Host: Two years and a bloody knife fight can feel like 10 years. So said today's guest Brett Kennedy. Brett has improved the small 250,000 dollar SDE moving business he bought in March 2022. He's got an ops manager to handle the day to day. He's not having to drive the truck himself anymore. When one of his movers doesn't show, he's doubled the business and in a bad housing market which is brutal for moving companies. And as of recording, he's got a second and much bigger business under loi. So it sounds like success and it is. But the rough ride to get here should not be taken lightly. You'll hear clear evidence of that at the end. How this lonely, merciless road can wear on people, even those who are succeeding. Please enjoy this conversation with Brett Kennedy, owner of Atlanta Furniture Taxi Announcements don't forget the webinar today, Thursday, July 25th searchers often shy away from buying existing franchise businesses, but longtime listeners will remember compelling stories of searchers who did buy an existing franchise unit or portfolio of units and have done very well. If you're franchise curious in your search, come listen to Connor Gross teach the merits of buying an existing franchise business and crucially, how to evaluate a franchise brand from an ETA perspective. Connor's owned or operated franchise units in multiple systems and he's grown his own portfolio through multiple successful acquisitions, so he knows the power of acquisition in a franchise context. Specifically, the webinar is sponsored by System 6. System 6 provides bookkeeping, payroll, invoicing and all the other day to day finance services to over 200 companies including more than 40 searcher acquired businesses. The webinar is today Thursday, July 25 noon Eastern. Link in the show notes of this episode or on the Acquiring Minds homepage, Acquiringminds Co and if you can't make it, register anyway so that you receive a link to the recording after the fact. Also, Smith List the Job board for operators and leaders of small businesses has a fantastic new opportunity. Tim Erickson bought a business called We Rent Copiers that does short term printer and copier rental in markets across the US. It's a $4 million revenue business and Tim was a guest on Acquiring Minds back in August of 2023 telling his story of his acquisition of this business. He's since transitioned the business, done a lot of the hard work to get it on firmer operational footing and he's now looking for a CEO to lead it in double EBITDA. He's looking for someone with a B2B sales background in particular, this is a fully distributed team. So the CEO role here is location independent, a rarity for the opportunities on Smith list. So if buying a business right now is less your priority than leading and growing one, check out this CEO role and others@smithlist.com link in the show notes. Okay, on to today's episode. 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

[4:01] Guest: the people who do it.

Host: What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator in community for people serious about buying a business. But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions, and in an active community of serious searchers. Check out acquisitionlab.com link in the notes or email the Lab's co founder, Chelsea Wood. Chelsea buythenbuild.com Brett Kennedy, welcome to Acquiring Minds.

Guest: Thanks for having me.

Host: Brett. You bought a moving business. It has been challenging, but I think we're catching you at a good time. You seem to be on stable footing, ready to grow, but with some definite battle scars that you're going to share with us. Start us off. Brett, with some background on you, please.

Guest: Yes. So we did buy a moving company. Me personally, I, you know, I started professionally, played baseball in college. I was, I was, you know, very active in that, very competitive, you know, played a little bit after college and that kind of moved me right into the world where I was going to be in something that was sales related, you know, very outgoing, didn't mind pulling a door or two and you know, getting in there and getting to know people. That got me right away as I, you know, got out of ball, into knocking on doors for ever. Jones Financial Advisor. You know, I was very interested in finance to begin with and you know, that was really what got me into the professional world. It worked my way through some different organizations in the financial world and landed with, you know, the company that I, that I was finally at prior to this acquisition. We're a financial advisory company, something I, you know, again, I've always been very passionate about in finance. And you know, we went through an acquisition there we were at 3 billion when I joined. We eventually exited at 35 billion and assets under management to Empower Corporations. So I was with a company called Personal Capital and went and sold to Empower. So at that point we, you know, we folded in and I, I had been pursuing, you know, this idea that I could acquire businesses because of course, being that financial advisor type, I, I had seen what businesses sell for in the public marketplace. 20 to 30 times earnings, you know, and you know, just the fundamentals of that, what that meant for someone's cash when they put it in there, how long they would expect that investment to take in order to return that capital. So then when I was introduced to Biz by Sell, I had a friend that sent me a link to a business that was for sale. Immediately I started looking through these and I was like, oh my gosh, like these businesses are selling for two to three times earnings. What's the catch? Little did I know that I would learn some of the catches that come with this.

[7:39] Host: There is a catch.

Guest: Um, but it was, it was that first foray, that first discovery and this, this ETA world now that is developing so quickly. You know, it took some years before, you know, before, before I found some that were interesting, before I figured out how to kind of go through that process. Looked a lot and you know, I don't want to jump too far ahead but you know, it, it did take a few years before I was able to find something that fit what we were looking for.

Host: Well, before we get into kind of your, your search, let me some follow up questions. What is the connection between being a really good professional, not in the US but around the world, baseball player and sales? I, you, I, I think I heard you act like that was a natural progression, but I'm not sure I see the connection.

Guest: For me it was, it was the, the work ethic aspect. So being a, you know, being as you can, well, being a professional athlete, like you've got to go to work when nobody tells you to. You know, I'm, I'm working out, I'm training, I'm doing this kind of stuff in the off season without the supervision of, you know, somebody saying, here's what you need to go do on a daily basis. I have to create that in order to continue to develop myself to be at a better level when I return the next year. And you know, and that translated directly to the sales roles that I went into because they didn't give me any people to call. You know, they said, here's how you do it. You know, go knock on doors. And I threw a suit on and I knocked on 200 doors a day in order to build a book of business. And, you know, then learned that there was some other ways to be able to dispense financial advice to people without having to sweat through suits on a daily basis. But that was, for me at least that's what led that. That grit and that self drive to go into a high performing sales role.

[9:33] Host: Yeah. Yep. And literally knocking on doors. Literally knocking on homes.

Guest: Oh, yeah. I had an app and I tracked every door that I went to, who I spoke to, what I spoke to them about. Did that for about six hours a day, and then went to networking events all night.

Host: Wow.

Guest: So it was very difficult.

Host: And were you able to build a book of business ultimately?

Guest: Indeed, yep. So I was able to kind of jump straight out and build a book there and then was put in a position to take over a book from somebody that had vacated an office. And it just kind of. In that organization, success begets success. They reward people who do well and help them grow.

Host: And one other thing I recall from our pre call, Brett, that's relevant, I think, is your childhood in a small business family. Give us a little color there.

Guest: Indeed. You know, I was in a small business when I was born. My family owned and operated. They still do a electrical contracting business here in Atlanta. Commercial. They're a union business. Been here in Atlanta for almost as long as I've been alive. Literally just a few years short of that, you know, dinner table conversation at our house was accounts receivable, accounts payable, you know, who's, you know, what customers doing what, what employees doing what. And that, you know, that was dinnertime talk for us. When we did get to have that dinner where we all sat down. Oftentimes it was one or the other parent rushing home to. To pick us up and try to cook dinner while the other was still working. You know, saw firsthand them, you know, struggle during times and be successful during times. You know, go through 2008. And then eventually I worked in the business with them as well. Not in a, you know, very productive capacity, but, you know, I was. When I was old enough to sort bolts in the warehouse, I was back there, you know, doing whatever I thought could be productive in that aspect. So just grew up in that environment.

Host: Do you feel like the quality of life that it afforded your family Was strong or was it? I guess. How well did they do with this small business?

Guest: Yeah, I mean for my parents both come from broken families. You know, they, they come from, you know, alcoholic parents to where they both left their parents at 18, you know, to go out and start their life. They didn't get this, you know, nice cushy college that, that I got or you know, earned through, you know, playing baseball and being dedicated to something. But at the same time with the support of them, they didn't have that. You know, my dad went straight into the trade. He was an electrician right away. You know, my mom was cpa, a controller for a company. And it, you know, it took them a little while to get into the business. And part of, you know, I, when I reflect on that and a lot of things that we've discussed over the years that I see is that they were very in business. You know, my dad was an electrician. He was, you know, he knew what he needed to know in order to do that. Great. And be, you know, that expert to his customers when he was out there. The one thing that they did over time, they grew. They had project managers, they had employees. They, they grew to, you know, 40 to 60 people at times, depending on how large projects were. But often the biggest struggle for them was, was hiring people and replacing themselves on things they, you know, my dad would take on so much and he would be there till 8 o' clock at night finishing everything that he needed to finish just to be productive in his way. And you know, over the years I saw that and I saw that and I'm like, guys, you, you know, outside looking in, it's, it's easy to have an opinion that way. It's like, hey, you know, you could be, you could hire people to do this. Yeah, you, you might make a little less. And I wasn't privy to that picture at that time, but you know, it, the, I was privy to see how much they worked. And you know, while they did stop and do the things that mattered a lot to us, take me to all these crazy baseball, you know, events and like, things like that growing up, same with my sister. They, they were very, very dedicated to working in their business continuously. And that business does still continue. In fact, my sister later joined them as their controller, my brother in law later joined as a project manager and then my parents phased out. And this could be one of those success stories of it actually passing to the next generation and continuing, which is

[14:05] Host: no searcher is going to get their hands on, on your parents Business.

