Host: Regular listeners of Acquiring Minds have heard many times the admonition, don't buy small. Buying a business without enough SDE gives you no cushion as the new owner. Well, as sound as that logic is, I feel like I have just as many guests who defy the rule and still make things happen. Today's guest, Chase Murdoch is an exemplar of this, because Chase and his partner Adam helped have built a holdco of really small businesses. Now Chase himself says that they did so not for some strategic reason, but out of necessity. They'd taken no outside funding, so tiny businesses were what they could afford. But there's power here because if they can 5x each of the businesses, as is their plan, they will own a portfolio of not so tiny businesses and own them outright. No investors. And by the way, these acquisitions have all happened only in the last two years. Chase's holdco is called Dakata, named for the decades he intends to be building and holding these businesses. So the long term cash generating potential of this portfolio is anything but tiny. But it's not all about the money for Dakata really. These are cool, fun businesses that add to the fabric of their hometown, Salt Lake City. A custom hat maker, a workshop for local artists, a builder of accessory dwelling units. Not your typical assemblage of boring businesses. Really interesting what Chase is building and still very early days. Here he is. Chase Murdoch, co owner of Dakata Group. 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. You already know that business owners are making amazing use of virtual assistants, often based in the Philippines. And while virtual assistants are helpful, virtual professionals are transformative. Moore Staffing is a boutique agency that hires a players in the Philippines not for simple tasks but for deep competency work. Think operators, supply chain managers, controllers. Moore Staffing de risks your engagement with a 12 month guarantee to you and they provide coaching for six months to their talent. When an engagement begins, that means your hire is coached in the background, no additional cost to you so that your working relationship flourishes and is as successful as it can be. Global staffing is increasingly the norm and building the muscle within your business to take advantage of it will be crucial in the years ahead. Speak with more staffing about the pool of capable affordable managers they can connect you with. Check out Morenow Co. That's Morenow Co. Chase Murdoch welcome to Acquiring Minds.

[3:13] Guest: Well thanks for having me man.

Host: It's good to be here Chase, you are the co owner of a holdco in Salt Lake City called Dakata Group. Dakata includes one business that you started from scratch and four others that you've acquired over just the last two years. I believe there are many unique and interesting angles to Dakata and we're gonna get to all of them. But before we do that, let's hear about your own personal history. Chase, please.

Guest: Sure. Well, yeah, like I said, great to be here, Will. So my background has been in entrepreneurship. Ever since my early 20s I have been an entrepreneur in the zero to one space. So creating companies primarily pursuing venture backed ideas, pursuing big ideas, moonshot ventures, and contrary to the space that Dakata is in Today, going from 1 to 2 or 1 to 10, I got the first 10, 15 years of my career start in the 0 to 1 business. So starting companies from scratch, building a startup team, trying to find product market fit, raising capital. And one of the things that I found as I was doing that is it was really fulfilling to me as an entrepreneur in the sense that I love building and assembling teams, I love going after big ideas, I love working alongside smart people. One of the things that I wasn't feeling an itch being scratched was this desire to build something long lasting, this desire to build something sustainable. And I felt like every project I was pursuing the goal was to go on a one to five year sprint, a quick trade off where I would trade off comfort, casual day to day work, life balance for an outcome of shooting for the moon, trying to build the next Twitter for example. And while it's fulfilling and while it's a bold endeavor and while I respect the entrepreneurs who have built their entire careers doing that, it left me feeling like almost like it was the arrival fallacy, like I was wanting to get to an outcome and build something temporary in order to exit, in order to sell, in order to kind of get to some quick middle ground exit. And I'm sure we'll get into it as we go, but Takata Group is kind of the antithesis of that. It was kind of the solution to that issue of not only did we switch leaving the 0 to 1 game to go play in the 1 to 2 game, but it was how do we build something long lasting, ideally with a multi decade strategy, hence the name Dakata Group where we can build something sustainable. And so my start, first 10, 15 years was pursuing various entrepreneurial projects, some successful, some completely flopping and a lot in between. And that's I've always been an entrepreneur

[6:11] Host: and you are as I said now in Salt Lake. Were. Were those years of your career also in and around Salt Lake or did you do a stint in the Bay Area? I seem to recall you were also in Asia for, for, for a time.

