Host: 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. My guest today is Andrew Finn. Andrew has acquired a couple SaaS businesses as well as built and sold his own company, and now he's investing in searchers. I was eager to have Andrew on because having run both a services business and SaaS businesses, he has good insights about the relative merits of those types of businesses. And I actually first found Andrew on Twitter where he shares those same insights. While he didn't disappoint, this was a fun conversation with a guy who's been in the trenches and succeeded and through it all learned a ton about buying small businesses. Here he is, Andrew Finn. Andrew Finn, thank you for joining me today on Acquiring Minds.

Guest: Excited to be here, Will, you are

Host: not my typical guest. You have done an acquisition, but this isn't just your typical acquisition interview. You've also started your own business. You're also an investor in businesses. So we're going to cover a bunch of different topics here, but the through line will be acquisition. The first thing I want to ask you is, I think you've since taken this down, but your Twitter profile up until recently read, investing in businesses like investing in businesses like an 1880s businessman. You probably didn't have the word business in there twice. Something to that effect. What was that? And tell us what that means.

Guest: Sure, I have a difficult job to describe, but it's also a really simple job in a lot of ways. It's trying to, you know, turn capital into more capital and try to, you know, at this point, fortunately, try to make money with money and try to build, you know, build this little fledgling empire. So a lot of the, you know, really great old entrepreneurs, I love reading about all these kind of gilded Age, gilded Age robber barons, and I'm certainly not one of them, but I just kind of like the way they generally approach the game of business. And it's not, Yeah, I don't know. I mean, it's just kind of about trying to win this game of business as opposed to, especially for me, it tends to be a generalist as opposed to really diving into one area and being like, I'm going to be the smartest person at this. Like, I'm just, I've chosen to be in the game business, compete in the game business, and just trying to do my best in the game business. And I think the kind of 1880s businessman perspective just really dumbs it down to like the profession of businessmen. Like whenever I go through airports and I'm like, oh, what's your profession? I really enjoy Friday businessman. Because that's it. That's what it is, right?

Host: I'm in business.

Guest: What do you do?

Host: I'm in business.

[3:00] Guest: Yeah. Great, Cool. I love it.

Host: Why'd you change it though?

Guest: Well, I say, I think we talked about it like you were like, oh, I assume that this means that you're only, you know, your particular interest in, you know, the types of businesses that would have been around the 1880s, like just plumbing businesses and territorial businesses. And I realized that that that's not at all true. So it maybe wasn't coming across as I intended it to.

Host: Actually, that's a great point because yeah, in this time where there's all this interest in acquiring non tech businesses, people are kind of going back to the sweaty businesses, the offline businesses. Many of my guests and me are interested in those businesses. I interpreted 1880s as like, you're not buying a SaaS, you're buying something that existed 100 years ago sort of thing. So good clarification. Okay, well, let's get into one of your businesses. This is not one that you have acquired. This is one that you started but recently exited. So there's a story there. Give us the three or four minutes on Arbor Bridge.

Guest: Sure. Arbor Bridge was the first baby. So I have a business partner and is my childhood best friend, this guy Tim Urban. And he had.

Host: Sorry to interrupt, but yes, everyone, that is, that is Tim Urban of. Wait, but why Fame? If you know the blog. Go ahead.

Guest: Dramatically, dramatically more famous than me. I am the other guy. So Tim had. This is like flashback to 2007. We're 25, basically. Tim had started this little tutoring business kind of to make ends meet when he was living in LA and turned into a film composer for films. And it was like around that time when I quit my job and moved back to the States. So it was, I want to, you know, I wanted to get into business. And the stars aligned and Tim kind of had this, you know, fledgling business. They said, hey, look, I think this could be something real. We partner on it and we give it a go. So that's what we did. And it was a.

Host: You said a tutoring business.

Guest: Yeah, so we originally, it morphed over time. So it was originally like an in person tutoring business. And we focused on everything that was not test, you know, so we would hire a tutor who would go to a kid's house in Beverly Hills and work with him on his 8th grade math. And then a few years into it, you know, we kind of realized that that was a good V1, but it was a very. It was kind of an easy to start, hard to finish type of business, which is most service businesses. We thought there was an opportunity to build something to online tutoring space. And so we kind of started a second brand that was specifically for SAT AST prep, one on one online targeted at the international market because they had a real need and that eventually became the entire business. So we obviously went back to the domestic market. But the business that we ended up exiting was just an extremely well done, high end one on one online tutoring company. We're kind of the first ones to really just build a brand and a business solely around the online component of that and to really build a kind of curriculum that was specifically from first principles to be delivered online and to an international audience.

