: Yeah, the, it started up as at about a 3, 3 times EBITDA multiple and we, that's where we ended up landing on as well.

There was certainly some push back and forth on what the EBITDA was. The, the, the former owners ran it the business the way they knew how in that it was to reduce taxes. That, that was the way that they made decisions. How could they minimize taxes? So there was a lot of you know, personal expense, you know, gray area personal experiences that went through the business as well to really drive down profits.

So you know, as we as we had conversations about what was actually there, what should be there, what add backs are there, you know, we, that's where we spent most of our time. But, but, but, but three times EBITDA was where we all got our heads pretty comfortable early on, which I thought was a very attractive given the size of the business of over a million dollars of EBITDA is certainly attractive. But there wasn't a lot yet of professionalism in the business and the mix was heavier on the construction side. So all of those things really made sense that it would be a 3x multiple as opposed to something a little higher.

[00:19:42 - 00:21:18]

Will Smith: Okay.

Okay, great. Well yeah, that was going to be my question. How could you get such a great multiple on a business that everybody listening wants to buy over a million dollars of earnings? But essentially again it was essentially a construction business and so everybody runs in the opposite direction from construction. Actually construction is something we really really dislike as a category.

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But they represent just a sliver of.

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The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions and an active community of serious searchers. Check out acquisitionlab.com link in the notes or email the Lab's co founder, Chelsea Wood.

Chelsea buy then build.com.

Did you see.

It as a construction business or as.

A distribution business, or as a sales and service business? Or how did you think about it?

[00:21:20 - 00:23:18]

Adam Vandermyde: I liked the mix. I know installation or construction can be a naughty word in this industry, but I did like they all I called it instead of a vicious circle, I called it the beautiful circle. So I did like they had that they had the key components because if you build a station in your area, guess what? You now are the service provider. So as you build more stations and, and it's.

We didn't just do retail work, we did commercial and that's something we emphasized as well. But anytime there's a new backup generator to monitor or a new retail station to monitor, there's a new opportunity for service and the new opportunity for larger fixes. And so they really complemented each other well. So I liked that aspect of it. And the construction side, if I remember right, the mix, when we acquired the company, I believe 65 to 70% of the revenue came from construction.

So that's why they treated it as such. And roughly 30% was on the service side. So it wasn't an insignificant business. $5 million or so in service, kind of the reoccurring side of it. But we also saw it was a great.

Their brand book was amazing. They were doing work with fantastic brands that were starting to signal to the market that they were looking to grow and grow through acquisition. There's not a lot of competition in this space in general, at least where we were in the Intermountain West. So all of those things really led to the fact that I liked the mix. I would want to mix it or improve the service side, but it worked well together and in tandem.

And. And that given with the lack of competition, just made it very interesting to me.

[00:23:18 - 00:23:58]

Will Smith: Yeah, yeah. And the question that so often comes up in my mind is just how big this market could be. So there are that many of these of.

I know that you do more than just gas stations, as you just told us, but what do you call a new site, just like a fueling station, be it on a private piece of property or a gas station. Is that what you are? Okay. And so the question is, are there that many fueling stations being constructed every year? I mean, I guess if you look across, you know, from Canada to Mexico and, you know, a good swath of the country, I guess the answer is, yeah, there probably are.

[00:23:58 - 00:24:13]

Adam Vandermyde: So if you look at the area in the Intermountain west, we are where people are moving to, the coasts are moving. So in my footprint, I have five of the top eight fastest growing states in the nation.

[00:24:13 - 00:24:14]

Will Smith: Yeah.

[00:24:14 - 00:24:36]

Adam Vandermyde: So as such, with that infrastructure, you need gas stations, you need fuel to help support that. So, yes, construction of new stations has been quite heavy in our area for a long time, and even during COVID and has not shown signs of decreasing quite yet because the population growth continues to be.

Be pretty strong.

[00:24:37 - 00:24:50]

Will Smith: Yep. Yep. Great. Okay, Adam, so talk to us about how you were enticed into the deal, or at least closer to the deal.

[00:24:50 - 00:26:58]

Adam Vandermyde: Yeah. So just after that, the NCAA being cancelled, I. I said. I said probably not right now. So it was kind of a soft no to the owners, but we hit it off with the owners. I think they saw there was a few interactions that I had with employees.

They didn't know what was. It was very secretive of what we were doing, but I think they liked how I interacted with their. Their people, their family. Right. Their employees.

And. And like the background that I. That I brought. So it was a soft no. That's when things got quite shut down in, In.

In Covid. And instead of quarantining by ourselves in Texas, we decided to just make a road trip out to southern Utah to spend some time with friends and family to quarantine together, if you will. So we happened to be down here in the area, and this was two months later, and I got a call from the former owner that said, adam, I got an idea. I want to talk to you about something. Okay.

So we met up, and I happened to be in town, so we met up and full, full kudos to him because it was a fantastic idea that really put me over the edge. He said, we really like you as an owner of the business. What if we signed a letter of intent right now, we agreed upon a price and a multiple, but we hired you as our CEO, I guess indefinite amount of time. We hired you as our CEO. You run the business, you kick the tires, you look in the closets, you do what you need to do there, figure out how to fund it.

But if you add any business, if you add any, Any value to the, to the company while you're there, that's yours. We, We've already agreed and signed on an loi so how could I say no at that? It's a business that, that fit all of my criteria. The size, the, the boring, the needed, the need of the business. All of it fit my criteria.

And now I had a chance to seriously de. Risk it and get paid to go be their CEO and due diligence and, and, and so I, that was enough.

[00:26:58 - 00:27:06]

Will Smith: And take your time learning how to put a deal together. You didn't have to race to figure it all out. You could.

That's exactly when you were ready. You could do it.

[00:27:06 - 00:27:35]

Adam Vandermyde: That, that's exactly right. Start putting together my leadership team, start making hires, frankly on their dime. And I mean it was a, it was a.

Probably somewhat risky on his end to, to make that leap for me. But it completely de. Risked for you? Not completely, but it de. Risked it significantly.

And I was, I, I said yes. And about a month later moved, moved, moved the family down.