Guest: No, no searcher, you know, but, but two really good people in a great position to run it. My sister and brother in law.

Host: Well I guess, I guess that's a pretty profound takeaway from seeing your parents in the business all those years. We all, it's such a cliche to talk about being in versus on the business. We all kind of know it, but you really saw it firsthand up close for years in, in a very personal, visceral way with your own parents. So I suspect you're just more cognizant of that than, than others who are, who are just kind of have the book knowledge about that but never really experienced it deeply.

Guest: I'm sure, I'm sure we swing the opposite way. You know, most people do. But the, you know the thing that I'll say about that is there it isn't that I didn't end up doing things in the, in my own business when I did take over a business and go through this. So you know, not previewing that too much but you know, a very had working very much in the business in the very beginning of taking over the company we acquired. Sure, sure.

[15:13] Host: Good teaser. Let's carry on here. Brett, coming back up to your financial advisor doing well, but somebody, a colleague, a friend puts on your radar the idea of buying a business. So you have a flirtation with Biz Buy Sell over the years. You keep your eye on things for literally a few years. You just kind of check in every now and then. Is that this is what your quote search kind of looks like or your, your journey into this actually doing it?

Guest: Yeah. And then Biz by Sell was not as pretty as it is now. It was a clunky website in the beginning of this. This was probably, you know, 2018, 2019 when I started looking at it. So it was, you know, definitely not as well put together as it is now with as many deals on there as there are now. It was just a pretty simple website with some businesses on there and it really not much showing up. They didn't even have a newsletter to sign up for yet at that point. So you couldn't like get in there and say hey, I want to search for these businesses. You just kind of had to go in and check to see what was posted on there. And at that point there wasn't a lot of other options. BizQuest, you know, some other small ones that never really became as large as they are now. So just started looking in that way and calling people, asking questions, digging deeper to see if that's Something that was even interesting because I really had no idea like what, what business I wanted to own at this point. What could I see myself doing? I knew that I was looking for something that, you know, wasn't flashy or sexy. I didn't want a software company or something, you know, volatile. I wanted something that would be stable. I grew up in a blue collar business, you know, something that, you know, could, could be, you know, stable and something that I could go out and grow with my skill set that maybe isn't already in that business yet. So just some high level criteria to begin with.

Host: Yeah, great. Well, when you saw this business, what was, what was it that, that turns you on and, and maybe tell us about the business?

Guest: Yeah, so I saw this one. It actually came through on a newsletter from Transworld Agent. So I, you know, visited some of theirs and taken a look at some deals and then it ended up signing me up for a newsletter. Saw this one come through, made my normal call just to talk to the broker about it. And it just started asking more and more questions about the business because it was, it was for sale for two times earnings. It was, you know, again, it's not moving, it's not sexy, but it is very needed. Until they have software programs that can move people out of their homes. You're going to need somebody to go in there and do that and need the equipment to do it as well. So that was what really, in the beginning kind of piqued my curiosity. And then as we went through the process of asking more questions, digging a little deeper, gathering financials, you know, and just kind of looking through everything, it was just like, hey, this is a, you know, a pretty clean, you know, pretty well run small business. You know, I don't know if you want to go into numbers right now, but they were doing about a million in sales, a little less than a million in sales. And it was a decent brand. That was the one thing that I noticed right away. They had a pretty well put together branding structure and they had kind of a lot of the bones there that I knew that I could build off of in order to create a household name here in Atlanta.

[18:59] Host: What's the name of the brand?

Guest: It's called the Furniture Taxi.

Host: Furniture Taxi. You know, it's funny about that, Brett, because I too noticed that about the business, about the business when I first checked out your, your website. It's, that's a, that's a much stronger brand than, you know, Smith Moving, which is kind of the, the, the typical brand naming format of A moving company. I mean, they really don't have very sexy names and furniture. Taxi is memorable. And it's got a nice logo to go along with it. The yellow and black kind of vibe, like a taxi. It's pretty. It's pretty good. Yep.

Guest: Makes those trucks very noticeable when you see them driving down the road.

Host: An SBA loan broker, as opposed to a direct lender, doesn't work for a particular bank. Instead, the broker pairs you with the right SBA lender for your deal based on industry terms, risk thresholds, then helps you navigate the process better than many lenders themselves do. Matthias Smith of Pioneer Capital Advisory is just such a broker. Matthias worked at two of the country's top 10 SBA lenders. So he's been on the inside of the SBA process and knows well the pitfalls and hurdles and how to avoid them. He struck out on his own to laser focus on the ETA in search space. Our niche is his niche. You'll see Mathias at all the ETA conferences. He's closed over 30 search deals since starting Pioneer in May of 2022, including some acquiring minds guests. To learn more and get in touch, go to PioneerCapitalAdvisory.com or click the link in the notes. Well, I want to hear more about the business, but before we do, let's be clear that you actually had put Lois into a couple Lois out before, Right? So this wasn't your first shot. Yeah, Give us just a few. Few minutes on that real quick so we know how. How serious you've gotten before you actually go for this one.

[21:01] Guest: Yeah, so we had put. We had submitted a couple Lois on offers that are on businesses that didn't get accepted, naturally, better offers, people in a better position for it. And, you know, it didn't stop us. We continued to pursue others. And then we did submit an LOI on a business prior to this one. And this was right before COVID So this was, you know, before we even knew what that was. And that one in particular we did get accepted. And we were starting just at the very beginning of the due diligence process. And then this brand new thing called Covid all of a sudden happened. And this business was very reliant on public parks, recreation centers that were state and federally owned. And all of a sudden, they had nowhere to execute their business model anymore. All those parks suspended, you know, the contracts that they had with people like them to be able to use their facilities, and they just came to a screeching halt. Um, you know, call it divine intervention, call it Destiny, if you want to. But in, you know, that happening at that moment, I do see as, I mean, beautiful business. And I'm sure they've, they've very well recovered from that now. But at that moment it was like, wow, this doesn't seem like. It seems like this happened for a reason, so let's, let's move on. And it did. You know, it, you know, they, they basically pulled out and said, hey, like right now we need to focus on recovering our, our company. And so we moved on. And then this other one came.

Host: What was that business, Brett?

Guest: It was an adult kickball league.

Host: Adult kickball. That's such a, that's such a fun one. Amazing that they. And it was actually generated real revenue. I mean, this was, this was something that you could make a living doing.

Guest: They made, you know, multiple millions of dollars in revenue per year off of their subscriptions. Yeah, they were in 17 cities. They, you know, and I mean, talk about a goodwill related business. They had no assets. I mean, we're talking maybe about $12,000 worth of kickballs, but, you know, like they had nothing except for that. They just generated a huge amount of cash flow with their, you know, their yearly dues for people who played in these leagues. And the funny thing is I played in the, one of these leagues previously.

Host: Well, here in D.C. when I lived here the first time I remember kickball being a thing. Going out and playing kickball. And always, it was always like the, the reputation was always that it was a really boozy thing, like not to be taken seriously. People basically 20 and 30 somethings partying after work around kickball. So it might have been, it might have been these guys.

Guest: It might have been used to party like a beer softball league. Yep, absolutely.

Host: Yeah, exactly.

Guest: That's so interesting.

Host: Well, good for them. After the kickball league, the next acquisition was the one you did.

[24:00] Guest: Yes, that was the Furniture Taxi.

Host: Furniture Taxi. Okay, so let's hear more now about Furniture Taxi. You've told us revenue was shy of a million bucks. The multiple was great at 2x the. You liked the brand.

Guest: How many employees at the time they had like 12 employees.

Host: Okay.

Guest: And so those would have been out in the field employees. The, the previous owner was very hands on in the business

Host: was very. So just. Which is to say what, that they were out in the field too.

Guest: No more operating it, you know, sales. Any, any type of admin, office, you know, answering phones, that type of stuff. You know, hiring kind of every aspect. It was kind of a, a one, you know, ahead of the organization. Then everybody else was pretty much either moving or driving a truck at that point. Wasn't quite displayed that way as advertised. But, you know, that's. That's the way that the business operated. They. It was very much owner operated. There was. There was no other support employees.