[6:26] Host: Was that a big angle or that was the wedge over time?

Guest: Yeah, so the wedge was international because I mean they just needed to access better, higher quality tutors for somebody in New York. Didn't do that. But now, you know, America's really gotten a board fit and Covid really jumped that ahead too. So I exited being CEO of that business five years ago and we're actually on our second CEO after me, who stay on at the company after it got sold. So everybody's staying on except for me and Tim.

Host: And so you guys sold the business in what, July, two months ago?

Guest: Yeah, yeah, end of June.

Host: Okay. And was it, would you consider it a successful exit? How do you feel about it? You know, emotionally?

Guest: Yeah. Oh man. Super, super successful exit. Nothing in.

Host: Congratulations.

Guest: Thank you. Yeah, you know, we're not talking about like a crazy tech exit, but just like very, very high quality kind of search fund size exit. No, I mean it's like an anvil coming off the chest. Uh, there is. You know, that business for me was just extremely. Just the amount like of just emotional tie up in it because of the

Host: day to day or because of some other like how many years you'd invested in it, like kind of. Kind of.

Guest: Yeah. I mean just so many ego things that like try to bite. You just can't peel away. And not even ego from like a grandiosity standpoint. Just kind of a. Okay, quit. You know, tapped out of the kind of corporate, traditional, high performing, you know, American path at 25. This was the thing we planted a flag in. And just the perpetual feeling of oh, you know, if this goes to shit, Like I'm gonna have just wasted, you know, 10 years and this whole, this whole journey is gonna be like a failure. And like I'm going to be 40, I'm not going to have money. Like just all those deep, dark Corollis and there's just like an operate. I mean, it's operationally brutal business because it's, you know, it's services and it's all people and it's education. But the, yeah, most of it was just like the huge fear of, you know, just failure around it.

Host: Interesting. Yeah, but it sounds like it was a good exit. So there must have been some value to what you created in holding onto it. Like it must have been a solid business if somebody wanted to pay a lot of money for it.

[9:00] Guest: Yeah.

Host: In other words, why did you need the acquisition to feel validated?

Guest: Because service businesses are really hard and they're scared. Like, you know, because you built it for, you know, that there was a day when nobody cared about you and exist. You know, the business didn't exist. And even though you've built up demand in a real business, you know that cosmically the world can wake up tomorrow and say, don't need you, don't care. See you later. And it could go to zero. That's not going to happen. But you just know that that's possible. That and then the fact that there's some seasonality elements of it which are always just unsteady and particularly with this business because they've been screwing around the CMS test so much the last five, six years. Every year is something different now it's a political issue. It's just very difficult to get comfortable with, even as an absentee owner, just that it would be fine and steady and there forever. But a huge part of that too is just the like neurotic pathways that got built up over the course of building business. Just like even though Megan was the CEO when we left was amazing and the business was like in really great shape and finally got to a point where it was profitable. And it's great, but like, I can't forget about, you know, we kind of ran it for sort of the point the last couple years of business was eventually like, I don't know, like two months of cash in a bank that does real. That causes real heartburn. And it's just kind of hard to.

Host: It's hard to forget that, well, this is something that I want to touch on from your. I mean, this has clearly informed how you now think about service businesses which we're going to get into. But you've tasted, I mean, not only services business, but SAS as well, because you guys acquired something called College Planner

Guest: Pro

Host: as a strategic move as part of Arbor Bridge. And so you got to see the magic of SAS at the same time. So anyway, why don't you tell the story of College Planner Pro.

Guest: Yeah.

Host: And then I'll follow up with another question about how that compares to a services business.

