[00:00:00 - 00:04:10]

Will Smith: It was not the first choice of today's guest to buy a business outside his home market. But after Brett Maxam searched for a while in the competitive Denver metro where he lives, he decided he'd need to widen his target geography to actually find. A business to buy. It worked. Brett found a concrete pouring business in Vancouver, Washington with between 3 and a half and 4 million of revenue and high six figures of SDE.

The sweet spot for a self funded searcher. He bought it even though it was a two and a half hour flight away. It was also project based and tied to the new home construction market. We get into how Brett thought about. These features of the business, these risks.

The structure of the deal helped mitigate them. Listen for that. Brett closed six months ago and spoiler it is going well. He's actually spending less time in the business than he expected he would the. Opposite of what most searchers experience, particularly in operationally intense construction businesses like this.

Construction businesses are also notorious for working capital challenges. We get into that as well. Here he is, Brett Maxam, owner of Morcrete Construction of Vancouver, Washington. What happens when for better or worse extends to due diligence, deal terms and Running a company together in this week's webinar, Today, Thursday, you'll hear directly from married members of the Acquisition Lab who've taken the leap into acquisition entrepreneurship side by side. The Lab's Chelsea Wood is hosting and Chelsea will dig into how these couples divided responsibilities, navigated disagreements and kept their marriage strong while building a business together.

You'll hear the benefits, the challenges of being partners in both life and work. So if you're considering buying with your spouse or partner, or simply curious how others make it work, this webinar will. Give you an honest look at what. It really takes to balance the love and leverage. It is today, Thursday, September 4th at 11:00am Eastern.

Register at the link in today's show notes or on the Acquiring Minds homepage. Acquiringminds co welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs, and on this podcast I talk to the people who do it. Running payroll, paying your bills, closing your.

Books, and producing financials. These are critical tasks every business owner must do or oversee. But spending time on them distracts you from the leadership in growth work you want to do. So let system 6 do it for you. Owned and led by a former Searcher, Chris Williams, System 6 is a leading outsourced finance team for hundreds of SMBs, including over 50 searcher acquired businesses.

Chris Tim and the System 6 team understand firsthand the challenges, the opportunities of of jumping into a business as its new owner. So whether you own your business already or have one under LOI, talk to System 6 about how they can give you time back and improve your financial operations. Mention Acquiring Minds and they'll provide a free review of your books and financial ops, a $500 value. Check out system6.com, link in the show notes or email helloystem6.com. Brett Maxam, welcome to Acquiring Minds.

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Brett Maxam: Will thank you for having me. Excited to be here. Brett. You bought a business related to residential construction. Scary.

[00:04:21 - 00:06:03]

Will Smith: And that is a plane ride away from your home. Scarier. And yet you've made it work for yourself very well indeed. You are working on not in the business to say the least. So we're going to learn all about how you have pulled this off.

Start us off please Brett, with what were you doing before you decided you want to buy wanted to buy a business and why did you make that decision? Absolutely before I decided I wanted to buy a business, I was an executive in a private equity backed business business. Something I've been doing for about 10 years in the role of CFO with a couple interim roles as CEO was fun, challenging, enjoyed the work but had been through enough acquisitions, a couple exits and thought that you know what, I can do that myself and have all the equity in the business and be running the show. So I was excited to find something that I could acquire and run myself. So you worked in private equity portcos.

You were not at the fund level, you were not a private equity guy but you were kind of adjacent and saw into how private equity worked. You saw a lot of transactions. Right. So this, this gave you some proximity to buying businesses kind of private private equity style and. And also piqued your interest.

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Brett Maxam: Yeah, exactly. So I had gotten into, I started my career in public accounting. We can get into that a little bit if you'd like. But decided to leave public accounting and came over to an opportunity where I could lead the finance function within a private equity backed company. They had just made their investment and that was a path to becoming the CFO of that company.

And with them I was with them for almost five years. Started off we were doing about 8 million in revenue and when I left almost five years later we had grown the company to 65 million in revenue. With that had done four acquisitions. Those acquisitions I really led point on the due diligence integration and you know, post close of those and how those integrated into the company and Ton of fun, very challenging. It was a great experience.

Every day was a little bit different and really enjoyed that. So that, that put me through the ringer and then I went on to do that with two other full time roles and a couple of fractional CFO roles as well. Great. So it was your proximity to seeing all these transactions that led you to realize or want to do it yourself. This was not something where somebody mentioned ETA to you, entrepreneurship through acquisition or you were in a business school and took a class or you saw Cody Sanchez online.

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Will Smith: This was kind of from your front lines experience. But you then did go down the rabbit hole. Did you not read the books, listen to the podcast? Absolutely. So I knew that I wanted to do it.

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Brett Maxam: And I'd say even early on I had an inkling that, okay, let me make sure I'm paying attention, what's working well, what's not for an eventual thought that I want to become a business owner. And so that was always a thought in the back of my mind. I'm an avid reader and so as I went out to look for those resources, that's how I came to find HBRs how to buy a Business, Walker Diebold's book and you know, just began consuming all of that content. It was as I was, you know, looking at Biz by Sell and other opportunities that actually came across the term ETA and discovered that was, that was an actual thing out there. That was a thing which must have been even more validating of the path that you've chosen for yourself.

[00:08:52 - 00:09:22]

Will Smith: Okay, so what, what did your search look like starting with where were you based? Where are you based? Yeah, so we, my family and I are based in the south suburbs of Denver and initially we were looking for a business based in Denver. We started off our search in probably around December 2023 and just started looking at what was available on Biz by Sell. Reaching out to brokers, reaching out to my network.

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Brett Maxam: Knowing a lot of accountants, attorneys, insurance guys, kind of looking under anything I could and reaching out to whomever I could that led to a lot of interesting businesses.

You know, I've always worked in and on smaller mid market businesses that every new one was something that, you know, I didn't really picture it existed before. So I didn't really have a honed in buy box where it was, we're only going to buy an H Vac company or a plumbing company. So it was fairly open. We looked at, we, my wife and I are me looking at it and sharing what I found with my wife looked at quite a bit and definitely had a few false starts. A couple of businesses we looked into that we issued Lois for negotiate Lois only to find areas of concern that we decided to walk away.

We had one loi on a business in the mountains of Colorado that we just couldn't agree to a purchase price with and then thought we found the perfect business. A really cool commercial plumbing company that we got into LOI on in probably June of 2024 and went through that full process, negotiated the purchase price, negotiated a purchase agreement, got SVA financing approval. We were pretty much two days before close, actually going to the broker's office to meet with the sellers to finalize the disclosure checklist and just cover any remaining questions on that before hoping to close that next week. And about 45 minutes before that meeting, the broker called and said, hey, I'm not sure what's going on. The deal's off.

Sellers just called me. I don't have any more details than that. Sorry. And that was, I mean in the fall of 2024 and just crushing because we, we had been through four rounds of the purchase agreement. We had heard all the legal fees.

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Will Smith: Had you quit your job, Brett? Searching full time? I was still with my job at the time. My expectation was that once we had that locked in, then I would give notice and have that transition period. It was an opportunity where pretty solid management team in place.

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Brett Maxam: And so it, it was something where I was going to be more working on the business than in the business. Right away, we hope. Yes. In fact, you, you bought something, I think smaller, less likely to be able to be worked on rather than in. And yet here you sit a thousand miles from the business, working on it, not in it.

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Will Smith: So we'll get there. But Brett, what were your criteria in terms of size and SDE or EBITDA and, and, and tie that to what kind of salary did you want to be able to pay yourself? Sure. Out of the, out of the acquired business. You know, it's probably similar to what a lot of your audience is looking for in the search space.