Host: Okay. All right. So you're the picture of the business, as you see it, is the movers and truck drivers out in the field and then the owner operator at the office basically doing everything else. But it did feel like you could. Basically, he'd step out and you'd step right in and continue doing what he's doing.

Guest: Yeah, absolutely. So my. My intent, you know, kind of the initial impression I got as we did some interviews through the due diligence process was I'd be doing a lot of sales, which I was already doing, and I was pretty okay with, but there was a lot of untapped potential because they were pretty happy with where the business was. They weren't trying to go north with it. They were just, you know, nice and stable and happy with the money that they were making from it, with the effort that they were having to put in. For me, that, you know, as an acquirer, that sounded like growth, right? Yeah, you're not doing as much as you could to develop the business. And, you know, it sounds like I can step in and, you know, really blow this thing up, which. Which we have. But yeah, it was. It was. I. We go and we'll talk about this, I'm sure, versus, like, you know, buying a job and buying, you know, a business that's operating and. And, you know, kind of the difference in sizes and what that means.

Host: Speaking of size, a million bucks or close to a million bucks and a moving company. What does that mean for margins and ultimate SDE that you take home?

Guest: With their participation, they were in the mid to low 200. So like, ranging from 225 to 250 on a yearly basis.

Host: 225 to 225 to 250 on a yearly basis. NSCE. Now you keep saying they. So is that for one person or two people?

[27:03] Guest: Well, I. I did find out a little bit later that there. The girlfriend slash wife was also very active in the business and that, you know, we didn't talk about that much in our interviews that there was some assistance there. So, you know, when I came in, the. The tasks were more. Were larger and. And of more quantity than I anticipated.

Host: Because you were absorbing his work plus her work. And yes, her work was. Had been understated. Okay. And how did you, how did you rationalize the low multiple? Once you got over your excitement, you could see maybe being like, well, maybe that's actually a yellow or red flag and it's not good news.

Guest: I didn't see that. I'll be honest.

Host: You thought it was all good news.

Guest: Well, I didn't. You know, I wasn't blind by, hey, you know, I'm going to need to go in there and I'm going to probably need to spend some money on some things, whether that's freshening up trucks, you know, doing more branding, doing more advertising actually, and spending a little bit more than they were in that way. But you know, initially it was more like, hey, like this is, this is a decent sweet spot. After debt service coverage, then I'm going to have a, I'm going to have about this much money. And then, you know, I also, in, in my personal situation, we were already a high income household and two W2 incomes. We were, we were paying a lot in taxes. So with acquiring a business that is asset heavy like this one, we were going to receive some pretty heavy tax advantages in the first few years of this acquisition. So part of, the, part of the figuring was that, hey, after debt service we're going to have some pretty decent money left over. And then also we are going to save significantly on the taxes we're paying on a yearly basis.

Host: And how did you structure the deal?

Guest: Interesting piece of it. So in the transportation industry, we have licenses and registrations that are required. Same thing for insuring a company like this. So we did a stock transaction that is treated like an asset sale. And you know, it basically is called a section 338-H10 and that allows the tax treatment of the sale to be treated as an asset sale, but it allows us to maintain the entity for those other purposes. So in order to keep our DOT numbers, our motor carrier numbers, in order to keep those numbers, you know, reflecting in our insurance, because if you go out as a individual and you want to start Will Smith's moving company here, you can't get insured on having, you know, multiple commercial vehicles. Your insurance would be absolutely through the roof. You need some age to your carrier numbers. And then that's a little bit of a hurdle of people getting into, you know, actually legitimately creating companies like this. The other side of this too is there is value in a corporation's credit history so that they have, you know, kept good credit. They've done a good job over time paying their trade lines back and keeping trade lines open. That does allow. I think it's an understated part of an acquisition that does allow future growth and our future credit for things you may need in order to grow the business, like eventually buying new trucks or taking out trade lines. So that was a big piece of it. You know, the biggest piece was the insurance and licensing aspect. So we retained the entity and did the tax treatment as an asset sale, which allowed us to have, you know, accelerate depreciation on almost all of the assets in the business in the first year. And then the, the stock sale allowed us to retain that entity, which we now operate through our. Through a holding company.

[31:05] Host: Okay, that was great. And Brad, just the point about the working capital and getting credit as a brand new entity, which, if you do it the traditional way, which is an asset purchase, you're a brand new entity. Surprised I Surprising this doesn't come up more, but it did come up in a big way in an episode with Adrian Pinto probably a year ago, maybe more. Now, who's local to you, bought a landscaping business in Atlanta. And as he, as he wanted to grow, he could grow, there was the demand to grow. But getting working capital, getting lines of credit for his new entity to buy trucks and so on proved really, really hard because it was a new entity without credit history. So I mean, so hard that it kind of, it, it caused him to make a particular strategic decision in the direction of the business. So I said that at the time. I'm interesting. I wonder why this hasn't come up more. And I'll say it again, because it hasn't come up again for another year until right now. But it's good, it's a good call out for people to be thinking about. And Brett, tell us a little bit about, more about the tax advantage. Can you actually put a number to this? So first, define exactly what it, what it means to accelerate. To accelerate depreciation. And then if you can actually give us a number of what that meant, that'd be great.

Guest: Yeah, you're gonna really play to your geeky listeners here. This is, this is what I enjoy as being the financial guy. So when we acquired this business, I'll run through some numbers really quick. It had just under $200,000 in depreciable assets. That's going to be trucks, you know, equipment in the back, storage vaults, dollies, everything to. Down to the desk and computers that are in our office there. When you make an. An acquisition like this, the total purchase price is what's going to be figured into your balance sheet and how you Own this business, like you know, especially the debt portion of it. But the assets and the purchase price is going to dictate. Just like you buying a car, right? I'm buying this whole business. And then that business is going to be segregated in the purchase price. When you agree on it with your seller that what each, what monies are attributed to what, Right? So when we went through our purchase agreement, our final delegation was $200,000 to furniture, fixtures and everything there. And then, you know, $200,000 to Goodwill, $60,000 applied to the, to the seller, non compete and you know, so on and so forth. That math is not gonna add up to what my actual numbers were. But I'm throwing some things out there for this example. And each are gonna be depreciable at a certain level. Just like you know, with a home or a rental home or somebody that does cost segregation analysis in a rental property. Like everything's going to be depreciable at a different level immediately upon acquisition in your purchase. All the furniture, fixtures and everything are going to be depreciable. Especially in our case because all of the vehicles were section 179. They're all very large trucks. So all of that portion of it was depreciable right away in the first year. So right away, any money we made in the business in the first year or probably two, was tax free to us. That also for me personally, since I was, you know, making multiple six figures on top of, you know, my wife who's also does very well for herself, that decreased our taxable income down to where the business was essentially showing a loss versus her taxes or her W2 income versus my W2 income, stacking on top of it and creating us towards higher percentages and higher brackets. So in that first year we were able to take almost $100,000 in depreciable loss while we had a net gain of six figures plus. So, you know, the ideal scenario, we had some cash coming in and, and then we saved a significant amount on our personal taxes.

[35:21] Host: So, so income goes up, but actual tax percentage goes down. And, and so like 100, just to be absolutely clear, people will understand, but $100,000, $100,000 loss. So this accelerated depreciation would come out to 30 to 40 grand essentially in tax savings. So 30 to 40 grand in your pocket, or you could say to yourself, 30 to 40 grand. I actually paid 30 or 40 grand less for the business. I mean, treat it how you want, but it, but that's, that's real meaningful. That's obviously really meaningful amount of money that was, that was great and, and Brett. But just so I understood something in there was a little gray for me, your W2 money. So I guess you made all your salary from your W2 right up into the point that you took ownership of this was that money was going to be taxed and was significant for that year, but obviously the subsequent years you were just going to be taking whatever the business could afford to pay you, correct?

[36:21] Guest: Yeah. And you know, since the business on paper wasn't really making money because again, all of those losses and appreciable assets, I didn't really have a requirement to pay myself that, you know, you don't. You're not required to pay yourself anything as an owner if you're not making any money inside the business. But, but importantly there I, you know, with my job in previous years, our combined income stacking on top of each other created a very heavy tax burden for us and it immediately mine no longer created higher brackets for that money that I was making. And then in fact it deducted some from her to continue to lower our burden down there while we were still able to collect decent amount of cash through the business.

Host: But to be clear, this tax benefit is just a one time. This acceleration is just a one time. It's as you take ownership of the business and accelerate all those assets in one fell swoop going forward in subsequent years, year two, three and beyond, you're paying normal tax on everything.