Guest: Yeah. So I've been out in Utah for somewhere between 15 and 20 years. So Utah's now home. I got my start and where the entrepreneurial bug first bit was when I was relocated out to the Philippines. I was working for. This was right out of high school. It was a unique experience for me for being so young a company willing to relocate me go out to the Philippines and oversee a team of project managers in the market research space. And that was where my first entrepreneurial project began is I was out there working and I was traveling frequently because when you're in the Philippines, you're an $80 flight from so many cities in Southeast Asia from Hong Kong to Vietnam and everywhere in between. And it was where I actually picked up my first custom tailored suit out in the Far east. And I had it made overnight. It was $80 and it was falling apart on the plane ride home but it fit me perfectly. And I kind of just remember that moment of saying this is an interesting product. We don't have this in the States. The supply chain is obviously a mixed bag. Some of the suits I ended up accumulating a half dozen custom suits during my time there was and some were remarkable and really well made. Some were like I said falling apart on the plane ride home. And I finished out my stint there, relocated back to the States and fast forward about a year later that's where I started my first business importing custom suits. So that was where my career got its start. This was probably 2009, 2010 and ended up raising some capital to go pursue this venture and ended up growing it to a multi state business. And yeah it was, it was a really fun journey. So been in Utah 15 years and spent a little less than a year out in the Philippines at the very beginning of my career.

Host: That's a really exciting. I'm sure it was quite an adventure. So let's get to the first business that you. That is part of the Takata Portfolio, Taylor Cooperative Custom Suits. And how you decide give us kind of the decision point where you and your partner decided to do that and leave 0 to 1 behind. What was the kind of the moment of crystallization?

Guest: Yeah. So the, the story goes back to southern Utah. We were out hiking together. I had just exited a tech startup. He was kind of in between projects as well. And Adam My partner in Dakota Group, he and I were really close friends and a part of it was trying to figure out what we were going to do next. And I was at this inflection point in my career feeling some of these emotions we're talking about of do I want to continue pursuing 0 to 1 primarily tech enabled startups or do I want to go make a career pivot? And he was in a very similar position. It was a grueling multi day hike that we took in southern Utah, in Capitol Reef national park. And we went down with no intentions of starting a business. We came back up though with the very beginnings of a business plan to go start naively this idea of a small business that we would start with a limited amount of capital, we would hire a general manager very early on and the vision wasn't to go build a multi small business holding company. We weren't even thinking along those lines. The goal was if we could start something small on the side that was cash generative, provided a little bit of an income on the side to me and Adam. It would allow us to have the fuel to go continue to pursue moonshot ideas. So we hadn't even fully made it full circle to we want to build small businesses. It was simply we see an idea of creating a lifestyle business and we'll go figure it out from there. Let's get something profitable. Let's optimize for building a really great product. It doesn't need to have a large tam, it doesn't need to have a large moonshot opportunity in front of it. Let's just create something small, something we're proud to have in the community and something that financially can be a really good vehicle in our lives and then we can continue to pursue entrepreneurial projects. We ended up starting that business not a month after that hike. We went from idea to our first dollar of revenue in 30 days, ended up filing to create the entity and started it on about $750 and at the time, very naive ambitions. Eighteen months later, we were doing about a million bucks a year top line. So we were able to very quickly grow this business, forged some really great partnerships in the supply chain and we ended up signing a lease agreement on some space for a brick and mortar luxury suit shop in Salt Lake City. And I kind of liken the process of building a small business. Kind of like what I would imagine a sculptor goes through when they're kind of shaping a bust. The first steps of creating this sculpture is you're hacking at the clay and you're Just trying to create the semblance of a head. And that was us in year one. We were just trying to build a great product and we were making broad brush changes and trying to build something that really worked. And what we found is year two got easier and a little bit better, and year three, even easier and better. Better product, better team. And kind of like the way you might sculpt a bust of year one, chopping at it. And then year two, it's like you're pulling out the knife and you're shaping the ears and you're shaping the chin, and then you pull out the scalpel and you're starting to really shape it. And that's what it felt like building this business was. And it was very different from what I had built in my career previously, which was raise a boatload of capital, burn through it as quickly as you can to go get to the next tranche or the next fundraising milestone and build aggressively. This felt very different. It felt iterative, it felt sustainable. It felt like we were making a lot of small incremental changes as opposed to a lot of big transformative changes. And it led to the creation of a really, really great team. Folks who stayed with us even to this day, who have been with us for years and years, it led to a really great product and it was a really fun format of company building. And that led to that company was effectively Taylor Cooperative, which is our first operating company in our holding company. So it's a luxury, custom clothier, brick and mortar in downtown Salt Lake City and a really beautiful business. It's a great business model. It's a really, really fun product. And we didn't know this at the time, but it was essentially our unfair advantage that allowed us to start acquiring companies and led to the idea of becoming a multi company holding company. But at the time, the naive ambition was, let's keep it as a sideshow and we can go pursue other ideas eventually. As the years went on, we fell in love not just with that business, but we fell in love with the idea of small business and what kind of role a small business actually plays in a community. And we started to begin to have these thoughts of, well, what is a community? What is a city without small business? And why have I spent the first 10 or 15 years of my career not even thinking about Main street small businesses, thinking about really large moonshot technology ventures? And is this potentially where I want to spend the next chapter of my career building companies like Taylor Cooperative? So that was the genesis of it all. And that's how, that's how Taylor Cooperative came to be.