[00:27:35 - 00:27:41]

Will Smith: And was the compensation, the salary going to be comparable to what you were walking away from?

[00:27:41 - 00:28:24]

Adam Vandermyde: Definitely not equivalent. It was probably half.

I was making good money though, where I was, so it wasn't like we were poor. But yeah, it was about a half of what I was making prior to. But I mean the way I looked at it was my end state was to figure out how to make this work with the company. So that was it. But I also looked at, okay, if it didn't work out, it's not a resume killer.

It looks good. I could, I could sell that what I, what I was doing and, and you know, took over as, as, as CEO. So I, I didn't see a lot of downside. And frankly, I think the company that I was with probably would have taken me back.

[00:28:24 - 00:28:40]

Will Smith: And to your point about the seller and their risk that they were taking on.

Yeah, you didn't have any skin in the game yet. You were a hired gun and if you ran things into the ground you could hand, you know, walk away from. Right.

[00:28:40 - 00:29:22]

Adam Vandermyde: That, that is true. There was so some of the things that they put in place, which was smart on his side, so give me some skin in the game is they did ask me to acquire 5% of the business based on the LOI purchase price.

So I think it was, you know, roughly $250,000 that I, that I cut him a check for. So, so there was that. Now if I run it into the ground, you know, certainly they had a lot more to lose than I did, but I, but at that point I did have, have skin in the game and it also gave them some confidence that I, I did have capital behind me in order to, to fund the business. So yeah, that was, that was smart and a good plan on, on his end as well, I thought.

[00:29:22 - 00:30:26]

Will Smith: Yeah, no, I, I, yeah, I mean I didn't catch this in the pre call, but now that we're talking about it again from their perspective, a quarter million bucks and uprooting your family and moving them to St. George, those two things together and, and their belief that you're going to like this business.

Yeah, yeah. That you're, you're going to want this thing and that it's growable and you could get in there and likely grow it and they're going to keep the purchase price the same as as, as from when you start day one, when you started it starts to, to make more sense. Um, but yeah, clever and, and good, good all the way around. Why do you think they wanted you so bad, Adam? Because to, to your point, the, even though it's a quote construction business, it's, it's still a great multiple.

Pretty great, pretty good multiple. I shouldn't say great, but it's a good Multiple. And St. George, you know, Utah, as you said, it's, it's a growing state. There's a lot of economic activity. I would have thought they would be able to find other buyers that they wouldn't be kind of so, so desperate for you.

[00:30:26 - 00:31:40]

Adam Vandermyde: I think there's, there's probably a few elements there. First off, they, they ran the business. Everything was done in secret. They didn't share a lot of information with employees. They certainly didn't want to run a full process and get the word out that they were looking to sell.

And so when they hired this broker, my brother in law, he wasn't allowed to take it to market, if you will. There was just select people he was able to go to that was just a person, their choice. They, they were very again, secretive on everything and ran up very different than I did. But you know, to their credit they, they built a nice business. But so that, that was part of it.

Now why me? I like to think there's a part of it where they, you know, were impressed with me. And liked what I brought to the table. And I think there was probably some of that. But also I was also a warm body.

These guys were getting older. They, they, they were ready to pass it on and didn't have a succession plan, didn't have kids to give it to and you know, a limited buyer list by design on them. So there's probably an aspect of, okay, he looks capable and, and can probably get this done. And I, I, they were, they were ready to retire. They were, they made it, they made that known.

[00:31:40 - 00:32:08]

Will Smith: Yep. Yeah. Fascinating this offer to come be the CEO but buy 5% of the business up front. So quarter million dollars in move your family to St. George, be the CEO. And when and if you, you and will agree to the purchase price and when and if you want to then fully buy the business, you, you do.

So, so pick us up. So how long are you CEO before you decide I want to buy this?

[00:32:08 - 00:33:42]

Adam Vandermyde: 6 months almost to the day. Well, to where I decided I wanted to buy it was actually fairly early. I would say probably two, two or three months in.

I started to get pretty comfortable. There was, it felt like every time I stepped somewhere there was opportunity, there was, oh, why are we doing it this way? Let's do it this way. Why are we trying it this way? Let's try this.

There was just opportunity everywhere I looked. So early on I made the decision that then, then leads to okay, the funding. Well, there's, there's two key portions to that funding that really helped the, the owner. At that point we were, I was wondering, the, the, the former owners were still in the business, so there was kind of dual executive teams at that time. So because it was, we were kind of gradually passing things over to me and I, and I wanted that I, I, I'm not cocky enough to, to think I can just go in and know what I'm doing.

Day one on a brand new industry. So they were still doing their individual roles and still involved, but we, we worked together and I think they, they started to really trust me. And so in, in the conversation about funding, they, they indicated that they would be willing to, to fund a significant portion of it. It turned out to be 50% in seller financing because they started to trust what I was doing, liked the changes that I was making. And I think there was again a very unique opportunity to develop trust by working side by side with each other.

And so they offered 50% financing.

[00:33:43 - 00:34:14]

Will Smith: But Adam, I mean that's awesome. Good for you. But I still feel like, yes, they've now de. Risked you, they've worked side by side with you, and so they're feeling more and more comfortable with you, that you really are.

The guy can take this, can do this. But similarly, you are feeling good about the business, increasingly good about the business and the opportunity here.

So it wouldn't seem like they'd need.

To sweeten the pot.

You probably would have bought this with.

You know, 10% seller financing.

[00:34:15 - 00:34:42]

Adam Vandermyde: Yeah, I think that, I think that's absolutely right. And I don't, I don't know that they ever thought sweetening the pot. I thought they actually thought it was a good opportunity for them, kind of delay taxes a little bit, put some secured income basis. I.

So I think there was benefit on their end as well. As long as they trusted that I wasn't going to whittle away their, their investment. I think they liked the concept of continuing to get paid from the business monthly for 10 years.

[00:34:43 - 00:34:43]

Will Smith: Okay.

[00:34:44 - 00:34:50]

Adam Vandermyde: That just kind of, I think, resonated with them.

So, yeah, maybe it was sweetening the pot a little bit, but there was certainly some benefit on their side.

