Host: Ben Bortner went for broke as he looked for a business to buy. Literally crashing with friends, driving Uber, accumulating debt. Ben was a vagabond searcher, but he did find a business to buy and in a dream location for the avid fly fisherman Key west, it was a pool cleaning and maintenance business just like the ones you see lots of on Biz Buy Sell in the sunny states. And Biz Buy Sell was where Ben spotted his business, the one he would go on to grow 2x top line and and 4x bottom line over the next three years. We spend a lot of time on operations in this interview. Pool cleaning businesses are logistically complicated, sweaty and blue collar and while Ben knew all that going in, it was still a grind for three years. There were plenty of days working in the business, not on it. And yes, he cleaned pools himself. After his impressive exit, Ben is turning his attention to investing in other searchers. So we talk about that at the end of the interview. We also do a breakdown of the typical structure of a self funded search deal that raises money from investors. We go through that really slowly, so it's a good tutorial. If you don't already know how that works. That's right at the end. A fun story and a great outcome from a guy who went for broke to buy a pool business in Key West. Here he is, Ben Bortner, former owner of the Pool Man. 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

Guest: podcast I talk to the people who do it.

Host: Listeners of Acquiring Minds know that for almost any business you acquire, its success comes down to the people and how you develop and manage them as their new leader. Thing is, in addition to management there is also a lot of process and bureaucratic work when it comes to your new employees. Payroll, compliance, HR technology, hiring to name but a few. These processes are crucial to get right, but at the same time distract from where you want to be putting your energy in leadership. So Aspen HR is an HR firm and PEO that takes this work off your plate and handles it with the care it demands. Aspen is owned and run by Mark Sinatra, himself a successful former searcher. So Aspen's own leadership understands the HR challenges that searchers have. Post acquisition, the firm is offering Acquiring Minds listeners a complimentary pre acquisition HR and PEO review for your target business. Check out aspenhr.com or contact Mark directly@markspenhr.com Ben Bortner welcome to Acquiring Minds.

[3:01] Guest: Thanks Will.

Host: Thanks for Having me, Ben, you've completed the full journey from searcher to buyer to operator to exit. But I would say that the end points of that journey were extreme. You started quite modestly driving Uber for a time as you searched and you ended quite spectacularly selling to private equity after only three years and returning your investors eight times the capital they invested. And now, like many successful searchers before you who have exited, you're turning your attention to investing in other searchers, which we will also talk about. So we got a lot of ground to cover. Ben, let's get into it. Start us off with some background on you, please.

Guest: Sure. My background was in finance. Ever since college I've been interested in investing and study of Warren Buffett and all the invest in greats. And so I spent all my free time in college and after college kind of analyzing businesses and was a partner at a startup hedge fund for five and a half years, which was kind of my dream job. We were doing a very, very Warren Buffet as kind of long term concentrated value, looking for high quality businesses that were trading for less than we thought they were worth and looking to take a stake in those and invest in those long term, kind of a very, very private equity mind, private equity like mindset in those businesses. But so we started that in 2012, but by 2017 we decided we couldn't find enough interesting things to do in public markets and so we decided to wind down our fund and move on. And that was kind of a challenging time for me because I was, I had my dream job, I thought, and I didn't know what I was going to do next in my life if, if that didn't work out. So I started doing a little consulting and a little investment research consulting on the side. And I realized quickly that I could do that anywhere in the world and I figured I'd take some time off and, and I spent, I decided to head down to Argentina and Chile and I spent six months in Argentina and Chile and I bought a truck in Santiago and drove it all the way down to Ushuai and back and, and did a lot of fly fishing, which is my passion. So I fly fished all over Patagonia and, and did some investment research in my spare time. During that time I had started to hear about this search fund thing which sounded like a pretty interesting way to, you know, combine my passion for investing. You know, identifying a, a high quality business that I wanted to own and operate was as well as actually getting to try my hand at pulling the value creation levers and not just talking to CEOs and CFOs about potential ways to create value, but actually having the opportunity to do that myself. So I kind of started searching pretty, just kind of not very seriously for about six months. And then after Argentina I went to Belize and I went to Florida and Louisiana and Mexico. It was kind of just bouncing around until about mid 2018. And then I decided to buckle down and start searching full time. And so when I had gone down to Argentina and Chile, I had sold all my stuff and put the rest in storage and canceled all my leases and sold my vehicle and didn't really have anything other than like two duffel bags and, and a backpack. So I came back to the U.S. i decided that because I was searching full time and I didn't want to commit to an apartment or a lease or anywhere and didn't know where I was going to live, I decided just to try to stay homeless, for lack of a better word, and kind of had a few friends that had spare bedrooms that were empty or. So I stayed with friends off and on, different friends for about a year. So I was essentially homeless for a year. During that time I lived with a friend and a couple friends in Denver, a friend in Seattle, a friend in Florida and was searching full time. And I had a little bit of money saved up, but not a lot. And that started to burn down pretty quickly and I started racking up credit card debt to fund my living expenses and search. I kind of figured I was all in and this was either going to work or I was going to be bankrupt and broke. And, and then towards the end of my search I, I actually took up, you know, some, I did some Uber driving as well as I did some part time fly fishing guiding, given my experience and passion for fly fishing. And just what happened, what happened to

[7:55] Host: the more lucrative investment research consulting that, that strikes me as better than, than driving an Uber.

Guest: Our contract ran out and the firm that I was consulting for actually went under. A lot of, there was a lot of change and then public equities, world active managers, the fees are getting compressed. It's harder and harder to outperform the market. You don't know what kind of crazy alternative data people have in terms of credit card data or satellite images and there's all kinds of stuff out there. People are. And you know, I actually don't think the market's very efficient. And over a multi year period things can stay pretty irrational and over that time you'll lose all your investors, unless you're Warren Buffett. But so anyways, so I started my search in mid 2018 and I was looking for all this kind of standard things that searchers are looking for. A lot of, you know, mature, stable business that was going to have a lot of recurring revenue, wasn't going to be economically sensitive, wasn't going to, didn't have some product or service that was going to become technologically obsolescent. I was looking at kind of the standard boring industries like landscaping and disaster restoration and pool industry was a little bit, was on my radar something that was interesting, that kind of met the criteria I thought it was. And then again my, my passion was fly fishing. So I was looking to buy a business somewhere where there's going to be good fly fishing. So that was either the Rocky Mountains or I really wanted to get more into saltwater fly fishing, which is kind of the, the hardest fly fishing you could do. And so I was looking for something in Florida and pool service seemed like a good business to have, you know, to be in South Florida. And I had lived in South Florida a few times and seen all these pool trucks driving around and they, they always didn't, they never looked very professional. They were kind of rusty and didn't have a logo on the side of them. And then I had, I had seen a lot of pool routes for sale on biz. Buy, sell. And so I thought maybe there was an opportunity to buy kind of a high quality starting point platform and then you could do a lot of add on acquisitions via you know, a little, little roll up strategy buying routes here and there. And there seemed to be some good technologies out there that would kind of streamline the business and from the billing and routing and scheduling standpoint and most of these businesses were, you know, 2/3 or more recurring revenue, kind of monthly or weekly service. And then there's a repair component, you know, repairing pool pumps and filters and stuff like that. And so that, that was an area that I kind of was keeping my eye open for. And, and then one day I just sort of got lucky. I had gone on this trip with my buddy who's a yacht broker. He called him up in May of 2019 and I said, what are you doing? And he said hey, I'm taking, delivering my customers 65 foot Viking from Panama City, Panama to Fort Lauderdale. And I said, well I'm not really doing anything. If you want to have a extra hand while I'll come along. And I'm just searching for a business to buy and that kind of kind of has its own flow. You can't really control. You can do proprietary search which we can talk about or kind of look for listings but you know, I can kind of do that anywhere. So I went along that trip and had a great time and it was in the Caribbean and I was like, man, I really want to move to Key west and do a lot of saltwater fly fishing. And the day I got back to Colorado, which is where I was living at the time, I found the cool Manakee west for sale. And I was. I have seen the pool man.