[13:26] Host: And Chase, when, when you guys are thinking, okay, we're going to start a small business and it's going to throw off enough cash to enable us to experiment and go and do the next moonshot. That still belied a lot of confidence on your part that you could just spin up a small business that would generate, you know, a healthy amount of cash. And sure it's not quite, you know, the chances of success of doing a small business like that are a lot better than one in a thousand of, of doing a moonshot unicorn that is successful, but you know, all business, there's a lot of risk to it and all, you know, the, whatever, nine out of ten businesses fail. I don't know if that's actually a, you know, that's kind of the rule of thumb that you all hear. Who knows if it's actually true, but, but there's a high failure rate in business. So I'm just struck by how confident you guys were that you could just start a small business that would generate a few hundred thousand dollars a year. You know, bing bang boom, you know.

Guest: Well, you were right. You were right. There were, I think there are two thoughts on that. One, this was effectively a, a do over of a business I had previously started 10 years before. And so I had that advantage. And the second thought I have is so while we had a lot of the product knowledge and a lot of the supply chain relationships and I had a very crisp understanding of how this business model works, the second thought I have is we went into this completely differently in that we didn't raise a dollar of outside capital. We funded it initially with a $750 investment. And that $750 was enough to go get to our first sale. And that first sale funded our second sale and those first two sales. And it was cash generative from day one. And the ambition wasn't to go build something that was throwing off hundreds of thousands of dollars in free cash flow. The ambition was if this provides 2 to 5k a month to each of us, that's a game changer because then if we're pursuing one of these moonshot ideas, we could potentially cover some living expenses or help subsidize this next big idea so that if we were to go raise capital on that idea, we could delay that date. So it was again, the way we were thinking about it is so different from how we're thinking about it today. Yeah, the general idea of as you're building it doesn't look like a straight up into the right line, but as you look back, you can kind of see some of those dots and how they connect. So at the time, our ambitions were really naive. We simply wanted a small business that we were proud to have in the community that was throwing off some cash flow and ideally somewhat independent of our time. And we were wrong on some of those ideas, but we were right on some of them. And that led to, you know, the creation of that business.

[16:09] Host: Great, thank you. And when. So once Taylor Cooperative started being successful and you really got a taste for small business, in businesses that live amongst the community and serve the community, what conclusion did you draw? You asked yourself, well, why have I been working on these moonshots and so overlooked this world? What was your conclusion as to why that had been?