[00:34:51 - 00:34:56]

Will Smith: But you had said before that they were very tax shield.

[00:34:57 - 00:34:57]

Adam Vandermyde: Yes.

[00:34:58 - 00:35:11]

Will Smith: Oriented. And so payment terms on a business sale is one way of, of shielding that capital.

That, that sale price. Yeah. So. And that, that, that was, you think that was a motivation?

[00:35:11 - 00:35:12]

Adam Vandermyde: Absolutely.

[00:35:12 - 00:35:12]

Will Smith: In many.

[00:35:12 - 00:36:29]

Adam Vandermyde: Yeah. And not to be critical, they probably know way more about taxes than I do. But in many ways, the, the, the tail wagged the dog of, on, on their decisions when it came to taxes. Taxes made most of the decisions, and I, I just approach it slightly different.

But in this case, I think it was a win win. I think it worked well for them. And so, so that became then, you know, 50% of it, then figuring out the other 40. Well, other 50%.

Another great thing that kind of fell in the lap with me taking over the business is they had a great, great relationship with the, with their banking that had been with them since day one. And so very early on, I asked for an introduction to their banker and had a great introduction who was more than welcoming and more than excited to try to figure out how they could fund. And we ended up deciding on an sba. And because they knew the business, they'd been with them through thick and thin. The down payment, they were comfortable with just a 10% equity stake.

And so they, they funded 40% of it with so 50 seller financing, 40% SBA, and then just 10% equity from my side and money down. So.

[00:36:29 - 00:36:31]

Will Smith: And you'd already put in five, and.

[00:36:31 - 00:36:35]

Adam Vandermyde: I'd Already put in five. That's correct.

And so you had, yeah, that was, that counted towards it.

[00:36:35 - 00:36:37]

Will Smith: So you had to bring another 5%.

[00:36:37 - 00:36:38]

Adam Vandermyde: That's right.

[00:36:38 - 00:36:41]

Will Smith: And so you came out of pocket fully half a million in cash for this.

[00:36:42 - 00:37:40]

Adam Vandermyde: Yeah, I would say we, I, I did pull in a few partners at that time.

Not for the money but for strategic. There was someone that was, I, I knew that was a double E and and MBA as I knew this business would somehow have to transition and somehow and sometime to ev charging as as you know eventually petroleum will go away. So I wanted to have those chopped so it gives a very small portion there. But I also knew that it was important for someone in the industry for that to have a COO cfo. And I'd already been starting net to network with somebody who was interested and so I left some equity for that person to buy in as well and then come join the team as my COO and CFO.

So I owned, ended up owning about 80% and then you know had had smaller portions for, for others.

[00:37:41 - 00:37:52]

Will Smith: Gotcha. So and those folks that you set aside the equity for, I guess one of you, one of them you just explicitly said would pay for it. Everybody was paying for it.

[00:37:52 - 00:38:48]

Adam Vandermyde: Everybody did buy in.

Yeah. At different, different rates per share depending on their involvement in the business. Because we you know we had, we had silent, we had the next year was, was essentially that CFO and COO who was going to be day to day managing the business. Then I was led the last tier because I had all of the loans and risk was in my name. So we were very strategic.

I was very strategic to try to keep all of the risk on me because of the size of the equity. So I said 20% but actually the, my, my partner that was the CFO CEO had 19%. That's an important delay deviator because anybody who's 20% above needs to be on the SBA loan, 19% below doesn't. And given the size of his equity it didn't make a lot of sense to have him take on that risk as well. Yeah.

So I shed, I had that full risk and therefore my shares were a little bit less expensive.

[00:38:48 - 00:39:02]

Will Smith: Yeah, yeah. And by being on the SBA loan you mean the personal guarantee. So anybody guarantee below if you 20% equity owner trips the personal guarantee. And so yeah, it kept him in 19.

[00:39:03 - 00:39:04]

Adam Vandermyde: That's right.

[00:39:04 - 00:39:23]

Will Smith: Earlier you'd said that 5% when the skin in the game that the sellers asked for as you came in as CEO was 5% for quarter million bucks. Right. But that wasn't the final value. That wasn't the final valuation of the business because that would suggest $5 million.

What was the valuation?

[00:39:23 - 00:39:26]

Adam Vandermyde: Four and a half was the. Four and a half was the final valuation.

[00:39:26 - 00:39:31]

Will Smith: By my math, that's basically a 4x or a little bit, a little bit under a high 3X.

[00:39:32 - 00:39:36]

Adam Vandermyde: Yeah, I, and that may be true.

I think it was in the threes again.

[00:39:37 - 00:39:37]

Will Smith: Okay.

[00:39:37 - 00:39:56]

Adam Vandermyde: It all depend on what we ended up including for, for the. But they came and said the business is 1.5 million in EBITDA as we start kind of whittling, whittling it some things down and, and, and I, I again I think we ended up maybe at 1 3. So yeah, it maybe pushed us three and a half times EBITDA.

[00:39:56 - 00:40:00]

Will Smith: I see, I see. Okay. But four and a half million was the final purchase price.

[00:40:00 - 00:40:02]

Adam Vandermyde: Four and a half was the final purchase price. Yeah.

[00:40:02 - 00:40:07]

Will Smith: Okay, great. You saw opportunity everywhere. Why don't you give us a few bullet points on the opportunities that you saw.

[00:40:08 - 00:42:32]

Adam Vandermyde: Yeah, the, as I mentioned there, every time I looked there was opportunities. They, some of it was back office.

They were very primitive in the way they, although they did have a, an ERP which was nice for that size of a business. There was a lot of folders and printing and other things going around the office for accounts receivable, accounts payable. So just, just working to professionalize the back end of it along the way. But as I mentioned earlier, I really wanted to turn this from a construction business that did service to a service business that did construction. And every decision that we, we make, including software, including hires, including marketing, including what, what conversations that we have with our clients needed to be centered around that reoccurring revenue on the, on the service side.

And so we, we invested and changed the org. Structure of our, of our service team. When I first took over, there was a service manager that had everybody in service reporting him. So he's, I think he had, you know, 18 or 20 direct reports which just again, you can't manage and didn't make a lot of sense. So we added some leadership tiers in there.