Guest: Indeed. Yeah. Especially for the accelerated assets. But then as you trickle down through the other portions of the purchase agreement, you're going to have your goodwill which is depreciable at a different schedule than these assets that we're discussing. So that will carry through for not going to quote any accounting here for the amount of time that that is depreciable. And then the same thing with the seller, non compete, that's a depreciable asset as well over a certain amount of time. So there is carry forward stuff that will continue to provide tax benefits to you as an owner. And then especially in an asset based business like this, you know, we're going to buy new trucks. You know, this past year we bought a new truck and even though we're financing it, that purchase is 100% depreciable right away. So we'll pay for it over time, but they'll give us the tax benefit right away for purchasing it. Great. Yes, sir.

Host: And I'm getting the sense too that the, the sce that the business was going to pay you was going to be a significant step down from what you were making in your W2

Guest: before taxes. Yes. But netting out after everything, it was going to be a pretty good watt, almost a wash for us where we're saving money on taxes and not having to pay as much out. You know, I'm working, you know, not being very exact here, but I could, I could have worked half the year and to pay for the taxes that we'd owe and then the rest of the year. We're actually net positive on what I was working for there at, you know, just counting it on top of what my wife makes as well. So it was, it was, it was not that much of a change on, you know, when it, when it actually gets sorted out in, in your tax returns.

[39:18] Host: Okay, okay.

Guest: All right.

Host: And what was the structure in terms of SBA and financing, etc?

Guest: This one we had, I pursued quite a few lenders, so I'm a, you know, I'll, I'll go, I'm not afraid to call people. So we, I pursued quite a few lenders just to see what kind of terms were out there. You know, I found one that I liked. It was a pretty normal SBA 7a structure prime plus. I believe on a smaller deal like this at the time they were prime plus 2.25 at the time of taking that deal. I mean we're talking about like six and a half percent. So I was not too, you know, worried about that at the time. But as you know now that's significantly different and, and, and, and adds significantly more debt service with higher interest rates as they've gone up.

Host: Yeah, yep.

Guest: We did, we did about, we did a little over, a little over 10% down. I think we did 15 down. It was just a hair over half a million dollars as a purchase, purchase price, about520,000 as a purchase price. We did, you know, about 10% down, 15% down. And then the seller carried a small portion, about 5%. Well, so as we structured everything out, then the bank covered the rest and. Yeah, and it was, I'm trying to think of any details I forgot there. Pretty straightforward.

Host: Yep, that's what I was asking for. Okay. And so before we hear how it's gone, set the stage one last time as to what you envision life would now be that you'd have what, 10 employees out in the field. You'd be at the office dispatching them, doing sales, doing back office and then doing what you can to grow. That's kind of, that was the picture of your Your, your imaginings of your life.

Guest: Yeah, that was in my mind's eye. I'm, I'm, you know, picturing this transition and I knew there'd be a slight transition from managing, you know, financial advisors to managing movers and truck drivers and, you know, the people that work in that way. But, you know, I was very confident in my ability to just go in there and just go. And if I, if it meant going and knocking on doors again to grow this company and find new customers and get out there and get into the marketplace, I knew that I could do that. I was confident in my ability to do that. And then I was also confident in my technical ability. So like just to, to do some basic accounting, to use, you know, to use QuickBooks, to, to know how to set up Google, my business profiles and to make sure that ads are running properly. And by no means am I an SEO wizard or any of that, but I knew enough there in the beginning to really, you know, to really light the business on fire in a way that it just hasn't, hadn't been doing before. And luckily the organic nature of this business, having already been in Atlanta for 10 to 12 years, this is the, one of the things that attracted me to it, was that it did have a reasonable returning customer base. You know, people that moved every, you know, so many years that had used them previously. It did have a footprint on Google where it was searchable. There's a lot of competition there, but it was there, it was in a region, it was searchable. And then they had some contracts that provided them steady business for like, you know, relocating big buildings, you know, multi unit apartment complexes and that kind of stuff. So they, they had some stuff there that they didn't have to, I didn't have to go out and find that. I knew that when I did go out and find what I was looking for and more business that it was going to be able to stack on top of it and, you know, provide growth.

[43:05] Host: And it was residential moving only. It is residential moving only.

Guest: It's a 90% residential movie. We'll do some commercial, light commercial.

Host: Okay. All right, Brett, so what about the picture that you just painted? Ended up being a little bit not so accurate once you get in there as new owner.

Guest: Well, you don't know what you don't know. So when I got into the business, one of the first things that I noticed right away is that I was going to be dealing with just with different types of people that I had before employees and managing a different type of person. That I had before with different goals, different mentalities, different, you know, ways that they think about work and different responsibilities outside of work that didn't necessarily, you know, tie them to have to show up to collect a paycheck. So it. It. The first thing that I quickly learned was this, is that the mo. One of the most unstable parts of this business is trying to continue to keep quality people working there. Then that things, as, you know, I grew into the business, things started becoming, you know, more and more evident as I wanted to grow. I'm bumping a ceiling and I'm so busy doing all of these other things that, you know, growth is hard because I'm already stretched thin doing a lot of the aspects of the business, whether that, like you said, is dispatching or just the administrative stuff that goes on behind the scenes with, with licensing, registrations, keeping track of that stuff. There a lot of moving pieces when it's just you right there and in the front office, and when the phone rings, it's either you answer it or nobody does. So that was very overwhelming. It was. It wasn't just physically overwhelming, it was very emotionally overwhelming because you're. You're diving into uncharted territory. I've heard people in your podcast say this before, a variety of different ways. You know, someone calls it a knife fight and like, you know, or every single day they go in, it's a knife fight to. A bloody knife fight to. To win that day. Another mentioned getting punched in the face every day a bunch of times as they go in. I mean, this is. That's a. That is a very valid feeling and very relatable for me for what I felt. You know, some days it just seemed like everything was going wrong and that. How. How am I going to do this? How. How am I gonna. Like, this is so different. And not just for me, but for my family, you know, for my wife as well.

[45:44] Host: We're.

Guest: We're experiencing this big question mark because checks aren't rolling in like they do with the, with the corporate job. We're trusting that the math and every. All this theoretical stuff that, you know, had gotten us into this was going to come to fruition and, and that, you know, money was going to show up in the bank after. After doing this work. But no one prepared me for the mentality shift that was. That was going to happen, you know, there. And a lot of that, I think, had to do with some of these. These things I was having to deal with that I just didn't expect to have to deal with. People just not showing up to work. Right. I told you a story when we first talked about this. You know, I'd have a. I called him. I called him Uber the guy. And he, you know, the previous owner had just been trying to keep things together, you know, as they were trying to sell the business and, you know, pretty much doing whatever he could to get people into work and, you know, and get the work done for their customers. And there was this one gentleman in particular that I nicknamed Uber, but he would, you know, kind of corner the previous owner into Ubering him to work if there was any sort of thing, like any sort of trouble for him to get to the bus stop, to take Marta up a few stations to get to work. And in order to keep things nice and, you know, smooth there, the owner was going along with it. He wasn't, you know, having. He wasn't just saying, no, I'll go hire somebody else. He, you know, he was just paying this guy's Uber and just kind of letting him do it because the guy knew what he needed to do on these projects and he didn't want to have to train somebody new. That was an immediate no for me. I was not going to Uber a grown man to come to work so that I could pay him to work. And my. I guess my pride up to that point just wouldn't allow me to do it. I hopped in the truck and. And drove myself.

Host: He was one of. He was a truck driver.

Guest: He was a very important truck driver. And so that. That's why he was kind of cornering him. Like he needed him to come in and drive that truck. And he, you know, was kind of. He was definitely taking advantage of him in that way to, you know, to get him transported back and forth to work. And I just, I wasn't there for that. And I. So, you know, that day that. That finally came to a head, I hopped in the truck. I drove myself. I, you know, I did that a few days there. In the very beginning, I was just listening to one you. Your most recent one, where the gentleman was driving the auto parts delivery at night. And that's exactly how I felt. It wasn't as long as they, you know, did that, but that's, you know, exactly how I felt. Very humbled, you know, going home from that. In those type of situations, it's like, what in the world have I done here? You know, I'm. I'm dry. I didn't anticipate I'd be driving a moving truck and doing this. So humbling. But Also, at the same time, has really helped my mentality of what's important for me and my own business for me to have in place. So having employees in place in between me and that to keep that from happening, or having people as backups in order to keep that from happening.