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Brett Maxam: And we were looking for, we, my wife and I, something doing SDE as low as 700,000, maybe up to one and a half million, ideally generating enough income to draw $200,000 or so of wages payable and service the debt on it and then give us a cushion where, you know, liquidity wasn't going to be too challenging, where we could build up assets within the business. And this we referring to your wife. To what degree was this a. A partnered search versus Just, you know, you're, you're conferring with her as you go down this life changing path. Much more conferring with her.

My wife's amazing, smarter than me and just a great sounding board. That being said, I was really in the trenches on the search and would, as opportunities came up, catch her up on them. You really use her for that first line of poking holes in the deal. Yeah. You know what, what about this?

Okay, how are you going to do that? And, but yeah, through that process, really looking at, you know, that 750 to 1.5 million, anything less than that we felt like might be a little too small and not generate the income we were looking to get from that. Great. So the commercial plumbing deal collapses. You don't even know why it just.

[00:14:22 - 00:14:59]

Will Smith: Or maybe collapses isn't the right word. It's. It's pulled at the last minute for mysterious reasons that are extremely frustrating. That's a good way to say it. Yes.

And then, and then how do you find this business in Vancouver, Washington? So we went back and looked at all the other deals we had been looking at, revisiting those to see if they're still out there, meanwhile seeing what else we could find. Much of it was through biz by sell. And then we just started expanding our search. We had done a little bit of that throughout the summer as we were trying to find the right business.

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Brett Maxam: So we, my wife and I had already had those conversations of okay, if it's not in our backyard, where would be places we would be interested eventually moving to, visiting quite a bit, spending quite a bit of time in. I'm originally from Indiana, went to school in Ohio. Beautiful places, just not areas I want to spend a lot of my time, but really like the western part of the country. And so we were very open to really anything in Colorado or west. We really like the Pacific Northwest.

We had looked at a few other opportunities out there that we didn't end up moving forward with, but had even visited a business out there. So we're very open to that area. So started looking in. Brett, how did you think about the question of distance? And all these, all these far flung locations were going to be.

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Will Smith: Require you to fly to them and I guess, I guess you were open to maybe moving but. And of course, and then later in the conversation we'll, we'll contrast your expectations with what you've actually found. But I'm sure in your going down the rabbit hole you, you bumped up at some point against the advice that you not one, not as their first business buy one that requires getting on a plane to go visit and manage in person. How'd you think about that? Yeah, I mean, it, it was a lot of soul searching and just making sure it would be something we'd be comfortable with.

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Brett Maxam: And there was that little bit of discomfort, a little bit of challenge. But I'm also coming from a history of almost 10 years as a executive in a private equity company where, you know, very often I was working 60, 70 hour weeks with companies that, you know, headquarters might have been in Denver, but we own companies in, you know, across the country. So doing a fair amount of traveling for that and, you know, just, that's. An important, that's an important answer. Like the, the format of remote management, flying to a site as you needed to was one that you were comfortable with a lot of, a lot of experience in.

Yeah, absolutely. So I, I had teams that reported to me for easily the last seven, eight years that were remote, that I had people in California or Wisconsin or Alabama that were reporting to me and had gotten very comfortable with that. So we knew it was going to be a challenge, but we were faced with a circumstance where we felt like we weren't seeing anything in the Denver market that looked appealing. The couple things we had looked at were at multiples much higher than we were comfortable going to and felt like there was a lot of risk in that, that if we were buying a company doing a million dollars of SDE, but at a 5x multiple, it would stretch us pretty thin there with the debt service as well as, you know, amount we wanted to put down as a down payment. Great.

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Will Smith: And, and, and that, that really, that really is a big swath of territory that you opened yourselves up to from Denver north to the Canadian border and I guess west to, to the, to the Pacific. Right. Or maybe you, maybe you weren't going to go to California. That's, that's, that's one that we often hear. California.

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Brett Maxam: Okay. Okay. We've spent a lot of time in California and I've, through previous employment, had subsidiaries in California and was familiar with the pros and cons and challenges of that. Yeah, Part of this was looking for a company that eventually, when, you know, I've got kids in high school, once they're out of high school, that we could see ourselves moving to or at least having a second home in those areas. And many challenges California has.

The weather's beautiful and there are some nice things to do there. 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.

[00:19:31 - 00:20:21]

Will Smith: 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 an active community of serious searchers. Check out acquisitionlab.com link in the notes or email the Lab's co founder, Chelsea Wood. Chelsea buy, then build.com tell us about the discovery of this business.

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Brett Maxam: So yeah, this was in December and we came across the business that was listed on biz by Sell as a concrete flatwork company. Concrete flat work. Concrete flat work. So what concrete flat work is, is we pour garages, driveways, porches, patios and sidewalks for high production home builders. High production home builders.

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Will Smith: So new homes are going in. It's a new development, a new subdivision, one of these big national names, or maybe not. Maybe it's a local regional home builder and they're doing, putting up a bunch of houses. And these houses have certain concrete needs, the ones you just mentioned. Driveway, porch, sidewalk.

What did I miss? Driveway, porch, patio, garage, patio, sidewalk, patio, garage. Sorry. Yeah. And you guys will pour the concrete for that.

You're so your customer is the home builder. Great. Okay. So very, as I said at the top, very tied to residential construction. Actually new, new construction.

So even more tied to cyclicality. We'll discuss and, and project based. Yes. So why, so why, so why this business, Brett? Of all the businesses in the Pacific Northwest down to Denver.

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Brett Maxam: Yeah. So as, as we dug into it, something I really liked and as I researched the area more, I, I wasn't aware of Vancouver, Washington before this. Vancouver's sister city to Portland, just on the other side of the Columbia and kind of a bedroom community to Portland. It's a growing area, a lot of demand.

You have zero income tax in Washington. So it's a, it's a very desirable area and seeing a lot of continued growth, a lot of spending on infrastructure and an area that we felt like would be maybe a little more protected against a correction in the housing market and got comfortable through it that way. What I really liked about the business was that while you don't have that repeat revenue for a specific house. I mean house eventually will need new concrete, but that's 20, 30 years out. What you did have was working with national, regional and local home builders was a certain level of known pipeline and backlog.

Typically what happens is we will get issued a, as a new lot gets developed, we'll get issued five to six purchase orders for each item we're pouring and we typically find out about those a month and a half to three months out. So a fairly decent backlog that you can plan on. You have the pipeline that is the entire neighborhood because we're awarded a neighborhood at a time typically with add on phases. So you have a decently high level of confidence in the near term of what you're going to be doing. Additionally for us there's the markets that the company's been in but we're not currently in right now of more commercial work, project based or residential replacements or add ons that in the past as a housing market has been challenged, the former owner has gone into those areas as well and being able to find work to keep the teams going.

Additionally what we liked about the area was that the fairly mild climate we're able to work year round. This last year there were only two days where weather didn't permit us to do work. But we're out there, rain, shine. You know, if I think the two days we couldn't work there was a bad frost and the concrete ready mix plant was shut down those two days. And so Vancouver, Washington, other side of the river from Portland, another side of the state line from Portland, but essentially Portland metro we can think about this as kind of the port Portland metro area.

Yes. I mean it's okay. From the airport to my shop it's 20 minutes. You could probably pretty easily calculate the TAM and get yet one more data point about demand for your services beyond your own pipeline, which I take your point that that was a great kind of leading indicator of where revenue is going to come from in the coming months. Because you could.

