Host: When Chad Hildebrandt requested the financials of a business he was interested in buying, the seller gave him a manila envelope with some numbers on it. Not numbers in the manila envelope like a printed stack of financials? No, just some numbers scrawled on the outside of this envelope. That was it.

Guest: Red flag, right?

Host: Well, Chad turned this red flag green by eventually getting his hands on the business's bank statements and reconstructing the last three years of the business's book books into his own spreadsheet. This arduous process took dozens of hours, but by the end of it, Chad knew how cash moved in and out of the business better than anyone, even the seller. And he liked what he saw. This is the story of how Chad Hildebrandt left a 17 year career in finance with a wife and three kids and bought a business with a lot of hair on it. He experienced real pain that both during and after the acquisition. But in his words, I love this and wouldn't change it. Please enjoy this conversation with Chad Hildebrandt, owner of a $3 million candle manufacturer in New Jersey. 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. August Felker is a two time successful searcher, first with a traditional search fund. The second time around he did a self funded search. Today August runs Oberly Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under Loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberly is a specialty insurance brokerage for searchers by a former searcher. Check out oberly-risk.com O B E R L E- risk.com link in the show notes Chad Hildebrandt. Welcome to Acquiring Minds.

Guest: Thanks for having me on. I appreciate it Chad.

Host: I love having guests who have written down their thoughts on their process of buying a business. It shows that they're a reflective person, which almost all of my guests are anyway. But this assures that a guest is self reflective and they've kind of pre structured their thoughts and you know, done my work for me. And you Chad, did that in spades. You sent me this wonderful page or two here of notes that I get to work from. As we talk now there is so much here. Thank you for so much prep, Chad. It is a fascinating and fun story. Fun for we the listeners, maybe less so in parts for you, the protagonist. But let's get into it. Chad Hildebrandt. Who are you, please? And how did you come to buy

[3:25] Guest: a small business in its simplest forms? I'm a, I'm a candle maker. This all somehow, you know, in short, my journey was from a journalism major in undergrad to, you know, banking, Wall street to candle making. And I think throughout that process, I think I'm 40 now and throughout that process, I think I've always just been, kind of been feeling my way through life and never certain what I want to do next, but kind of open minded. And so there's obviously a journey and a story behind all that.

Host: And so you, while you majored in journalism, you spent many years in finance. I mean you've had a whole career in finance. Tell us about that and how that evolved into eventually wanting to buy a small business.

Guest: Yeah, you know, I enjoyed, I had a, I probably switched my major a couple times in college and landed on journalism. I was pretty happy with that. And I think I've took away from it a tremendous appreciation for writing and print journalism in particular. And one of the most important takeaways I learned from majoring in journalism is that it doesn't pay student loans very well.

Host: And even worse now than 20 years ago or whenever it was you were in undergrad.

Guest: Yeah, and I graduated with a uniquely high amount of undergrad student debt. I'm still not sure how that happened, but I realized very quickly I'm like, oh yeah, I got to make money. And I had a friend who I played rugby with who worked at a bank and he was an intern, probably one step above the mailroom. And I'm like, I'd like to do that. That sounds neat. And so literally started out making photocopies at a bank. Yeah, a smaller bank called Standard Chartered. It's a little bigger now. You'll see them on the COVID of Liverpool as a sponsor. And so focus in Asia. And probably a year later, after kind of working, grinding and introducing people and ask for opportunities, I got a opportunity in management training program and I got shipped off to Asia for a little while to do training and to do some work out there. And then found my spot within the organization in an area called transaction banking. You know, I'd say in short, working with treasury teams within large corporates, Fortune 500, Fortune 1000 companies on, you know, financing imports and exports. Okay. I, you know, I did that for a little while. I think in my training program. I had done opportunities in, I had a, on sales and trading and strategy actually came out of the program during the crisis. So, so when I had, when I came to training program, you got to find a job within the bank. It's during the crisis all these opportunities evaporated both internally and externally. And I think having gone through that crisis, financial crisis early in my career, I, I think there's elements of that that still shape how I think today of just seeing, going from if I got fired today, I would have a better job tomorrow. And how kind of flush with opportunity Wall street has. And then almost seemingly immediately everything evaporating. Just, just people I thought had amazing jobs and lights were set, were suddenly jobless and had no opportunity. And you just suddenly hold on to everything you have and just. I kept my job. I had an opportunity. I was very fortunate. But I think that that shapes, you know, when you go through kind of quasi crises like that, it really stick. Builds scar tissue in you and seeing kind of the despair in a lot of other people. And again, I was fortunate. Went to hsbc, then Deutsche bank and really dug my heels and I think broadly again kind of in a quasi loan structuring group. Trade finance was my specialty, so financing imports and exports. I did have an opportunity towards the end of my career to work with family offices. So within our sitting between our private bank and our investment bank, we did family office coverage. So family offices, especially ones that focused on private equity. And that was kind of my first intro into kind of lower middle market acquisitions and seeing how they think about these things and talking with them and that was really interesting and a lot of, a lot I took away from that. And most recent, my last job before I quit was with a pretty notable private equity firm working with a group within there on their working capital strategy. I think I had a tremendous opportunity in my career, a lot of great experiences. I think ultimately I always knew I was never happy in the corporate world. I loved clients, I loved working on solutions. I think most people I talk to don't love that they work for a big company, but you, you find a way to make it work for you. And. But, but I always hated it. I, I'm not a particularly, you know, structured person and, and you, you mentioned, you know, I came to you with all these notes of how things should work of, of kind of. I came to you with a lot of structure, but it's. That kind of came off the back of me looking at conversation we had and say, oh good. Oh goodness. There's not a lot, there's not a ton of structure that I need to add in. So it's like this, this, this over

[8:43] Host: compensation because you're actually such an unstructured person.

Guest: Exactly, exactly. And so, but, but I think ultimately the higher I climbed, I realized several things in my career. The higher I climbed, you know, the more money opportunity I got. I, I wasn't happier. I became more disillusioned with, you know, working for big banks and finance. And I always wanted, I. Owning my own business, something I always wanted to do. I never knew how to do it on the side. For the past 10 years I had been buying multifamily real estate. So I developed this playbook. I'm like, okay, if I continue my career and I decided to keep managing real estate, I think this is a home run, I should work out really well. And I'm very confident that would have worked out. Unfortunately, I just wasn't happy.

[9:28] Host: It was brutal.

Guest: Working a lot of hours during the week and then managing real estate on the side on the weekend myself. So I had several properties, multifamily properties,

Host: define that for us. What exactly was your portfolio?

Guest: So I had, I had a four family, low income section eight. I had a three family that was kind of towards the higher end of the spectrum of, of tenant base. And then I had a, I have a, a vacation rental as well that, a short term rental that we rent out. And then I was about to close on my largest property which would have been, you know, a, an eight family with eight apartments with a mixed use retail on the base and go through negotiation, make that work, the negotiation of that. And I just, I think I just, at the end of it, I just pulled the plug and I'm like, I don't want to do this anymore. This is, this is brutal. I'm, I'm just inundating myself and again on paper is such a clear path to success. And it, but it was kind of one of those things where I kept thinking, okay, when I'm mid-50s, I'm set, I'm done. And then being like, yeah, but between now and then it's going to be a rough ride. And I think especially now there's a lot of emphasis, you know, see on Twitter online of, of you know, own real estate. It's a great investment. Do this, it's, it's passive and it's just anyone I've ever met who owns real estate and is really, it's a meaningful part of lives it is incredibly stressful in ways that are not talked about. I don't. The hours I worked in real estate overall were actually pretty minimal, but they were brutal. You know, you. You don't get calls for a, you know, a broken water heater on, you know, a Saturday afternoon when nothing's going on. You get it at 4am in the morning, you get it on a Christmas Eve, or you get calls on the busiest workday on a Monday and you're about to travel and someone calls you at 4am and says, there's water coming through my ceiling. What's going on? And it's. It's brutal. And then, you know, I'd spend, I'd say like 30 days of the month. I'd be like, this is the easiest job. I just collect a paycheck, I click the rent check. And then like one or two is a month. You're like, this is awful. I want out. And then you just gotta run, I guess.

Host: It's quiet. It's like, it's like being a fire person. It's quiet, quiet, quiet, quiet. Then crisis, then quiet, quiet, quiet. So. So if there's ever any work, it's always crisis mode. There's never kind of, you know, in between just managing things like, you know, people prefer. So that's nothing or crisis.

Guest: Yeah. And then I thought I hit my niche dealing with low income and I appreciate that, you know, and I almost. Part of my problem was I probably interacted and probably did too much for tenants and with the properties and took a lot of pride in what I did. But, you know, it's a lot more work, you know, in that space. So it's. But, but I enjoyed it. It was great. But. But. And it was a great experience. But I got to a point, I just liquidated everything. I'm like, I'm out. I got to a point where I said, okay, I'm going to leave my job in a year with or without an opportunity. I'm. But I'm done. I'm out. I want to do something different in the most serendipitous way, without a full knowledge. Just coordinated exactly with me paying up, paying my last student loan payment, which is like the weirdest irony of all. I. So as I made the decision, I looked and I was like, oh, my student loans are done. And you're like, that's great. This, this times out perfectly. Not that that had long not been a thing holding me back or keeping me in with what I did in my twenties, it certainly was.

[13:04] Host: But at the same Time. It's not to say that, you know, you were felt totally unburdened and free and clear because you got a family, you got three kids.

Guest: That's right. I have, I have three kids. My wife, my wonderful wife works as well. So we are, you know, I think as a family, we are an action packed family. There's, there's not a dull moment, but you know, they're the reasons you do it all.

Host: But so how did you, how. So okay, so you've decided enough is enough after 17 years of, I assume is a successful career and also building this real estate portfolio on the side, which also has been, has been rewarding for you financially, but you're also done with that. So, so, so that, so then what, what, what do you consider, what do you look at and how do you discover the concept of buying a business?