[11:41] Host: It was called the pool Man.

Guest: The pool man of Key West.

Host: Of Key West. Go ahead.

Guest: And so it just happened, you know, as fate would have it, the day I got back I found it and it seemed like the perfect fit for me and started talking to the broker and the owners and, and came down and visit the company and closed on the acquisition in November of 2019.

[12:08] Host: November 2019. And how old are you at this point?

Guest: I would have been 32.

Host: And how much was your judgment clouded by the fact that you wanted to

Guest: live in Key West? I don't think a judgment was clouded too much. I thought it was. I did a lot of research and the one thing that was kind of tripping me up as I couldn't figure out why there wasn't any rollups like private equity backed rollups in the space. There didn't seem to be a lot of. I was trying to figure who are the major players. You know I. And landscaping. There's Brightview doing a big rollup.

Host: Yeah.

Guest: And it's a great question. And so I was, I was like, why aren't there any rollups is what am I missing? But it seemed like a good business. And again, I like the market. I like kind of the geographic barriers to entry we had here. We had, you know, we're on, on an island and seemed like a lot of vacation homes and stuff like that. And so people that were unlikely to cancel their service if there was a recession because they're not even here most of the time. And for all those reasons I thought it was going to be a pretty good and stable business and not seasonal overall.

Host: Yeah. Well Ben, one question on that. Now as I said at the top, you've exited now to or larger player and, and, and you can't speak too openly about it because you're under non disclosure for that. So if I ask you something about the pool business, you feel like you can't answer, just say so. But the. There are a lot of pool routes on biz by sell, you know it's like pool routes, you know, and Nail salons and FedEx routes, you know, a lot kind of. Some of these ones you see in almost every geography, lots of them. And so that always strikes me as a signal that these are really hard businesses or you know, they're people that are buy or selling the businesses more than buying them. And the other thing about pool, despite all of the, the characteristics that you describe, very recurring recession resistant people, I mean they need to get their pool service is I. My limited understanding of it is that the barriers to entry are pretty low. It's not super high skilled, like even probably less than landscaping now, correct me if I'm wrong. So, so how did you, how did you wrap your head around barriers to entry and, and how competitive the industry probably was at least appears to be as an outsider.

Guest: Yeah, it, there are there. It's very low barriers to entry. You know, I think a lot of the people who have second homes or vacation homes or commercial customers want to have a larger company, but it is, it is a very challenging business. It's. Pools are actually pretty complex. There's a lot of chemistry going on in pools with the water and it's hard. That's one of the hardest things to train new employees is how to balance all the chemistry correctly. And it's. Obviously there's risk too if they put too much chlorine in and it bleaches someone bathing suit or makes their skin have a reaction. You know, we've had a few of those phone calls. So it is challenging. It's a hot down here. It's so hot in the summertime. I mean, I've cleaned a lot of pools in the summertime. You have to do whatever you have to do when you're running a small business. And sometimes, you know, we were shorthanded or I went through some acquisitions and, and we were shorthanded as a result and I had to clean some pools and. And I mean, you're drenched in sweat. I mean it's, it's hot, hard work. So yeah, it is hard to get employees and keep them and train them. I was lucky that I, you know, when I acquired the company had a good team in place. Most of those guys were still there when I sold the company. And I'm not going so many ways here, but.

[15:56] Host: Okay. Yeah, no, that's, that's great. So, so it sounds like one of the barriers for entry, if you will. Or, or, or maybe it's not a barrier to entry, but kind of something that keeps it from just all of the margin just being competed away is that it's really hard work. And, and so there's probably a lot of turnover in the industry and people don't last. So staying power becomes a competitive differentiator. Is that a good distillation?

Guest: Yeah. And I think you know, with the larger company you've got a big team. So if your pool guy goes on, wants to go on vacation for a week or two and we're, we're still going to clean your pool when he's gone. And yeah, so I mean there was always a lot of one Polars, we call them one Polars driving around even down here. And, and they come and they go. Yeah, it's. You have to get a critical mass, critical scale to kind of make sense. It seems to be you have to have kind of a critical mass to really, for the business to really make sense as otherwise you're typically out cleaning pools or doing repairs yourself every day. Most of the smaller businesses kind of. There's the owner is kind of doing that.

Host: Yeah, yeah. And. But even with the one Polars and they come and they go and you stick around like they still are a nuisance to you because I imagine you have existing customers are like hey, well I can get you know, Bobby with Bobby the one Polar in here to do it for 75% of the cost of you. So you're, you're suffering from, from you know, a price compression or margin compression, you know, price anchoring. Even if, even if the, the customer doesn't realize that, you know, the one Polar is going to be going away or whatever is the, is the answer simply, you know, you just hold firm and that, that customer will come back around when they realize that you're, you know, you're better than the one pullers.

Guest: Yeah we always, I always held firm with that. So what they'll learn is they'll, they'll go with that person and then after time they'll learn that it's that that person's not doing a good job for X or Y reason. And we developed a reputation, I guess. I don't know. I never had the problem. Developed reputation for having really high quality service. I invested in my employees training. When I got there, the first thing, one of the first things I did was get everyone CPO certified. Which certified pool and spa operator. And so I use that as a marketing say. We've got the best trained employees. All of my employees are CPO certified. And what happens really is the customers get used to their pool guy and they develop a really close relationship with their pool guy. And so you, they, that's, that's kind of the problem when you, you typically don't have too much turnover with customers as long as your pool guy stays. You know, if you, if you're losing that employee and you had some customers that really liked him or her, you might have some churn because the new guy coming in doesn't know the pool. There's kind of an ebb and flow to how the pools respond every week to the chemicals. And the pool guy learns how that each individual pool is behaving and how much use it's getting. And, and they knows, and they know where everything's at and they just kind of know how the customer wants to take care of. And so it's, retaining your employees is a really important part of keeping your customers happy.

[19:23] Host: I want to share an update on the Acquisition Lab. As you know, the Lab is a highly vetted cohort based accelerator and community for people serious about buying a business. After going through the Lab's month long intensive, you have ongoing access to almost daily Q and A sessions with advisors, regular live deal reviews with Walker Deibel, author of Buy, then Build Potential Deal team introductions and a very active Slack group with other searchers on the path. Well, the update is that the Lab recently passed 60 businesses acquired and for well over $100 million in aggregate transaction value. Also, all members now enjoy lifetime access to the Lab because when you buy a business, it's often just the first of many and the Lab wants to support you in every deal, not just your first. Lastly, check out my recent interview with Shane Ursum, episode 105. Shane acquired a business with over a million dollars in EBITDA in just six months and he attributes a lot of his deal success to what he learned in the lab. Check out acquisitionlab.com or email the lab's director, Chelsea Wood. Chelseieve.com I also just want to ask about, I mean you've kind of stated it, but this, this is going to represent a big shift going from an investor, essentially professional investor, investing analyst, to somebody who's operating a very sweaty, literally business in South Florida. Just you were on board for that. Did or did you have to convince yourself to do it? Did you not want to look at something maybe a little bit more air conditioned like buying a business that's, you know, B2B services or something like. That's such a, you know, that's such a big change. How did you wrap your head around it?

[21:11] Guest: I guess this is probably Where I was a little bit naive, you know, I didn't really think about all that stuff when I bought the company. You know, I grew up in a kind of middle class rural family so I was used to getting my hands dirty around the house and doing things outdoors and stuff. So. But I, yeah I was, I had a very white collar professional job and I forget one of the first things, like when I first bought the company, the first day I was going in, I didn't have a place yet. So I stayed with the sellers for a week at their house in their guest bedroom. And so I was like, what time are we going to work tomorrow? And they're like oh we're going, everyone gets there at 6:30. I was like oh, that's early. I didn't think about what time we were starting work. And so I was like, I guess I'm going to be an early guy now.