[48:55] Host: On that point, Brett, we could, I could take that. And you're teeing me up to take it in three different directions that are. I know we're headed. Let's, let's, let's go with the big one, the size of the business. Okay. So regular listeners will know that size of business is always one of the big questions. Conventional wisdom says buy bigger for. For a number of reasons. One of the biggest, if not the biggest reason, is exactly what you just articulated, that there's more infrastructure there. So it's not, you know, you're not one, letting one employee go away from disaster, from you doing the work or you carrying boxes or being in the truck. On the other hand, there's also example after example of acquiring minds. Guests who bought something really, really small, and they learned the business that way, learned it intimately and sometimes painfully and sweatily, but felt that but and pulled themselves out, grew the business, and now their business is, you know, at the size where, where they, you know, the ideal is, you know, it's 750 or million dollars in EBITDA at SDE and they have a really small loan because they bought a really small business. And so they're, they're able to pocket more of that sde and in the interim, they've really learned the business intimately. So anyway, how do you feel reflecting back, you bought a 200, call it 25, $250,000 STE. Business that's quite small, smaller than the conventional wisdom says to buy by a lot. And you experienced firsthand how fragile it was. So I give all that to you to react to, please.

Guest: Indeed. So there, there are good things and bad things about smaller businesses when you're looking at them to acquire. That'll. That'll be the visual of it, right? Smaller ones are going to command a lower multiple, you know, because you are buying something that is going to be more demanding of you as the buyer. You're, you know, and to use, you know, those terms, you're buying a job, right? In a lot of senses. For my personal investment goals, you know, take it back to like a fiduciary advisor here, right? For my personal investment goals. It was not my goal to have to be so involved in a business that it was going to pull me away from this idea of building a portfolio of businesses, like businesses and, or unlike businesses, you know, but still this idea that our eventual goal was to continue to size up and grow our portfolio through acquisition in, in order to, to combine businesses together to achieve an SDE goal like you talk about, like a million plus or, you know, a deal like that. The, the first thing, you know, in the beginning and one of the ideas behind this when we were acquiring the Furniture Taxi was, well, hey, you know, there's not a, there's, there's not as much risk here. It's a smaller deal. We're not, you know, we're not coming out way out on a limb for a $3 million purchase price. And the SBA wants to take everything from you to guarantee it. You know, it was a, it was a smaller size deal, a little less risk. It, you know, right away, as you can tell on those numbers, you know, we're looking at and saying, hey, we can probably, if we don't take any money out, we can probably just pay this thing off in a couple years and have a really nice, you know, cash flowing business there. But in reflection now, it's as I looked to continue this as we're, you know, working on other deals and you know, in due diligence on another deal right now. It took me away longer than I expected from that portfolio build. And as you well know, there's, there's never a timeline on that stuff because you may not find the right deal. It could take three, it could take three years, or it could show up overnight and you could end up doing three acquisitions at once, like a lot of your guests have. But it's, you know, it's for, for me and my personal goal of building and continuing to grow. It did pause that timeline a little bit longer than I expected. You know, the proof of concept happened. We saw that, you know, this business can make some money and that it can service debt and that, you know, hey, like, okay, this works. It gave, you know, a couple people, myself, my wife, that the confidence that this is a pathway as well. So that, that's one thing that it did serve a good purpose for, but the other side of it was it served a lot of pain for that purpose. You know, I've worked really hard for the past couple years to get the business to a point where I'm not necessary in every single thing that happens inside of the business to, to cushion myself, to put people in a gainful position so that they can help coordinate some of the things that I don't like to coordinate so much. Like, I, I don't like doing the dispatching and scheduling and communicating with, you know, all, all of the guys that much. I, I like having somebody in between there so that I can focus more on the part that I'm contributing to at this point, which is still pretty heavily in sales and, you know, obviously the administrative and back end stuff that goes into running a business. But I will say that as I reflect now, it was smaller than I. The goal that I had should have, should have allowed me to buy. And part of that's education, part of that's me not knowing what I didn't know at the time. So a lesson in time, I guess that would be. But, you know, in that I have also gained so many other lessons that I believe will contribute to continue building this portfolio for my family.

[54:35] Host: Well, that was going to be, that was going to be. The thing that I asked is there's this optimistic interpretation of buying too small, but still growing it. As I said earlier, that you just, you touch every nook and cranny of the business. You understand it at a deeper, more intimate level, as painful as it was to do so, and that there's value in that going forward. Or is that woo, woo and optimistic and really, really not that valuable?

Guest: I mean, I'm sure I could have learned those lessons in a business twice the size. Yeah, I couldn't have learned the exact same ones, but I could have led down a pathway and continued to educate myself in this space and just, you know, continue to take in information from people that know more or no differently than I know, which is, you know, one thing I love about listening to, you know, your podcast, other people's podcasts, talking to people, meeting with people, you know, and, and networking with other people that do this. I learned something new every day with, with what's out there. I, I really enjoy the space in general and, and talking about it and learning more about it, but it has contributed to now having a bit more, I don't want to say restraint, but I have a stricter focus now on what I'm looking for in the next business. And this one that we're going through due diligence on right now, I have a stricter mindset on what I need to come from that business because it will take up more of my time, it will take up capacity from me, it will, you know, provide some synergy, hopefully, between the two if, if that works out. So it allowed me to really narrow my focus in on what I wanted to happen next. With a bit more knowledge than I had to begin with making the decision on that first one. I will never tell someone not to go buy a business that size if. If that is what their goal is. Everybody has a little bit of a different income goal or a little bit of a different. What they want to have to do or the speed that they want to have to do it kind of go. So I'll never say, hey, don't buy a business that small because you're going to end up slowing your pace down of building a portfolio because maybe they're not looking to do that. Maybe they're. Maybe they would like to have a business that size and, you know, and work in it and because it's something that they love to do. I, I'm, I'm not passionate about being a mover or, or moving, but I am very passionate about building great businesses and serving people around me and providing employment and, you know, providing for my family through this means.

[57:22] Host: Well, just before we get too far away from the, the bloody knife fight, is there any, anything more to say about that, Brett, like how that really felt or maybe any other examples? Just because I just want to hit it home. Your, Your story about Uber, you know, the guy called Uber who demanded that the, that he. His Uber into work be paid for and you cut them loose and have to drive the truck that day is, Is really illustrative. But, you know, I, I could see somebody being like, well, whatever, you know, that, you know, that was, that's a colorful story. And he, that was an unfortunate day, but, you know, day comes and goes, he gets a replacement. Big deal. But. But this experience is actually much more emotionally taxing than that. So sometimes I feel like a single story doesn't really capture how in the, in the depths of it, how hard it was. I mean, you were really discouraged at times. By the way, I should say Christian Bateson introduced us and Christian, of course, is Atlanta based and was, I guess probably his episode air probably a month and a half ago. The construction cleanup business and a big proponent of this life path. But he mentions your story and how it was really hard for you kicking ass now, but it was really hard for you at the low points. So I just. Before we get away from that, I just want to give you the opportunity to tell us more about how hard it was.

Guest: Yeah, I mean, so I, I tell you the, the Uber story because that's a, it's got some color to it.

Host: Yeah.

Guest: And it's, and it's funny and it's got a Nickname and it's, you know, it's just a, it's something that we joke about internally now with, you know, with the guys that I work with and that I only tell that one because of the color. There are dozens of days, you know, dozens and dozens of days like that where people didn't show up, where people did show up, but they didn't show up in a capacity that they could go out to do a job in someone's home and. You mean drunk, high, I don't know. You know.

Host: Yeah, right.

Guest: You never pick your poison attitude. You know, there's a, there's a variety of situations that showed up there and it, there were, I mean there was a solid. I would say for the first six months I was going, I was waking up every morning going in just waiting for a text message from somebody. Oh, I'm not going to be there or just waiting for, you know, someone to call out or to, you know, say and it.

[1:00:00] Host: But.

Guest: And the reason I say that is because being so early in the business, I didn't really have like this great hiring pipeline of people that were just kind of waiting in the wind to be able to pull in or people that I knew that just kind of wanted some part time work where I could call them and say, hey, you know, you want to come drive? Somebody didn't show up, you know, that kind of thing. It was, I was pretty fresh. I didn't have a lot of resource in that capacity and the previous owner was no. Was no longer in the picture, barely even communicating. So it was, it was like for six months, it was almost on a daily basis. I was waking up and not sleeping on the, on the front end of that. Not being able to sleep because I'm just waiting to receive this faithful text message that's just going to really mess up this day. And when you're emotionally, when you're in. I'm going to go in there and I'm going to grow this thing and I'm working my tail off and I'm doing all this stuff and putting these, you know, putting guys in the position to get, have gainful employment and full employment and you know, I want to get more work because I want to get more guys in there to have booked a day where it's maybe the, one of the largest days you've booked so far as you're on this, on this path towards growth to then have multiple people not show up and, and into, you know, I can't tell you a specific story, but a day where two Drivers don't show up, I can't drive two trucks. So, you know, it's, you know, it, you know, becomes this balance emotionally, too, of, of learning how to handle those type of situations and that type of stress. And then eventually, you know, as, as people do, you, you figure out a way to make that not happen anymore. And, you know, that's what we have, we have gotten much better at that. And then I've also put some people in positions where I won't be the first call. If somebody doesn't show up and they need to go drive, they, they can go and do it on that behalf. But that also keeps the business from slowing down. If I'm out there doing that, I'm not booking moves. I'm not doing the other stuff that I need to be doing in the business.