We changed the sales process and professionalized that equipped them with a lot more collateral material to do their job, but also became quite analytical. I saw an opportunity to really pull out of our, our footprint more and more on the service side. So for instance, we went back and looked at every customer that, that had used us on the service side in the past but hasn't called us in the last year. That's where that's our leads list. Right.

I don't need new stores. Let's go talk to the old. The old people that have been used us and why aren't you using us? And so we made a conservative effort to really grow our service side. And over the course of the five years that I, that I owned it, we did extremely well and grew it by almost 50% on the service revenue on the service side, which is a high margin, which leads to other opportunities, leads to construction, which also then leads to service.

So it was a very good success on our service side, emphasizing that side of the business.

[00:42:33 - 00:42:40]

Will Smith: And Adam, did you change the business model at all or did you just lean into selling the service more aggressively?

[00:42:41 - 00:44:14]

Adam Vandermyde: Yeah, I wouldn't say that we full on changed the model. What we did change, though, is because there's not a lot of competition in this space. It became obvious to me early on that there wasn't a big focus on customer experience.

The kind of mantra was, where else are you going to go? Okay, maybe you go to that other competitor and you'll be back in in two months. I just don't want to. Even if there's not a lot of competition, I don't manage that way. I don't run a business that way.

And so we really, we. One of the roles we created was a customer concierge. Their job was to represent the customer in everything we do. So if there's a billing dispute, if there's a customer calling in, saying, you know, questioning something, this person was told, you represent the customer, not us. So what do we need to do and how do we need to make it right?

And so then they'd work with the service manager to address that. Again, ways and things and approaches that didn't exist in the past. And I feel we did get a lot of traction from that. Our customer turnover rate went down quite a bit. People were continuing to call us, so we were a lot stickier.

And as our salespeople did go out and get new accounts, we, we, we saw that we were able to successfully steal them, if you will, back because of the, the customer service approach that we, again, there's, there's a lot of not so nice people in this industry and we wanted to be the people that you wanted to work with.

[00:44:15 - 00:44:23]

Will Smith: And the not so nice piece is just because the competition is thin. So people can, I think that's not treat customers very well.

[00:44:23 - 00:44:32]

Adam Vandermyde: It's also just an industry that's kind of, can be rough and tough and kind of blue collar and yeah, just not a focus on on customer experience.

[00:44:34 - 00:46:17]

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When we keep talking about service, you weren't getting everybody on like a, like going back to whether or not the business model changed. You've said it hasn't but we're not talking about true recurring revenue where there's some sort of plan, service plan or something. It's simply, you know, this stuff breaks because it's mechanical and used constantly and it's, it's, you know, kicked around so it, it reliably breaks.

Stuff reliably breaks and just being the one that they call when stuff reliably break. So some customer might call you a few times a year and each of those calls might be a few hundred bucks, few thousand bucks sort of thing.

[00:46:18 - 00:47:43]

Adam Vandermyde: Yeah, our average ticket price is about 800 or 900 bucks a call. But yeah, there's, there's kind of three categories there, there's the, there's those that, yeah, we just want to be in line that they, that they give us a call for the service. But there are, there's, there's others, some of the larger players that have multiple sites, we have a contract with them that we are their provider.

There's preset negotiated rates and how much we can charge for parts, so on, so forth. So there is that aspect of it. We did Dowel and I still think there's opportunity here for this. But for a true subscription type model, not for your service work, I don't see that ever happening in our industry. But there's preventive stuff.

There's week, there's monthly testing and inspections that need to be done. There's annual testing on tanks and other things to make sure there's no leaks. And then there's there's some other preventive stuff that we did package and put together an actual subscription base. That that, that got a little bit of traction but by that time we were starting to get close to a cell so we kind of let it. Let it die.

So I still think there's probably something in, in the industry that, that, that we could, that we'll, we'll. We'll work through. But for the most part it, yeah, it's those, it's those contracts or the reoccurring revenue. Hoping they call you tell us about.

[00:47:44 - 00:48:21]

Will Smith: Well, I will say Adam that we joked on our pre call that this story just feels like everything breaks the right way.

Right the from you know, it's a great business and the owners the way they entice you and de risk it for you. We haven't even gotten to the end but that that goes the right way as well. And then that was of course very naive for me. And you were like actually there was plenty of bad stuff that happened during those five years including a construction project that was really dire. Tell us that story.

[00:48:22 - 00:51:53]

Adam Vandermyde: Do I have to? Yes, I will. And the reason why I lead with that that comment. I've had some pretty high level stress positions in my life and during this time I had. I've never felt the pressure that I've had and the stress that I had going going through it.

But very early on Covid impacted the supply chain everywhere. But in, in our industry was no was no exception. And there was a site that we were building in California that because of long lead times a decision by my team was made and probably the right decision at the time but was made to swap out certain pipe for pipe that had a shorter lead time. So we finished the station and built the station and it opened and there's some tests that are required only in California that, that, that that that test and make sure that there's the. There's enough slope for when you're done fueling in the dispensers.

Any extra fuel needs to go down back into the tank so it's not sitting there, you know, putting fumes into the environment. Well for whatever reason every single point of of slope failed the test in California. We've never in 30 year history that com. Our company's never failed that. It's quite simple.

You just have the right slope. Well turn turns out the piping substitution that we that we did was was the factory. Although it was fully lice fully approved piping for that purpose. There was no nothing shady about it but this piping has a little bit of flex to it and so all of those slopes back down to the tank was a little bit of a U that you know, create a little P trap for, for fuel. That didn't get back significant in the grand seeming things?

No. Did it affect the operation of the station? No, but we failed the test and I flew out there to meet with owners and try to understand what was going on. And one of the harder decisions we've made, but we decided to rip up that site on our dime and replace all of the piping. That's, that's hard, that's scary.

That's, there's real costs involved in that. There's months where my team could be on a revenue generating job, but they're on this job working through it and making it right. I'm proud to say, although there was a year of extreme touch and go stress and pressure of, I mean we lost a million dollars of EBITDA that year. Or more. More actually.