Host: And so you adjusted that. Actually you joke but like if you were getting up at 8:30 or what, I mean that's actually kind of a big change. It can be done, it's done. I now get up at 5, I used to get up at 9, but it takes a couple months to adjust. So what, you just started going to bed earlier?

Guest: Earlier I hadn't gone through, I hadn't gone to job, had a real job for two years and so yeah, I wasn't used to getting up anytime when I get whenever I wanted. So it was a change. But I just, you know, once you buy a company here, gotta do whatever it takes. I mean especially if you're a self funded searcher like I was, um, you know, you got a SBA loan that you guaranteed and, and you've got investors and people you don't want to let down and, and so I'm just all in. And I did whatever I had to do to make things work.

Host: Cool. Well that's great Ben. Oh, and before we get too far off of it, I just want to, I just want to say I had my own. I lived for a year in Argentina, lived for a year in Chile. I was living under different circumstances. This was back when I was 24 and I had had a web business that I sold, so I was flush. Not a millionaire, but for a 24 year old. So I mean I look back on that time as, although you, you probably had a little money in your back pocket from selling all of your assets. But I too went down there absolutely completely unencumbered. 24, nothing to do but learn how to speak Spanish. I mean it Was it was just one of the most wonderful couple of years of my life. And my, my now wife is Chilean, although I didn't meet her in that moment. I met her much later. But anyway, so the Southern cone is an area I know well and near and dear to my heart. Okay Ben, so before we, I want to talk about like once you actually got into the, to the role of operations and we're getting up at 6:30 but before that. So I'm getting a picture of somebody who's pretty broke couch surfing for a year, Uber driving, dwindling savings, credit card debt, or I guess completely dwindled savings.

Guest: If you're going into, if you're going

Host: into debt on your credit card, how did you scratch together the money to do this? Can you give us a, a picture of what the, that looked like and even the capital stack?

[24:04] Guest: So yeah, I approached, you know, so during this time of searching everyone like I'm going to buy a small business and everyone's like yeah, with what money?

Host: Right?

Guest: And, and you know, good question. I've got a plan and this is how it all's going to come together. And so yeah, I found the acquisition. It was a, it was a relatively small acquisition to, compared to a lot of searchers these days. But yeah, so I approached some friends and family who you know, were willing to back me and my parents invested in me because they believed in me. And a lot of my friends said well, I don't really know, but I believe in you, Ben. And so I'll give you a little bit of money. And, and you know, I've had a lot of professional friends that were doing well and so they had a little bit of money to invest in, in me. And, and so yeah, we, I got there was, I've raised about 15 to 17% of the deal was, was in equity from investors and there was about, there was a seller note that was a little bit less than 10% of the deal. And then the SBA loan was the rest. It was about like 70, 75% of the deal I think. And I put about $100 into the company to open the bank account and that was, that was my investment and all my hard work and my, and I guarantee the loan.

Host: So, and just so people understand who, who other people will be very comfortable with this already, but for others it might be foreign. So you, your equity, when you present this to your investors, in your case kind of friends and family, your argument is that my equity comes from the fact that I'm bringing the deal found the deal, doing the transaction and going to be the one in there. And is that a pitch that everybody is receptive to? They're like, oh yeah, I get it. Or because you know what we also always hear about from more professional investors is like, no, but I want to. Or in lenders is oh no, but I want to see you have some skin in the game, namely some of real cash of your own network in this deal. How did your investors respond to the fact that you were only bringing $100 to it?

Guest: Well, every, every lender has their own criteria. That's not a set of SBA criteria. So there's, there's certain lenders out there that don't require you to have any tap cash in the deal yourself if you know if they can understand that. And they, and then again the typical terms now. So I've invested in a lot of self funded, funded searchers now too. So the tip. So, and what I told my investors was, hey, look, I'm taking a very small salary. I took a very small salary. Compared to what most people were paying themselves, it was less than six figures. And I said, I'm going to pay other than my salary. You're going to get all your money back first and then we'll split the profits. I'll have a majority of them, but you'll get all your money back and then you'll get some equity. And so that's typically what people get now in self funded deals. They're participating preferred stock with some kind of preferred return and a liquidation reference like one times, which means, hey, I'm going to get my money back and I'm going to get a, you know, 10% or 8% preferred return annually and then you're going to own 70, 80% of the company or whatever it is, but we'll own 20 or 30. And that's a typical structure.

[27:16] Host: I actually want to dive into that just, and go real slow. But let's do that toward the end when we, when we talk about your, the hat you now wear as investor. But that was, that was great. Let's get back to the story here. Ben. So, so, oh, it, well, and just. But one final point on this. So you retained how much, how much of the common equity was yours in your particular deal? Can you, can you share that?

Guest: Yeah, Yeah. I had 80% of the equity after my small salary.

Host: So you are staying with the seller for the first week. You're told the night before day one that you're getting up at 6:30 the next morning, not only the next morning, but for the next X number of years of your life and you get in there, what, what do you find in the first week or two?

Guest: Yeah, so I mean I didn't, I had done some research about pools but I didn't really know anything about pools and, and so I was drinking from fire hose and they didn't really have a manager team. It's just the two sellers, the husband, wife, team. And so I was learning how the business worked, how the, all the. Mainly when you do an asset purchase, you've got to basically rebuild the whole company. Like new payroll do, move all the titles over, registering them and setting up your own accounting software and billing and all that stuff. So I was learning a lot, working 12, 13 hour days. And, and then one of the big revelations was I found out that I really didn't like the seller, the husband, and he was kind of a jerk to all the employees and was a yeller. And I was like, well you're yelling at my employees, these are my employees now and I don't like the kind of culture so that you're creating and I want to make a change. And so I asked him not to come back. After about a week or two I said I don't think I need you anymore. You know, I'll let you know if I need you. And so that was.

Host: Did you make it? Were you direct about why you were asking him to do that or like did you express your, your, your displeasure at the fact that he was yelling at your now employees?

Guest: I don't think so. I was trying to be somewhat cordial and, and yeah, of course I think he, he really didn't want to be there anyway so he was happy to not have to come in but he was kind of like, well we'll see what this kid can do and blah blah, blah. So, but you know, so we, we actually didn't announce me as the owner right away. He announced me as the new manager. They were going to take it a step back and I was going to take over management. And then I pulled aside the top guy who's kind of the service manager and we had lunch together and I said, look, I'm the new owner, you probably know that I want to work with you. I think you're a really important part of this team. And so I developed a, gave him a bigger title and I developed a compensation plan for him that was more incentive based and so got him to buy into to me. And he kind of, I think was skeptical but was willing to give me A shot. And we had a really good relationship together and he is now the manager now that I'm gone. So I kind of trade him up and, and to become the manager.

[30:34] Host: And Ben, he was skeptical. You're the new guy, which is natural. On the other hand, I'm hearing that the seller was a yeller, so it couldn't have been the happiest work environment ever. Toxic, maybe. Even so at some, on one hand, he and the other staff were probably more amenable to somebody, some new owner coming in because, you know, maybe it can only get better sort of thing.

Guest: Yeah, no, I think, I think you're right. They, they, they were a little skeptical at first, but they, I think over time, you know, I was definitely was doing a lot of things to treat them better and got everyone trained and you know, professionally trained and all that stuff. And I think people started to really appreciate that. And that's why pretty much like I

Host: said,

Guest: everyone but one or two guys were still there after three years and they were all, you know, they really appreciate. I think they really appreciated me. And, and one of the, one of my most proudest one things I'm really proud of is the fact that during my three years, I was never ever asked by any employee for a raise. I was always giving people raises before they, they even asked for them. So I think that's.

Host: Well, Ben, I want to, I want to spend some time on your management. So, so let me, let me pause you and we're going to come back to that. But just you had mentioned in this conversation with, or at least in your early conversations with the manager that you developed a new compensation package for him that incentivized him. Can you give people some color on that, like, or some specifics?