Guest: Sure. Yeah. So it took us a long time at test prep company to really get settled in on kind of our main growth customer acquisition channel. And for us in that business, it was relationships with private independent college consultants. So the people who a family will hire outside of the school to help them kind of navigate the college admissions process, they were great partners for us because we had the same goals, which is getting kids higher scores and give them more options where they want to go. And once we kind of honed in, they were like, this is actually the channel that works. Then next question is like, okay, so given that, well, how do you build some kind of mode around that? How do you differentiate yourselves long term? Because any test prep company can go to counselor and say, hey, we do test prep. So the idea we had was like, oh, what if we own the software that they all use to run their business? Sure. It happened to be this little duopoly market. And there was College Planner Pro is the newer entrant who was growing a lot faster. And I reached out to the guy and it just happened to be great timing where he. There's a very kind of like, no, I don't think it's unique to SaaS. But there's a moment with SaaS businesses where this guy was grinding away for five or six years and probably making nothing for four of them. And then turns a corner and all of a sudden it's like, okay, I think I have a business. And then one more year goes by, it's like, oh, shit, okay, great, I have a business. This is really exciting. But the downside is now all I'm doing is customer service. And I'm just trying to keep. Because as a solo, as a one guy SaaS business, you're just trying to keep your head above water. And then you realize your options are, I need to hire people to do these other functions, which means I'm going to go to making no money again. And I have to deal with hiring and I have to deal with managing now. And it becomes an entirely different job. And he really wanted to continue working on the software and it was great because his wife was A counselor. And he really cared about the product and really cared about the business. So we acquired it from him and we kind of just packaged him. Initially there was kind of really great jack of all trades type employee we had at Arbor Bridge and we kind of made him the general manager to work with Travis so Travis could go back to doing programming and he could do all the other stuff. And over time that, you know, that business has really just continued to do great. It's, you know, at least three times bigger than it was when we bought it. And now it has like 80% of that probably addressed market. And there's.

[14:12] Host: So you. You leapfrogged the other. The other. Or maybe you were neck and neck with them, but you've dominated the market.

Guest: They were like even when we bought it and now they're. They kind of got sold for scraps I think last year. And yeah, it's mostly just us and did College Planner Pro seven employee business now. And the CEO is this other woman who kind of grew up in the Arbor Bridge system. She's mainly.

Host: And is it part of Arborbridge?

Guest: Well, it was part of the same company, but now it's not because Arbor Bridge is gone. So now it's just standalone. But they're separate legal entities, each have

Host: their own CPO and did college. So your original strategy for acquiring College Planner Pro, which was not for the SaaS business itself, but for the lead gen, basically did that. Yeah.

[15:03] Guest: Honestly, it's funny because five years into that and we still have barely, because we're so sensitive to just being a good partner for the customer base that we hardly have even pushed on that and it just turned out to be kind of a really good business on its own. And we didn't want to. I would say that the, like, that was the initial thesis for it. Once we saw it, we got in there, we kind of realized that was more like the margin. That was more like kind of a margin of safety element. We're like, okay, if that works out, that's great, and if it doesn't, that's fine. This is still a great, a great business. So hopefully with. I think it'll be easier now that our ridge is owned by somebody else to try to actually figure out that partnership. Because we really just did want to piss people off by saying like, hey, guess what? Test Web company now owns a software company that you guys all use and now we're going to force that down your throats. We always try to be really, you know, get in there, be very hands off. So that still kind of remains to be seen.

Host: Oh, interesting. Okay, so College Planner Pro just ended up being a good acquisition on in its own right. Not because of this, this chess move of yours.

Guest: And it will, it will eventually. It's just the thing about the test prep industry is it's like it's not a latest and greatest industry, it's a steady and reliable industry. So the primary thing is always a long term brand building. Just like, hey, you're gonna see a brand here adding value every day and just becoming more and more trustworthy over time. Like Princeton Review still exists somehow as a business and they haven't just because, you know, it was like a great brand in the 90s. Yeah, once brands get there, it takes a, you know, takes a long time for them to go away.

Host: So it's the magic of the Lindy effect, man. You know the Lindy effect, it's the one where. The likely shelf life of a business looking forward is as long as it's lived to date. So if it's a 20 year old business and even if it starts to decline, it's likely to stick around for another 20 years.

Guest: Yeah, yeah.

Host: That's not like scientific, that's based on, I can't remember the story of the Lindy effect, but it's based on like some marketing observation or something. So I'm curious about, like, is there anything to extrapolate from your experience acquiring a, like a practice management software for a particular niche? Because I see in the SaaS world, I see a lot of entrepreneurs trying to create those and you acquired one and it turned out to be a great business. I was just looking at a deal in the trucker space and there are all these practice, these small SaaS companies that help you run your trucking business. Any thoughts there?