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Will Smith: Because I as I understand like a lot of cities will just know a year or two or more in advance like how many new homes will be built in a metropolitan area in the coming two or three years. And, and that's basically your tan, right? How many new homes are going to be built in the Portland metro between now and 2027. And you can kind of. That that's your mark, that that's it.

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Brett Maxam: Yeah, absolutely. And right now we're only doing work in the state of Washington. But look to Oregon as A market we can expand into as needed. We. I kind of joke I drive around in circles when I'm out there.

We basically have anywhere between seven and nine neighborhoods that we're actively working on within 20 minutes of our shop. And I'm just, you know, got my teams going around and circles to those various locations, depending on the day we're setting up and then pouring the next day. And tell us about the kind of bullet points of the business. Age, employees, revenue, whatever you can share. Yeah, so we've got, let's see, age.

The business is a little over, I think, 30 years now in business and has always done residential work, but has branched out into commercial and maybe direct to consumer as well. But really in the last, I think five to 10 years, is really just focused on that residential high production, new construction, building team. It fluctuates. Right now I think we've got 13 team members, including one virtual accountant. And right now I'm actually hiring.

So looking for additional concrete finishers. Typically our labor pool is we've got setup teams who kind of like carpentry work laborers and then concrete finishers who typically have years of experience and a little bit higher skill set, but always looking to train our laborers into becoming those finishers.

From a revenue standpoint, currently targeting, I'd say mid 3 million to maybe $4 million of revenue this year. Is that with growth or is that what it was at when you bought it last year? You. So you bought it last year. When did you close?

We closed February 1st, and we're going. To unpack the deal because there's a lot to learn from that as well. So basically the beginning of this year, February 1st, so that that number that you said mid threes to maybe 4 of revenue, is that also what it was in 2024? 2024? I think the first part of the year took a little bit of a dip, but that's about averaging between three and maybe not quite $4 million the last few years.

So somewhat steady. For this year, we have been able to add two additional subdivisions, actually three additional subdivisions, Two with an existing builder and one with a new builder so far. So have been able to grow that month to month. It's. We're somewhat subjective to what the builders are doing from how many homes they're starting in their neighborhood.

And typically we may have POS for three months, but we'll find out right now on August 15th. We may get some clarity or get some revisions on how many houses are being started in September that typically we won't start working on until late September, October.

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Will Smith: And so roughly how many, how many houses a year do you do? Oh, we're probably very roughly, I'd say between 240 to maybe 300 or so.

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Brett Maxam: A lot of month to month fluctuation with that. For example, August is going to be our busiest month of the year so far. We're seeing a lot of builders pushing to get houses done by the end of 2025, which means they really need to be worked on right now in the month. So we're seeing an acceleration there. And what are margins like in a business like this?

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Will Smith: Or if you can just tell us what the SDE was. Yeah, so SD was right around, oh, not quite a million but kind of in that higher area. I don't want to get into too many details of that. But higher end of six figures. Higher end of six figures.

And so right where you had hoped above the threshold of where you were looking or where your window was. Great, great.

Well, I, as I said I want to get into the anatomy of the deal. There's some, some which was a, a great one but a little bit more on just how you assess the business. So we've already kind of talked about, we, we, we have already talked about getting comfortable with flying back and forth. What about just the management of a business like this? So, so project based construction businesses are notoriously difficult businesses and operationally let alone, you know, quality of revenue questions and so on.

But operationally, I mean, and a, a blue collar workforce, one, it's something that you, I don't think really had worked with before, correct me if I'm wrong. What, what were you thinking in terms of just like how, how much, you know, leadership am I going to be able to exert? Is the team going to want or need, you know, that, that kind of obvious question. These are hard businesses even if you're in them all the time, let alone if you're flying back and forth. I had done some work with blue collar workforces so that wasn't entirely new to me.

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Brett Maxam: But you're right, it's a business that's out of state that the seller was, I guess one of the areas that gave me comfort was the seller had taken a pretty big step back from the business a few years ago with some health challenges, not going to get into the details of that, but had been decently hands off with it at that point. Had a really strong foreman that we still have who's amazing, who'd been with the business, really working with the seller since before he even formed the business. So over 30 years, guy knows a ton about the business and so had some comfort that he was going to be there with it. We haven't gotten into it yet, but we move pretty quick with the transaction. And I actually was out there in Vancouver meeting with the seller and actually working with him and driving around meeting all the employees and all the customers in mid January before we actually closed on the business.

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Will Smith: Oh wow. So was able to actually see a lot of that in progress. Had dinner with the seller and the foreman and so had a chance to meet him, confirm that he wasn't planning to go anywhere. Was there an explicit conversation about the fact like hey Mr. Foreman, I don't live here so I'll be managing you remotely and I probably as, as, as we transition the business, I'll be here more frequently, but that probably taper off a little bit over time. Did you guys get into that central question directly or not?

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Brett Maxam: Not, not as directly or it was. Implied maybe because he knew you didn't live there and weren't planning. It was implied. I was playing it a little bit close to the vest that I wasn't fully intending to move my whole family out there.

But I mean my intention was originally that maybe for the first year to two years I would be out there three to four days a week and ah, so originally we went into it thinking that I was going to be commuting, jumping on a plane first thing Monday morning and out there through Thursday or Friday. So it, we, we had the hopes that, you know, we could ramp that back. But we went into it thinking that I was going to be spending quite a bit of time out there. Okay, so this kind of incredible situation you find yourself in was actually not planned or at least not this early in the journey. Not this early in the journey.

It's gone incredibly well and been very fortunate that what the owner or the seller and his wife were doing, we were able to automate some of those processes, really delegate some of them as well, and then hired a virtual accountant to take on the remaining items so that when I do go out there, I'm now spending much more time working on the business, meeting with the customers, looking at opportunities to grow, look at other builders we can be working with, meeting with my foreman, but doing a lot less of the actual in the business day to day. This is something we're going to return to and just exactly like how this is working out so well. So we'll come back to it. But let's hear now before we get Too far away from it. The terms of the deal that you negotiated to acquire the business, please.

Sure. And again, keeping it fairly high level, we were able to buy the business for less than 2 million. Got it at a very nice multiple, sub 3x multiple. And due to some concentrations in the business, we're actually able to negotiate a 70% seller note. So we didn't go the SBA route on this one and got very friendly terms with that, so helped mitigate a lot of the risk going into it with concentrations, new construction out of state.

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Will Smith: Well, let's unpack that a little bit, Brett. It still is a loan, even though it's not sba. It's still a loan you gotta pay. Although you probably don't have a personal guarantee. Correct me if I'm wrong, no personal guarantee on that.

Okay, well, that's a huge. Removes a lot of the most, most dire risk of one of these SBA style projects. But it still is a loan that you have to pay. You still do have monthly payments. But how did this come about 70% seller financing?

This is the sort of thing a guru would, would, would tell the world that you should go out and try to find. But we wiser heads know that it hardly ever happens. How did you negotiate such so much seller financing? Yeah, I, you know, I think definitely some luck had to play in it, where I believe the business had been looked at by a few others, I think had gone through the process of trying to get SBA financing on it and had seen some challenges with that. And so had a pretty frank conversation very early on with the broker that, you know, I like the business, but it does have some hair on it does have some customer concentrations and that, you know, if I was interested in doing this, I, I would look to see if the seller would take on a note for a majority of it.

[00:37:17 - 00:39:41]

Brett Maxam: And so that was fairly positive. You opened the conversation that way or you opened the negotiation with that kind of putting a stake in the ground. Yes. And the seller didn't. Or the, the broker representing the seller didn't flinch.