Guest: Yeah, I mean, there wasn't anything I, you know, I started, I was like, okay, we're going to have X, you know, blah, blah, blah, blah. You got to hit all these things and, and I'll give you meaningful bonus every quarter. It ended up just being kind of, you know, as things happen, you know, you're busy and you don't have time to track all those things necessarily. But you know, so I was just giving them quarterly bonuses on top of, you know, I gave him a small salary increase and I gave them more vacation time, things like that. And those are, that was the main thing. So.

Host: Okay, and the boat. But you. The bonus, recognizing that it wasn't, you know, overly spreadsheet it out, but it, but was it kind of loosely tied to just the performance like the Revenue performance of the business or was there any kind of KPI that you were loosely tying it to?

[33:02] Guest: I mean, that was the goal. But at the end, I was. No, I didn't. I just kind of gave. It became. It became just kind of complete. Just kind of like what I gave him every quarter. You know, I want him to stay happy. So I was just kind of giving him the full bonus every quarter.

Host: Okay. Okay.

Guest: He was doing a fine job. So.

Host: Okay, great. And all right, so that. Now speaking of, of compensation and the fact that nobody ever came to you for a raise, so now go into that a little bit more, please. Did you raise every. Give everybody a bit of a raise immediately and think, talk, talk through what you did and what your philosophy was.

Guest: Yeah, I don't. I didn't give them a raise immediately. I was just. I had a really good spreadsheet going and I was always like, every couple weeks counting up how many pools people were doing and making sure that, that their pay reflected. If they have more pools, their pay was going up and I was increasing that offer pool. And, and so I, I kind of tried to give everyone a little bit more money every. Every six months or so. And the new guys, maybe they would ramp up a little bit faster. It became, you know, a very competitive labor environment. So the wages were just going up in general over the last few years. Yeah. So, you know, I would see what other people were hiring for, for, you know, workers for in town and trying to be on the high end of that. I was monitoring like there's various Facebook's very date here for all the local businesses like, or local locals are all on Facebook. There's various Facebook groups for hiring and people selling stuff. And so I was kind of monitoring the hiring one and see what people were getting paid and making sure that we were staying competitive and, and, you know, doing all the best practices in terms of, you know, I added a 401k and which some guys appreciated, some people didn't. So.

Host: And this was all yours was a smaller acquisition, as you've said. So you didn't have tons of cash flow kicking around to do all this stuff. But it was, it was penciling like you, you had enough and also you were paying yourself less. So there was just. There was enough to go around and continue to, to. To break even and make a little bit of money for the business.

Guest: Yeah. So the way it happened was I started out with the company. It was just me. I did everything for the first six months or so, all the billing, the answer, the Phone calls, payroll, if I had. Sometimes I don't remember if I had to clean any pools in the first few months. But, you know, I was rolling out this new software to make everything more streamlined. You know, I think the guys were a little. I rolled the software. There was definitely some skepticism about the software. They were used to doing, like leaving paper door hangers and had Excel spreadsheets of routes and schedules that were really a pain in the ass. But so once we roll the app out, we did slowly, and they saw, yeah, this is actually pretty nice. And now customers can't say I didn't come. And, you know, no one claimed, no one cleaned my pool today. All those calls went away completely. And then Covid hit, which was kind of a scary time. You know, I wasn't sure, you know, if anyone was running the business in that time. What, you know, we. I didn't know whether it was the right thing to do to, you know, we were providing a critical service. But I also didn't know for my employee self whether I was, you know, putting their lives in danger, sending them out into the field every day. And so it was kind of hard to know what to do. But I. I figured during that time, kind of around April 2020, I was, you know, realizing I needed to get an office person, office manager, and I figured now would be a good time to hire someone. I figured, you know, people were just getting laid off. And so I put a job posting up and I found a awesome office manager, got a lot of applications, and I found a really awesome office manager who I just thought I was going to click with. And she had the right kind of personality to fit in with all the guys. She had been office manager of a plumbing company. And so she came on in April 2020 and really helped me spend more of my time focusing on the business rather than running all the, you know, dealing with phone calls and billing questions and stuff like that. And then, you know, I would plan to do some acquisitions, but I didn't really plan to do them in my first year. Like everyone says, don't buy, don't do any acquisitions in your first year. But I had someone approach me, wanted to sell, wanting to sell a route, and I said, well, we could probably integrate that pretty easily just one route. We'll have her, you know, the former person, train up my manager, service manager on that route, and then he can train someone else, you know, on that route, which, you know, we did. And that worked pretty smoothly.

[37:38] Host: So this was. This was a. This was a one polar getting out of business?

Guest: Yes. And well, she was cutting way back on her route and so we kind of segmented her geography where we were buying it and she was. Her not compete was not going to be able to allow her to do pool services in those. That area, those. Those islands for us down here in Keys. But her husband actually is pool builder. And so she was. She. She had got those pools because her husband had built all those pools. Basically he was going to stay building pools, but he wasn't servicing pools. And then I had another. There was a couple other companies for sale that had been talking to off and on since I bought my company because there was a couple for sale. But we had really agreed on price. But one of them, I think he was just kind of set up and done with. Done with running the business. He had some. He had lost his partner a year before. So I think he was just kind

Host: of,

Guest: you know, ready to move on with his life. And so he. He approached me and. And I had started to develop kind of a reputation in town as, you know, being a young ambitious, at least in the pool world, you know, where we're doing pretty well. People. People actually tried to poach our employees at first and they were all pretty happy, as you mentioned, so they didn't want to. With the changes and so they didn't want to leave. But. And he told me actually after we closed that he tried to poach my employees and none of them wanted to leave. So that kind of told him that maybe I'd be a good person to buy his company and take over his employees. And so we ended up talking and because of COVID stuff, he was just ready to move on. And so I got. It was attractive purchase price. The integration was a little rough. We went to announce it to his employees. He just said, here's Ben, he's a new boss. I was like, well, I was hoping for a little bit more but, you know, greening than that. And they said, well, you know, I'm Ben, I am the pool man and we're excited to have you guys and blah, blah. But you know, one of the guys quit on the spot, which was not good because we got pools to go do. And so the seller had to. Had to go do those pools that day. And so I guess that was his fault for not doing a better job by the messaging the sale. So we took on those pools and that was a lot of work because I think they had kind of. He didn't have a very high quality employees. And I think they had started to Let those pools kind of go. I can't. The chemistry is complex, but the chemistry of the pools was all wrong and it was going to become a problem. It sure had found a problem for a number of them because the way they were doing the pools was chemicals, was not right. So we had to retrain his employees. Some of them weren't retrainable. And so after six months, basically none of those employees were there any longer, which was kind of a disappointing. But in the end, it worked out. We retained almost all those customers. Pretty much always acquisitions. You'll lose a handful, a few percent right away. They don't like the change. They, they want the former person. And

[40:48] Host: so Ben, when you say that the guy quit on the spot, do you mean he literally, like, as you're saying, hi guys, I'm Ben, he stands up and walks out.

Guest: I think he, he, he was definitely seemed skeptical and I think he went out and then he came back and, and like, he had done like, went out and did like one or two pools and came back and said, I'm. No, I'm done. And so, yeah, it was, it was almost on the spot. It wasn't. It wasn't quite on the spot, but yeah, yeah, rough.

Host: So you, you bought one business, then you absorbed sort of the route of a one polar. You buy another guy's business who's slightly larger, and you've also been operating your own business. Now you're. And you're in your first year, right?

Guest: Yeah, so it's in my first year. I guess going back to the reason why you. How I got down that whole line of answers was, you know, adding on each additional pool company. There's quite a bit of synergies. You know, you don't need you. You know, you can get rid of some insurance. You don't need two warehouses. So you can kind of start really, you know, adding those, adding those other companies caused my cash flow to really explode in a good way. So, yeah, so by the end of the first year, we were generating a. A lot of, you know, free cash flow.