[18:07] Guest: I have a million thoughts. One is you want a small tank. You do not want venture backed. Competitors is I think really, really critical because they're playing a different game and you lose. And even if you don't lose, you know, you might bleed out during it. And like in that space we had a. Yeah, you just don't. You want a small tan. Small tan. Venture back. Competitors is number one. Two, you want the problems you're solving to be really not generalizable. Like you want them to just be like weird problems specific to that person. And there was in that industry and kind of the weirder, the deeper the better. Because then you could just be the only one in the world who was waking up every day trying to solve those problems. And customers will see Value in that software is hard and always harder and more expensive, more difficult than we think. And it remains that way. So that is like a, you know, and software developers are hard to find and they're expensive. And especially when you acquire somebody else's software stack, that doesn't make it easier. I mean, recurring revenue businesses are just way, way better than service businesses. Objectively, the customer's problem this month is probably the same as customer's problem last month, six months before that. And you have built a robot to solve that problem, and the robot will continue, continue to solve that problem and, you know, there'll be new things that they want. But fundamentally, that original problem you're still solving. So you like them? Yeah, yeah, I like them. I mean, I mean, the way I was thought, the way I always thought about it was this is a little bit different now than it was five years ago. But, you know, we started getting into it, I was like, wait, you're like, you're telling me that this, whatever the janitorial business sells for 3x and a software business sells for 5x or yeah, 5x. And I always thought that was insane because I was like, this thing is a bond that grows with all sorts of amazing downside protection, but it's trading for distressed asset prices. It just seemed like such a massive price dislocation and you can get so much more. I just think you get so, like talking about like the, like the Lindy effect. I think software businesses have the same thing where, you know, especially if you borrow to buy business, you're always trying to figure out, like, what's your oh shit scenario? And for me, it's always like, okay, what if I just are terrible? And I did we just stop supporting it? We don't build anything new, we don't answer customer service tickets. Like, whatever the product is right now is all anyone will ever get forever. How much will you get? And I bet for most of them you still have, if it's a good product in each market, five years later, you still have half your customers.

[21:18] Host: Yeah.

Guest: Just because, like, they don't want change. It's still doing its job. And to me, that feels very, very comfortable as a financial buyer.

Host: So when you said the 5x SaaS trading at 5x versus a janitorial company trading at 3x, what you're saying is in fact 5x, even though it's more than 3x, you still think it's priced? You think SaaS companies have such a big margin of safety that they 6, 7, 8x is. They'd be worth it or did I misunderstand your point?

Guest: If you found a, I mean, so in the lower middle market part, like this lower part of the market so much as a function of just finance and debt. But like if you were, say you were someone with $100 million and you're like, I need to put a million dollars worth, and someone's like, hey, here's this business that makes a million dollars a year, but it's been growing and it keeps growing and you understand the market, you see the path to growth. You're like, all right, so this thing will actually make a million dollars a year that you can return to the investor and that's going to grow up to, it's going to add 20% a year or 15% a year. Like you would definitely pay, you would happily pay $10 million for that business. Like there are businesses in public markets that look like that. They trade for way more. I mean, everyone just gets spooked because they're small businesses and doing the deals is a pain and transaction costs and all that. But like functionally it's a great, I mean they're great, they spit off cash and they grow. And I think at least my experience with the recurring revenue businesses that we own is that they tend to have some kind of intrinsic growth rate. And this is a business where nothing's really been invested in marketing sales. It's just kind of like all organic word of mouth growth expansion. And that intrinsic growth rate will continue if you don't screw it up. And it's so you don't even necessarily have to invest tons of marketing and sales. You can just be product focused and let the let time continue to occur.

Host: Andrew, I wonder if you got lucky in acquiring a business that had it was a solid piece of software and so there was word of mouth effects because certainly there is bad software that doesn't just grow naturally. Like not all SaaS just grow 10 or 15% a year. In fact, if you work in the SaaS space, everyone is just completely fixated on churn because you will lose your customers and you also reach a ceiling. Although this is for much larger SaaS companies. You reach a ceiling where your customer base is so large that to overcome your monthly churn means adding a ton of new customers. Again, that's like a problem for a bigger company. But still, going back to your other point, I'm not sure they all just grow magically. Some do, but probably not. There's a lot of crappy software products out there, man.

[24:17] Guest: Yeah, I mean There's a low numbers, low sample sizes give a strong probability that there's a lot of luck involved. But I do think certain market dynamics just lend themselves. So the product has to have enough complexity to it. Right. So if you're making some product that doesn't have a lot of complexity and then somebody else could build a new one in three months and you have to consider how difficult it is to sell the customers, how critical it is their business. Like, does it intertwine? I think that you could still get to this comfort level. Like I bet for one of those things you're describing, if we actually talked about it, we could point out like, oh, this is why this wouldn't hold up here. Yeah, yeah. Definition needs to be a little bit tighter. But I think, yeah, I think it's just about understanding the customers and the value it provides.

Host: Well, so now that you're flush from your big exit, are you going to go out buying SaaS companies?