No, he great broker and I think had done a good job of educating the seller. And I think also it helped that they had been through the paces with a couple other buyers who had discovered it wasn't maybe the business you'd buy with 10% down and a 90 SVA note. And this hair that you're referring to is their hair. Other than the customer concentration and the market being cyclical, I mean, there is. Some cyclicality in the market.

The business, to me Some of what mitigated it was that the business has been running for 30 plus years. Yeah. That there are different levers to pull. Certainly if you're seeing new construction ease up, you can start to look at doing more direct to consumer jobs. Residential driveway replacements, RV pads, that type of thing.

And we've got very few fixed costs. If we're, if we've got a week where we're not pouring my team's hourly salary and they realize that, you know, some weeks may be 20 hours. Other weeks right now is one of those weeks where maybe it's going to be a 60 hour week and you know, you want to make hay while the sun's shining and you know, hopefully sock away some of that overtime that they're getting. But if we're not pouring, my cost goes substantially down. I'm not paying for concrete, I'm not paying for labor.

And so that helped in the short term. Think about some of those risks. Yeah, yeah. And then having the seller note. I've got a very motivated seller who wants to see me succeed and has been great to work with.

We ramped down the transition of time pretty quickly. But you know, as things come up, he's pretty responsive. I'll text him and say hey, we have this warranty issue or looking to do this, what would you recommend? And you know that that seller note keeps him very engaged and you know, me being successful in the business. Yeah.

[00:39:42 - 00:40:13]

Will Smith: And does the seller note have any forgivability attached to it? So if you lose one of those big customers, for examp, you don't have to, you know, you can pay proportionally less of the seller note back. It doesn't. We looked at that with a few other deals but because of the, what we were able to do on the multiple as well as the terms of the seller note felt like we were getting enough where that wasn't necessary. It would have been a great addition to that and further de.

[00:40:13 - 00:41:02]

Brett Maxam: Risked it. But I think we were, you were already the limit of what we could already get out of that in, in. The term of the loan because one of the things this was actually covered in a recent webinar with Chelsea Wood of Acquisition Lab where there's this, there's this notion that seller financing, the more the better and it's always a net positive. And of course, as I just kind of jokingly said to you, not suggesting you didn't realize it but, but I was more joking kind of in the face of this notion that it's still a debt. So everyone treats it like, it's somehow less onerous or less bad than a bank debt, but it's not necessarily.

No. Yeah. I mean, it's still money that we owe and that has to be paid back. And. And also, like, what are the terms of the loan?

[00:41:02 - 00:41:39]

Will Smith: Every loans, like, you know, how good or bad a loan it is comes down to the terms. So it's very. The simplistics. This is just that just seller financing is a good thing, so. Absolutely.

Terms. Can you share what the terms were? Yeah. So as we were, or as I was negotiating with the broker and we, we started off getting agreement that that 70% was the right amount, and we kind of backed into that based on how much I could comfortably feel that I could put down on the business. So we got through all of it really backing into things.

[00:41:39 - 00:42:47]

Brett Maxam: So we started off okay, this is the amount that I could put down cash at close, which means this amount will be the note, which ended up being that 70%. And then there was a certain dollar amount that the seller was targeting that he wanted to get in monthly payments. And so that was the next area. Okay, we can feel comfortable about doing that. And, you know, one of the last items was the interest rate on it.

And I was, you know, kind of saying, okay, well, if we know the amount and we know the payment, great. Can, can we get away with a 0% interest rate? And it didn't end up that great, but we were able to get to 5% interest rate and then just solved for what the amortization period was based on the rate and the payment. Looking for an SBA loan to buy a business. Then meet Pioneer Capital Advisory, your team for getting an SBA 7A loan quickly and at great terms.

[00:42:48 - 00:43:50]

Will Smith: The team at Pioneer has closed 81 SBA loans in just the last two and a half years, with an average close time well under the industry standard. Founder Matthias Smith and general manager Valerie stash both have 10 years of SBA experience and know the process cold. There are three analysts at Pioneer who build you a lending presentation that speaks the language of the bank's underwriters and gets them to. Yes, two account managers to guide you from underwriting to close as fast and smoothly as possible. And two sales associates ready to walk you through the Pioneer Capital Advisory process.

That's nine people at Pioneer, a real team to get you where you're trying to go. New owner of a business. Go to pioneerCapitalAdvisory.com or click the link in the notes. What did the amortization period end up. Being amortization period ended up being.

[00:43:50 - 00:44:07]

Brett Maxam: I'd have to look, I think somewhere between seven and eight years and I'll stay silent to the payment amount because then you could back into the whole deal. But. Okay, well, let me, let me. An area we were comfortable with. Well, and so let me.

[00:44:07 - 00:48:01]

Will Smith: As you should have been, Brett. Yes, because let me underline a few things there. Seven to eight years. So for SBA style, you didn't do sba, but SBA style, self funded style. Search businesses.

We have all been gotten accustomed to 10 year loan terms because that's what the SBA is. But that's an uncommonly long loan in the world of business lending. And it's one more reason that SBA loans are really appealing and arguably, you know, could only exist through government subsidy. That's a really long term. And so, and, and so further evidence of that, when you do get seller financing in these deals, often it's, I mean you can sometimes see one year, two years, three years, super short periods, maybe more standard to be three to five years.

But seven to eight is a long. That's a nice long term. Oh, yeah. So that's so great. And that you got it at a really compelling interest rate also.

Great. And then the final point I'll just make is that it's. This is such a good example of. So what you said is your seller just had this monthly number in mind. He wanted to receive from you in the form of debt, you know, a loan payment on his loan which is going to be his income going forward for the next seven or eight years.

It's just such a good example of that psychology, which is easy to forget that oftentimes sellers, they just have a number in mind. You know, it's not necessarily based on the market value of the business. It's more based on whatever that, whatever their own psychology or their own personal needs. And it sounds like this is a little bit one of those. Yeah, I mean it was very much in these conversations I try to always remind myself to maybe shut up and let them do a little more talking.

Yeah. Whether it's a broker, a seller, if they want to share. Great. Then maybe ask a few leading questions and absorb what you can because otherwise, I mean, in this circumstance I would have been negotiating against myself. So why not find out what they're really looking for and slow roll it a little bit and came out to a really great outcome.

That is probably the most useful and powerful advice that I've heard in dozens of episodes. And we've all heard it It's a bit of a cliche, actually. In negotiation, just be quiet. Be comfortable with silence. That's not exactly what you said, but that's an adjacent piece of advice.

Be quiet, Be comfortable with silence, and let your other part of your counterparty talk and keep talking. And often things will be revealed that are. That are helpful to understand, to craft a deal that you both find is what you want. So. And by the way, that's probably good advice in, you know, in life, not.

Not just in business transactions. So. I love it. Brett. So, and so that.

So we've talked now about the 70%. That 30% was solely from you, or did you raise money from investors or friends and family? No. So from the deal that I mentioned earlier that ended up falling apart, a little bit bigger deal that we had already gone down the path of setting up a Robs account utilizing my wife and my 401ks to fund originally intended to fund that deal and that we just left open and were able to use for this deal. So it was a combination of 401k funds and then personal taxable accounts that we had and went back and forth on that, whether or not we really wanted to go down that path.

[00:48:02 - 00:48:46]

Brett Maxam: But. Which path? The 401k path. The 401k? Yeah.

And ultimately came to the decision that it gave us a little more flexibility while maintaining complete ownership of the company and maybe being able to do a bigger deal than we otherwise would have. I think if we didn't have that, we still could have done the deal without the Robs. But we already had had that set up. And so, yeah, it added a little bit of nuance, but because we already had that set up cash in Rob's qualified 401k accounts, that made it really easy just to set up the next deal and actually get a pretty quick close.