[42:09] Host: Amazing.

Guest: And so I used that because I was paying myself a low salary and I was broke. Still pretty much broke. Still had credit card debt. So I wanted to get my investors paid back as fast as possible so I could start making some money and pay off some of my debts personally and not be broke any longer. So I pay all my investors back at the end of the first year, they go and they got all their money back within 12 months. So that was pretty, a pretty good accomplishment. As well.

Host: And that's, that's great. Yeah, congratulations for that. But I just want to set the stage where you are at the end of the year. So these acquisitions, you've been in the business now doing well, lots of free cash flow, paid back your investors. Just revisit your kind of thesis, if you will, from that perspective that you know, you looked at the pool industry, you like the recurring revenue, all the, all the boxes that we just talked about that this industry seemed to check. But you know, you saw that there weren't people doing roll ups so that was kind of suspicious. And you've learned that it's hard, hard work. So now that you're an insider and have some scars, but also a lot of victories, how did you feel about like what your thesis had been? How did, was it basically correct, directionally correct or what?

Guest: Well, there, there were a few roll ups that got started at the end of my first year, so that was interesting. But yeah, I was starting to see how much work it is and you know, I kind of had to have

Host: my hands

Guest: around things pretty closely. I felt like keep everything on track. So I wasn't sure personally if I had the skill set to really run a larger, you know, multi branch operation. You know, I don't, I never had managed any people before, so I wasn't sure. I'm not a very good delegator. I'm kind of a, I like to have my, I'm a micromanager a little bit in some sense. But yeah, so I wasn't sure what my long game was going to be, you know, and, but I definitely. Because we lost all those people from that first acquisition. I had been out cleaning pools for a few weeks or months and kind of the worst time of the year. We definitely. One of the hardest positions to hire for and retain in the full industry is the repair tech, the guy who's doing, the mechanic who's doing all the work on repairing his pool pumps and filters and stuff like that. And I, we had, I had gotten a good, really talented repair tech with the acquisition, but he had some personal problems in his life and he maybe like to drink a little bit too much and so he sometimes would call stroke for work, which is really frustrating. You got the schedules, you got customers who want to get their jobs done. And in Key west there can be a little bit more of a laid back kind of party culture,

[45:07] Host: to put it mildly.

Guest: So he taught me a lot about pools. But we kind of started butting heads and I, I don't blame him. I think it was probably frustrating for him to have to, like, basically teach his boss about how pools worked and explain all this stuff about equipment and, you know, why we needed to do this and that. So I think there was some tension that built up between us because he was just frustrated having to explain everything to me. And so I ended up. We got in a fight one day, and I ended up letting him go. And that's kind of a scary thing because I didn't know how to do this work myself, and it's hard position to hire someone for. So over time, I decided I have to learn how to do repairs myself just so in case I had a vacancy in a position, like, at least keep our customers happy. And so I did learn that. And then I ended up that guy, he worked for another company for a while, not in pools. And then I heard he got laid off, and he was friends with my service manager, and so I reached out to him. We kind of had our. Had our makeup moment, and he came back. It was. Was really good for a while, but then his life kind of went on a downward spiral again. And. But during that time, he did train a really, really good replacement, and he's been great. The mechanic we have now that still with the company today.

Host: But you know, Ben, one of the things I. I find intimidating myself about buying businesses is that like, yeah, you come in off into an industry you don't know, and you got to learn real quick. And so, you know, the learning curve alone is intimidating. But. But also looking like. Not that I'm embarrassed to look dumb, but just like, it's hard to gain the respect of your new employees if you're so nakedly an outsider. It's like, dude, you know, they'd be like, dude, you don't know anything about anything.

Guest: But.

Host: But actually what I hear from people is, no, actually, like, as long as you are eager to learn and you take an interest in what all your. What your crews are doing, in fact, the psychology is that they're really eager to. They're really eager to show you, and they like that the boss is like, taking an interest in and you know, how they. How they do their trade. Doesn't sound like this guy had that reaction. He had the reaction that, like, I would be worried people would have, which is, you don't know anything and you're making me teach you.

Guest: Yeah, I think for the first few months, he was kind of. But then after a while, it got old. But, you know, I think to your. To your point, I would tell searchers to kind of embrace the fact that you don't know anything and. And be honest about that and. And go out and to the field and. And learn it, you know, do it. Get your hands dirty. You know, I. When I. When I started all my employees, CPO certified, I was in that class, too. Like, I. I sat in on that class, and it was on a weekend, and I actually got the highest score on the exams for all the employees. So they were kind of like, well, maybe he does. You know, he's obviously a smart guy, so he'll figure this out, I think. But, you know, so I got out. I wasn't afraid to get out in the field and take my hands dirty and learn it the hard way. And that'll give Bayou a lot of respect and loyalty from the employees, you know, and like I said, just treating them right and paying them well, and that bought me a lot of respect and moral, too.

[48:26] Host: Okay. Okay, so it sounds like this guy was kind of the exception. Now that you have a year of experience, what you are feeling about this space is, like, it just that it's really hard. Like, keeping the. The trains running on time is. Is what's. Is what's hard, and maybe what outsiders don't appreciate. And you're working very in the business rather than on it. Although you admit, by your own admission, part of that is just your personality. Did you have. Did you have any moments of. You're talking about some of these challenges. Did you have any, like, where's your headspace at? Did you have any fetal position moments? Ben?

Guest: Yeah.

Host: Any panic moments?

Guest: Yeah. As anybody knows, you know, running a small business is just a grind. You know, it's a lot of work. It's. You have ups and downs. Same with the search process. You know, my search, you know, I had a couple failed deals lost. You know, again, I didn't have money to be spending on failed deals, but I, you know, so I just racked up more credit card debt for a failed deal, and I'm still homeless, and so it felt terrible. And. But then you get close to closing one, you get excited. So it's all a roller coaster. Yeah. I mean, you definitely had some moments where it's like, oh, oh, crap. I just, you know, lost everything I had to, you know, within my first year, I had an employee get in a car accident with a guy on a motorcycle that resulted in a lawsuit. Resulted in a lawsuit. And so that was, you know, pretty scary, you know, because they were threatening to sue me for more than, you know, the insurance Policy coverage and all that kind of stuff. So you know, so there was, there's things like that that happen, you know, and, but then there's also like really big wins. You get a big customer, a big sale. And so there's, there's always, it's kind of a roller coaster. So it's definitely a lot of work. And I worked, you know, 12 hour days five days a week and then I worked on the weekends a lot. And for multiple years, you know, in and on the, in and on the business, I was putting serious time.

Host: Yeah, yeah. And you, my impression is that you're, or at least we're kind of single. At least you don't have, you don't have kids. So this was kind of also determined your lifestyle. So maybe somebody with kids that might not have been tenable. Fair. Just I just want for people who are listening to kind of if they map themselves onto your, your, your story. Yeah, yeah.

Guest: I was single and I was the first one in every morning at 6:30 and I was the last one home at 6:30 or 7:30 at night, you know, or later. Yeah, sometimes. And so I was, I didn't have a girlfriend or any kids or anything for most of my experience. Run of the company.

[51:03] Host: Yep.

Guest: Yep.

Host: Okay. Now any, anything more to say about you, the culture and how you improved it? You we've talked about paying your people better. You got rid of the yelling, the yelling, previous owner pretty quickly, sooner than expected. You don't yell, you treat your people well, you got them certified, you're adding value to their career trajectory. And so anything more that you did that you want to share and also could you feel the culture of the place improve? Like were you. I mean, I guess people trying to poach your people and people don't want to leave. That's a huge testament.

Guest: Yeah. So I mean it definitely like I set it out from the beginning. Our mindset was to be the best, most professional, reliable, dependable, you know, pool company and the Keys, which there's a lot of unreliable and dependable people in the Keys. So you know, pretty much every, every service, every service business down here is like that is unreliable and unprofessional.