If we, if you take in the opportunity costs, how do you fund that? How do you stay afloat, how do you make payroll, how do you, how do you do all of these things? But I am proud to say that we did get out of that other than financially unscathed. There was no bond claims on the job, there was no legal actions on the job, there was no reputational impact because guess what, we stepped up and did the right thing. And so in other instances it actually, that actually helped us.

So it was, it was the hardest thing I've ever had to deal with in my life and kept on being the hardest thing for like I say, for about a year until we were able to dig ourselves out of that hole, which we did very well. But that was an extremely scary time. There's.

[00:51:53 - 00:52:05]

Will Smith: When I hear you say that, you know, you, there were times in that year when you had to figure out how you're going to make payroll. So this could have broken the company, this could have taken the company down five times.

[00:52:06 - 00:52:56]

Adam Vandermyde: My CFO came to me and said we got two weeks of cash left. We got two weeks, two weeks and five times. That's, those are, those are hard, hard conversations. So we were able to, again, we had great relationships with our bank. We were able to extend lines of credit.

We, my, my partner and I did put some more capital into the business to, to, to allow and bridge that gap for a time. We had to restructure the, the payment to our, the, the seller finance. We cut the payment in half I think for, for six months. That was, I mean we were in support of it, but it was the bank that. That made that decision to kind of give us a little bit more Runway.

And like I say, we.

[00:52:56 - 00:52:56]

Will Smith: We.

[00:52:56 - 00:53:05]

Adam Vandermyde: We came out of it and. And all. All was well, but it was.

It. It was the scariest, toughest, hardest thing I've ever done for. Without a doubt.

[00:53:07 - 00:53:16]

Will Smith: Did you make the decision to rip everything up and. And lay new pipe kind of on your own, or did you seek counsel before you made that decision?

[00:53:17 - 00:54:28]

Adam Vandermyde: No, definitely sought counsel with. With the. With my executive team. I will say at that time, I probably under. Well, not probably.

I absolutely underestimated the financial impact of that decision. I don't know that I would have. It would have made any difference. I think we needed to make it. I think in my mind, I thought, okay, we'll kind of break even on this job and then move on to the next.

And it just. That just. It just wasn't the case. It was. It was.

It was a big, hairy job. The opportunity cost I hadn't fully thought through. So, yeah, I probably didn't understand the depth of that decision until the aftermath. So. Lessons learned there.

But in everything I do, I seek out decisions and including with. At that time, we were working with the gc. I mean, we had conversations of this doesn't matter. It's not going to impact their operations at all. Can we just slide and get away with it and say, you know, we'll give you a $30,000 credit or something?

And again, it just kept coming back to was the right thing to do. That's what we had to do, and so we did it.

[00:54:28 - 00:54:50]

Will Smith: Good for you, Adam, for making the right call and enduring that pain. The sellers must have been grumpy. This is a good example for people who, you know, might not understand why it matters so much.

The senior debt versus junior debt. If this was a case where you're seeing your debt, your lender, the bank said you.

[00:54:50 - 00:54:50]

Adam Vandermyde: You were.

[00:54:51 - 00:55:16]

Will Smith: You can only pay the seller note at half the. You can only chop it down to 50% to just give you breathing room and make sure you can pay them.

And so your seller, your sellers don't have a say in that matter, really. And because they're. They're. They're junior, they just have to suffer that if they eat that. And so anyway, good case of like, senior versus junior and why it's better to be senior.

[00:55:16 - 00:56:09]

Adam Vandermyde: Yep, that's exactly right. And. And, you know, the real risk involved in that. I mean, they were both frustrated and good partners in it. I will say.

They. They understood. We explained that we needed, you know, we Were we were cash tight. I, I frankly didn't go into a lot of detail of exactly what happened. I didn't need to.

But I mean we needed a Runway and made it clear that it was the bank's decision, but frankly it was the right decision for the business. And so they started to push at the end to get it turned back on. And so they were pretty quiet until five or six months in saying hey, it's time. What's going on here? And.

And so then we worked with the bank to turn it back on. But so they were both loud and frustrated and good partners.

[00:56:10 - 00:56:24]

Will Smith: You'd said that the pace of change was rapid at the business and getting buy in from employees was key there. That's management leadership at work. What can you tell us about that?

[00:56:25 - 00:58:58]

Adam Vandermyde: Yeah, one of the things that I was pleasantly surprised. Um, and some of the things I'm gonna say, I mean no knock on the former owners. I, I have a deep respect for them on how they built the business to where they did and they, they bled and sweat and lost sleep for 20, you know, 20 some odd years to get to that point. So full credit to them. But, but also on the other hand there was a lot of things and processes that people had been silently frustrated with and wanted to see improvement and change.

And the way I manage is put the right people in the right position with the right tools, incentives and get out of the way, let them do their job. And that was not the management style from before. And so when we started implementing some change, the way I went about doing it is I listened. What is frustrating you on the job, what will make your job easier, how can we address this? And, and listening to what needed to be fixed, prioritizing it, fixing it.

And then this is something that a lot of people don't do as well. Taking credit for that. I heard you. This is what we did. And guess what?

We fixed it. And so I started doing. Every two weeks we would do, we called it Petro Talk because the name of the company was Petro west where I would get up and share a 15 minute video of things that are going on in the company. I'm very transparent. These are the things we talked about in the executive team.

These are some, some improvements that we've made. We also did engagement surveys every six months to, to, to get a touch on how people are feeling about their jobs, how people do they have the tools that they need. So we, we felt like we were well, very well in touch with the business. So every change that we, we Implemented there was like, okay, that's awesome. I've got this.

How about can we, can we improve this? Can we do this? So I went as fast as I felt that they could absorb it based on the feedback that we got from all of those touch points. And it was pretty rapid, it was pretty fast. Not everything we made, every change we made was great, but we made enough change that was really good that we earned some political capital with them to continue to trying things and also admitting when things weren't good to go back to where it was.

Some things we did break, but keeping. Keeping good tabs on them and them being really anxious and wanting change was a good combination because we were able to move a lot of things pretty quickly.