Guest: So from spending a lot of time on Twitter, there's obviously, there's a big real estate community and people talking about real estate and they kind of, there was an overlap with SMB, small business Twitter with a lot of people buying businesses. And you know, you follow those people, you see what they have to say and you're like, oh, wow. And I can just go on bizbysell.com and look at a business and I did that. I don't remember the moment where I was like, oh, I should just look at that and do that. But I did it. You know, I might have spoken to someone and then I just, I just dug in. Yeah. Went full in on podcasts and, and Twitter and reading what people had to say and looking at businesses and just sifting through. I, I actually didn't, there's a lot of things looking back on it. I, I don't wanna say I did wrong. I mean, obviously there's always, when you're joining a new process, always things you do wrong. But it didn't occur to me that there was a ton of deal flow and volume outside of, you know, what's posted online, public, online. I'm just like, oh, here's the opportunities. And obviously as you know, the public opportunities, you have to, you know, there's, you have to sift through a lot more, you know, a lot of restaurants, a lot of, a lot of things I just had no interest in. And I knew, I did know I had parameters. I said to myself, yeah, I didn't know what I wanted, I didn't know what business I want to buy. I was pretty minded, but I knew I didn't want anything to do with food and I Didn't want anything retail really. I had actually, even, even franchises I had poo pooed in the beginning. Looking back on it I think, I think franchises actually are very interesting opportunity. But that at the time I had, I had taken that out. So you know I had looked at like a bread truck route. I had looked at you know that there were some clothing wholesalers like I looked at some foreign wide. I was just, my approach was I just look at a whole bunch of stuff. I don't know what, what it is I'm looking for. When I see it, I like it and I'll know or at least I'll know I don't want to do that thing or I'll understand that.

[15:46] Host: And at this point have you. What are your kind of financial parameters in where are you searching? I assume it's a geographic. I, I know from a pre call it's a GE geographically constrained search. You've got three kids, you're not going to be uprooting your whole family. So where are you searching and what are your financial parameters?

Guest: Yeah, so I, I said I live, I, I live in Jersey City just outside New York. So I wanted to be within an hour of where I live that I didn't I because my wife works, she's got a great job. I wanted her to. Yeah, we don't want to uproot that. We're happy with where we are. So within an hour I wanted a business that I could understand. You know, I think, you know, there's a lot of emphasis now here on like you know, buying an H VAC company or plumbing business. And to me that's crazy. If you don't, if you don't understand that business and you have to jump into it, that's, that's scary and you're not going to build that knowledge. It takes a while to build that knowledge. Now people do that and they're successful by all means. But it wasn't. There wasn't. That wasn't the type of hair I was comfortable with. And so I think for size, you know, I was pretty open minded but I think I was probably in the. It's funny, I knew I at least wanted 500 SDE. I knew that I did have people I could raise money from if I needed to. But I think I knew early on I didn't want to raise money. I wanted to be self funded. I think, you know, one of the biggest takeaways I had from my career is my success had always been beholden to other people's strategies and when you work for a company, certainly you have your ability to articulate a strategy or how you want to implement it, but you're still beholden to a broader strategy, both the companies and let's say, your bosses or your teams. And I think historically I've been beholden to ineffective strategies and I think I I had been burnt out from that and I just said I don't want to answer to anyone. I want to be able to do whatever I want when I want and not have to answer anyone. Which is both the reasons for wanting to own my own business, but also just not wanting to have to deal with investors. And obviously you can get good supportive investors, but if I can just not have to deal with that and if I need advice, I'm happy to go outside and do that. But again, not be beholden to that. And certainly I want to make quarterly or annual reports to people and have to explain myself.

[18:11] Host: I want to share an update on the Acquisition Lab as you know, the Lab is a highly vetted cohort based accelerator and community for people serious about buying a business. After going through the Lab's month long intensive, you have ongoing access to almost daily Q and A sessions with advisors, regular live deal reviews with Walker Deibel, author of Buy, then Build Potential Deal team introductions and a very active Slack group with other searchers on the path. Well, the update is that the Lab recently passed 60 businesses acquired and for well over $100 million in aggregate transaction value. Also, all members now enjoy lifetime access to the Lab because when you buy a business it's often just the first of many and the Lab wants to support you in every deal, not just your first. Lastly, check out my recent interview with Shane Ursum episode 105. Shane acquired a business with over a million dollars in EBITDA in just six months and he attributes a lot of his deal success to what he learned in the lab. Check out acquisitionlab.com or email the lab's director, Chelsea Wood. Chelsea then build.com so 500sce and you had liquidated this real estate portfolio at this point. So you had more more liquid than probably you know, the average person listening to this.

Guest: Right?

Host: What's your what was your balance sheet looking like?

Guest: I I had a decent amount I had and what works out too is we we never owned our house or apartment so we always rented so we had always put our money into pro other properties. So we we were pretty liquid at that point. Beyond yet. Yeah, it's funny because for a certain point when I did find this Business I, for reasons we'll get into, I didn't have the full cash needed to close. So I was looking for a partner to partner up with me. And it was funny because I went to a number of friends who I think are more successful than me or certainly have higher paying jobs and they weren't as liquid as I was because they're just like, wait, how do you have that? I'm like, because it's everything I have, it's every dollar. I am just, I, I don't own any investments or assets right now. It's all just sitting in cash. And so, yeah, it probably made me look more successful than I was. I remember a couple of my friends like you have how much? Again, I'm, I'm not, it wasn't certainly not enough to retire off of, but, but more than, it was just I had a lot sitting in cash because I'd liquidated everything I had. And okay, so, but, but with I, I, I didn't fully understand the, the SBA element. I, I knew I could get an SBA loan and, and, and I could put down only 10% and I knew that, but I hadn't, I hadn't dug into that fully the financing element, until I found the asset I was looking for. Now, my recommendation to people, yes, I'll fully understand the, the financing element, what you have in your capabilities and, and, and you can mod out hypotheticals. I didn't, I didn't even think to do that at the time. I kind of was just full steam ahead, like, I need to make this happen.

[21:19] Host: Okay, but what, what do you mean? Did you then when you learned about SBA financing, it didn't end up working. I, I feel like there's something in there where, where you were naive and learned something later. What is this learning?

Guest: Well, I never, I, I think just as natural part of your search, you know, you, if you understand, you know, the mechanics of SBA financing, both, both going into it, what the timing is and what you, what, what it takes to get that financing as well as what's available, what the rates are, how much leverage you can get, all of that, that's going to help make a decision as far as the type of asset, how big of an asset you can get, for instance. And I didn't go that path and for the most part I never needed to. A big reason being is the business I ultimately bought was not financeable for a number of reasons and it wasn't traditionally financeable. Someone had tried, someone previously had tried to get financing. It didn't work out. I think the books were just a complete mess. You could have spent a lot of time trying to clean it up and make it make sense and ultimately it was too tricky. Now that ended up working in my favor because I was a little more liquid. I could work with them and just say, okay, these people who need 90% financing to make this work, they're out. You're not gonna, you're not, you're, no one can do that. The amount of people that can write a larger equity check, you know, that, that narrows the field a little bit. So I was in, I was in a situation where I, I wasn't a competitive situation. But, you know, a funny story is the business, you know, it was, let's say, you know, I think initially including property, you know, for sale, you know, a little over 3 million and the seller was unwilling to write a big seller note. But you couldn't get financing, so they wanted somebody who was just going to give them millions of dollars of cash for the business. And I, I knew that that was highly unlikely. In retrospect, that was impossible. It was never going to happen. At the time. It was like, oh, that's highly unlikely. It's probably, you're probably not going to find someone. So I, you know, and we can get into details, but long story short, it took almost a year of negotiating to get from where we started to my initial loi to the deal we closed on. And the deal we closed on would have never happened. If I took that exact deal closed on and gave it to him day one, he would have never taken it. I think he needed to go through the motions of understanding what was feasible, what was reasonable. Because, yeah, you can imagine if you're a business owner, you're looking to sell your business and brokers are vying for that business. Sell that for you. Yeah, they're off. They're going to sell you the world. They're going to say your business is worth this much and you can do all these things. And they don't know. And understandably they wouldn't know that market. So managing the expectations of the seller. And one of the things I learned too is you have a lot of lawyers and accountants in this process that I, I think they understand the, a very tight niche of the realm. But, but they're advising sellers and frankly, in my experience, usually pretty poorly.

[24:39] Host: Well, I, I want to spend some time on, on the transaction, but just before we get there, Chad, so, so, so wrap us up on kind of how you found this business. You're you're looking in Jersey City, a radius of an hour and 500 SDE, you're looking at biz buy, sell. Are you? Who else are, Are you searching or is that it? Take us from that point to finding this business.

Guest: So it was, I had three opportunities. I said I found this business pretty quickly and business by selling. I immediately liked it. Again, it's, it was, it's what we are. You know, the company is a candle company. We are a private label candle manufacturer. We manufacture candles for other brands, hotels, resellers, boutique shops across the country. And. But the idea of, you know, that there's a team of people, we've got 10 employees, the idea that, okay, I can understand how candles are made, that's not something you need to go to school for. For instance, as I've learned, there's an incredible amount of details and nuance and even science that goes into it. I would have never thought but, but nonetheless, you know, you could, it's, it's attainable for sure. And so manufacturing certainly was high on my list of things that were appealing. I would say this is manufacturing light because it's not like we have, you know, a ton of automation and heavy equipment.

Host: But you want, you like to manufacturing business. You liked the concept of buying manufacturing because a lot of people have an aversion to manufacturing. It's, it's, it's in that pile alongside whatever retail and convenience stores and, and restaurants that they won't touch. But you liked it?

Guest: I loved it. I think, you know, it's kind of one of those getting your hands dirty type things. And you know, I think, you know, it's very process oriented. You know, I don't have a lot of other businesses that I've looked at to compare to. It's what I know right now, obviously what I eat, drink and breathe. But I love it. It's great. And so I think with regard to manufacturing, you're just looking at systems and processes all day and how do we make this better? And obviously how do we sell our product and create a superior product?