Host: So it's a great place to do business if you're, if you are professional, reliable.

Guest: I guess, hey, it might be a good place. You know, a lot of these, I think a lot of these, you know, smaller towns are kind of like this. But. Yeah, yeah. So I mean I could definitely, you know, I was like, hey, you know when, when something, when there would be an issue with service. I'd be just like, hey, we're not, that's not what we're doing. We're here to provide the best service. And, and you know, I think employees want to do a good job. They want to be proud of their work. So I really support them in that. And then, you know, I really supported my employees. You know, customers would call in and say, hey. At first, people would call in and say, hey, no one cleaned my pool this week. And this happened with my acquisitions that I did too. They would, when I first did the acquisition, they go, so and so didn't show up. You know, we didn't have them rolled in on our technology on our, you know, app yet. And what the app also did was it sent the customers an email with the service report and the photo of the clean pool and stuff. So immediately I can go back and say, well, look, he was here at so and so time and here's the photo of the pool. And so those calls all stopped and I could stand up for the employee, you know, you know, it's hard to stand up for the employee when you don't have any evidence, but. And so employees really appreciated that they didn't have to go back and do their jobs second time, you know, a second time because of some customer that was being a jerk or pain to deal with. Yeah. You know, and so I always kind of, whenever there was kind of a dispute, I really would look at it fairly to the employee and try to take the employee side. And those are really my, the key people. You know, if it's a customer, I'd rather lose a customer than lose an employee. So. But we wanted to, we wanted to provide a good job too, you know, so good service.

Host: Yeah. Great. And Ben, before we start moving on to your exit here, did you, when you were working these 12 hour days and then, and then also on the weekend and really kind of living in the business is my impression. Did you feel like you had chosen the right path or did you feel like, oh boy, what have I gotten myself into? I mean, you're, you're having these victories, so I assume you're feeling pretty good about things. What. Talk to me about that.

[54:11] Guest: Yeah, I mean, definitely. There was definitely times I questioned whether I'd, you know, it was, you know, in hindsight it was, I definitely think it was rewarding. It was a wording experience running a small business and, you know, growing it. And I think I left my employees better off, better positioned for their careers and now have a. They're part of a larger company where there's a. More of a career opportunity there to grow. There's lots of different management levels. I think I didn't really want it to be running this company for the long term. Decided and that's why I decided to sell it. One of the reasons why, you know, I decided I, I really don't want to keep doing this. And I didn't think, you know, we have talked about it. I didn't think I could put a manager in place and really step back and, and trust them to do the job without me and just kind of sit back and collect checks. So I decided I didn't really want to do.

Host: And why not? And why not, Ben? Why not? That is the obvious thing.

Guest: I just thought, I mean it's a challenging business. So I didn't, I didn't trust, you know, I would be able to step back and the manager wouldn't run into the ground or, you know, I wouldn't be able to keep my hands off things.

Host: And

Guest: you know, my passion is investing and I think now that I've been gone, I've kind of realized that I want to get backward to investing. And, and yeah, I kind of, I like the, the, the chase of a deal more than I like running a company and dealing with employees and customers and all that kind of stuff. I mean, not that I, I mean I really appreciate all my employees and I like them. But you know, everyone's got their. Just dealing with, you know, people not showing up or having to get sick and just all that kind of stuff makes it challenging. I mean, the pool industry, going back to your question you were mentioned earlier, I mean the pool industry is very logistically challenging and we're touching every one of our customers every once a week. You know, cleaning 800 plus pools a week. There's a lot of moving parts going on there. So yeah,

Host: but just not to beat this, but to death but hiring the gm. So part of it was, it sounds like you just, that was going to be this whole other step up in your, in your skill set of finding that person, training them, not breathing down their necks with your micromanaging personality. So, and so that was the kind of a bear of a project and that, and so you'd still, you'd still be in small business. So you just kind of concluded you rather just handle, hand the whole thing off to somebody if you could rather than go through that next step.

Guest: Well, that and yeah, I thought the opportunity to partner with this private equity bagged roll up was Going to be a pretty interesting opportunity. You know, I thought I believed in what they were doing and saw a big opportunity to roll up the pool industry more more broadly. And so I thought partnering then was, was an attractive option and it would give my employees better benefits now that you have health insurance. Like I said, they have a career path to, you know, to bigger and better things in a small pool company that really one of the they can. There's only one service manager at our company and so there wasn't a lot of upside opportunity for them in their career. So I thought this was going to be the best, the best route for them and for me and sending to partner with pool troopers.

[57:39] Host: Pool troopers. Okay, well we're going to hear about that just one more second. But one more question. Is finding a GM not in businesses like these kind of blue collar businesses, crew fieldwork businesses, can't you promote from within or is it really like all these people who are doing pools, really none of them are necessarily equipped to become a GM sort of thing.

Guest: So I thought it was being hard to find a GM in my market, which is kind of a crazy unique market T West. You know, it's, it's a very high cost of living. So it's hard to bring someone in from outside. It's also, not only is it a high cost, but it's hard to even find anything to live. You know, a house to rent or to even buy. I mean most houses here are a million dollars plus but I guess like 900,000 is the average median price. But so I thought it was gonna be really hard to attract someone from outside of my market

Host: now.

Guest: My service manager is now the branch manager. So yeah, he's, and he's, I think he's doing a good job but Cool. Troopers has a much more developed software program than we has a more ERP like you know, full service software that's custom built and that allows them to run the businesses much more remotely than you know, the software that I had. And you know, a lot of accounting is, and they've got, they've got big teams, you know, doing the accounting and at, and customer service at their headquarters. So, so while Tyler's doing a good job, you know, managing the employees and stuff, he's not really a full. What the GM would be doing all the, you know, in charge of the customer service and, and billing and the payrolls and the payroll. He's not doing that kind of stuff, you know, not setting up benefits. So I'm not trying to say he's Wouldn't cap. He's not capable of being a good manager, but he's. I don't know if he's that next level up of a GM kind of thing.

Host: Okay, okay. So the pool Troopers opportunity, you hear about them, I know from another podcast you've been on that you actually reach out to them. Correct. So, so give us, give us the kind of quick version of the story about how, how you started talking to them.

[1:00:03] Guest: Yeah, they, so they came on the scene. You know, they were, they were very large in Tampa. They've been around for multiple generations in the family in Tampa and growing quite a large business in Tampa. And they were, they partnered with a private equity firm to go and expand that, you know, that brand into other markets. And, and they were pretty. Being pretty vocal about wanting to, you know, in various trade magazines, you know, that you read in the pool industry that wanted to buy other companies. And yeah, I wanted to get in early and be on part of the ground floor and, and was, you know, thought might be a strategic exit opportunity for me and had a good valuation and, and so I went up and met with them and really liked Gary, the old CEO, really like the team and the private equity team. And so we started talking. They ended up, actually ended up, started talking in 2021, but then they went on a pause in their acquisition spree. They kind of, they did a bunch of acquisitions and then they kind of consolidated them and then they restarted that acquisitions in 2022. So we restarted talks in 2022. And yeah, I really like the team and I was, you know, came up with the price that we both thought was, was good and fair. And so I sold the company in August of 2022 last year and had agreed to at least a six month transition that, you know, I had planned to stay around longer. I think we both planned on me sticking around longer. And it just, the transition process kind of burned me out and I decided I really. I've never really worked for a large company in my entire career. The only time I did was when I was an, an undergrad. I interned at Ernst and Young and I essentially got fired from that internship. And so I, I don't think I'm really fit to, to be in a large organization. Personally.

Host: I guess it was a happy accident, Ben, that they were, they were in Tampa, so they were your neighbors. You could just drive up and see them. What is that, five hours, four hours from Key West?

Guest: Yeah, I actually never drove though. I just flew. It was our flight. It was pretty cheap on a Little local airline. So, yeah, I could fly up there. They're pretty close. I think that made sense for them to kind of focus on.

Host: There's.