Host: BRETT One of the things that people who have talked about their own fetal positions in their early ownership of a business have said is that part of the fetal position experience or the despair during the transition is that you're learning how to deal with stress. You're learning how to deal with, emotionally regulate against the slings and arrows that are, that are coming at you so, so hard. And so, and then you learn, you regulate, you build a muscle. And so then two years later, you look back at some of those things that happen on those hard days in month three or month six, and you say, well, that happens today. But I just react different. I'm more Zen about things. So, yes, business has improved, yes, maybe layers of management, yes, there have been mechanical improvements to the business so that those situations maybe are, are buffered or avoided altogether. However, also, you just, you just deal, you just, you just can handle it emotionally better because you've, you've, you know, you've developed the, the muscle to do that.

[1:03:18] Guest: Is that, is that a, is that

Host: a dynamic you notice in yourself?

Guest: 100 things still happen on a daily basis. You know, disappointing things show up, or, and whether that be like, as, as small as somebody not showing up for, you know, a job, or somebody doing something less than intelligent on a job site in someone's home, or, you know, so on and so forth, or a hurdle last, you know, an, in a giant increase in your insurance expense, or all of a sudden a bill showing up that you didn't expect to happen, that's passed through from your landlord or, you know, or, or, or like, it's, it is a, it's a daily battle for recognizing that, hey, things are going to happen. You know, you're built to do it and it's, it does take a little time to realize and, and be confident that you're, you're built to do it and it's, you're going to solve it. It just, you know, you don't have to. It's not always a red alarm fire that you need to, you know, run in and put out. So, and, and I think that is, that leans then back towards like trusting your people when you do have those people in that position to do, you know, to do what they're supposed to do, to do what they're, you know, what you've tasked them to do and softens that a little.

Host: Well, and you've now hinted at a few times, I wanted to make sure we get there. You said on the pre call that an inflection point in your experience here was hiring somebody to, to basically be a layer between you and the guy, the guys in the field, the movers themselves. I call it a gm. I don't know what title you want to call it, but it was just a really profound shift in the business. Tell us more.

Guest: Yeah, I mean, allowed me to free my mind space up from things that were taking a lot of mind space away from me. Like I mentioned losing sleepover, you know, waking up early and not being able to go back to sleep because I'm just waiting for that kind of stuff that shifting that responsibility to someone and then helping them with the process to improve that allowed me to free up my mind space for development purposes. Things that can develop our business versus reactionary things that I was going to have to do, you know, on a daily basis or something like that, you know, like develop. Then once that was in place, we could work together to develop a process on how we were going to keep people, you know, in a, in a, in a holding pattern on whether they wanted to be full time or part time or kind of keep people in the wind. Our continuing hiring process, just like we do our sales process so that we had multiple people coming in the door at all times. We're constantly interviewing people so that we do have a pipeline of people. If our business fluctuates and we get a really high demand and we need some guys, well, we've had some really good interviews that we can pull from. If we don't end up needing them, then we, you know, we say, hey, we just don't need you right now, but we'll call you back. So, you know, it allowed me. And I think that's a really great dichotomy, like a separation there of where before I was reacting, oh my gosh, is nobody, is someone not going to show up today? Whereas then now I'm just thinking more about what else can I do to improve this process so that this doesn't happen to my operations manager versus what was me, you know, what's going to happen on this day.

[1:07:00] Host: Well first of all, congratulations on making that step. What a transformative improvement to the business. But I also, I'll just use the opportunity to call out like when people evaluating what business to buy. We already talked about size and so often including you know, I contribute, I contribute to this. It's what size of business do you buy? And, and really maybe the better question is does the business have a man a if, if it's going to be kind of a trades kind of blue collar business, is there somebody in there who's going to run the operation? So call it a GM or depending on the size of the business, call it two gms or however many just really understand, really understand are you going to be able to work on the business or in the business? And, and that, and that can't, that, that won't be, that isn't necessarily revealed just by SDE because you know, if you have a million dollar SDE business, maybe that business is so profitable because the owner's doing everything and the owners vary in the business. So you're going to buy that business have to be very into business versus a $500,000 SDE business. Maybe it's less profitable because there's a nice GM or two in there and you can get in there and not be just pulling your hair out and been drowning from day one. So really the that is something that people should clarify in their minds is is do they not want to be in the business? Maybe some people will but do they not want to do they just want to be working on or doing strategic and have somebody who is the buffer, who is keeping the trains running on time or not. That seems like that should be a criteria everybody gets clear with further in

Guest: their own search 100 and I I highly recommend you know, do your interviews with the, with the seller, you know, sit down with them multiple times throughout the due diligence process and, and get a sense of that. But then also interview some people that aren't in the process with you, you know, that maybe own some business call around, you know, it's worth, you know, follow some Facebook groups that are from that.

[1:09:01] Host: In the industry you mean?

Guest: Yeah, sorry. And you know, in the industry you're seeking, you know, go Follow some Facebook groups that, that talk about the woes of that industry or go, you know, reach out to people like that. Because now I do that more and I, you know, I, I really find that it gives me more insight into what I'm going to expect when I go in versus this. You know, it was a little bit of a surprise, but again, you live, you learn, you get surprised, you work hard, you grow personally and you know businesses and then you, and you keep on the path that you're trying to do. You're, we're going to build a portfolio. It just a little for my investment philosophy and what I was trying to do, this one just didn't, it wasn't the smoothest way to start that.

Host: Yeah, yeah. Well, we're going to hear what the future holds, where you are now, what the future holds as we close out the interview. Brett but before we get to that from the pre call, another one of the stories, this is less about just kind of being in the business, that stuff that we've really already hit on. But and it's more about kind of a structural aspect of the business, which is where the, you're getting business from, where demand is coming from. So in the moving business, you're getting leads, people are wanting an estimate. Consumers who are moving house want an estimate and you're giving them an estimate and hopefully closing them as a customer. That's what it looks like in the moving business. And what happened with respect to that when you got in there?

Guest: Yeah, it, so an important, again, important aspect of interviewing your sellers and asking great questions and kind of going through there, but going, just going through and, and really kind of digging into the details that you want to know or you, you'll need to know. And, and I did a lot of this. You can't, you always look back and say you should have done more. But one thing that, you know, I, I'd say I missed it or it just didn't come up or maybe it wasn't something that I could have suspected could have been the case. But the seller's significant other who worked in the business significantly more than they allowed for as we were talking about it, was also very involved in the business and then had some skill set that helped them do this business with a less overhead cost. So just particularly her family owned the software company that they used to the CRM system that they used in order to transact business. So they got access to that for free. They didn't have to pay any software cost or anything like that in order to operate it. Well, you know, I get in there and it's like month one and we're sitting next to each other and they're teaching me how to use this software and everything else. And you know, at that point I find out that, oh, well, that's, you know, my family's software company and I'm, you know, I know how to do it very well. I know all the developers, I know everybody there. And you know, hopefully they'll give you, you know, I think they'll give you like a month or two free if, if you want it. And I'm like, what do, what do you mean? Like, this is not something that's just you purchased or like a hardware type thing that you're, you download once. Oh, no. Monthly subscription. And then they also are one of the top lead providers in the space. So they, they have sales funnels and websites that funnel leads and then they can sell them to the individuals who, who buy their software. And it's just like a back end of that software where they sell leads in there. It, you know, helps people if they're say, I've got a move that's going from here to Colorado, but I don't have anything going from Colorado back to here. I can go in there and I can search for stuff that's going back that direction, try to buy it from them and sell it. And they would use that to their advantage. And they also, you know, probably got, they, they got some freebies for sure from the family kick towards them. So all of a sudden I get in there and it's like, well, wait a second, I'm gonna have to pay a lot for this software, for this proprietary software in order to just operate the business the same way that you guys were doing before. You know, like, what gives? And then on the other side, it was like, well, I'm also not going to get any lead flow that you guys were getting from that. That would have come naturally. So it was a for better, for worse. We ended up with a, in my opinion, better software that provides a better customer experience. Because I just, I didn't even really like the one that they were using.