[00:48:48 - 00:49:14]

Will Smith: Great. And now I know you. You don't want to say the exact purchase price, but we heard you say. We heard you say that revenues are. We heard you say what SDE was and that you got it for, you know, the.

In the range of three. So we can. We can basically, I think it's fair to say middle six figures.

[00:49:17 - 00:49:24]

Brett Maxam: Yes. Mid six figures is what you brought. And that was a combination of 401k and your own balance sheets. So you, You. So just to be clear, you.

[00:49:24 - 00:49:29]

Will Smith: You had that money. Yes. Only because you tapped your 401k. Yep. Yes.

[00:49:29 - 00:50:01]

Brett Maxam: And that way we could also have some excess room, some emergency funds, and weren't completely all in on the business. So you're still somewhat liquid, you still. Have cash and reserves, gave us that ability to have cash and reserves. And, you know, someone had given me advice years ago to if you ever look at doing sba, if you have any equity in your house, take out a home equity line of credit, even if you don't tap it. So had that set up already, so have some difference.

[00:50:01 - 00:51:05]

Will Smith: Say more about that. Brett, what is that tip? I, you're the second person I've heard say that in as many months. So please, if you would, for the audience. So my understanding is that if you do go down the SBA route, which we had originally considered, that it's very, it's, it's recommended, or it's a good tip to go in and secure a home equity line of credit, essentially a second mortgage on your house.

House. You don't necessarily need to use those funds, but by getting that in place, if you were to go the SBA route, then they allow you to keep that open. And in some cases they look at that as being fully drawn upon. And some cases they don't put a lien on your home as part of. That SBA process with the second mortgage, you basically are withdrawing equity, built up equity out of your home down to whatever, like 20% or something.

[00:51:05 - 00:51:59]

Brett Maxam: Sure. And then I think the SBA only will lean, put a lien against your home if you have equity above some threshold like 25. So it could be only if you have that equity left above it, or that they enter into the third lead position, that if you hadn't done that, and you do need the home equity, you actually have to go to the SBA and get approval to get that home equity loan. So it's wise just to get that in place, whether or not it gets you out of having that lien on your home through the sba. So two good reasons to do it.

For us, ours wasn't utilized. It just gave us that additional cushion beyond our personal assets, that if something did go wrong. We had different avenues. Yeah. Circling back just to your loan, I, I, it just occurs to me there was one other really good element of it, which is it's fixed.

[00:51:59 - 00:52:47]

Will Smith: So it's a low interest rate. It is. And it's a fixed interest rate, which is very rare in SBA land. I've heard it happen a time or two, but it's usually variable. And of course, as interest rates have gone up, many searchers, self funded searchers using SBA loans, have been punished by that badly.

And so that's something that you don't have to worry about now. Obviously we expect interest rates. If anything, they'll probably be coming down, drifting down in the next few years. But um, you never know. And fixed when it's a low rate, as it is in your case, that's.

Oh yeah, that's the best. I mean for double. Double. We'll see if I can ever get a business loan sub 5% and you know, refinance it. But I'm not too worried about that and I'm not sure that that'll come up.

[00:52:47 - 00:53:22]

Brett Maxam: But in the meantime. Yeah. Taking out that variable of, I mean, hearing so many horror stories of someone getting a, you know, mid 5, 6, 7%, 8% loan and then having it go up 3, 4 percentage points or doubling and just destroying their cash flows. So having that. Well, and it has literally put some searchers out of business.

Oh yeah. So it, it, it is, it, it can easily be and has been in cases that I'm aware of, fatal. So it's, it's not to be taken lightly.

[00:53:25 - 00:53:55]

Will Smith: Fantastic. Now one other challenge with these types of businesses, construction businesses, residential or otherwise, is working capital. And you hear this all the time because you projects and now your projects are probably. They're shorter term than other projects might be. How long is a.

Is a given project, by the way, Brett, in your world? I mean, projects are a quick turnaround. Couple days. Yeah. I mean with a semi custom home builder.

[00:53:55 - 00:54:47]

Brett Maxam: Custom home builder, we're breaking up, breaking each house up into five separate purchase orders. So we're able to invoice as soon as we do the work. So typically one to two days or two to three days. One day we'll set up whatever we're going to pour, we'll pour it the next day and invoice it as soon as we're done with that. Yeah.

And so typically we're getting paid 30 to 20 to 45 days. And it just. That 45 days might just be the time to process it. And some of our builders pay on the 10th of the month. So if we get it in on the 5th, they might have already had their cutoff.

So we don't get paid until that next window. And then it takes a few days. A lot of them still mail it. So then you're just waiting for the check to arrive. Yeah, well, it's a turnaround.

[00:54:47 - 00:57:56]

Will Smith: So. So just to, but just to underline this for people, there are typically two working capital. Big kind of issues in construction. The first that you just named your, you know, the, the contractors, the gc, the general's contractors or the home builders in your case pay slowly for whatever reason in construction land. That's the culture and you ain't going to break it.

So they pay slowly. So you do the work then don't get paid in your case, 20 to 45 days later. Sometimes it's worse than that. So that's one issue and we're going to return to it in a second. The other is what you don't have is the work in process.

So if it's a long project, you know, you're getting paid incrementally as you complete the work. It just, it's one more complication to, to deal with in, in working capital. And for the inexperienced searcher out there finding themselves buying a business like this and finding themselves dealing with that, it can be overwhelming indeed and you know, not a lot of room for error there. And it can, it can be, it's not to be taken lightly. And I've heard more than one, you know, due diligence provider, CPA say a first time searcher or somebody who doesn't come from construction should not buy a business like that.

It's just working capital complexity is too much. Okay, returning now, I wholeheartedly agree with that. And to me it was, we weren't having these months long projects where you have to worry about working capital, revenue, recognition, all of the things that go with that slow pay and even realizing that you thought you did 90% of the work only to find out you actually did 60% of the work and you have all these additional costs. We, if, you know, if an error happens, if we screw something up, then we might have to rip out our work and report, but it's an extra day of work and usually, you know, one of five or ten other things we'd be doing that day. So this business has a very low risk for if you completely screw something up and make it right, it, it's, it doesn't hurt you that badly.

Yeah, yeah, no, that's great. That's a. What a, what a great quality of the business still, Brett, the working capital, the, your receivables taking, you know, call, let's call it 45 days to arrive. That still can, that's still a long time and, and can be tricky to deal with to learn. I'm not hearing from you any of the like, oh, you know, working capital, you think you understand it, but your first time as business owner you realize you really don't understand it until you're actually dealing with it.

And it's just, it's an important feature of many searchers experiences. But I'm not hearing that from you. Is that because you're a cpa, you've seen into these business like you're just, you're experienced with working capital or what? Most of my CPA career I, I wasn't very good at tax, I wasn't very good at audit or maybe, maybe I wasn't that passionate about it either. So I never became a great technician in either of those fields.

[00:57:56 - 00:58:22]

Brett Maxam: I always enjoyed business advisory and so spent quite a bit of time working with companies, building out 13 week cash flows, helping them with projects. Did a fair amount of fractional CFO work before becoming a cfo and you know it. It's a simple tool. But a 13 week cash flow is critical to running any business. Give us, give us 60 seconds on that.

[00:58:22 - 00:58:57]

Will Smith: I mean it sounds self explanatory, but you're the first person to say that so emphatically. Oh yeah. So I, you got to have a 13 week cash flow. What that basically is, is a simple Excel spreadsheet where you look at 13 weeks, which is a fourth of a year and you're basically saying, okay, top of it, here's my cash balance I'm starting with, here's the revenue that I'm expecting to collect and here are my cash expenses that are going out. And every week solve for ending cash.