Guest: Now there's a few. And I think the ones that are doing better consolidated are kind of consolidating more of an area than more. More broadly. This. That's just my perception of kind of monitoring and seeing what's going on. But so I think they're. They're smart to focus on kind of a market that's close to their home base.

Host: Yeah. And Ben, how do you. What does that initial outreach look like? Because, you know, in any kind of sale of, I guess of anything but of a business, if the seller approaches the buyer first, you know, they immediately lose just a little bit of leverage because it's like, you know, you're showing that you want to be sell as opposed to being able to play hard to get. Were you super careful or strategic about that or was it just like just firing off an email?

[1:03:31] Guest: Yeah, I was a little bit hesitant to fire up that email because, well, I don't want to, you know, I don't want to attract attention and then not get a deal done right. Because, like, oh, wow, maybe we need to go down to Key west and buy one of Ben's competitors or something. But, yeah, so I was a little hesitant, but, you know, I thought the opportunity was. It was great to partner with one of those. So I did reach out to multiple companies and just had a better relationship and more interest from pool troopers. I thought they were going to be a great fit for the team. And so, yeah, I just said, hey, I'm interested. I think what you're doing makes a lot of sense. And here's my background and, and here's what we've got going on, and I think it would be interesting to talk to you guys.

Host: And.

Guest: And so we had a kind of a call and had a meeting and a couple of meetings, and that's kind of how it went.

Host: Okay. And what can you share about the exit in terms of numbers? I know you can't share super specifics, but maybe ranges, anything.

Guest: No, I can't share.

Host: Can you. You. But you are able to say that you were able to return eight times. As I said at the top, eight times your investor capital.

Guest: Yeah. So the whole, you know, the whole three and a half years was a good experience for me and my investors both, you know, financially and for me personally. You know, I think we all investors made a good return on their money, which I'm proud of. And And I was, you know, I ended up pretty well off and, and now I can afford to go and do more investing and, and stuff. So yeah, it was a good experience. And, and that's one of the things too, I might say to searchers is don't be afraid to start a little smaller than, than what you see a lot of people recommending. You know, sometimes if you start small and then you can add to it, you know, you can grow pretty sizable company and then you'll, because, you know, purchase prices for small companies are a lot lower than they are for larger companies and you can create a lot of value doing that kind of strategy. So yeah, I wouldn't, wouldn't be, and you have less competition as well for the smaller deals. So I wouldn't be afraid to maybe look a little smaller than, you know, everyone's saying you got to buy a $1 to $3 billion EBITDA company. Maybe I would look a little smaller than that. I wouldn't be afraid to.

[1:06:01] Host: Yeah, yeah. But with the understanding that your life might look like what you just finished describing for us over the last 30 minutes, which is working very much in the business, you are really the operator. You are the one making the trains run on time and you got to be prepared for that. It's not like you can just start moving chess pieces around if you buy small.

Guest: That's true. Yeah.

Host: Okay. And, and Ben, when you just what you did with the business, um, I, I, I think we can say that you doubled revenue during your tenure and you 4x EBITDA in three years.

Guest: Yep. So yeah, you know, via acquisitions and organic growth and, and various things I did to improve the margins. Yes, I'm, you know, one, I added a lot of revenue via acquisitions, but two, I just started to develop, you know, a reputation as being, we were the best pool guys to have done Key west. And, and so we got a lot of new customers and some really big commercial accounts as a result of that. And two, yeah, you know, scaled the company up and, and you know, tried to try to, you know, have premium pricing in the mark in the market for a premium service. So we, we're definitely not trying to be the cheapest pool company in town. And so, you know, was able to drive a pretty, pretty significant margin increase and ended up being, you know, a good, good experience.

Host: Great. Let's start closing out here, Ben. But let's talk about now you as an investor first. Just kind of like high level. If people have a deal, should they bring it to you? I mean, what are the parameters of, of the deals you're looking at. And then, and then yeah, we'll maybe do a little bit of a tutorial for people who really don't understand how these things are structured, what, what it, what it could look like and maybe we'll use some example numbers. So first things first. What. Talk to us about being investor. What you're looking at, what you're looking for.

Guest: Yeah, so I've, you know over the last few years I started investing in searchers that people would reach out to me wanting to acquire in the pool industry which because I was kind of the pool guy. So I've invested in a few of those deals so I'm on board. But now, you know, now that I've gone through this whole process of having a number of searchers reaching out to me, wanting to, wanting me as an advisor or investor in their deal and then I've got people that want to co invest with me and so I've decided, you know, and my passion is investing so I'm launching a fund to back self funded searchers. We're going to be providing equity gap capital for control buyouts of small businesses. And then you know I also, you know, I'm happy to provide my guidance and, and experience and, and help you in any way that I can.

[1:09:04] Host: And what sorts of, is there industries or, or types of businesses that you're interested in? Is it going to be kind of similar to route businesses or would you look at an E Comm deal?

Guest: I can't do pools in any of the good states but so I can't do pools in the Sunbelt, but yeah, I'm looking for the same type of businesses, kind of boring, unsexy, stable, service oriented home services trades. I think there's a lot of opportunity in any of these businesses just to you know, improve the quality of the service, the professionalism. I think there's a lot of, there's a pretty low bar out there a lot of the small businesses and you know a lot of people need these services and want these services. So you know, plumbing, H vac, electricians, generator installs, disaster restoration, landscaping. I think all of those are you know, attractive businesses. Great.

Host: And size of check, is that something that you would say or like roughly?

Guest: Yeah. So you know I'm targeting 10 million investor commitments or capital commitments and so we would want to put that into somewhere between 10 to 20 companies which would be where our check size would be 500,000 to a million in equity capital. So probably. Well I've, I've Said that searchers should not, not be afraid of smaller deals. You know, we're probably going to be an investor in larger deals. Just so you know, smaller deals probably can't put enough capital to work to be meaningful for us. But that's, that would be the target.

Host: And are you looking for people who is it permanent equity or are you looking for people to grow and exit and return the money and then some back to you within, you know, a reasonable time frame? Or could these be buy and hold searchers?

Guest: Yeah, so the, the fund does have a target life of like seven years. So we would typically look for partners that, you know, have a three to five year goal to, to, to grow it and improve the value in whatever way, whether that's another roll up or whether you're going to have an organic growth strategy. Now if you wanted to hold it permanently, there's various ways we can structure the deal with an exit. Kind of pre thought about five years from now where you would buy, do a manager buyout of your minority investors, we could come up with some kind of structure that would make sense, come up with the valuation framework that we would think about. But seven years is a long time. Five years is a long time and who knows what people are going to want to do. So nothing. And this, you know, private small business investments is set in stone and people think things change, people might change their, you know, what they want to do once they've gotten their, got their hands dirty.

[1:12:06] Host: Yeah. And so Ben, we've spent the last hour getting kind of a profile of, of, of you. When you're looking at a deal, you're going to obviously look at the business itself, the deal itself, but you're also going to be looking at the searcher. Now having been through all of this, any criteria that you look for in your searcher and your searches that you'd invest in other than obvious things like, you know, grit and you know, all the, all the usual good stuff.