[1:13:47] Host: Yeah, yeah. And did you, did you lose a lot of lead volume from that or was not a lot of, not a lot of leads were coming from that. Really.

Guest: It was, it's hard to say because I, I, you, you couldn't see a lot of past history from it. But, you know, from some of the things that I just kind of discovered as we were going through it, there was Some coming from there, but okay, you know. And then also they had been in the moving business together for decades, and in a variety of capacities, he had worked at other moving companies in Atlanta, and she had worked in that space, obviously, with her parents for a while. So they just naturally had some, you know, some organic traffic that came because of people just knowing them. And that pretty much went away after the sale, because there we go. We just didn't communicate anymore.

Host: So things with the sellers went bad. Got bad.

Guest: I won't say that they went bad, but I have. I made a decision to just basically kind of, you know, cut things off there, because as we dug into the business, we found more and more things that were just like, hey, like, this is just, you know, you should have told us about this, or, hey, this is something that you were doing that, you know, really wasn't right for your customers, or they left things behind that weren't paid, which, you know, were. Could have, you know, were small sometimes, were a little larger sometimes. But, you know, it just. It were things that were. It was things that was hard to find that, you know, when we were going out to pursue better vendor relationships, we were finding, because, oh, whoops, they had an account with us five years ago that. That they didn't end up paying off. So it was just just little things overall. But a lot of little things add up in a small business.

[1:15:37] Host: All right, Brett, let's start bringing it to a close. Tell us where you are today in terms of revenue, in terms of employees, whatever benchmark.

Guest: Yeah. So when we took the business over In March of 2022, they were doing about 7 to $750,000 a year in revenue. And like I told you before, SDE on a trailing average, three was between 225, 250. So we're in that range. Our first three quarters of a year, we did 750. And then in the next year, 2023, we did 1.1 million and are on pace this year to hopefully crest 1.4 million in revenue. That will definitely contribute to our bottom line. And in order to achieve some of those goals that we've had, we've also had some capex. So we have had to spend some money in order to grow to get to that size. And it's a really tough time to grow if you are hiding under a rock and unaware most people are not transitioning in their homes right now. You know, interest rates were very low, and there was. There was a lot of transactional volume in the real estate marketplace just a Couple of years ago. Most recently in this past year, we're at 15 year lows for transactions in the real estate marketplace. So that means less people are moving obviously. So the, the customer has changed on us, but so is the market. You know, it's less volume, people are more price sensitive, you know, and then on the other end of it, expenses have gone up, insurance is, you know, continues to go up on a yearly basis, fuel cost, truck cost went through the roof. So and labor cost as well because you know, everybody's feeling the pinch of things being more expensive. So growing during this time has been an increasingly challenging exercise and discipline and where we're putting those advertising dollars and those growth dollars to work. Because cac our customer acquisition costs is one of the most important things to scale in our business. You know, we, we have to be very measurable there based off of the average size of our moves. And while we still do still have a lot of those contracts that they had, we have a lot of that organic business. During this time especially there is a lot of competition, there's a lot of moving companies. You know, just click on Google and type in moving companies and you'll get more choices than you can even, you know, you can even call there. But you know that that is where at least in my mind and maybe I tricked myself to believe this, the people that work hard for their customers, that do a great job for their customers, they, they take market share during times like this. They, we, we are growing when the market is doing the transactional volume market on our, you know, on the biggest customers that we get. Big homes is down 40%. We're up 100% in that two, in that two year time span.

[1:18:48] Host: That's amazing.

Guest: And that, that comes from again, discipline and spending a little bit of money that they, they weren't spending before for sure, but then also doing a great job for people. You know, there were some contracts that they had that were just teetering on the edge because they had used less than ideal people to, to go service those contracts at time we've recovered those, we've, we've grown more with that customer. We've gained more customers that they've recommended us to now and you know, and, and gone out and sought our own, you know, and, and, and then been able to use some of those people that were barely hanging on when we first walked in. We've been able to use them now as references for other larger companies in that same realm. So that hyper focus on quality and getting out there, getting a five star Review, giving them an exceptional experience and a repeatable experience and having a process and how you do it is really the difference maker, especially in a service business that is in your customer's face and in their home. I'm, I'm sure your lawn care folks are, are equally as focused on that. Yeah.

Host: Yeah. Well, Brett, I got to congratulate you. That's, that's phenomenal. Progress Industries is at a 15 year low, you said.

Guest: Yeah.

Host: I mean, 2008, you've doubled in that environment. Yeah. And that. Well, so congratulations on that. And then, I mean a lot of what I heard you just say sounds like that you've transformed the culture basically. You've brought in better people or, and, or trained people better essentially, and, and just instilled kind of cultural value of quality that maybe didn't exist before. Can you say anything more about that? Because it sounds like the, the soul of the place is, is very different. And how, how have you done that in two years?

Guest: Yeah, I mean people, people care when you care. Right. And so when that, when I'm in there and I'm, you know, in there meeting with the guys and I'm, I'm still very active and you know, talk to all of our employees and I'm, I'm around there always and just constantly talking about doing a great job for people. Man, you're going to go get that five star review or rewarding employees for getting those type of things and creating a compensation structure that rewards them for the goals that you have as a business owner and that you have for your business. Continuing to preach that stuff, you know, and, and like, and just in, in like you said, getting people in there that buy into that can create that culture. It is a constant battle. You're, there's, you're never going to win it and be able to walk away and say, oh, yep, there it is, it's good to go. You know, there's, there is nobody that will do what you will do in your own individual business and care as much as you will care. I don't care how much you pay them, but what you can instill in those people. Now I don't have to go in there every single day in order for that culture to remain, but I do need to go and maintenance that we have created and still continue to improve on it and find out what is and isn't working and create processes to try to tackle that and make that better not only for our customers, but for the guys that are working for us. I mean, if you, if you're going into business or in any type of business and you don't think you're in a dual sales role. You're selling in and out, right? You're, you're, you're selling to the people that are going there to work for you and you're selling to the people that are going to be your customer as well. It's just whether you think about it that way or not.

[1:22:27] Host: Great, great point, Brett. Jerome, I recall, made a similar point about a home care business. And he. Home care business is essentially a staffing business. You know, you've got the folks who need the care and then you've got the caregivers going into their homes. But caregivers are usually 1099 anyway. They come and go. A lot of turnover. And he said things finally click for him when he realized that he needed to treat his home, his home, his caregivers like his customers as well. He had two groups of customers. The obvious customer, the, the, the person receiving the care, and then in fact also the people delivering the care that he was paying were also his customer. He had to do everything he could to keep them excited, keep them happy. So great, great point. So let's just, let's just kind of reflect on where you are. So you, you, you are still working on the business. Clearly you're in there once, twice, three times a week. But you also have enough capacity now that you're looking at doing another acquisition that you have under loi. Is this acquisition a moving business?

Guest: It's not a moving business. It is very much involved with people and trucks, though. It's a transportation business. Not going to go into a ton of detail because it is just under loi. And you know, these deals don't, are not done until there's ink on that purchase agreement and a checks in somebody's account and that working capital is in your account. And you're sitting in that chair next to the owner and he's saying, where do you want to start? So it's not done until it's done. But this business is in a, you know, in a similar type of industry. They're, they're, you know, transporting stuff from one place to another. When you, when you get down to the root basis of what my business is, it's people in trucks. Right. And so, you know, similar businesses, you know, kind of, kind of can run in a similar vein. So this business is, has some synergy, but it is not a moving business in people's homes. We, it is significantly larger. So I can kind of run through, you know, some of those numbers. It's, yeah. Purchase price around 1.8 million. The business is doing about $650,000 in SDE on a yearly basis. As part of our purchase price, we'll receive about $200,000 in accounts receivable. We'll just go ahead and buy that so we're not having to, you know, try to write checks afterwards for who receives what, make the transaction a little simpler. And it's, it's just a, it's every. It's an acquirer's dream. You know, it used to be a partnership. One of the owners passed away. The, the current owner is just looking to retire. He's been in this business for 25 years. It's been in our marketplace here in Atlanta for 30. It's just a very good, well established business. And they, you know, it's clean. They have nice, clean books. They don't, you know, dilute it because they were a partnership. They don't dilute it with a bunch of spending where you're trying to guess how much the previous owner spent on his puppy inside the, you know, building maintenance category on his P and L. You actually, you know, can get a clear look into it. And like I said, there could be some synergy between our businesses that passes revenue naturally from one to the other. You know, I'm, I'm, I'm hoping that's 10%, but we'll see. You know, I'm, I want the business to stand up on its own without having to have a synergy to, for, for each to work really well. And this is a really great target because of some of those things that I told you about the ownership and the cleanliness of their books. They're very organized, which helps makes this due diligence and financing process much easier. We're not having to chase them down for documents, as you well know and some of your people have talked about. This process is a hurry up and wait. There's a. Some things will happen a lot all at once, and then you're going to wait two weeks, three weeks and not hear anything at all. So as we dig through everything and kind of discover more, we'll continue to piece together what the actual purchase is going to look like. But we are going to take a lot of things from the previous transaction and use them as we decide on how to make this one. This one, as we've designed, could be a very favorable deal for our portfolio. And the way that we've designed the transaction structure could actually allow Us to not have to put any money down in order to acquire it. So we're happy to talk about that if it happens. Yeah, maybe we revisit in a different episode. But you know, there are a lot of different ways you can structure these deals as an acquirer, especially being a self funded searcher, you know, to, to go bigger without necessarily having to have a huge amount of capital.