Host: Well, and there's also, I guess, one thing to like about manufacturing without speaking above my pay grade is. But my impression always is that there's a very much a recurring component to it. You establish relationships and then you're taking orders basically. So, you know, the phone rings and you got a new order to go out. And so, so we all love recurring and manufacturing has that in spades. Do you think that's a fair characterization?

[27:21] Guest: I think that's Right. You know, I think obviously when you look you and you can other businesses, let's say project based revenues, where it's one off. Like know, extreme example would be construction where you know, you have much less reoccurring revenue and it's, you're working, going up project to project. I think this, this is, this was you know, high reoccurring revenue and, and that made a lot of sense to me. You know, obviously low concentration of customers, broad customer base. I think the business did hit a lot of those things that people tend to look for. You know, I thought there's a lot of opportunity, understandable business, broad customer base, reoccurring revenue. I think those are things people like to see and it certainly made a lot of sense to me.

Host: Yeah. But actually it is reoccurring revenue, repeat business.

Guest: It's not, sorry, it's not, it's not

Host: actually pure recurring where you are shipping whatever 5,000 units a month, month in, month out on you know, digging the credit card or invoicing automatically to a customer. It's you are taking orders and only, and only you know, delivering your service or delivering your product once an order is received. That's kind of what it looks like.

Guest: Okay, that's right, that's right. And so you know, customers will come in and there's no, there's no fixed contracts for saying we're going to buy this amount per quarter, it's as needed. But, but repeat customers.

Host: So you find this on biz by sell. It has a lot of the features that you like that we like as searchers and so, so take us into the, to the process now of, of what this acquisition, this 11 or 12 months look like.

Guest: Yeah. So I think I identified it pretty early. Yeah, it's something we've talked about is there's something I've learned in my career previously in banking that I think the most interesting deals we ever worked on were the ones that had a lot of hair on them were the ones that everyone, a lot of other places had passed on or looked a little hairy at first. And we dug in and we said actually there's a lot, there's something really interesting here. And that's not to say, you know, most deals certainly passed on most deals because they're too hairy and they weren't for us. But when you, when you can find the right hair and you can find something interesting and you can find hair that you're actually comfortable with or you feel you can mitigate appropriately, then that creates an opportunity for you where it's less competitive and, and you can, you can, you've got much more pricing leverage.

Host: And so. Well said in such a great insight. Carry on, please.

Guest: Yeah, and then, so that, that's always, that's always made sense to me. It's always been super important. You know, those deals that are straight down the fairway, you know, both, both in, in, in lending or even in SMB where, oh, it's, you know, it ticks all the right boxes and everything's perfect. Usually you're going to pay for that. You know, I do hear these stories offhand of this perfect business. Someone got at the perfect price. But, but usually when either a. When I talk to people off the record, it's not quite that or when you dig in, there's a little bit more to the story. So. But I've always, just because of that, his background of mine, I've always had this inclination to gravitate towards things that people kind of steered away from and just said, okay, is there a way I can make this work for myself? And in this case, you know, we went into the, I went into the business, they had said it's not financeable. So initially they wanted a big check. As I was looking for a partner, the owner said, actually, I'll stay on. You can buy half the business and I'll buy the other half and then over time I can buy him out. And so we spent a lot of time making that work and negotiating that. In retrospect, that was doomed to fail. And the blank stares I got from people as I described that structure to them were probably well founded. You can see that.

[31:14] Host: Why, it does strike me something about that doesn't feel quite right. Yeah, but please articulate. Why does everyone give you blank stars? Why was that such an obviously bad idea?

Guest: That was a horrible idea. But, but, but I needed to do that to get to where I needed to go. I think.

Host: Sure.

Guest: I think that, listen, I think with any sell, you, you have someone who has an existing business. They've been. This previous person had been here for 20 years and he was selling because he was burnt out. Understandably. He, he had a tremendous amount of success during COVID but it kind of like that also crushed him. Like he. The business was booming, it was great. And he had to work so hard to make it work. On top of that supply chain was brutal. So orders are getting way backed up. You're getting yelled at all day in 2020 and 2021 because Glass isn't coming in on time and there's nothing you can do about it.

Host: Yeah.

Guest: And so I think everyone. And I saw that and I know there's normally a concern with sellers when they're selling too young. You know, you want someone selling at 65, 70, they wanted to stay in the business, but. But they're time to retire. And when they're younger, let's say 50, there's a concern. Okay, am I catching a falling knife? Is there a reason he's selling? I don't know about, but I was able to.

Host: So he was, so he was that more that age.

Guest: Yeah, he, he was 50. He, you know, visiting him, the factor and talking to him, I could see it. It was pretty evident why and what had happened and the stress that had come with it. But in trying to make this work and trying to sell the business, he's like, okay, you know, I can, I can stick on. I've got a partner. But, but I think ultimately, you know, you. And in probably one of your more recent podcasts, someone was saying is, you don't, you don't buy a business. You buy a business with the intention of changing. You don't buy a business to keep it the exact same. You want to put your mark on it. And you can't do that with the old seller there. And that's not, that's not a specific comment. It's because of my seller. I think it's. Any seller, if they've run the business for 20 years, they have an idea of what works and how they want it to work, and coming in and trying to do that is tough. And even during the transition, after I'd bought the business and he stayed on for a couple of months, I'm starting to, like, tinker with things. And I could see him twitching sometimes, understandably. But, you know, even the mistakes I made, there are mistakes I had to make to understand myself.

[33:34] Host: Well, it's, it's related to this theme of as buyers, you are, you really think that you want the seller to be around for a long time as a resource because this is the, this is going to be your, your mentor in the business. This is the person who's going to teach you everything. And so much information is locked up in their head. So you really, you, you really just want to kind of have the instinct to cling to them as a resource. And then so often you get into the business and, you know, after, not that a lot less than you would have predicted, you're ready for the seller to be on their way and like, get out of your way, and you've kind of. Maybe you haven't downloaded everything from their brain, but it's enough. And. And you just.

Guest: You.

Host: You're getting that kind of too many cooks in the kitchen feeling.

Guest: 100.

Host: So people, people, people. It seems like buyers often overestimate how long they'll want the seller around.

Guest: Yeah. So it's funny because this whole process is all these things that happen that I thought were unique to me, and I'm just like, oh, I got to deal with this. Isn't that. And then every time I talk to somebody, I am absolutely blown away by how similar all our stories are and stuff like that about having the seller. You know, we had. You know, we've talked about this. One of the most important things in my journey as far as finding a business. Yeah. Go. Negotiating it and closing and then operating is. I developed a group of people actually met on Twitter that are also SMB searchers, one of which was on your podcast, Jesse, in the past.

Host: Coming back on again here in a couple of weeks.

Guest: Yep. Oh, that's fantastic. Great guy. So him and a couple. We've. We've got him. We've got another guy who bought a boat manufacturer, another guy who bought a pool company, a pool services company, a. We got a water filtration company. And so just a lot of different people all over the place. And we all kind of, for the most part, came through this together. We all closed within a year of each other. So there's a point where we're all searching and, hey, this happening. Is this crazy or is this normal? And having that was one of the most important things I can recommend to people is having a team of people that are going through it with you and sharing that. Because there's a lot of experiences that a lot of people can't relate to, and they think they can, and you talk to them about it, and people will be practical and helpful about it. But it's not the same as having someone saying, I'm going through the exact thing right now. Yeah, here's how I'm hand. Here's how I'm handling it, rightly or wrongly.

[36:05] Host: Well, that's a great piece of advice for the audience. So it was just a kind of a text chain. You guys were all on kind of a text group together or WhatsApp group or something.

Guest: Yeah, we have a WhatsApp group. There's six of us right now, I think. And I've met people otherwise that I chat with, you know, quite, quite a bit. But we had met up in person a couple times. Since then, a couple of the guys, after they closed, they moved away to different states for their businesses. So I wasn't able. So we aren't able to meet in person as much. But it's been. I've been in that chat for almost, probably a year and a half, almost two years now. And I'd say we talk every day and if nothing else, just event. It's a therapy session, if you will, which is incredibly important.

Host: Well, speaking of venting, as you go through your search, take us back now to. So. So. So you decide not to do this thing where you're going 50, 50 with the existing. With a seller, with the existing owner. So how does it evolve? Next?

Guest: Yeah, so we. We were working on an agreement, the contract to make that work. And, you know, one of each person's legal counsel is. Is obviously in a position to protect their client and put up guardrails. And so when you have two people coming into the business, it's something as simple as one of the lawyers having 50. 50 is actually really tricky because you don't have a tiebreaker. So how do you. How do you integrate that? So they're like, someone should be 51, 49, and my lawyer is telling me, you're going to buy the business. This is going to be yours. Like, you're coming in, you're paying for it. You should be 51. His lawyer is like, you're crazy. We need to be 51. And just hitting a wall like that. And I remember there's one. One of the moments I realized this wasn't going to work is his lawyer had told him, if he's 51, he can come in and fire all your candle makers and bring in his own people. I remember thinking like, I just came from Wall Street. Like, I don't have a team of combat candle makers to bring in. You know, you know, I wouldn't do that. But that's. I think that tends to be the nature of how lawyers think about these things sometimes. And it's just examples like that. We just kept hitting roadblocks. It just was not working. And then through that process, I think the seller had realized, okay, the only way this is going to work is if I sell him the whole thing. He. He doesn't have enough money. I have to write a much bigger seller note. And so he, I think through that, warmed up much more to saying, okay, if I want to sell this business, I have to be willing to write a much bigger seller note. And, you know, I probably ended up writing a 40% equity check, which is. Which is more than I wanted to write and most of my liquidity. But the upside to that being, I actually, you know, cash flow is super simple. I really don't have to worry about that. And you go to a degree anyone else has to worry about. So it gave me. What do you mean?

[39:03] Host: Because your loan is less. So your interest payments are less and less burdensome every month.