[00:58:57 - 01:01:07]

Brett Maxam: The next week you've got your beginning cash and you just flow them out there. You may, in the next couple weeks to month you may have a really nice accurate picture of what you're expecting to collect. And from then on it's just a guess, but you've got your, you know, I know I'm going to be paying my loan payment every month, I know I'm going to be paying my rent every month. I've got a pretty decent expectation of if I do this much revenue, I'm going to be paying this much labor and concrete and my other vendors. And so it's just plug and play.

And you go through that exercise and then you take a step back and say, all right, do I have enough cash or where am I getting tight? And when. And if that is the case, hopefully it's 10, 11, 12, 13 weeks out when you have enough time to actually figure out and do something about that. So that's an exercise I went through, modeling the business as part of my due diligence to really say, okay, here's my base case, here's my high, here's my low. What do I need in working capital to make sure that six weeks out, I don't have a problem.

And so going through that process is how I backed into the amount of working capital cash I'd need to fund that balance sheet to kick things off and then build in some contingencies. You know, you're coming into a new business. This was an asset deal. We've got to get set up with the customers. We got to make sure they have the right payment information for us.

We had probably just ended, so maybe the first six months, any purchase orders that were already awarded to the seller, he was going to get paid that check and so then we'd have a true up. And they were great about that. They were cutting me checks twice a month as they got paid. But building all that in ultimately to say, you know, let's make sure we don't run out of cash six weeks in. Yeah, that's so powerful.

[01:01:08 - 01:01:33]

Will Smith: And yet it's, it just almost seems so intuitive. I'm kicking myself for never having done now, I've never been in a working capital intensive business but. And then, and just to be clear on the process of a 13 week cash flow, you as you know, current weekends, you just tack on the 13th week to the end. So you don't recreate it in batches of 13 weeks, you it once and then at the end of every week you just tack on the next 13th week after that. Yeah.

[01:01:33 - 01:02:00]

Brett Maxam: And, and just hide what happened before and keep track of what happened before because then you can go back and also use that to see what actually happened. And it, it's a great point of reference to go back and look at that and maybe understand, okay, if we do grow, how is that going to impact things? Because that's the other challenge. Excessive growth has put a lot of companies out of business as well. Yeah, for sure.

[01:02:00 - 01:04:02]

Will Smith: Well Brad, I wouldn't be surprised if you hear from a search or two out there asking, asking if you'll do a 13 week cash flow for them for you. It's probably really simple to put that together. For non accountants it's probably less so. Yeah. Happy to be a resource to anyone who could use it.

And I don't mean to, I don't mean to, you know, charge. You charge a good hourly fee for yourself. Brett, I'm just not trying to take your time from you, but I could imagine that just sounds like a very useful tool. And so, so yeah, so I can imagine. I'm just wanting it.

Yeah. Okay, so you buy the business, you're in the business. What can you say? About your ownership of the business and how you actually find yourself spending actually less time in it than you thought you would, which is again, it's a remote business, it's a construction business. All the reasons why you think that this would be a searcher business where, where it would be even harder than you thought and it's actually been easier than you thought.

Tell us about your, your tenure so far and why you think it's going so well. Yeah, absolutely. I think my previous experience has helped me immensely. I've gotten into a number of businesses where that very first one that I was the CFO of, I was the head of finance and the only person in finance when I started that. It was myself, the former or the now minority owner and the office manager who were doing all the financials before I joined and then so joined them and then did four acquisitions, grew internationally and just very much complicated things which required building out a team and getting very comfortable, hiring people, getting them into the right spots and growing things vastly.

[01:04:02 - 01:08:16]

Brett Maxam: And so I learned early on that I'd much rather hand something off to somebody and set the expectation that they're going to make mistakes and they're probably going to screw something up and it's not the end of the world. Almost anything they can do, we can fix. And so it was lessons from that that I learned that helped me go into this business and look at what the seller and his wife were doing that maybe someone else could be doing, whether they were already in the business or that we could hire for them to do. And so try to be very intentional about in those first couple weeks and months, documenting what that was, trying to figure out what might work well and then start executing on getting that out of my hands and leveraging the team to do that work.

Definitely a few iterations of that. Some stuff that didn't work, you know, going down the path of looking at different software solutions, only to really look at, okay, does this maybe over complicate things? So some trial and error, but was able to take a lot of what was done and you've got a very competent and capable foreman. So some of the stuff, you know, leveraging his skill set, knowledge anyway to do that and just getting out of the way. In other cases it was moving from a very paper based system to digital system and then also hiring a virtual accountant out of the Philippines who's been amazing and has just been able to take things that I felt very comfortable with, you know, the invoicing, all the finance and accounting things that I could easily do.

Myself, but that were taking quite a bit of my time and maybe one of the best value add that I can hand off to her and she can knock out and do and just frees me up immensely. Is she full time? She is. Originally I was thinking she might be 20 to 30 hours, but she's been able to take the tasks that I've been able to hand off to her and then add to that pretty significantly. So I think right now you mean give it taken on even more work than you.

Yes, taking on even more work. So things like you've probably seen the signs that 811 call before you dig for every lot we do. So like if there's power lines or anything, you need to call or go online and make sure that the area is marked properly so that you know anytime you dig in the earth, you're not digging into a power line or cable line. So with every lot we do, we have to submit that. So it's things like that that every time a PO comes in now it's on her task list to go ahead and submit that request, get that done.

Stuff that the seller and his wife were doing and how many hours in. Total were they working in the business combined? Combined, I think they represented that maybe he was doing around 20, 25 hours of work a week. She was maybe doing similar on the back end. His wife was doing all the accounting.

A lot of the administrative things. He was driving around kind of that. Driving around in circles. He was driving around to the various sites to see, okay, we can do that. Lots driveway next.

Okay, they're excavating this ground. We can do that coming up here. All of the home builders have websites where the. They're called site superintendents, where they're scheduling out and they're saying, I want this driveway done on August 25th. This foundation's going to be ready here.

So there are tools out there that they weren't using because they've been doing it the same way for 30 years that I was like, oh, great. Well, why don't I just look out here and then I can text the superintendent, say, hey, I see that you're going to be ready for us here. Is that still on track? Is that so A lot of things that. Well, you could even have somebody, your.

[01:08:16 - 01:08:28]

Will Smith: Your person in the Philippines do that. I mean. Oh, absolutely. So now part of what she does is she builds out a schedule for me based on what's out there. I'm still actually doing a fair amount of that.

[01:08:28 - 01:09:40]

Brett Maxam: But that's something else I can further Take off my plate is figuring out where we're going to be. We're pouring. My foreman's helping me out quite a bit with that as well too now, because you still do need a little bit of that. Hey, you're. This is scheduled a month from now, but I actually see that the foundation's poured.

You're going to want that like in two days. So it is helpful to be boots on the ground a little bit. But he's out there anyway, so it's helped me immensely. And then also we have to measure what we pour. So certain areas are more subjective.

And part of, you know, 10 hours a week, the seller was going out and measuring areas for invoicing. Now I've got my setup crew. Every time we set something up, he take one of the guys, takes pictures and puts on there the measurements. So I've got that as a permanent record and then have my virtual assistant, she's taking those and converting those into invoices and has me completely out of the mix on that. So it's just a lot of little things that have freed up my time quite a bit.

[01:09:41 - 01:10:35]

Will Smith: And. And so this is. This is just a. A classic case of you bringing fresh eyes looking for operational improvements. Some of that is putting in technology.