[00:58:58 - 00:59:08]

Will Smith: Well, yeah, it sounds like it was bottom up change as opposed to top down. It was their ideas that you were implementing to start.

[00:59:09 - 00:59:45]

Adam Vandermyde: To start there was.

We certainly had larger changes that, that we wanted to instill at the right time. So there were certainly some that came top down, but probably 80, 20, 80% of it came from them. I agree with that. That like I've been wanting to make this change for years and haven't been allowed to. I mean, you know, they had to get approval for the color of pens that they bought in the office.

And I'm just, that's not the way I manage you. You have a job, you've got the, my, my instruction, my, my overall strategy and how to do it, go do it, get it done. And they. That resonated extremely well with them.

[00:59:46 - 00:59:49]

Will Smith: Do you ever have to say no to change ideas?

[00:59:49 - 01:02:05]

Adam Vandermyde: I'm sure the answer is yes. Let me think of and try to think of an example. Well, yeah, my, during the, the hell that we went to on the construction job, my, my CFO came to me, which I always welcome ideas whether we do them or not are good or bad and said I think we need to ditch our construction, let's not do construction anymore. And as I mentioned, it's a, it's a, you know, at that point is a fairly large portion of the revenue. And I, you know, he had some merit in his thinking in that there's a lot of back office support, there's a lot of headcount that we have to support the construction group.

The risk as we just went through is pretty high on the construction side. So that one I thought through we had to have back and forth conversations and then I immediately went to analytics and math.

Now that you bring this up, actually it's interesting because it spurred something else. I ultimately decided there's no way that we can do that as a company, nor that I feel like we needed to. But I respected him enough that I took five steps back to look at that and to really consider it. The answer was no. But in the process, and I didn't realize until now that that's what spurred this.

I'm a very analytical guy. I went back because of this issue and I think because of his question, I analyzed every single construction project that we had in history since the company started to try to create a profile of what does good look like on construction. Do we need to sell the parts? Should we just provide the labor? What states do we do better in versus others?

What type of customer segmentation do we do better than others? And that analyst, that changed our overall strategy of how we go after jobs, what jobs we go after, how we price them, which ones are going to be more aggressive. And I think again, it probably didn't give him enough credit. It was from that question where I said no, that that really spurred a lot of this analysis to get us smarter and better, which completely changed the trajectory we were on as a company.

[01:02:07 - 01:02:21]

Will Smith: Fantastic. Okay, Adam, so take us a few years in. Take us to where you start to get the notion that it might be a good time to sell. We will hear why you thought that.

[01:02:22 - 01:02:22]

Adam Vandermyde: But where.

[01:02:23 - 01:02:32]

Will Smith: What did the company look like as you started to chew on that possibility in terms of like EBITDA revenue, where you'd grown it, the revenue mix that was so such a big strategic shift.

[01:02:34 - 01:05:18]

Adam Vandermyde: I think the time where it started, I think makes sense, is I set a goal to have from the financial aspect and the revenue mix of the business, where taking out construction, the rest of the business provided enough gross margin for us to break even. And then construction was the cherry on top. Construction was the profits. That way, if the economy somehow dove and there was no more construction ever, we were fine.

We weren't making a lot of money, but we were paying the bills. And we got to that point probably within two years. There was a lot of private equity money that was starting to come into our industry at that point. So we started to have people knocking on our doors and, and interested in us. And as, as I started fielding, of course we fielded those conversations and started developing relationships and networking there.

It just wasn't. We knew it wasn't the right time. We were on, you know, three or four or five year Runway that we hadn't accomplished everything we wanted to. And. But we knew as we learned more about this industry, if you, if you put a Map up on of the United States and put a dot for every location of a company like ours that is owned by private equity.

There's a lot of dots on the east coast and there's some dots on, on the far west coast in California, but nothing in the middle. Very, very, very few in the middle. But each of these companies are saying we want a coast to coast model. So at that point we came maybe a little cocky. We knew they needed to go through us.

We're the largest player in that space or in that footprint and they want a coast to coast model, they're going to come through us. And so we then knew the way we were were trending was the right way of, of really focusing on service and growing that side of the business. So we continue to do that and continue to professionalize the business as well. All those things that our story, our mantra became, we're going to build the West. It's just a matter of who we're going to partner with.

Is it going to be us that's going to bootstrap it and build it and grow or are we going to have a partner, but it's going to be us. And so it came to a point where we, our pipeline was extremely good, our trailing 12 months was very good, that I decided to go ahead and hire an investment banker and run a process. So it just the way that the industry was shaping up our performance, we just felt that the timing was the right time and it turned out to be the right decision.

[01:05:18 - 01:05:20]

Will Smith: And where was EBITDA and revenue at that point?

[01:05:22 - 01:05:29]

Adam Vandermyde: Revenue was about 23 million and we got the EBITDA to about 2.3 on a trailing 12 month.

[01:05:31 - 01:05:37]

Will Smith: And despite the fact that you'd had knocks on the door inbound from private equity, you chose to hire a banker.

Why?

[01:05:38 - 01:07:30]

Adam Vandermyde: Yeah, I went back and forth on that decision again thinking I'm pretty hot stuff of I've ran corp dev, I know how to buy businesses. My partner's a, a cpa, so he knows accounting quite well. We can do this on our own.

It just we started to kind of dabble and have conversations with some investment bankers and one of them gave a presentation at one of our industry events that we started to develop a relationship with and sort of doing the math, there was a certain, you know, several hundred thousand dollars that they would charge. We had the decision internally, do we think that they can provide more value than the, call it $400,000 payment that we're going to pay them to sell the business. And we thought the answer Was yes, because we had multiple players. We really wanted to have them create some competition. And we also thought that even though we were credible, they would provide a lot more credibility on driving a higher number.

So I'm actually almost ashamed that I had the thought of doing it myself because they absolutely brought way more than value to that to the conversation. We did have multiple offers. We were able to negotiate some nice terms. But we also feel it was a great win for the company that acquired us. So they absolutely earned their keep.