Guest: Exactly, exactly. Versus you come in now. You can pay less equity and then just keep a cushion in the background. That works as well, too. Cash reserve. But I think paying a lot down, not having to pay that interest and just. It does. Actually, it did give me quite a bit of peace of mind, especially during, you know, slow seasons. In the summer, for instance.

Host: Yeah. So you had to bring 40 equity, and then what did. What was the remaining 60%? Was that all seller note or 100?

Guest: That. That was all seller note, the 60%. Wow. Yeah. Yeah.

Host: That's huge.

Guest: It's a huge seller. Yeah. And I thought I was incredible. I thought I was a genius for working that out. And I met someone who got 100% seller note, and I, you know, they took the cake. And obviously, as you can imagine, there's. There's. There's. They have their own set of hair on their deal. Yeah. But I think.

Host: Well, and returning to the hair, I mean, I love this point that you made earlier. So just to be crystal clear with the audience about what the hair of this deal was, it was the fact that it was unfinanceable. Correct.

Guest: Because the books were not in any recognizable order. I think when I came in, he. When I looked at the business, he gave me three. His financials on the back of a manila envelope. And he's like, that's what I think. Not even animal. No. It's like. It was scribble. It's like, this is what I think the business is. And I'm like, okay, let's. Let's get started. Wow.

Host: And. And. And Chad, I think when this concept, this idea of hair and. And being, you know, the buyer who's willing to deal with certain hair, but what that also means is that there's something about the hair that you can overcome that other people can't. That. That there's kind of a, you know, it's. It's less daunting to you because maybe you have a special skill or a special way to overcome this hair. So. So in this case, like, why did that hair. Why did. Why was that not enough to scare you off? Was it because you had 17 years of experience in finance and kind of, and having non existent, practically non existent books was something that you felt that you were specially qualified to overcome?

Guest: Yeah, probably the short answer is, you know, stupidity and naivete on my part. But I think more more broadly, no, I think I could make that work is it actually ended up being something that worked in my favor where a lot of people I spoke to who had seemingly clear books, I think very late in the process found out those books were not nearly as straightforward as they thought and had to do a lot of work backing into it. I wasn't in a situation where I had to take the seller's word on anything. I, I just said, okay, give me, give me your last three years of bank statements, of credit card statements, of everything. Give me all the data and I will just line by line sift through it. And I took, we had PDFs of all his bank statements. I converted all those into self spreadsheets. I then created. I. So I had line by line every bank transaction through his bank on a spreadsheet and then just started organizing it. And obviously the things that are repeating, certain customers, certain vendors, everything, I can group that into a pile and then one by one, all the one off stuff, figuring out what was that and what that related to. And yet sometimes I'm usually just googling companies and certainly asking them and talking to them about it. And that was, that was an insane amount of work. And part of the reason I did it was I probably didn't realize what I was signing up for when I started to do that because in theory I didn't think it was too bad. It was a ton of work. I'm glad I did it. But I understood the business incredibly well. I think what kind of, what all those line items were and what made that business tick from that perspective, incredibly well because of that work.

[42:49] Host: Yeah. Well, I love this part of your story, Chad. So let's make sure we are really clear with the audience what this is. You get a manila envelope not filled with records, it's got nothing inside, just the back of the envelope. It just happens to be a man envelope giving you three years of financial history. And so you say, okay, can you at least give me your bank statements? He gives you 36 roughly bank statements, one for each month for the last three years in PDF form. And you literally go through line by line on these 36 PDFs, extract every transaction, put it into a spreadsheet and you are recreating his books for the last 36 months from scratch. So Far so good.

Guest: I would do. There are programs online where it'll automatically convert the PDF to, to Excel and then I could do some formatting. And you, once you get in a groove of doing that, playing with spreadsheets, you know, there is some, a lot of efficiencies there. But, but. Yeah, that's right.

Host: Okay.

Guest: Okay. And to be clear, there were, there were tax returns through this business. They just, it wasn't straightforward or helpful in a meaningful way. And. Yeah.

Host: Okay.

Guest: Yeah.

Host: Okay. So you've got this. So, so you've created the spreadsheet that is for basically the P L of the last three years and that's been a tremendous amount of work. How many hours just to get that P and L in front of you? I mean you're basically doing your own quality of earnings, I guess.

Guest: That's right. That's right. I don't know. 100 hours.

Host: Like 100 hours. Even with these programs that will slice and dice.

Guest: It was months of work.

Host: Months of work.

Guest: Yeah. Okay.

Host: But at the end of it you've got this spreadsheet that's, that's, that's the P L of the business, you know, tied right line by line, right to the bank statement. So you feel really confident now and you have the best picture of this business better than, than the seller himself probably has or understands. And so I, I love how you put it to me that this basically this red flag of the finances being so non existent or, or obfuscated.

Guest: Yeah.

Host: Turns into this, this, that you, you judo, whatever jujitsu it into this real strength. Because going through the hundred hours of work though gives you now this document that you have extremely high visibility, granular visibility into the business and really, really, really understand it probably better than many of my listeners understand the businesses that they buy that it in a nutshell. I just want to emphasize this process.

[45:24] Guest: Fascinating to me. I think so. Right. You know, I don't want to speak for what everyone else does, but again through.

Host: Yeah.

Guest: There, there was one, was one guy in my group of friends, searchers, who, who was working off QuickBooks and, and everything was there and it looks straightforward and there's a couple of things that didn't add up and it kind of ended up being that thread that once you pull on it yet I think it. A lot of stuff didn't add up or make sense and not that someone's, you know, purposely obfuscating anything, but just a lot as, as a common topic. A lot of these people have, you know, I think, you know, accountants or Just, you know, bookkeepers that are, you know, it's a part time job or it's not something they had history in doing or they've been doing for 30 years and just had never adapted tactics of ways of doing things over time and just things miscategorized and not, and not presented right. And so he had discovered like a whole bunch of glaring, gaping holes in that process. And then having late in the process to start going, doing a lot of what I, the work I had done as well as the. When you have to do that, there's that feeling of okay, what else is wrong? What else do I know about? Because you know, this doesn't get said a lot but like, and maybe I'm biased and I'm sure there's exceptions, but I think when you look at a business and you look at their financials and you go like, okay, this is what it is. Like you haven't caught it. Like whatever business you look at, there's a bunch of hair, a bunch of ugly things hiding in the closet that, that are there, that you either see them or you don't. But I promise you that they're obviously the varying degrees of severity for sure. But yeah, I think those things people talk about behind closed doors of just like, what are the skeletons in the closet business you found? Like, they're there and they're real and if you can hit them up front and you can address them, I think you can kind of go into this with a much more clear head. Not that you know, there are always going to be surprises when you own a business. One of the more interesting things I learned I found out I was talking to when I was doing my family office coverage, I was talking to a prominent family office that does lower middle market PE and I was asking about the hold period. I was like, you know, are you typical PE fund where you know your average asset is going to be five years or what have you. And they're like, honestly? He's like, I can say this now. He's like, the first year you don't know what you own until you bought it. You don't know what it is until you own it and you spend the first year figuring it out. He's like, when you're doing due diligence, no one tells you the CFO doesn't work Fridays that get conveniently left out. And it's true, you couldn't possibly. Especially if you're going to a new industry, a new business, you can research all you want, you can do all due diligence but until you're operating, you really don't understand what you own and what, what the right levers are to pull in that business. And, and that, and that, that, that's the reality. I think people deal that in the large scale more than they'll admit too. But like, but you can, that doesn't mean you can't do good due diligence. That doesn't mean, you know, due diligence is worthless. It's very meaningful. It's just, you know, the sooner you can uncover and address whatever skeletons there are or whatever, whatever hair there is, then then you kind of understand your asset better and you're in a better position and there will be less surprises.

[48:44] Host: The thing is, what. Because we all recognize that these businesses are very to the point that you, you really can't know everything. You can't diligence away all risk. What we do is we look for proxies or signals. So kind of the classic example is like if the seller has been, you discover that the seller has somehow been dishonest with you or in some other dealings in their business. You don't say to yourself, well, can I get over this lie? You know, because, you know, I can get over this way, this, this and this way. No, you should say, well, I should, you should really kind of extrapolate. Well, if they're lying about this, they're probably lying about 10 other things as well. And you know, it's, it, it casts much, a much longer shadow. And so I'm not saying your guy was lying. I'm just using that as an example. But to, to tie it to, to your story. If there's no books and you have to recreate them from scratch, isn't that a signal that there's going to be all sorts of other areas in the business that are similarly under managed or, or, or, or, or whatever, or obfuscated or, you know, not up to a standard that is acceptable. Like, isn't that a proxy of something?

Guest: To a degree. You know, keep in mind there was nothing. There's. I'll take a step back. When a lot of these businesses, when they're started by somebody, you know, the intention was never to create a company. It was, I'm creating a job so I can do this thing. And, and, and it kind of, it usually builds into something greater than they'd ever imagined. And yeah, and you're kind of, you're, it's almost like you're, you're building a ship as you're, as you're floating away. And so a lot of it isn't lying or obfuscating. A lot of it is just this is just how we've evolved. A lot of it's old practices that made sense a long time ago and changed. I think when you come from, when you come from the big corporate world, there's 10 people for, you know, you don't only in retrospect, I've realized how bloated those organizations are and they've got all these middle managers and people overlook overseeing anything. You're a small business like you don't have time to sit there and sift through everything. A great example of that is I don't really look at my financials right now. I do my QuickBooks. I'm diligent about that. But I have certain friends that sit there and go okay, what's my P and L this month? And I don't have time to do that. I don't care to do that. I, fortunately I don't my because I have a large equity check and because I've got a very short cash conversion cycle, I don't, I, I, I'm, I'm privileged to not have to worry about that. But even still from a profitability standpoint, like I, I don't care. I, as long as I'll feel it if, if, if revenue's down a lot, I'll feel it and if down a lot, I'll feel that too. I'll know that intuitively just by being in the business. But I can only focus on so many different things. I can only focus on so many different processes. I am slowly chipping away at everything. But, but I get it from a small business standpoint of I think every time we get wrong information and every time we, or something was incorrect or feels obfuscated, often the answer isn't you were lied to. Often the answer is that that just wasn't something that they paid attention to a lot. Or, or they're answering with their gut, which is how half their business was run to begin with.