Guest: Yeah, I mean there's, I, I don't, I didn't create either, either one of these. But you know, Warren Buffett says you're looking for three things in a person. You're looking for energy, intelligence and integrity. And if they don't have the last one, don't even bother with the first two. So I think that's, that's a good summary. But us, someone also said the 5H's which is like heart, hunger, hustle, horsepower and humility. I think those are also good. Yeah, but you know, someone who's, you know, for Me, I, I wanted to partner with someone who's going to run this business full time. This is their sole endeavor and, and they're all in and they're going to guarantee the debt and they have all their personal capital tied up in this deal and this is, you know, kind of a make or break and deal for them and they're going to go out and, and work their butt off for three to five years and, and create a lot of value for, for them and for their investors and it's going to be a great win win. And so yeah, I, you know, that's what I'm looking for and typically that's a self funded searcher. I, I think the self funded searcher model is the best for both the searcher and for the investor I like. You know, I'm not interested really in backing someone's search. I'm more interested in a deal, you know, that's under loi. You know, if you want to approach me and you've got a deal that's already under loi or I'm very happy to, you know, build a relationship over time and give you feedback on your search. You know, if you want a second set of eyes on a deal and any thoughts or considerations as you structure that deal or negotiate that loi, happy to provide that feedback as well. You know, I've got a good understanding of how you can structure things with a seller note that this is an SBA compliant manner so you can sort of have an earn out or contingency. I did that with all my deals where you know, we had to meet certain revenue targets based on historical revenue in order for the seller note to have it, you know, not have its value diminish or you know, if you're, if you're buying a business that you know, requires a contractor's license, you can, you can tie that into the seller note, you know, he has to continue to qualify that the business under his license as an employee or however you structure that while you go out and get your license. So I got my pool contractor's license so things like that I can provide value in, I can provide value with, you know, helping you think about strategy and opportunities to grow and, and scale this business and exit it. What with the strategic, what the strategic exit opportunities might look like and things like that. So I look at, you know, I want to have an alignment of values and goals and with people and people want to go out and you know, run this business full time and, and create a lot of value and, and that's Great, great.

[1:15:33] Host: Ben, let's, I said we'd circle back to this. So let's do this as the last, last question. Just going slow. Just again for a lot of people know this, a lot of people will not what a self funded deal structure looks like when you raise capital. Let's do easy math. Let's say you're buying a business for a million bucks. That would be, that would be on the, on the low end. But again it's a nice round number million dollars. And let's assume 75% of that's going to be an SBA note. And so I got to fill the remaining 25%. Let's say 15% of that's going to be seller note. So that covers 90%. And then the remaining 10%, $100,000 of equity needs to be brought to the table. I don't have $100,000 in liquid cash. I need to raise it. What does that look like?

Guest: So you would typically go out and so $500,000. I probably say, hey, I'm going to sell 10 units of $10,000 each. I'm going to pay you a 10 preferred return and you're going to get your money back first before plus your preferred return before I get any further profits. So you would get basically what's called participating preferred stock. So with a 1x liquidation preference. So he's that searcher, he or she is going to pay back the hundred thousand dollars plus 10% annually until it's paid back, all the money has been paid back and then that 100,000 of equity might convert to 20% common equity after it's all the liquidation purpose has been repaid. And so you would find 10 investors for 10,000 bucks each for a hundred thousand dollars.

Host: That's great. And on the just the preferred piece. So again to be crystal clear, so the investors are getting equity in your business, but they're also getting interest on the money that they've invested until you pay that back. So it's a bit of this kind of hybrid. Yeah, let's just hybrid debt equity instrument. Go ahead.

Guest: Yeah. For simplicity's sake, let's say it's not, it's not compounding. So it's just 10 per year on the 100,000. So after you pay them back after three years, they pay them back 130,000 and now they've got their 100,000 back plus 30,000 of interest and then also converted to 20% equity. So if there's 10 units, it's 2% equity per unit. So you know, I own 2% of your company now, if I just had one unit. And so I think it's a good model.

[1:18:16] Host: Great. And on the, on the 10% return, the preferred return, the typical range there is 8 to 12%. Right. So when you use 10%, that actually is a good median for people to understand.

Guest: Yeah, typically. Yeah, I think that's a good median, especially with today's. Rick, you know, interest rates, you know, it all depends. You can structure it either way. If you want to have a lower preferred return by the higher, they might need you. I might need to give a more common equity, but maybe you can pay a higher preferred return and keep more equity for yourself. You know, as investors, we're looking to just kind of get to our IRR target, and there's multiple ways to do that. But, you know, with interest rates today, I mean, the prime rate today I think is 8%. And so prime plus 200 is 10%. I think that's probably a reasonable starting point today. I mean, that's what your, your SBA loan is going to cost you. One prime plus 200, 200 something. Probably you're looking at 10 to 11% interest today on SBA.

Host: Great. And that 10% preferred return rate is. You said let's, for easy math, let's, let's assume it doesn't compound. So after three years, 10% on 10,000 on the $100,000 in total equity is going to be cost you 10,000 plus 10,000 plus 10,000 30,000 over three years in total. But actually, typically it does compound. So the math is a little, is a little juicier than that. Yeah, typically it compounds. And also typically you do. Am I, as the searcher buyer of this business, paying you that 10% every year, or do I just pay it at the end and total it all up? Or, or it depends. Or both ways or what?

Guest: Typically you can do both. You could do either one, it's typically either pay with cash or in kind with, you know, either more preferred units or just. It just accrues so you don't have to pay it. But, you know, if you're like I, like I was, and if you're like me and, and you're broke and you want to make some money, you know, I want to pay my investors back as fast as possible. Plus, you know, if you're paying a 10% interest rate, I mean, it starts to add up pretty quick, especially if it's compounding. So it might be to your benefit to pay your investors off relatively quickly.

Host: Quickly and so you've paid off your, so let's say things are going well after year one or year two, you've paid all your, your investors in aggregate that $100,000 you borrowed, plus let's call it two years, plus the additional 20%, $20,000 of their, of their preferred, which is accrued into $20,000 of their preferred rate. And so at this point they've gotten all their money back and now everything is just common equity. I have 80% of common equity and they as a group in aggregate have 20%. Now I can do whatever I want with the cash flow. I can reinvest it into the business or I can take it out as a distribution, as a dividend and pay myself 80, give 80% of that to me and 20% to the investors. And that's given that I own so much of the business, I can do that at my discretion.

[1:21:18] Guest: Yeah. So yeah, typically, typically, you know, if you want to make a distribution, you know, you make a distribution and you pay out 80% yourself and 20% to the investors. So you know, if, if that business was doing 300,000 of EBITDA and you just paid out 300,000, then you're giving what, 240,000 for yourself and 60,000 for your investors. So you know, top of your salary, it's now you're making a pretty good living.

Host: Well, Ben Border, thank you very much for coming on and sharing. So for, you know, would be buyers of businesses who, who might need an investor want, investor want to work with you. What's the best way to reach out to you? What do you prefer? Email, Twitter or Search Funder? I know you're active on Search Funder as well.

Guest: Yeah, I'm active on Search Funder. You look me up on LinkedIn. My email is benlackwatercap.com that's my name. My new firm is Slack Water Capital, like Slack Tide. So kind of, I think of it as kind of a transition period between the, the outgoing tide and the incoming tide. And, and it's kind of what we're doing. We're transitioning between an outgoing retiring owner and a new incoming owner.

Host: So I like that.

Guest: And it has a fishing and it has a fishing connotation as well.

Host: So. Well, yeah, maybe tell people how much of a fisher you are. I mean fisherman you are. Obviously you made it clear at the top you, you wanted to live in Key west so that you could pursue your expand your, your fly fishing hobby to saltwater. But you now, I mean, you're pretty serious.

Guest: Yeah, yeah, so I compete at some tournaments, and, you know, I want to compete more tournaments and passionate about, you know, fishing for tarpon and mainly permit. Permit on a fly rod, which is. You only do that if you're absolutely crazy because they don't like to eat flies, and they're hard, super hard to catch. So, you know, people count how many they've caught. You know, last year, I. I had a pretty good year last year. I caught 10 left last year, and an entire year fishing, I caught 10 per row fly rod. So, you know, it's.

Host: And. And for people who know, will that number impress them?

Guest: It might. It's okay. It's, you know, the really. The really best for catching 20 or 30 a year. So. Okay, that's my. My goal is to get up there and fish in some of these tournaments and. Which, you know, are big down here. The key is for tarpon and permit. That's kind of the. The holy grail of fly fishing, in my opinion.

Host: All right, Ben. Thanks a lot for joining me, sir.

Guest: Thanks, Bill. Appreciate it,

Host: Sam.