We thought, okay, do we need to hire attorneys or can we review everything on our, on our own? Maybe using gp, GPT and others. Again, stupid thought because they were phenomenal. The attorneys were fantastic and we're able to set up, you know, really help us avoid some of the landmines that we didn't even know were landlines. So very, very grateful for the, the service providers that, that locked arms with us in this venture.

[01:07:31 - 01:07:55]

Will Smith: Well, on the banking, as you said, so it was good. The fee for that was going to be a few hundred grand. And so the math for you is basically can they get me more than a few hundred grand for the purchase price that if I took this out to market myself, I'd get right. Seems like a low bar for them to cross, like easy. They'll be able to do that.

[01:07:55 - 01:08:16]

Adam Vandermyde: And we find, we, we eventually came to that conclusion as well because we also didn't need them to. We knew who the buyers were going to be. We've already talked with all of them. So they didn't bring anybody new to the table, but they absolutely brought the value. So yeah, but that, that we, we also agreed with you, we thought that was a low, low bar and yeah, they hurdled way over it.

[01:08:18 - 01:08:24]

Will Smith: You talked about managing to EBITDA in this chapter. What do you mean managing to ebitda?

[01:08:25 - 01:10:20]

Adam Vandermyde: Well, as I mentioned, the former owners managed to taxes and so they wanted extra costs going through the business. We didn't. Every decision we made was how do we maximize EBITDA from what types of construction projects do we go after that Drive higher margin.

So I created a metric of margin per labor dollar. Those are the types of construction projects that we wanted to go to. We're going to spend 100 hours on this job. Let's find the jobs that bring substantially more margin for those hundred hours as opposed to just doing labor. We want to sell the parts and sell the equipment and sell other aspects of the job.

To add on to that, how we chose to manage our fleet and vehicles. We consolidated an office or Two that we didn't need anymore. There was a very large yard that we had that just kind of ended up storing old equipment that was useless, but we're paying for that. So over time, how can we skinny down the business, the controllables, but use some of that. Yeah, to go to the bottom line, but use some of that to invest in.

To where we really think will drive profitable growth in the service side of the business. And so there was investments that we made on. On the service side of the business to. To continue to grow that. So just every decision we made the other way I'll put it, there were times that you would ask me, what's our revenue this so far, this quarter?

I. I could have guessed. I couldn't tell you. I didn't care. I could tell you exactly what our EBITDA was. I could tell you exactly what our gross margins were per day on construction, but I could.

I just didn't care about revenue. That wasn't. That wasn't a thing to me. I didn't make any decisions on that. It was all about profitable growth in the form of ebitda.

[01:10:21 - 01:10:27]

Will Smith: And that was your approach the entire time, or was that just as you started thinking about a sale?

[01:10:28 - 01:11:23]

Adam Vandermyde: I would say not the entire time, but as I felt like I got smarter in the business and what levers were important. So probably after two years before I was really getting serious about a seller, that's when I really started transitioning to the way I think. So I even mapped out on our construction side, all of our jobs. The estimated time it took, the jobs, the estimated margin.

And I'm not kidding, I knew every. I think I did it down to a week, not necessarily a day, but every week. This is what we can expect from a margin perspective from our construction jobs. And if we had gaps, how do we fill those in? So, yeah, it was probably two years after buying the business that I feel I got smarter in that.

And I think it was a benefit. That's all our team talked about. We bonused on ebitda. It wasn't about just top line. It was, in fact, zero about top line.

It was all about profitable growth.

[01:11:23 - 01:11:30]

Will Smith: Okay, Adam, so who is the buyer of the business for you and what does that deal look like?

[01:11:30 - 01:13:23]

Adam Vandermyde: Yeah, so. And Wesco is the ultimate buyer. They are a strategic that's backed by private equity.

So they are really in the Northwest United States. So kind of go all around the intermountain region where we are. So from a regional footprint perspective, it fit like a glove. It just made. Made A lot of sense.

So they are a company that had at the prior to acquisition I believe had 280 or so employees. So not huge. Some of the other people that we were dealing with were quite larger which we really respected and liked and had some very good conversations with.

But one of the reasons why we chose nwesco was they were smaller and we would play that much more of an impact on the second bite of the apple. Why both of us did roll over equity into some equity into the new company and we're playing key positions which is exciting but it's private equity backed strategic. So now there are 300 plus employees plus some other acquisitions that are probably going to happen here pretty quickly and close soon. So growing rapidly the deal looked like because of the way we were able to professionalize the business because of our pipeline, because frankly of our management team and they saw us as a platform to be able to grow, to grow the Intermountain West. We were able to Capture about a 7 times EBITDA multiple on the sell of the deal.

And again, you know, easy to say, we're in the process of making it come to life. But I think it was a good and fair deal for us. But I think it was a good and fair deal for them. We're making a big impact and we're excited to continue to make a big impact and grow this thing even further.

[01:13:24 - 01:13:27]

Will Smith: So 7x on you said 2.3 of EBITDA.

[01:13:27 - 01:13:28]

Adam Vandermyde: Correct.

[01:13:28 - 01:13:31]

Will Smith: So that's about 16 million bucks. That sound right?

[01:13:31 - 01:13:40]

Adam Vandermyde: Did I. It was 14 and a half.

So if I'm giving you the 14. 14 and a half was the total. So 7x on 4.

[01:13:40 - 01:13:40]

Will Smith: Yeah.

[01:13:41 - 01:13:48]

Adam Vandermyde: So I think again there was some, some add backs that we, we had some, some questioning about but 14 and a half was the total.

The total number.

[01:13:48 - 01:13:55]

Will Smith: Great and just Incredible multiple expansion from 3 ish to 7 in 5 years.

[01:13:56 - 01:14:21]

Adam Vandermyde: In 5 years almost to the day. And some of that we can take credit for others was was the market changing and, and the competition in the marketplace making some changes as well. So we certainly did our part but the timing I think was, was advantageous for us as well.

There's, there's a fair amount of private equity money starting to come in and, and a lot of people being gobbled.

[01:14:21 - 01:14:24]

Will Smith: Up like us and how much did you roll, Adam?

[01:14:25 - 01:14:28]

Adam Vandermyde: I rolled a million dollars into, into the new company.