[52:13] Host: I think it's such a good point Chad, because and I, a recent guest and I were talking about the same thing from a slightly different angle. But it's like as buyers and as people who are trying to be as diligent as we can and thinking about the financials in a big way and the, the margin, the ste, the ebitda, you know, how the financing is going to work. We're very numbers focused as we should be when dealing with a financial, big financial transaction. The biggest one of most of our lives. And then, and then we're mystified that these sellers can't tell us what their margins are or don't know, you know, exactly what their P L looks like last month or last year. It's like, what. How do you not know this? This is. So this is the metric to define, you know, how effective your business is. If you define a business as something that generates cash and then.

Guest: No idea how much money I'm making. None.

Host: Yeah. And then the same buyers will get into the business and become owner operators. And just like you, all of that, those financial metrics just all of a sudden drop on the priority list and maybe completely off the list. And there's so many other things competing for their attention that are more pressing, more important, and frankly, actually bigger picture, actually bigger picture. We think the finances are the big picture. But, but really there are other bigger picture things. And then they, and then they, and it's only once they get into the seat do they understand the owner operators and the sellers and why those sellers weren't on top of their, you know, what their EBITDA was for the last three years.

Guest: Yeah, that's right. It's funny because, like, people ask me if someone asked me how much money I make or how I'm doing, I'm like, I don't know. Yesterday, you know, $50,000 check came in and I'm like, I'm pretty good. And two days later I got $100,000Amex bill to pay and the swings on my, on my bank account. And all I do is look at my bank account. That's a good business. I've got enough buffer. And I don't look at it and go, oh, I'm making a lot of money. I go, I look and go, okay, I've got a good buffer. So when, if stuff hits the fan, I'm going to be, I don't have to be as nervous. And because the reality is I can't forecast what my customers are going to be doing next month or this month

[54:23] Host: or

Guest: what product I'm necessarily going to run out of. And I've gotten very comfortable with that. And that's fine. I know I'm profitable, I know what my margins are, and I've developed a pretty good model for how I should be pricing everything to make it make sense. So on a deal by deal basis, I get it. But on a macro scale, money's flying in and out and it's net, net going up, But a lot of times up to back one and I know directionally it's working out okay, and, and that's fine. All I can do is put my head down and go, okay, what are the things I need to do to make this a better business? And if I feel myself outperforming, if, and I'll know right away because we're just going to be incredibly busy, I know I can start investing in my business a little bit. And if we're down a little bit, I still know what I need to do. If we're down a lot, okay. I need to start taking dramatic steps to stem the bleeding. But the reality is I feel that it just, I'm here, it's an aura. I know how busy people are. I see the orders coming in and I intuitively know right away. And that's not something I've held day one. But when you do this for six to 12 months, I hit, I hit a year next month. You do start to feel that.

Host: Well, and let me actually press on this point that we're both agreeing on and maybe, and maybe see if we're actually wrong because you're still in the throes basically of, I mean, you're into it, you're kind of on the other side of your transition, but you're still new into this business. Is there a time maybe at the end of three years or five years or maybe when the business has grown and you have kind of a management layer where you should actually return to real, having much tighter financial visibility and you should know your margins and your EBITDA and your. Or your SDE and everything. Have that stuff really dialed in on the tip of your tongue. Yeah, maybe. Maybe a, A more valuable business and a more mature business, you can and should have that, those numbers at the ready. It's just when you're, it's still messy and small and you're in your transition, you're not quite there yet.

Guest: Well, I, I would certainly caveat that I, I do have friends that have businesses where the. Where because the cash conversion cycle is much longer and because of you having higher leverage ratio, that cash flow is a much tighter concern. And those people should for sure should be on top of that. You're going to get crushed if you don't. So again, part of this is the privilege of my circumstances with that. I mean, maybe to the question of in the future, should I pay more attention to stuff? Maybe. But at the end of the day, I've got limited time and if I can spend time making a sales call or making sure orders get up quicker so we can take on more orders or negotiating with a vendor to get better pricing. I'm probably going to do those things over staring at a spreadsheet. Now do over time, will I look at a little more? Yeah, sure. And I am diligent about I do my own bookkeeping. It was really tough to set up, but once I get used to it, actually I don't spend a tremendous amount of time doing so I can pull up those reports, but I look at it and I can go, oh, you know, I've spent more on fragrance this month or wax this month. The reality is like, there's probably a reason for that and I can go spend time, dig into it and yeah, mistakes can happen and there's issues I should be aware of. But I think right now I'm so involved in my business that most of what happens, it's a little bit more intuitive from me. And the managing by spreadsheet thing makes a ton of sense when you're working for a big company and when you're in it, it's tough.

[58:13] Host: Very well said, Chad.

Guest: Thank you.

Host: I want to get to the transition because there's a lot to say there and what ownership has felt like and looked like. But just to, just to close out the actual acquisition, you have here, deal fatigue. And you've already told us that this was a long and evolving process of about many, many months to get this thing across the finish line. What do you want to say about your emotional state during this long slog of a, of a deal?

Guest: It's tough. I mean, you know, one important thing in any searcher's journey is the decision of are you going to quit your job to do this or are you going to do it at the same time you have your job and you know, there's no right or wrong answer to that. It's circumstantial. Everyone what their financial situation is, what their work situation is. I was working while I did this, so that I did this part time. And in my mind I was like, okay, work's a little bit light right now. And searching didn't feel like a full time job. The difficulty was that, you know, you might in theory, let's say, you know, this wasn't the case. Let's say you've got 12, you're doing 20 hours a week searching and 20 hours a week during your day job, you go, that's 40 hours, that's fine. The reality is all those things have a habit of overlapping. You know that those, those important work calls tend to have at the exact same time, you've got the important calls with a seller of a business and it gets really tricky and that's really stressful. And of course, when you quit full time to, and go full time to look for a business that's stressful because every day you don't have a business as a day you're spending money and not making money. And it does feel like a, you know, sand dripping through the, through the hourglass a little bit. So. And in my group, we're split. You know, half of us were, were, were searching while working. The other half were quit their jobs to do it. And that's his own. That in and of itself is his own unique stress. My deal died five times. Probably we hit a wall and we just said, okay, let's walk away from this. And then a couple weeks later we'd be like, hey, how about this? And again, in my career, all the great deals, those hairy deals, they tend to die and you kind of have to let them die a little bit. And if it's a good deal, it'll come back to you in a way.

[1:00:25] Host: Yeah.

Guest: And I've seen that happen so many times. And if it's a bad deal, it'll stay gone.

Host: Yeah, it should be.

Guest: It'll stay dead. And you want it to. But going through that process, you know, it's, it's stressful in theory. You need to do due diligence. You go, okay. You go to your cell and say, okay, I want all these items given to me. And they're like, I'll give you half of this. And I'm going to trickle into you a little bit every week over the next month. And that seems to be a common theme, is just getting the information, the data, much of which you're not going to get because they never had it. And pulling. It's harder to do than you think. And so, you know, I've got, I'll get, okay, last year's bank statements. Cool, I'll work on that. And then here, here's the first three months of two years ago. And then a couple weeks later is the last three months of two years ago. And here's a couple from two, three years ago, by the way. I'm still working. I'll get back to you. And the old. He had a, he had a small local bank and they, at a certain point, they didn't give PDFs you had to get. They would mail you a copy. So I literally had to take copies of bank statements, scan them, convert them to PDF. And then convert them into Excel, and it was just time consuming and it was tiring, and you forget. You get, yeah, luckily I didn't. I wasn't working on multiple deals. But you. You confuse deals really easy and things you're told that seem crystal clear and you understood a month ago. Suddenly you forget. You're like, wait a minute. Is. Are all these expenses from this thing or did this happen? This thing? I forget why I said there was a spike in payroll this month and how important it is to keep incredibly detailed notes. I think that was one of the things I learned my previous career is having a salt spreadsheet and just being overly diligent with everything. You write down, all the questions you have, all the data you got and you still need, and the organization of that will make your life incredibly better in the process. But ultimately, it's tiring. You know, after I said this negotiation for this deal was, you know, over nine months, and it was brutal. You know, and it. Once. Once you pass, you work on something for six months and you see a die and just say, okay, everything you did was a waste, worthless. Onto the next one. And there's people who will say, like, yep, I'm just. I've got the mentality, like, on the next one. I don't believe them. Like, that. That crushes you. You. You have to. You. You know, you. You know, the people I feel like, who are really good at what they do, you know, tend to be pretty passionate about what they do and pretty into it. And. And when you give so much of yourself to that process or something and it fails, like, a little part of you dies in that moment. Yeah. And again. So I had that network of friends to lean on. And, you know, I'll say everyone talks about this SMB thing. As, you know, you. You make a big financial decision and you put your life savings into it, and. And it's huge. And maybe you can go bankrupt, but. But the important thing is the. The friends you make along the way. That's why we really do that. Not really. But.

[1:03:33] Host: But.

Guest: But it helped. Oh, yeah.

Host: Okay. So.

Guest: So you.

Host: But you do get it across the finish line and remind us the size of the business.

Guest: The.

Host: Yeah, kind of.

Guest: When I bought News and yes, sales were, you know, just under 3 million. You know, what I found out was, you know, the business had. Was booming during COVID obviously home goods, candles, you know, people were buying, and it was a peak for the industry. It's funny because everyone. Everyone talks about being scared about businesses. They're like, okay, how do they do during COVID And that's, that's a bad sign if they didn't do well. To me, I was scared of businesses that did really well during COVID Because if you're doing incredibly well during COVID what happens when Covid's gone? Yeah. So as on top of the stress, this whole deal, you know, sales are actually going down as, as we're negotiating it and that, you know, you don't know why. You don't. There are three things at play. One, we're coming out of COVID So this would have been. That Covid bump had slowed down, we'll say, across all industries. So this would be middle of 2022. Combine that with the Ukraine war had started ramping up. There's a lot of skittishness economically. And lastly, what I had read, and this makes a lot of sense to me, is that toward the end, sellers kind of take their foot off the gas a little bit once they see that island they're retiring to hypothetically, wherever. And you know, you're not as focused on the business, you will see a little bit of pullback. So all those things. And so, you know, there's a couple of bad months in there and you go, okay, is this a blip on the radar? Is this real? And you don't know. And that was really tricky.