Guest: No, no, I don't think so. I mean really right now?

Host: Well, right now you're going to take a nap?

Guest: Yeah, I'm going to relax a little bit. We're having our first kid.

Host: Oh, nice.

Guest: Which is super exciting. Yeah. And the, you know, so we had the. In our little hole co we had three operating companies and all three of the CEOs kind of grew up in the Arbor Bridge system and now one of them. So now we kind of have two of them. But it's. I can't unless one of them kind of like fit in with one of those portfolio companies. Then it would be tempting. I'm also, it would be so hard if something amazing came along and I saw it. It's hard. You know, the businessman in me would get very excited, probably try to figure out how to do something. Cause I like discipline. Right now I'm more looking for kind of independent sponsors and self funded people who are targeting deals in call it the half million to million and a half dollar EBITDA range or even a little bit smaller where they're kind of looking for, they need some equity as part of their cap structure and they want people who understand what they're trying to do and understand the space and have comfort with some of the, some of the grind. Because in, you know, especially when you go sub million or half million, there's just, there's always problems and there's always things that are ugly and they're never as ugly as you think, but they can be kind of scary for people.

[27:02] Host: Well, that's a perfect segue. One of the. I think actually, yeah. The very first tweet that I saw from you that really got my attention was you said something about how, you know, many $500,000 to million dollar EBITDA companies or maybe whatever, 500,000 EBITDA companies are pretty close. Just a few tweaks away from being 750 or million dollar EBITDA companies. If I'm butchering this, you'll correct me, it sounds like that's actually the very type of entrepreneur you're looking to invest to go out and do that. So expand on all of that in that tweet.

Guest: Sure, sure. So if it's a small business that's being put up for sale and it's around that size, it's not likely to be a high growth business. So it's probably been around for seven years and maybe more and it hasn't grown like crazy. So you can kind of assume that the, the entrepreneur who started it is either bored and doing something else or they're limited in some way. It's just, it would get bigger if they weren't. And what's most likely is that especially for really older businesses and you kind of see this a lot where it's like they get to a point where it is a great situation for the owner. Like you make them half a million bucks a year and what it would take to go from half million to one and a half is they got to really care about sales or they really got to invest in some marketing dollars and they're like, I got a great life. How about I just now work 10 hours a week? And that's awesome. But there's no way that that business doesn't have just tons and tons of things that could be easily improved. It might be a sort of situation where it's like, oh, this person could hire, there's tons of low hanging fruit if they just hire two new salespeople. But they just don't want to deal with the fact that you're going to spend 150 grand or 200 grand in these two people and you don't really know what you're going to get out of it. And like whatever, you know, like that happens. And having been on the side of, you know, owning a company for 13 years, like you just get ground down and at some point there's like, you're like, I tried that once. I don't want to do that. I just, I don't want that headache, I don't want the heartache. Things are going fine and I just Think that you just end up with tons of, you know, just tons of opportunities for new blood to either come in and fix up ops or fix up marketing sales.

Host: You know, it's funny, I hear that and then I hear counterpoints to that and then I hear counterpoints to the counterpoints. But like one of the, just the counterpoints that you often hear to what you just said is that, you know, if this business, if it's, if there's such low hanging fruit in this business that's now for sale, why didn't the owner do it right? It's like, you know, if it's so easy, why didn't, why isn't the current owner doing it? And you basically just gave the answer that they're tired, they don't feel like it, they're comfortable enough, they're approaching retirement. I mean there are very legitimate answers.

[30:29] Guest: Yeah, I think that's what's really difficult is that in this part of the market just screwy things happen that don't seem sensible to someone who is like, man, all I want in the world is own business. When I own a business, I'm going to own it so hard and I'm going to care so much about it. That's all I'm going to do. And you just end up with kooky situations. Like the, the second company we bought a couple years ago, Apartment Guardian, it was a really great business and we were kind of trying to figure out why the guy wanted to sell it.

Host: Tell us what Apartment Guardian is.