[01:14:29 - 01:14:35]

Will Smith: And your role now is to con is to basically run the mountain west of in west coast.

[01:14:36 - 01:15:39]

Adam Vandermyde: Yeah, we were big enough that they created a full region for us.

So we are the same branches that we had before and same state and footprint, but, but we are now a region within, within west coast footprint, which was their first region. So they're gonna, there's a lot of things they're modeling and patterning and, and kind of piloting, I should say, with our region that they're probably, probably going to go to a more regional model as well. But, but yeah, so I am the, the regional director, so continuing to run that region. But, but each of us key players on the executive team are also the former executive team, I should say no longer the executive team, but the leadership team in the region are now playing a fairly large role in other corporate responsibilities because they frankly need the bandwidth and the bench strength in order to do that. So I had the opportunity, I was at the board meeting last week that we had or a strategic planning session and was grateful to be invited there and add my input.

[01:15:39 - 01:15:50]

Will Smith: Incredible. Exit and run there, Adam. So 14 and a half million. And had you paid down, how much of the, of your debt on the original 4 1/2 million purchase price had you paid down?

[01:15:51 - 01:16:02]

Adam Vandermyde: It actually had gone up because of the financing that we did on those, that tougher year that I talked about.

So we owed about $5 million in debt.

[01:16:02 - 01:16:03]

Will Smith: Okay.

[01:16:03 - 01:16:09]

Adam Vandermyde: That included all vehicles and all lines of credit and you know, all in was about $5 million of debt.

[01:16:09 - 01:16:13]

Will Smith: So then you had nine and a half million dollars and you had 80% of that.

[01:16:14 - 01:16:15]

Adam Vandermyde: Correct.

[01:16:15 - 01:16:19]

Will Smith: Well done. Good, good move. Yeah, yeah, all the way through.

[01:16:19 - 01:16:27]

Adam Vandermyde: It was nice. I've taught this to other classes and guest lectures, but it's the hardest thing I've ever done.

But the best decision I've ever made.

[01:16:28 - 01:16:36]

Will Smith: The best decision you ever made because you became a millionaire or for some other non quantifiable reason. And if the answer is because you became a millionaire, that's fine.

[01:16:36 - 01:16:57]

Adam Vandermyde: Yeah, I'm sure it is. I would say all of the above.

I mean the, the, the, the, the path, the journey has been fantastic. I've, I've enjoyed it. I'm a much, much, much better manager, person, businessman than I was before. And yeah, it's certainly nice to, to be rewarded for that as well. Without question.

[01:16:58 - 01:17:08]

Will Smith: Has your psychology or personal psychology changed now that you got some money in the bank? What's that like going from having, you know, whatever you had to having real money now?

[01:17:09 - 01:17:28]

Adam Vandermyde: I'm surprised how little I want to spend now. Have we made some, some, some spends, sure. But now I've got another company, if you will, of some money that I want to Put to work.

And I want it to make work as I'm sleeping. And so it's been a fun.

[01:17:29 - 01:17:33]

Will Smith: What does that mean, Adam? Everybody wants to invest. Do you mean something more than just investing?

[01:17:33 - 01:18:31]

Adam Vandermyde: Investing is a large word. So having some money in the market, is there another business I want to buy or start up? Is there franchising you want to go into? Is there, you know, you start being approached by other businesses that, that want and need, need, need investing. And so it's been a fun journey to start really thinking through how to put money to work.

But, but it's a very serious thing too. I, I, I want this to, to last and become an income generator and, and not, not just a, a toy and a, and a piggy bank. So I, I pro. Do that innately, but until it's really put in front of you, it's, it's, it's a little bit surprising. The, the mentality I have is, okay, I've got 10 bucks.

How can I make 11? I've got 20 bucks. How can I make 25? I, it's a very diff, probably surprising mentality that I've had since because you.

[01:18:31 - 01:18:52]

Will Smith: Thought with you, you know, you had your, you know, you got your, your sacks, your bags of cash, that, that would kind of ease a focus on money.

And if anything, it's, it's made you want to grow it more. You're more, more about growing your net worth than you were with more money. Now you're more eager to grow your net worth than you were even when you didn't have it.

[01:18:53 - 01:19:01]

Adam Vandermyde: Yeah, I think that's, I think that's fair. Whether whether I'm an anomaly or not, I don't know.

But that's, that was a little bit of a surprise to me.

[01:19:01 - 01:19:04]

Will Smith: Yeah. Anything we didn't cover, Adam?

[01:19:04 - 01:20:12]

Adam Vandermyde: I don't know that there's anything we didn't cover.

I would say if I'm going to give some additional recommendation to people who are thinking about it. If you find the right business. Is there risk involved? Absolutely. Could you lose everything?

Absolutely. But I would do it again, obviously now knowing what I know. But in the future, I could consider doing it again. It was what a great journey, going, locking arms with and celebrating with my people. One of my favorite things to do will that maybe I just remembered that I did with, you know, a little bit of money is I tried.

Jackson bonused every single employee in the company. And that day was awesome. Having those texts and the conversations and the tears and the hugs and the, that was awesome. So yeah, I mean, the celebrating with them, I couldn't have done it without them. Couldn't have done it without them.

And they know that and I know that. And just the adrenaline rush that was able to bring was nothing that I've ever experienced before. It was awesome.

[01:20:12 - 01:20:18]

Will Smith: Yeah, I'm sure that was an incredibly special experience. Good on you for doing it well.

[01:20:18 - 01:20:19]

Adam Vandermyde: Great.

[01:20:19 - 01:20:38]

Will Smith: Adam. What a phenomenal story of business acquisition. Thanks for sharing. Thanks for sharing so transparently.

The number is all the way up and down. Really appreciate it. We'll link to your LinkedIn. Unless there's somewhere else we should in the show notes. It's LinkedIn.

Best way to reach out. Yeah, super. Okay, we'll do that. Adam Vandermyde, thank you very much.

[01:20:38 - 01:20:40]

Adam Vandermyde: Thank you.

Appreciate the time.

[01:20:40 - 01:21:24]

Will Smith: Hope you enjoyed that interview.

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