Host: How did you solve it? Or did we. Did you not. You just kind of leap of faith that.

Guest: I think that was one of the things that allowed me to leverage to get a, to get a higher seller note and, you know, pretty favorable terms on the seller note. I wanted seven years, he wanted four years. And I said, okay, I'll pay you in four years, but there's a seven year amortization. So I'm paying as if it's a seven year loan. And, but, and then once I hit year four, I have to pay you the remaining balance, which, which is much smaller. And that was a good happy medium. And I, I talked to a lot of searchers who hadn't thought of something like that. They get stuck on the whole like, I want seven, you want four. And there's actually a way to split the baby to a degree. And so that goes back to kind of my structuring background experience of thinking about these things through that helped a lot. And it was one of those things where we both wanted something and there was a way to get us both what we wanted.

[1:06:16] Host: Well, another technique to have addressed that seems like a forgivable part of the seller node or some in Escrow that you could clawback if the business didn't perform. Did you consider any of that stuff? Sort of. Business had to perform to a particular historical norm for him to get all his money to.

Guest: Two things I would have done differently. I would, it's not forgivable. I would have put in a forgiven element. I probably could have renegotiated. I probably should have tried to renegotiate the price a little bit. I think by the end when I realized, like, okay, there's a 15% pullback, that's really, I should be renegotiating. I use that as leverage across the board on a lot of items. But my feeling at the time was the seller was so pegged to this number, and anytime it was like a third rail for him, anytime we talked price, he was like, absolutely not. And I think he just would have walked. But insulted by it. But looking back on it, I think there's ways, again, there's ways I'm really happy with how I structured and I was really proud of myself and thoughtful and there's ways I think I didn't, I don't, I think I could have done better. And that was one of them, is making, making the seller know, forgivable one and two. I think if, if I had, if, if I come to him, just say, hey, listen, business makes the most money. You're getting less price. I think he would have poo pooed that pretty quickly. But I think if I, if I, if I'd been creative about how, how to help him think through that and, and, and ways around that, we probably could have found out something. But the reality is, if I'm being 100% honest, like you're working on a deal for seven, eight months, like you're, you're, I, I, I was fried. I was fried. I was like, let's just get this thing done. I was still confident it was a good business. I, I still really liked what I saw. I was still getting at a, at a, at a relatively low multiple. Uh, I just said, you know what, like, let's, let's not, I don't want to lose a deal again on, on something like this where ultimately I'm still happy with the business.

Host: And so sales were under 3 million, just under $3 million. And Ste was approaching a million. And he, you had said that he, the purchase price he wanted was 3 million. So you're in a just over 3x multiple.

Guest: It was less than that because we, he originally wanted the real estate included. I took out the real estate one of the things I got creative with is I got a, pretty much have a call option on the real estate. So for the next five years I can buy it at a fixed price. So the price I can buy for today I have that price is still valid for up to five years. Where most people, they'll negotiate a right of first refusal. So if the person wants to sell it, they get the option to, to, to overbid who's ever there. But I have a fixed price. I, I can at any point I can buy for that price. No one else can take it from me. So if I, if I want to keep it. So again, going back to liver little leverage points, I did apply with, with every, with kind of economic condition, I was able to get value out of it for certain.

[1:09:11] Host: Yeah. And that price for the real estate that you were negotiated, what was the price that you negotiated basically the market price of that real estate today?

Guest: Yeah, pretty much. Maybe even. Honestly I think it was a decent price. It may be even been below. You know, I think that would have been 700k. But obviously without seeing the property, that means that won't mean anything to anyone. But so the price I'm happy with and if I'm not happy with it, then I don't buy it, you know. So one of the things, one of the huge stresses we have now is we're actually running out of space. So as much as I like the place and it's good, we, you know, we, we outgrow it and we don't have the ability to expand. So crazy enough, what I can do is I can actually, I can sell the property before I own it. I could find a buyer to using round numbers. Someone, someone wants to buy for a million. Okay. Oh great. At close I do a buy sell. I never owned it and I still make that benefit from having owned it when I sell it.

Host: Yeah, well, I mean, exactly. So if you have this call option on a piece of real estate for five years, not to sound naive, but it, you know, seems realistic that it'll appreciate somewhat in the next five years. And so at the end of the five years, even if you don't want the real estate, if it's still available to you at under market, you just essentially flip it. You have basically the ability to flip it at any, any point you want. That's very interesting deal. So and the number was about 700. So the purchase price of the business was about 2.34.

Guest: 2.4. 2.4.

Host: Great.

Guest: Okay.

Host: Well Chad, we are, I'm just paying Attention to time here. And we haven't gotten into any of the adventure of running this business. We're not going to be able to get to all of it.

Guest: But.

Host: But there's a lot of important stuff for people to hear about the transition. So let's get into it. Start. Start us wherever you want. What. What is something you really want the audience to know about what your transition looked like?

Guest: I. I think it was. One thing I didn't mention about my process is I convinced him to let me work in the business for a number of days during the search, and he agreed to it. And, you know, it was kind of one of those audacious asks where I was just like, hey, let me. Can I work there for a day? Let me just, like, I'll literally put me in the assembly line. I'll just work and just tell people I'm a guy, you know, and we did that. And I ended up doing that for, you know, probably a total of, you know, seven, eight days throughout the process, just sporadically. And obviously people were, you know, hey, who's this guy? What's he doing here? I think he told him I was a potential investor maybe, you know, to part of the business or might be joining in a more senior position. And I actually got to the look and feel. And I think most importantly is interact with the employees. And I think that was a huge thing. Cause I was really happy with the staff and the employees. The one funny thing is after I closed, I was talking to somebody. I'm like, yeah, everyone. Everyone was super quiet when I was there. And I'm realizing they're not now. And it didn't occur to me that, like, when I was there, I got a different version of everyone. Everyone's like, everyone didn't know if I was a spy or what I was. And everyone was really quiet and worked very hard. And they. They still do, to be clear. Just less quiet. So. But. But really good people, good staff for the most part. And so coming into it, day one, I think probably one of the things that. That gets underappreciated is employees have no idea what this means when a business gets sold. You know, they don't. They don't follow any M and A activity. They've never been through this. They don't know if they're gonna get fired or what that means at all. And I think a lot of people just assume, like, I'm coming in and everything's gonna be the same. And you can say that, but they might not necessarily believe it. So I Did spend a lot of time, you know, day one, saying, hey, listen, this is walking through my own journey. This is why I'm here. This is what I did. I bought this business because of you all. Not because I think I can get better people than you. I don't think I can. But I need you to help me build this, to help me do this. And you guys are a big part of the reason I bought this. So help me do this. And I think it was very well received and it made a lot of sense and it put a lot of people at ease because people definitely I did get, like, back when that in the. Initially, once it was originally announced that people thought like, okay, our job's gone, or what does this mean? Yeah. Now you will inherit any problems, you know, people unhealthy, happy with salary, or people who, you know, any frictions that took place, like they're there when you inherit it. I. I've talked with a lot of people, very common, you know, for day one, but certainly first week, you're going to have employees say, can I have a race? And you need to be prepared for that. And I think the best thing to do is you can deflect and just say, hey, listen, my goal is to take care of everyone. I need to figure out this business and what's going on first. Give me some time and buy yourself some time and figure out what you want to do. But. But it does. A lot of people are shocked when literally day one, you know, I. Someone was met in the parking lot and just said, like, I need a raise. I need you to do this. And you're just. You don't realize how beholden you are to employees at this point in your. You don't. You don't understand the business. You've just bought it. You. You realize that all these employees could walk out right now, and I go bankrupt. Yeah. You know, and. And you feel it, and it's terrifying. So be prepared for that. Those tough conversations I did have, that's

[1:14:42] Host: what's so interesting about the dynamic, because we as buyers feel really. Yeah, like you said, a bit terrified that, you know, everybody could just walk out or three key people could quit or what have you. And so you feel really reliant on the employees, and sometimes to the point that we forget that they also are feeling fear that they're going to be let go or that. What. What does this mean? So there's kind of like mutual suspicion and. And mutual fear, but at the same time, it's. It's a healthy Fear because you, because you really are reliant on these people. And there are stories of people leaving, maybe not day one, but, you know, there, there are horror stories, including guests on this podcast. And in certainly the raise thing, that comes up a lot. And so, by the way, Chad, do you. Would you advise people to say as part of their day one speech, no raises? I mean, you would, you would, you would. You would say it much more delicately than that. But I've heard that being a technique like there's going to be no. There's going to be no payment change or compensation changes, salary changes for six months. And just saying that, not as, not reactively when somebody approaches you for a raise, but actually saying it as part of your speech, would you, Would that have gone over well, do you think? Or at least would that have been tolerated as a way to kind of keep people at bay?

[1:16:08] Guest: It would have worked for my method because I walked in there and I just wanted just energy and positivity. And a part of your message is, hey, we're going to be awesome. So much energy. Let's do some great things. And. And you don't expect a raise. Like, I think that would have totally. That would have totally diluted the message a little bit or left a sour taste. So. Okay, again, for me, I. I was fortunate that I, I wasn't approached, but I've talked to enough people that it's very common.

Host: Oh, you were not. So nobody came to you asking for a raise? I misunderstood.

Guest: Not right away. People, as a business owner, people will always come for raises. But I was fortunate enough that people didn't come to me. But most people I talk to, that seem to be a really common thing. So. But just keeping that in mind as you go through it. And again, that just goes to the group I had of friends talking about what we've all experienced. And because I had heard that, I was prepared for that if it were to happen.