Guest: Yeah, sorry. It's a security device company. So we make basically a life alert device. It's a key fob as a button on it and it contacts emergency services. And the end market is for mobile workers, people who work at multifamily partner complexes. So think about like the leasing agent who's having to show apartments to random strangers and isn't going to be keep holding her phone out and dialing 9, 1 and 1. If they end up being creepy, it's just something she can keep on her keychain. Or the maintenance guy who's going in and changing a light bulb or goes on a ladder might fall off or any situation we have, you kind of have to do active shooter risk management to want the employees on site to just have a really reliable way to call the police. It's a really basic, basic business. We call it cheap and cheerful. But the, you know, so the guy who started it, he ended up, he had started another company that was absolutely killing it. So he hadn't really been Working on it for a couple years and he had some partners and is like, is basically his wife and his sister in law and sister were all working at the business. And it, you know, we just again, took a little while to get our heads around, but it was just like. He was like, yeah, I just, I don't want to deal with this anymore. And I want to, you know, I want to build a house and I got this whole other thing that's, that's going to be a huge win for me and I just, I don't want to stress about it and that, that just happens. And each. I mean, because you're right. So, I mean, probably the majority of the cases where you're talking about like, oh, this can't be. The owner would have gotten, made it better if he could have or she could have. But you just kind of have to be open to the fact that it's different, you know, it's not. They're not thinking about it the same way that you are. That's really, it's hard to correct that.

Host: Yeah. I mean, many of my guests, like, have proven that they acquired a business from a retiring owner and they go in there and they pull some levers. And I don't mean to make it sound easy, because in many cases it's been very hard, at least for the transition period, but they pull a few levers and dramatic things happen in pretty short order. So it is a real phenomenon.

[33:22] Guest: We will be those people with Arbor Ridge, I'm sure, because they knew, because we haven't been running business for five years, you feel what it's like to be on the other side of it. And I know that somebody else is going to take it over and be like, oh, yeah, like we hired five salespeople. It wasn't that hard. And all of a sudden this is growing, you know, grow like crazy. Just like, how are you, man? Yeah, we're going to do it.

Host: That actually raises a question. So, about services, businesses and whether or not you're investing energy and growing a business, you installed somebody, somebody else was running Arbor Bridge. You guys were sort of absentee or at least remote for the last five years. Right? Okay, so first of all, just talk to me about that, because there's part of the dream of acquiring a company, even a service, like a messy services business, is that you, the entrepreneur, the acquisition entrepreneur, you get in there and you give it a few hard years to do all the things right, improve it, take it to the next level. But the vision isn't probably to do that for 30 years. It's to do it for a while and then go out and find your operator, your CEO, and put them in under you, and then you kind of step out and either do it again or whatever. So answer that. But then also, just. But answer also, in light of the point you just made, why was Arbor Bridge not doing all those things if you had a CEO in there?

Guest: Okay, well, I'll tackle the first one. So what you're kind of talking about is, yeah, we're all trying to make the jump, making the jump from labor to capital, from where you're selling your time to where you're making money in your sleep. And I think that planning process has to start really early. And you need to be building your company to exit one way or another. Personally exiting kind of ends up being the same as selling to somebody because you just have to build something that can exist without you. And who wants to buy a company that's completely dependent on the owner? Nobody. You want to buy something that feels like an asset, not that feels like a pile of goop. So starting early is really important. And so we had. I kind of pegged Kate is her name, you know, in 2012. And I'm pretty sure, I mean, you're definitely smarter than I am. And I think you could run this business one day and probably do a really fantastic job in it. But it was like a three or four year period of venturing her into it and then probably a year or two afterwards. And I mean, obviously finding the talent is the most important thing because you can't, you know, you can't teach that. But after that, it's just really being willing to let, you know, let somebody else take, actually take responsibility for things and make mistakes and, you know, really great, really great way to kind of move the process along is taking long vacations.

[36:19] Host: Yeah.

Guest: And kind of say, hey, I'm going away for a month. Nobody called me. Kate's in charge because we. Because, like the psychological part, the other employees is, you know, probably the second most important thing at the Talent is they have to actually regard the next person in line as being kind of like worthy of the job and that they want to stay long and they feel like the company's still moving along. So it's a lot of work to kind of promote, you know, promote the next person coming up and really just giving them responsibility. But you also kind of like, let them, at least for me, just not, I don't know, not handholding and a lot of just kind of like throwing off the deep end and hoping that they swim and regroup and discussing. What was that experience like? And then kind of like mapping out the skill set of the CEO and all the things that need to add and just kind of continuously adding to it over the years.

Host: And so this as a model for, say, somebody that you're investing in, somebody who's going out and buying a sweaty business, a services business, this model of they go in and fix it or improve it or take it to the next level and then find their heir. This is a model you believe in. It's just hard and takes time.