[1:27:33] Host: And, and Brett, do you feel that your access of this deal and, and maybe be getting it at particularly favorable terms is because you're already in the game or do you think that you could have, is, is this one example of being in the game, more doors open or might have you have, might you have had access to this acquisition, acquisition number two, as a searcher, as somebody who wasn't yet in the game.

Guest: If you're, if you're watching on video, you see me nodding heavily. The resume makes all the difference in the world. When you're talking to these lenders, they like to see that you've been successful in doing this. So to the point that maybe I say the first one was a little too small for the goal, maybe it actually wasn't. Maybe it led us to be able to get this larger one with better terms because we did take that plunge initially. A lot of that is going to come down to the terms that you get. It's not necessarily the accessibility. If you've got the capital, you know, and you can fall within their guidelines that they're looking for and the deal makes sense. Servicing the debt, they'll, they'll, they'll entertain the deal with somebody that necessarily hasn't acquired a business right away. But you will absolutely get better terms with a better resume and, and proof that you've done it. In fact, we may, we'll probably end up combining both loans with a much more advantageous term than we ended up having on the first one, which will benefit both businesses if we do get the structure we're looking for on this one.

Host: Okay, well, to be continued. Sounds exciting. And it sounds Brett, like, you know, I'm not trying to be too rosy about your experience. But as bad as it was, you know, in two years time you stabilize things. You've doubled the business in a really inhospitable environment. You've put in managers so that you're to create a buffer between yourself and the, the day to day and you might be be taking down a business that's a lot bigger. You're very off to the races. And that's in two years. That's not A very long time. So it's one of these where I, you know, I struggle with my, the kind of, the body of, of all of my interviews and the bloody knife fight reputation that being a small business owner is, because even, you know, even folks with hard stories and really hard transitions like you sometimes, you know, still get through it in a relatively short amount of time and then appear to be crushing it. So, you know, I don't know if that what there is to take away from that.

[1:30:11] Guest: Every, everybody's story is different.

Host: Every journey is unique. And I don't want people out there who are really struggling to think that they're doing something wrong because they haven't figured it out in two years. But it is striking that this story, which kind of had a negative feel, actually, after two years, you're stable, you're growing, you're really doing great in your existing business, and you're looking at now buying a second, much bigger one. So how do you interpret it? Let me put it back to you. How do you interpret your story?

Guest: I'll comment on that. You did mention Christian earlier in this, in this interview. And, you know, I was introduced to Christian because of this. You know, one of my friends was like, hey, you need to meet him. He's kind of going through the same thing. And the one thing I'll say about meeting him and then the value that that's added in the context of what you're asking is one of the things he said to me, and I'm sure he's not the inventor of it, but for me, he was in the moment that he said it, was that you'll heavily overestimate what you can do in one year and underestimate what you can do in five. And to your point, I love that,

Host: I love that saying expression.

Guest: To your point, when you say that it's only been two years, I'm almost taken aback. I'm almost like, wow, it's only been two years. Because, you know, two years or a little less in a bloody knife fight, you know, can feel like 10 years in a rosy picture where, where everything, you know, goes nice and smooth. But I do, I, I take that and I, I, I reflect on that a lot because, because part of the story that I just told is that I don't feel like I, I felt like I was held back from accelerating as much as I wanted to in that time. But then I do sit back and I reflect and I'm like, okay, like, you know, in the grand scheme of things, two years is, is a Relatively short amount of time, but we've got big goals over here. So, you know, this is, this is a, definitely a step in the right step up there. It is a step up in complication of the deal. And, and all of this, I think, will continue to help grow us as we continue to acquire. I don't. One that we're working on right now being the last one. I think we could have a really, a great breadth of companies in our portfolio. I would like to stick in Atlanta probably, maybe until I get a little older and shoot down to Florida. But our goal is to have some really high quality companies here in the town that I grew up in. And, you know, there's not a lot of people that are native Atlantans anymore like me and my wife. And it's, it's a pride thing. I, I, makes me a little emotional, but it, it, it's a pride thing because I watched my dad do this growing up. I, I watched him go through these same struggles. And he passed about four years ago, but I think every day how much he would laugh at me calling and telling him a story about Uber or the nameless stories that I have on a, on a daily, weekly basis of crazy things that happen, you know, when, when you combine a bunch of different people, you know, to do this type of work and in a stressful environment, it's stressful moving. So you're, you know, you're combining a lot of personalities and into a mishmash there during that time. And I think often, you know, about his struggles and the things that I probably didn't even know about, but then also just, you know, being able to, like, tell him these silly stories and what his reaction would be having, you know, haven't. Haven't done that grind. Haven't. Haven't been through that. And me not having the same perspective while he was going through all that stuff when I was young. Too young to know.

[1:34:12] Host: Well, Brett, I think we, you know, our,

Guest: our parents suffer. Jesus. Yeah. Yeah. And when you become a parent, hits even harder.

Host: Yeah, our parents suffer and we don't realize it as kids and, you know, sometimes by the time we're experiencing it, it's too late to

Guest: camaraderie. Have that camaraderie with them.

Host: Right.

Guest: On all their experiences.

Host: Wow. Anyway, we'll see, we'll see if that stays in.

Guest: Yeah. Hey, man. Well, you're. I mean, this is real. At the end of the day, what we're talking about and feeling and all of this, it's, it's the real life part of acquiring businesses. You know, we can talk sde, we can talk multiples, debt service coverage, what crazy terms you can get with different lenders and all that kind of stuff. But at the basis of it, every single person that's out here doing this on your podcast, on other people's on, you know, in the world that they don't even know that your podcast exists. The world I was in before, they've got a family, they've got an emotional feelings about what they're doing. And. And that's the part that. That's why I'm sitting here with you on this, to be honest, because I. I do want other people to have what I had with Christian and what I'm now gaining with you and with other people that I'm developing this camaraderie with, on the struggle, on how hard it is, because it's a whole lot harder when you're alone, right. And it's lonely at the top. I mean, that, you know, you are the owner, you are the top. It's lonely there, no matter how many people you have working under you. But you. There are people out there like me that you can reach out to that love talking about this stuff or that can help you just pull your head out of your. Whatever, you know, when. When you're just having a moment. And. And I've had people that serve that for me, so I just. I feel grateful and humbled and motivated to, you know, be that and share that and share my story for what it is now and then later continue to share the story for how it develops. I think a lot about how this will sound five years from now, ten years from now, and what I'll even think of what we've talked about today.

[1:36:41] Host: Well, Brett, how.

Guest: How do you.

Host: Do you have a. A way if people want to reach out that you want them to.

Guest: Yes.

Host: Are you on LinkedIn? Are you on. I'm on LinkedIn email or what?

Guest: Yes, I'm on LinkedIn and I'm on Search Funder as well, a profile on there. So that's. That's searchable. You can contact me through either. That's preferable because that's. It's super easy to message through there. And it's, you know, as well, I get inbound constantly, you know, from a variety of different directions. I miss most calls because I'm on the other line with someone else.

Host: Okay.

Guest: All right. So definitely reach out through LinkedIn and then we'll. We can set stuff up, you know, would love to, you know, is hang out or you know, have some in person camaraderie with local people here in Atlanta or if it's over the phone if you're not here in Atlanta, that's just as fine as well, but well

Host: great, great offer Brett. Everybody take Brett up on that and thank you very much sir for coming on and sharing your story and being as always transparent, vulnerable. You got me there at the end. Really a beautiful, beautiful story here. So thank you sir. We, we so appreciate it.

Guest: Thank you for having me on and thanks for doing this. You know, I know you put a lot of work into doing this for our, I say our community but yeah, our community, the people who care about this and have chosen this as their life path and calling.

Host: Well I appreciate that Brett. All right, sir, until we hear about the acquisition number two.

Guest: All right.