Host: One of the things that you have here, Chad, is that in retrospect, you were so concerned with the wrong things in the first three months post close, and you wasted a lot of precious time and effort. What were you so concerned about? To erroneously.

Guest: I think, you know, a big topic in buying a business is how and when do you make changes to a business? Yep. And you, in a way, you can. I always heard this thing like, don't make any changes for the first 3, 6, 9, 12 months. And I think you have to make certain changes because a lot of how a business operates is particular to that owner. So that owner maybe did a lot of things that didn't necessarily make sense, you know, weren't right or wrong, but just that was how they thought or how they wanted to go about their day. And, and maybe there's certain things they like to start the day with, certain things like they end a day with. And I don't like to do that. And I want to change that order or how I like to file things or whatever. And there's a million of those little things that if you don't make that change, it's going to be confusing for you. But when I started, I was like, okay, first thing I want to do is make kops. I want key operating procedures. I want to write down everything everyone does and we're good. That seems really practical. I realized after a week that that wasn't going to happen. Like it was just getting in the way of me learning it and operating it. I think what's really, what's burned into me is when I took over the business, it was September, it was the beginning of the holiday season. So busiest time of the year for us. I'm stepping in the shoes. I'm learning out of business at the business time of year and trying to make changes. There's some changes I needed to make. But looking back on it, I think focusing on again the key operating procedures, the formalities of it, of, you know, didn't make sense actually. I just needed to learn and understand the business. A lot of micro changes for sure. And truthfully, like, there's some things that are a blur. I remember spending a lot of time on things that didn't make sense. Looking back on it. And I don't remember them because the first three months I loved it, it was amazing. But I got so burnt out. I was so gung ho about it, you know, I was. It's funny, it's actually almost embarrassing to say this, but I was probably doing 15 hour days, started coming on the weekends a little bit, and then realized if I want to maintain my family in one piece, I can't do that. But it was so busy. There's so much to do and I was enjoying it, loving it. But I remember saying to myself, okay, as I get burnt out, once I get burnt out, I'll pull back. And in retrospect, that was a really bad idea. Cause once you get burnt out, it's too late. You're already, you're already burnt out. That's not a switch you just turn off. So by the year end, you know, but by the year end I was toast. I'd been. I had been working so hard, and I thought coming into this that, you know, hey, I've. I worked in banking. I did real estate on the side. I'm an active runner. I've got three kids. Like, I know busy better than almost anyone. And it's just different. Like when you're on your feet moving pallets and you're running around and you're worried your business is going to go bankrupt just because anything can happen. And every day you were just making mistakes and learning. Like, it. It was. It was really tough and really exhausting. It's the hardest thing I've ever done by a long shot. It's the one of the things I'm most proud of. I love it. I wouldn't change it for a second. But how hard? Actual hard work? I was shocked. I was shocked.

[1:20:50] Host: But it sounds like you're. In retrospect, you're saying that you didn't need to work that hard. It was kind of by choice that you were working that hard.

[1:21:02] Guest: So it was the reason. And I saw this when I bought. One of the reasons I wanted to buy the business is you look at things, you go, okay, I can optimize that. I can make that better. One of the things was, you know, the seller was doing two or three people's jobs, and it's like, okay, great, I'll just hire for that. Did I fully appreciate, you know, like, the friction that causes that, that you want to hire? You want. You want to learn it yourself before you hire someone to do it? 1, 2. The timing it takes to hire somebody and get the right person and then train them. And then when you're in the middle of business season, you don't have time to do that. I got to do that in off season. So did I need to work as hard? No. Did I need to work incredibly hard? Yes. I think one thing I learned is one of the biggest takeaways I learned is that, you know, ideas on how to run this business, things we can do. I have an infinite list, and I'm actually really confident they would all work. Ideas are easy. It's timing and the effort they take. So for every idea I've had, it's taken four times longer to do and had way less of an impact. I'm glad I did them and they needed to be done, but just everything is time consuming and there was no panaceas. There's nothing I'm aware of or have been able to do yet. That's been like a game Changer things have added up to. I'm really proud of our business, the processes we've done, the small changes, but a lot of them were just during change in a bucket and watching it add up over time, and it took a lot of time to do that. I think my favorite example, as I walked in, we have. We carry 150 fragrances on a wall, and they're not in alphabetical order. You just work here, and you know it, and you ask somebody where the lavender fragrances they go. They go fourth shelf from the bottom, fourth from the left, and you go, okay. And you do that, and you're like, this is crazy. I need to organize this. And then it took forever to organize it. And. And. And I got employee pushback. I'm just like, they're like, no, we know. We know where everything is. Don't mess with that. And that was like, one thing I didn't appreciate is like, no, no, this makes sense. It's alphabetical order. I'm confident you guys know the Alphabet, and then you'll be able to grab it. They're like, yeah, but, like, every employee could grab one without looking. Literally, they would. Their hand would go out, and they'd grab it. And I ruined all of that for them. And. And the reality is I. I alphabetized. It is a good move. It needed to make sense so new people can come in. And. And. And mistakes were happening occasionally from people not looking at what they're grabbing. But the actual. It was better. We're a better company for it. But actually not as much as I would have thought, because now everyone has to think about where they grab it. And they can't get used to it because when we add a new fragrance in, it shifts all of them down the line. And they. And so when they were used to every. Without looking, grabbing everything, everything's moved. Every time we got a new fragrance because that changes the order. And so it actually were slightly. That seemingly obvious change. We're actually slightly slower because of it. Yeah. But it needed to happen, and it made sense. But I got a ton of pushback from employees at first. So that. That little example times that by a thousand. My first three months of just, hey, here's a really obvious thing we should do. No, don't do it, please. Like. Like, trust me, give me a shot. Okay, I did it. It took forever to do. It worked, but actually not nearly as much as I thought it would. And that. That was that every day for three months. It's till today. Till a year. Almost a year. Later. Yeah.

[1:24:40] Host: Well, and that, Chad, is why they say don't. Don't make changes. Because you often don't understand yet the ripple effects of making those changes, the frame. And you don't understand that there's often like a method to the ma. So I guess the method to this madness was, you know, having all of the fragrances out of any sort of order was because what the good news there was, when you added a new fragrance, it didn't screw up the order of the 150 you already had. So there was. You know, it sounds like it's probably better in the long term to have alphabetical order, but there was some method to the madness, and you just couldn't have known that until longer in the business or until making the change and having it bite you in the butt a little bit.

Guest: That's right. I think when you. When you come into the business, you look at certain things and you just see chaos. And there's kind of three different types of those, of those, of those reasons those happen. One is because that process used to make sense, that it no longer does. Two, it actually does make sense. You just don't realize it yet because it's. Maybe it's a bad process, but it's the best of all the bad solutions. Yeah. Or three, that's just a preference of the former owner and you have no idea which one it is. And you almost won't learn until you mess with it. You have to now the timing of when you mess with it and how you mess with it. Completely different situation. But I think I was surprised by a lot of things I looked at from the outside that looked like chaos and didn't make any sense. And then when I dug in and tried to mess with it, I realized that, okay, there's. There's a reason for this. Yeah. Yeah.

Host: Chad, I want to make sure we have time just to learn a little bit about the candle manufacturing industry in business. So before we get into that, is there anything else? Just about the journey and kind of, you know, being meta about your whole adventure here that you want to make sure that we share with the audience.

Guest: Yeah. Listen, I think everything is harder than it looks. I don't think it's for everyone, but for the people it is for. You know, I wouldn't change this for the world. You know, I feel so much more in control of my destiny. I feel so much more fulfilled with what I do. I'm a lot prouder of what I do. And owning a business, it's something that I've always felt that I wanted to do and I get all the joy I thought I would and it's incredibly difficult and hard and soul crushing some days, not soul crushing is the wrong word, but we still all had bad days. But I love it. But just build a network, talk to people, reach out. And I think asking a lot of questions and learning from people's experiences is great. And I learned a lot from these podcasts for sure. I think that's how I learned. And for me that was, that was the most valuable thing.

[1:27:35] Host: Oh, well, fantastic, Chad. I'm thrilled to hear that. And let me ask you, how does, how does your family react to dad now as a small business owner versus a corporate guy? What do your kids think? What does your wife think?

Guest: My kids are 8, 7 and 3. And so them running around a candle factory and getting to play with wax, they love it. They make a mess every time they're here and they ride the pallet jack and all those things, so they love it. They see less of me especially. What's weird is during COVID I worked a lot, but I was working from home for a lot of it. And now they saw an extreme change that probably would have happened anyway, but, but nonetheless. So, you know, they definitely miss me a lot. I miss them a lot more. But I think it's, I think it's good. I think, you know, setting expectations with your family, you know, with your wife, and making sure with your partner that they fully understand what you're going through and what your intentions are and how this ends up, this impacts your family a lot. And again, that's one of the things people don't talk about is we talk about the stress of going through this process and also the financial risks of going through this process. You know, how you, how you work through that with your partner, who's clearly an important part of this, is really important, and making sure you're on the same page.

Host: And, and did you anticipate being away from the family as you are now? And so was this something that you kind of, for lack of a better word, pre negotiated with your partner?

Guest: I had no idea. My wife certainly did. I had no idea I'd be working as much as I am now. To be fair, I'm pulling it back. I'm not working 15 hour days anymore. Maybe once or twice a week. I, I, I make an effort to leave early, to take my kids to practice once a week, for instance, and, and things like that. I am getting better at delegating things to my team. So, so I'm freeing that up. But to get to that point was really, really difficult. And so. But. But, yeah, I didn't know how hard this was going to be or how many hours I was going to work previous to buying a business. I'd spoken to another owner, and he told me. I asked him how many hours he worked, and he goes, I'm embarrassed to say this. And I remember being like, why are you embarrassed to say that you work a lot of hours? We certainly work in a culture that, you know, like, brags about the hours we work, and that's like, you know, it's this kind of contest in a way sometimes. But I felt that shame and embarrassment with how many hours I work because it made me feel, like, ineffective. And, hey, buddy, you bought a business that you can be free and you can do what you want, and now you're a slave to that business. So there is a. There's. There was a surprising. A little bit of shame working that many hours and feeling like I was doing it wrong. But again, talking to a ton of business owners, and a lot of them went through that. It was very common. Was. Was. Made me feel a lot better. And the promise to my wife that slowly I'm going to work less and less hours. It works. I'm trying to hold to it.