Some of that is frankly pushing. Pushing some of the work they were doing down to the guys in the field. Some of that is bringing in a new resource in the form of your woman in the Philippines and getting this, giving this work to her. Just kind of a combination of all of that. But it, but it's.

I say classic case because, you know, this is. This is. This is kind of the searcher thesis. Find a business that. Where they're doing the things as they've always done them and come in like a consultant and start making improvements.

And it's just really worked in your case. It's really. Yeah, I don't. I don't mean to over explain it. I mean, it's kind of as simple as that.

[01:10:35 - 01:11:24]

Brett Maxam: Yeah, no, it's worked fantastically.

And I think it's gotten to the point where it allows us to more functionally grow because otherwise the businesses add a certain cap where, you know, if it's me running around and figuring out where we need to go, where we need to pour what we've poured, how much, you know, the measurements, there's only so much of my time that I could do that. But by leveraging this out, it puts us in a position where then we can get those processes down. And as we grow, you know, we can, you know, get those to be very repeatable. So I think that tees us up really well for the next phase of where we're going. Well, let's.

[01:11:24 - 01:11:54]

Will Smith: Before we turn our attention to the next phase, which will close us out, tell us how much you are. You are now working in the business. So what does your time commitment look like every week and how. And how often are you going out there? Yeah, so I'd say realistically, I'm probably spending, given the day, 1, 2, 3, sometimes four hours on the business, in an average week, it probably drops down to maybe two hours a day on the business, maybe a little bit less.

[01:11:56 - 01:13:02]

Brett Maxam: And that's when I'm at my home in Denver when I'm out of the business. That started off, I was out there every week. That started ramping down to maybe skipping a week, once a month for those first couple months to. I think it's been almost two and a half weeks since I was last out there. I am going out there on Tuesday.

And when I'm out there, primarily what I'm doing is trying to make sure I'm out in the field, talking with the site superintendents, making sure things are going well, addressing anything that's not spending time with my foreman. What I'm learning is that what I was going out there and doing was, you know, some of what the old owner was doing, driving around and finding out what we'd be doing next. And I'm finding that that's a little disruptive because I'm having him do that and then I'm coming in and taking that away from him. Yeah. For the time I'm out there and then giving it back.

[01:13:03 - 01:13:51]

Will Smith: Yeah. And so trying to stay out of the way with that and so trying to manage what I'm doing while I'm out there. Additionally, you know, buying 30 breakfast burritos and getting breakfast burritos to my guys and, you know, dropping them off is some appreciation for, you know, the different folks working for the homebuilders, but really just meeting with them and being a presence, trying to be memorable when I'm out there. But it's certainly taking less and less of my time. And so I think, to answer your question, when I'm not there, maybe 10 hours a week, maybe a little bit more sometimes, but typically that's on things where we're trying to get into a new neighborhood and working on proposals and bids.

[01:13:52 - 01:16:41]

Brett Maxam: And then when I'm out there just spending time in the field and I might be doing a little bit more and Just checking that we have enough supplies and everything else. But a lot of that is going down significantly.

One of the other things I was doing was measuring everything until I handed that off. So that's been a very recent change. We're probably only three, four weeks into that. But that's helped immensely. Where now with the guy who's measuring it for me, I mean, he's doing a better job than I am.

He's actually documenting it. Half the time I'd get out there, start talking to somebody and realize that I left and forgot to look at one of the lots and had to drive back out there. And so it's taken that time down quite a bit. You didn't know anything about this world or concrete even before you got into this? Very little.

I had worked with a few companies who did residential development, but that was very much on the out of the weeds working on the business. Theoretical, more numbers focused, but no, no, no concrete or construction. Hands on experience before this. And how have you found the learning curve of the business itself, of the service you sell to be?

Definitely early on, it was a steep learning curve. I've gotten comfortable going in and not doing the fake it till you make it thing and actually saying, I don't know. And so as things would come up, I actually, it helped. Early on I was driving around with the seller, getting to meet all the site superintendents. But as things come up, I've gotten comfortable saying, you know, I don't know, let me look into that and find out and get back to you and either reach out to the seller, talk to my foreman, two guys who have been in the business 30 plus years, and finding the answer and coming back and addressing it.

But our business, very much like other businesses, is customer service focused. If you don't know the answer, I found it being very receptive me saying, I don't know, but if I get back to him in a couple hours or a day, that's gone quite a long way.

So it's been very receptive to me not being the most experienced guy out there and, you know, not holding myself to that standard. Yeah, that's. That's great. I love that kind of trajectory of getting comfortable being like, I don't know, but I will get you an answer as soon as I possibly can. Do you think so?

[01:16:41 - 01:17:05]

Will Smith: This is one of those businesses, Brett. Where.

You know, who would have guessed that it existed? Well, of course it relates to construction. And we know that, you know, putting up a building requires a lot of different trades. But I'm not sure anybody any of us have ever thought specifically about the fact that there could be a whole business of putting down the driveway, putting down the garage. Yeah, I don't know many people that say concrete flat work.

[01:17:05 - 01:19:03]

Brett Maxam: I'm going after that one. Yeah. So is this, but do you think that this is a good type of business for searchers in general given, you know, all of the kind of success of yours that you've just laid out, or do you think that somehow yours is a diamond in the rough, maybe because of this great foreman, maybe because of the 30 years of in market brand that it's built and connect, you know, so, so do you think this is something that the listener listening right now should, should go out and look at in their own market? Yeah, I think if you can get comfortable with the risk around new construction, ideally target a market that hopefully would be a little less susceptible to fluctuations where there is going to be a. Demand.

For that continued growth. Maybe in places where there might not be, then I think looking at targeting businesses that service home builders are, could be a very great business for people. It's very fragmented, not just concrete. You think about everything that goes into home construction. You've got the, typically the framers, the roofers, the guys doing the siding, Sheetrock Electrical.

A lot of times it's mom and pop businesses. Maybe there's a couple big businesses out there, but typically they can't service everybody. And so it is smaller businesses who have found their niche. And it's great work because you're not out there trying to figure out the next SEO algorithm, how to show up on Facebook or Instagram or you look at H Vac, all that, you've got to become an expert in marketing or hire somebody who is to be out there constantly finding that next project. Yeah, yeah.

[01:19:04 - 01:19:50]

Will Smith: And this point about being so tied to new home construction, which, which really I, I, I, I think it's fair to say would be the quote unquote weakness of the business. The thing to be concerned, the primary thing to be concerned about. You had said how your seller in years past when there was kind of a down cycle of new home building, diversified into, you know, residential reconstruction projects or repair or whatever, RV pads. How big is that market? Now that you're in the business, do you feel like that is a way to hedge against the cyclicality or is that just like just dribs and drabs and really isn't going to withstand a big down, a big downturn in new home construction?

[01:19:50 - 01:21:48]

Brett Maxam: I think it's a pretty significant market out there and then is very complementary in the fact that oftentimes when, you know, you're seeing a market go down and you're not seeing the new home builds, you're seeing a lot of people staying put and reinvesting in their properties. In the Pacific Northwest, people often have a little bit more land and, you know, might have a shop that they want to build, and so they need a pad for their shop floor or an RV pad or want to extend their patio. So there's a big market out there. There's areas that we just haven't had time to look into yet, but have considered getting into, even just the business of cleaning and sealing driveways to, you know, looked at a few businesses that do the garage epoxy floors, especially in our business, very complimentary to new home construction. And so we've got a lot of paths to look at right now.