Guest: Yeah. And you, I mean, price helps with that in a way. Right. Because you're, you know, if you're not paying that much coming in, then it gives you a little bit of wiggle room when you, when you leave. And that, like, it doesn't put us, like, if you, if you grow the business from a million dollars, you've been up to $2 million. If you've done like three or four years that you're there, you're good. Like, you've won the game and you don't have to find somebody who's now going to take it to five. If you do, that's amazing. But really what you want at that point is someone who can just hold alignment, too. So I, yeah, I, I believe it. I think, you know, test prep's a little bit easier probably because you got all these really, really smart people who end up in it and just because they, their career took a couple of odd turns and they end up in test repping like, holy crap, are you smart? And actually. So Kate, who is the original harbor CEO, is now the apartment government CEO. So he's just slid sideways. Yeah. What was the second question you asked?

Host: I think we touched on it. Well, can that CEO bring the same vigor that you, as the eager new owner who's just acquired the business, can? And I guess the question is, you hope, but it's probably even rarer.

[39:03] Guest: Yeah. I think you have to be realistic about what I think that person ideally is the operator. So the way it went for our business is we had this big ramp growth period where you're ramping on the revenue sales side, but then also building infrastructure. So infrastructure for test prep was like custom software to run the business because that ultimately is what's going to drive profitability because, like, you need less people on the kind of corporate level to be able to do more and do it better. And so you need software for them to do that. And then, and then curriculum Building so that your tutors actually do a better job and it takes them less effort. And all it takes, like, that takes a crapload of money over time and like arriving at a business model. So I think by the time I left, we were kind of like, okay, we, we know what we're doing. Like the existential, we resolve the existential issues of the business where it's like, we know what the business is, we know how we require customers. Now we need to go and deliver on that and we need to continue on these infrastructure projects and then those kind of get wound up and that's when business can really get profitable. And then maybe it's like a different person or it's a different set of skills where we're like, all right, now we're really trying to build, you know, a long term, I don't know, kind of a long term organization culture. And you're doing that the whole time. But it's a little bit, it's just a little bit different people who are like, build, build, build versus hey, like, how do we make this super sustainable and profitable? So that's actually something that's really helpful for having new CEOs is, you know, I was terrible about being profitable, like every single last dollar. I wanted to invest in growth and I would just like run at max cortisol all the time and stepping away from it. Then you can say to someone, hey, we are going to be profitable. This is. And they say, okay, great. That's part of my job. My job is to have this level of profitability. And that was. I could never do that, but somebody else could.

Host: Yeah. Yeah. Well, you know, your Arbor Bridge story, it kind of sounds like a, a real. What's the word I'm looking for the perfect example of why acquisition entrepreneurship makes sense. Because you guys invested long hard years in just figuring it out. And now it's figured out. You figured it out and you took your 30s to do so. And your acquirer is coming into this thing that works and they're off to the races much more quickly. And I'm just restating the whole kind of the whole philosophy behind acquisition entrepreneurship, but hearing, you know, kind of the pain that you went through building Arbor Bridge like this is exactly like anybody building a services business probably goes through similar pain over a long amount of time. And so that's why you just want to shortcut all of that, skip ahead and acquire the services business. I mean, it sounds so smug, but it's, but it just, it just, it's, it screams that you know, smarter move.

[42:09] Guest: Yeah, well, I mean, once we, after we kind of did our first, our first deal with, I was like, this is so much easier than building. Like, building is so hard and it's such a grind. And like while we were doing that, we'd also tried two other kind of startups that failed. It's just hard. It is really hard going from zero to one. And yeah, if you find something that's already going and you're just make it better and like, I mean, realistically, if you do eta, then you're kind of talking four or five years to pay off. And it's a pretty awesome payoff when you get there. Because if you own a real business that's making real money and it's debt free. Listen, debt free. Whereas you start something from scratch, it might fail and it probably takes 10 years. The risk is, you have to, I guess, which is, I don't know why. Sometimes I get a little frustrated when people are. Get too spooked by the SBA stuff because I'm like, well, yeah, you're trying to get a free company. It's going to be risky. It's like a great move.

Host: People get spooked about the personal guarantee and just having the loan hanging over your head. And your point is? Yeah, well, but it's also an amazing financial deal.

Guest: Yeah, you're basically trying to get a free company. Like you're not. And you're getting used to most of the time like getting paid decent money to do it. Like it's not so Andrew, on that

Host: point, it sounds like we're bumping up on time, but you've done SaaS, you've done services, you've got scars from each. I think you like SaaS more.

Guest: Fair. Very fair. Yeah.

Host: Okay. But you're actually investing. I'm not sure you said this, but I get the impression you're investing in, I guess you're investing in searchers. So searchers might be acquiring in SaaS or they might be acquiring in services. But it sounds like you believe in this SBA services acquisition thesis. You just don't want to be the one getting your hands dirty.