[1:30:33] Host: That's great, Chad. That's so valuable for people out there with kids in a family who are doing this. And actually, on this point about family, you make kind of a comparison in your notes here to being a father. You say consistency, no panaceas. Like raising a child expecting to do one thing right in neglect, in neglecting other areas will not end well. And you're referring now to management, but comparing it to parenting. Can you elaborate on that?

Guest: Yeah. You know, one of the reasons I. You know, one of the reasons. One of the big reasons I wanted to not have any investors or partners is because I can. I've got no. I'm under no timeline of when I can sell this business. People ask me all the time, do you want to sell it? Do you want to, you know, do you want to step away? What do you. What's your plan? You want to do this forever? Answer is, I have no idea. And I don't need to know. I can figure that out. But regardless, you know, I'd like to hold this for as long as I can and do this, and. And if I. I can try to do this one big thing that will revolutionize the business and. And it probably won't. I need to be Mindful of being able to come in every day and perform and be consistent. And that involves not overdoing it any particular day, week, month, year. Obviously listen, we're gonna have days, we're have to step it up quite a bit. But if you like my Q4 last year I got overworked, I got burnt out. January, February, I was toast and I wasn't able to perform. Um, I wasn't able to do what I wanted to do where otherwise con. Again, consistency, you know, of just trying to do a little bit of everything and be. And every day get a little bit better because otherwise if I'm trying to do front load, all of it, I'm going to fail and then, or even if I'm successful, I'm going to be burnt out and not be able to do anything after that.

Host: Okay Chad, well let's close out with just a quick tutorial on the candle manufacturing business. I said to you in our pre call that candles seemed like a, like it would be a really competitive and difficult business because I feel like they're making candles is something that a lot of people start as you know, as a hobby or kind of as a crafty person to do an Etsy store. And I, I referred, I referred to an old episode of the Office where Michael Scott's girlfriend Jan or Jan starts, starts a candle business. And, and so it, you know, in a business where the barriers to entry are low, it attracts people who, who are passionate. You know, always a, always a red flag when you're in a business competing

[1:33:21] Guest: with people who are just passionate about it. That's right.

Host: One of the reasons, one of the reasons we avoid restaurants and you know, I would think this is my naivete but I would, I would think a product, a commoditized product, one where it's hard to differentiate for all those reasons it strikes me as something like a hard business. So tell us, react to that and tell us what you know about the candle making industry.

Guest: Yeah, I would put candle manufacturers in three buckets. You know, I think the first bucket is the one you described. So like the Etsy at home, people making their own candles and almost everyone starts out to that degree. Then you have the high end, the mega producers, manufacturers who are making for like the nests and maybe doing some for Yankee or any major candle and they're full automation, they've got massive machines and warehouses and you know, unless you want 5,000 or 10,000 of a single candle fragrance, like they won't take your call. And we sit in the in between Where I think we offer the selection and closer to pricing that the high end guys will do but we still have lower minimum. So they're you on the, on the lower end. The Etsy ones they, they're great at customization. They can do some really interesting things. You know there, there's certainly some, you know a certain degree of love in every candle that they're hand making but that's not scalable the customizability or you know you wouldn't go to any of those people to get you know certainly several dozen problems maybe but over that once you get the hundred, certainly thousands they're not going to be able to compete with that at all. And certainly not what we offer is we carry. You'll see behind me I've got two dozen different candle vessels. You know you can come to us. We're a one stop shop. We have any, all the vessels you want. We have the wax. We have 150 different fragrances, lids, boxes and we'll do labels and you can have your entire brand designed here. So we work for a number of notable international hotels. Some sense you've probably experienced. We have a number of online retailers, resellers and boutiques across the board and people just want to start their own candle brand and even some mid sized candle brands we've worked with and where we stand out is we do have lower minimums than the big guys because those again they won't talk to you at 5,000. But we can do more than the ultra passionate hobby people. They just don't have the equipment, the machinery experience to do what we do. We do have a few competitors but I think where we're unique is our inventory to do all this. It's funny we. One of the things that one of the chaos things we talk about that made sense is we are, we're, we're. If you Google private label candle manufacturer. We're one of the, one of the first organic hits. We used to be two, one or two. I think we slipped to three or four but and our website is completely a little bit of chaos is our web is our website. There's a lot going on. It's still one of the projects. I have to clean it up and fix that up but I didn't realize those two things are linked is because our website's a little bit of chaos. We've got a lot of pages you have to click on a lot of different spaces. You have to bounce around a lot to do that. It's one of those things that helps drive the metrics that people are on your site for longer and are clicking through your site more and therefore we show up higher on the organic when you Google us. And it's one of those things that on the surface I would have fixed, I would have said like, hey, you know, let's clean up the site, let's simplify it. I'm still looking to do that, but I have to be much more strategic like that because it will impact the Google ratings. That being said, at this point, people do find us online and we've been getting a lot of inbounds, but a lot of it's word of mouth. I think what we do is a little more unique than probably people realize in what we can offer at the scale we can offer, at the price we can offer.

[1:37:22] Host: Fascinating. And Chad, since you're a private label manufacturer, so these, let's call it hotel chains or whomever, I don't know, some other brands want to have their own candles with their names on them that they give away or sell or what have you. How do you generate new sales? Because this seems like how do you find a new brand that may want to but hasn't yet decided to release their own line of candles? Like there's no, that's kind of an invisible itch. So how do you, how do you go finding those folks so you can scratch that itch for them? Do. Am I making sense?

Guest: Perfect. You know, I like a lot of other people. So I saw the business, you know, saw that, okay, there's no marketing here, there's no sales and they're doing quite well now. What happens when you add marketing and sales? And that's a common thesis I see with a lot of businesses and we all laugh about it now because the reason no one, there's no sales or marketing is no one thought about it is because you're so buried with your day to day it is incredibly hard to do. And, and, and so I, and I have, yeah, it took me, it took me six to nine months to really find time to do any type of marketing and sales whatsoever. I, I was just reacting and now I'm able to do it. And I think, you know, I've done a lot of direct marketing outreach myself and I just, I'll call up companies and just say why don't, why don't you, you have candles. Why aren't you working with us? This is what we can do. Or why don't you have a candle line? And working with people who are existing customers and saying why aren't we, what more can we do for you? Because we also do diffusers, room space, body sprays as well. So there's a number of complimentary products we offer. And, but, but Chad, give me an

[1:39:14] Host: example of, of the type of business that you'd call who doesn't have a candle line? And you call them and say you should, like, who is that? Just basically like another hotel chain, for example.

Guest: I, I'd say where we had the most success, our sales were the most success for people who already had candles. But I, I think we could, we, we call and say, who's doing your candles? Why? You know, talk me through. Here's what we can do more. And a lot of times there's something they dabbled in that maybe they're dealing with this smaller Etsy style business that, and we have, we have machinery, we can produce a lot more, we have a lot of experience and probably more going to be more price competitive. And then that's compelling to them. They say, okay, great, you can do, you can do even more than our current customer, our provider can, and you're cheaper. So there's that element. The other element is a lot of people carry other people's candles. So it's people who have candles, but it's not their candles. They have other brands. Why don't, you know, you can have your own brand customized to your own store, company brand, whatever it is, and your margins will be better. And it's a product you designed specifically for this space that's really compelling as well.

Host: Well, Chad, anything that we haven't said, I mean, there are things we haven't said because I'm looking at our list here, but is there anything, is there anything really major that went unsaid?

Guest: I think, I don't probably, but

Host: I

Guest: think, you know, you got the gist of my story. I think for people, ultimately, you know, I think this is probably important. I found a business early and I closed quickly and I moved quickly and I kind of brute force make it the close and ultimately it worked out. I think that one thing, you know, we talk about, if you want to do this, I think it's very easy to get skittish about it, about buying a business and doing it and finding excuses not to and looking at every deal you see and seeing, okay, there's, there's, here's some hair on it, here's some problems with it. I don't want to do it. And I do have a bunch of friend searchers that have been looking and they throw out every deal because it's got a little bit hair on it. And it took them till, like, their 30th deal to be like, oh, I have to get a deal with a little bit of hair on it. And, and listen, maybe again, I think there are. It depends on how you define hair and what's tricky about it. But if you're looking for the perfect deal, you might be looking for a real long time, if not forever. So finding something you can get comfortable with and being willing to pull the trigger.

Host: Yeah, well, maybe. And maybe that is the art and the skill is figuring out what. That's what that sweet spot is of just enough hair to deal with or finding the right kind of hair for you.

[1:42:01] Guest: Right.

Host: And really, maybe that's kind of one of the, kind of the names of the game of being a good business buyer. Well, this has been fantastic, Chad. We could have gone for another hour, but I gotta let you and the audience go. How do you prefer people reach out

Guest: to you if they have questions? Probably on LinkedIn. Chad Hildebrandt, you can find. I have a. I have a Twitter. I don't, I look at, but I don't, I don't comment on. So I'm quiet, but I, But I, I'm a, I'm a lurker, if you will. But. So if you reach out to me, I'll be there. I think it's the Chad Aaron a, a R O n on Twitter. So you find me on there. I'm happy to help out anyone who in the process, I think the community has been incredible. You know, everyone's been so helpful and wanting to help out wherever they can. And so the ability to return the favor is always great.

Host: Chad, thanks very much for coming on. Thanks for all of your prep in such a deep and rich conversation.

Guest: Absolutely. Thank you. Will.