I see quite a bit of opportunity to continue to add on additional home builders that we're working with, but have thought about expanding into more residential work, which would take, you know, a marketing arm and a few other things. But there are a lot of great companies that do that right now that, you know, would be a way for us to diversify and mitigate some of that risk. So it's definitely in the back of my head on, you know, what direction are we going to go next? And because I do have time for that, really considering some of those paths and what would make the most sense for the business. Well, let's close out with that, Brett, and maybe tie in your conversation that you had with Adam, Adam Markley, who's been on the pod and is a friend, talking about what your next step should be.

[01:21:49 - 01:22:40]

Will Smith: You just hinted that you're looking at acquisitions, but I think in talking to Adam, you talked about looking at acquisitions unrelated to your existing business. I don't want to steal your thunder, but that these various paths that you're considering, lay them out for us more explicitly and then. And then share what you kind of. The conclusion of that conversation with Adam West. Yeah, absolutely.

So. Having additional time on my hands only, you know, needing to work 10 hours or so when I'm not traveling out there, got me to thinking, what. What should I be doing with this additional time I have? And other than cruising biz by sell, looking for the next thing, yes or no, or maybe that is what you should. That factored a lot into it as well as, you know, going down and looking at other forums and going down looking at other broker listings.

[01:22:40 - 01:23:26]

Brett Maxam: And so I started Doing a lot of that and, you know, listening to your podcast as well as your other podcasts that you have, saying, okay, well, I've got a unique background that I think would make me very well suited to the independent sponsor path and started going down that and looking at other businesses out there and found some interesting opportunities. Actually reached out to Matthias, who I talked to for a couple other acquisitions as well, and get his thoughts on, you know, a larger transaction and understanding what I could maybe do with SVA with all the changes. And he actually. Smith Pioneer Capital. Yes.

[01:23:26 - 01:23:32]

Will Smith: Gotta just plug my sponsor there. Thank you, Matthias. Carry on. And so, yeah, thank you, Matthias. He's given me some great advice.

[01:23:32 - 01:26:24]

Brett Maxam: I haven't had a chance to use him, but have come close couple times. Okay. But he recommended talking to Adam about it. And after I went through everything with Adam, he's like, you know, that could be a path to follow. It's like, that's going to be challenging.

Especially because a couple of deals I was looking at had hair on them. And, you know, as you look bigger, if you don't want to be competing with private equity, the perfect deals out there, you're probably not going to get a shot at as a new independent sponsor. It's like, look, you're going to be spending a lot of time raising funds, going through due diligence to get the deal done to maybe, you know, make a decent amount of money, but a couple hundred thousand dollars on, you know, management fees and maybe some carry. But, you know, a lot of that is like, what if you just took half of that effort and put it back into your existing business? You know, worked on further refining the processes, but growing the business, getting it to SD of over a million dollars.

He's like, where would that put you? You could mitigate some of the concentrations you have, increase the amount of revenue you're earning, round of income, you're earning real time in the business, and regardless of if you want to sell or not, significantly increase the value of your business, all while, you know, mitigating that risk. If you spend all this time on these other activities, what happens if something goes wrong in your current business? And so he really walked me through it. And, you know, on one hand, kind of, you know, was a downer for me for like, okay, I was pretty excited about going this other route, but as I reflected on, I was like, that's really good advice.

Why? Why wouldn't I want to reinvest some of that time and really make sure that we succeed? Well, but, you know, look, at growing the opportunity. There's so much potential for organic growth as well as maybe a roll up or some other opportunities, but ultimately led me and very recently to kind of refocus my efforts. And so where next week I was going to go out to Washington for a couple days.

Now I'm going to go out there for a little over a week and really focus on how I go about, you know, increasing the business size, doubling down on our efforts, and really focusing on where we should be going next. And Brett, why? Why? I agree that Adam's advice was sage, but it's also interesting that that wasn't your first reflex anyway. Most searchers get into their businesses and they're thinking to themselves, you know, once I've stabilized, once I've transitioned and stabilized and everybody's cool, like, first thing on their minds usually is going to be how to grow this thing.

[01:26:24 - 01:26:48]

Will Smith: So interesting that, that once you stabilized, you said to your. You didn't say that to yourself. Instead you said you kind of forgive me, but maybe got a little bit of the shiny object syndrome or the, you know what, why did you go so far afield from the thing right in front of you, which, which is grow your business? The, the one you got? Yeah.

[01:26:48 - 01:27:20]

Brett Maxam: So growing was always an objective and it was, I think originally slow and steady growth. And as I've gotten, so it was growing the business, but not as quickly, not as much. And I think it also plays in the fact that I do run it remotely. So I'm in Denver here and you know, the opportunity maybe not travel as much and that growth will require me to be out there more. Yeah, I think it's.

[01:27:21 - 01:28:26]

Will Smith: Yep, that's the answer that makes sense. That's the big piece of it. Well, and so, and so at almost an hour and a half here, Brett, we have uncovered a reason why there is. There is a little bit of an. In an imperfection to this thing where you're flying to the business because you, you handled it so well.

It's gone so well. It's just great. But in fact, maybe not imperfection a cost, which is that absolutely you. You find kind of there's this psychological effect where maybe you don't lean in as much as you would if it were in your backyard. Because.

Because every time leaning in means going out there. Yeah, I think that that really is it. And yeah, after my conversation with Adam, it was then sitting down with my wife and kind of playing out what, you know, in the back of my head. I was, we. We set expectations that I was Going to be out there so much that when it didn't require me to be out there as much, it, it got comfortable and I was like, okay, well, it, it's going well.

[01:28:26 - 01:29:36]

Brett Maxam: I don't think it needs as much of my time. And then it was sitting down and refocused, saying, okay, well, you know, let's, we, we can find a sweet spot here where, you know, I'm not going to be out there full time, but maybe I go out there a little bit more than a couple days every two weeks. Maybe it is, you know, a week every now and again. And, and it's a quick trip. It's a two and a half hour flight.

So it's not, it's not that crazy. So I think it's that. That is the reason for it. I think we were comfortable with me doing a little bit more than I've gotten down to now. Brett, anything else to share with the audience that I didn't ask you.

I think you covered it. I just appreciate what you're doing and the content you're putting out there. It's helped me immensely, given me some ideas. And I'm looking forward to, you know, just being in this space, growing the current company and, you know, probably still revisiting other acquisitions down the line. Yeah, no, no doubt I see the twinkle in your eye, but I, I will say, you know, thanks for coming on.

[01:29:36 - 01:30:38]

Will Smith: Thanks for sharing this. You know, how you've done this so successfully because, you know, we all try in our world to not oversell buying businesses that it is hard. These are, you know, you know, fragile, messy institutions, these small businesses and in construction, notoriously. And so. But, but at the same time, I don't want to, I don't want to always just talk about, oh, glum.

How hard it is. I love, I love that you just have. I've had such good fortune with it. To your own. To not good fortune.

You'd really, to your credit. So I'm, I'm just thrilled to show the audience a real positive side of what's possible here. It's, it's really cool what you built and with all that time you got on your hands, you know, we, we expect, we expect growth here, Brett. Expect big things from you. So, yeah, I'll be happy to update you on it.

We'll link to your LinkedIn and what's. The name of the business? Morcrete. Morcrete Construction. Morcrete.

[01:30:39 - 01:30:56]

Brett Maxam: Morcrete. M O R C R E T E. Got it. Great. Super. Brett Maxam, thank you very much, sir.

Thank you. Will appreciate it. Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode.

[01:30:56 - 01:31:33]

Will Smith: With an introduction to the interview, a link to the video video version on. YouTube, and soon key takeaways, numbers and. More essentials from the interview. For those of you who don't have time to listen or watch it, subscribe. At Acquiringminds Co. You'll also find all our webinars there on the website, both.

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