Guest: Yeah, I think a good deal is a good deal. And I think the most important thing I just kind of wrestling about is the most important thing for people who are in the early part of this journey is just like, get in the game, own something. And you can always own a better thing later. But it's the thing you feel, you know, equipped to take on at this point is, you know, lawn care business then do that and you'll probably do. Probably do great with it. And then in five years you'll maybe want to do something bigger or something that's a fundamentally, you know, better business. That's I think it's a great way to start. And you know, price matters and price, you know, ultimately as an investor just kind of looking for good deals. I think what's nice about the software or I'll say there's a group of businesses that are software like, you know, they feel like software, you know, so maybe they're, I don't know, there's kind of like certain products that are. There's still high margin, they're still super scalable and it's not software. I mean something like a, you know, like a newsletter is an example of that. Yeah, make it once. The nice thing about those is I think you have the chances of really high growth and something really great happening. And it's nice to have that super high upside from the investor point of view. And I'm pretty damn risk tolerant. So I like things with a lot of leverage and I like things that can grow. And that's just going to happen to me. My tolerance a little bit more than smaller service things.

[45:45] Host: But I'll ask you after your, after your child is born if that risk

Guest: tolerance has shifted at all next year. Well, we moved to North Carolina so that's a de risking move.

Host: Oh, were you in LA this whole time?

Guest: No, we were in la, then we were in New York. We moved out to North Carolina last year.

Host: Last question, bit of a tangent. So capital camp you were at, right?

Guest: Yes.

Host: So for people who don't know, that's kind of a private equity, but kind of at the lower middle market side of things. Brent Be sure runs it and there are a lot of people who are the big names on Twitter and SMB. Twitter showed up there, people were talking about it. So how was

Guest: was really fun. So it's interesting because the other person who organizes it is Patrick o'. Shaughnessy. Right. Sorry. For sure that's not the best you end up with. The guys who run University of St. Louis, sorry Washdews Endowment were there. You kind of end up with more some institutional public market investing types too. So it is a bit of a range. The way I kind of describe it is it's the one conference I can go to where I can explain what I do when people are actually interested and will pay attention.

Host: You can't just get away with being like, I'm in business.

Guest: No, yeah, right. Which is my default. I hate that question. I'll ask them about a million questions before, just in hopes that they won't ask me. But there are. People will ask and they'll listen, and it's just super good vibes. I think that's the thing I liked about most is just, you know, the conferences, you can kind of walk up to any group of people and it's not like, oh, who are you? What can I get out of you? It's just like, on a very human level, hey, want to learn about you so make you cool. So it seemed more, I don't know, more like frenzy than working.

Host: And is that. It's invitation only or am I wrong?

Guest: It is, yeah. And I don't, you know, I don't think. I don't know. I don't think that was like, the design was to be exclusive or anything. Just, you know, probably capacity constraints with. Think Columbia.

Host: Sure, yeah.

Guest: Columbia, Missouri. But it was really cool.

[48:02] Host: You know, it's probably a bit. A bit curated and so that does help with the quality of the conversations.

Guest: Yeah, yeah, for sure it helps. And it's just. I think the main thing is that, like, it's very collaborative and not extractive. Like, I don't know if you've been. I served at some point. You've been to some kind of, like, venture tech conference, but they're like the third circle of hell. Just every. You walk up to someone, look at the name tag, someone looks over your shoulder, just, you know, it's just gross. It just feels like a meat market.

Host: Cool. Not cool. Capital camp sounds cool.

Guest: Yeah, Capital camp is cool.

Host: Well, Andrew, we're at time, but this was. This was awesome. I'm eager to see what you end up doing after you've taken a breather and had a kid and settled into North Carolina. Because, you know, you're not Vanderbilt yet, man.

Guest: So

Host: you still got to do. Put that money to work and do some interesting things with it, which I. Which I encourage people to follow your Twitter to see how you think about this stuff. What's your Twitter handle?

Guest: Finscave. F I N N S C A

Host: V E. And is that the best place to get ahold of you and follow you?

Guest: Yeah, I mean, pretty easy. Like andrew64ventures.com always interested in meeting independent sponsors and people who are looking to put together deals. Little part of the market.

Host: So you are looking for a deal flow. So people who got something should reach out.

Guest: Yeah, absolutely. Cool.

Host: All right, Andrew, until next time. Thank you for the time.

Guest: Awesome. Thanks a lot.