Guest: Well, you know, I think I started to see a shift in what I wanted out of my life. I think as the business coming back to this bad sculpting analogy I made earlier as we were pulling out that, that fine scalpel and making those adjustments, it was very fulfilling. It's. It's fun to tinker on a business and to see changes you put in motion return a kind of positive result, whether it's again, team or product or anything related to them. And instead of wanting to go be on the COVID of the Entrepreneur magazine or Fortune, it was like I really was valuing the work life balance. I was valuing the team building component and I wanted to continue to do more of that. So it was kind of a shift in what I personally wanted and I think Adam was going through the same thing, but there was this higher purpose that I was personally starting to feel as we were building it. It was becoming something of. We didn't use this term at the time, but we use this a lot today when we talk about Dakata. But Taylor Cooperative became more and more something of a community asset. It was something where we were involved in community events. All the local mayors got their suits from us. We got to meet really interesting clientele. We would advertise in local publications. We were a part of Salt Lake and I kind of wanted there to be more businesses like that, not few. And as I kind of got to know the business landscape, the small business landscape, there's a lot of stats that are alarming for where we sit today. In 2023, small business is on the decline. There are fewer small business, small businesses today than there ever have been. Large mega corporations like Amazon are making it more difficult to compete in the marketplace, more difficult to recruit talent. And if we Fast forward this 20 to 30 years, I don't like that world. I don't like this vision of, you know, on the corner of Maine and Broadway and Salt Lake City, will an Amazon store. Right, an Amazon pickup locker. And so a part of the early idea as well, before we were thinking about Dakata, is it's intellectually stimulating to try to figure out how can we compete as a local independent business with some of these larger mega corporations. There's large brick and mortar retailers who sell suits. How do we compete with that? And what is the role of local business in our economy? And so as we were continuing to find success year over year, year, throwing off more cash flow and the product getting better net promoter scores through the roof, we were trying to figure out, Adam and I, do we double down on this business? We're throwing off cash flow? Do we reinvest every dollar back in this business and go open multiple locations over the United States? Do we sweep all the cash out and stay as a local business and just sweep every dollar of free cash flow out and maybe go buy a cabin? Neither of those answers felt right. We were too young to go buy the cabin. It felt like small businesses are risky. It's like, will it be around in five years? We wanted to ensure that it would be. So it didn't make sense to not reinvest, but to go reinvest every single dollar in growing Taylor Cooperative didn't feel right either. And this was around Covid times. And we had the opportunity to acquire a second business. And that came knocking on our door before I had ever uttered the words holding company or before Adam and I had even thought about our kind of long term vision. And over the course of that year, year and a half process of considering buying this business, it led to a lot of reflection that ultimately led to Ducata Group. And one of the thoughts we were thinking about at the time was did the playbook that's worked for us over these years at Taylor Cooperative in building this first business, can that playbook be applied to other small businesses? And that's what we wanted to go figure out. And so those were some of the thoughts going through our mind at the time.

[20:20] 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 $1 million 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 I do want to return to your the kind of the your philosophical view of Amazon in every corner versus something a locally owned business on every corner. This is a, this is a kind of tension that's been going on since, you know, since forever since franchises were invented and then Walmart came along and then and for our generation it's now Amazon has been the story for the last 10 and 15 years but there's always some monolith that seems to be gobbling up small business and has been for low these 70 years probably. And you know we, we could indeed have a very philosophical, philosophical conversation about this and I and I think that, and I'm going to tie this in now too to Moonshot. Just your your personal ambitions and your own career and how you envision it. Moonshot versus Small businesses. I think one of the reasons I I'll you correct me because I'm gonna put words in your mouth because it's kind of how I feel too. The small businesses are things that are overlooked is because if you're ambitious you want to do something big and small businesses don't feel big. I mean they have it's right there in the name small business. Right?

[22:50] Guest: Correct.

Host: And so what I what I think you may have stumbled upon and a lot of people in our space, and particularly those of you building Holdcos is a way to thread the needle to be involved in small businesses and keep the keep all of that texture that we all love both as entrepreneurs and as the people who live in these communities. We don't want everything to be McDonald's, Starbucks and Amazon to keep the texture of small business, but still be able over the course of your 40 year career to do something big I. E. A Holdco. And so it seems like that may have been the answer the Threading the needle of being able to do small business for a career, but still do something big, big for your career. What are your thoughts there?

Guest: Yeah, I think you're onto something and I've never really thought about it this way. So I'm glad you're kind of teasing out this idea in that way. I think, well, I'll share something more personal than I usually share in conversations like this. When I had My son, who's 11 years old today, I was in my 20s and went through a divorce during that process and co parenting my son between my household and his mom's house. And at the time, that was when I was in the very beginning stages of really looking up to these coastal hubs as hubs of innovation and places to go build a career and kind of the only place to be if you wanted to build a company that would make a dent in the universe, so to speak. And I remember feeling really attracted to wanting to go relocate and go move out to the Bay. A lot of my friends had done that and entrepreneurs that seemed really committed to building something big, that seemed to be the only pathway is go move to New York or out to San Francisco and go pursue a big idea. That's where the talent pool is, that's where the capital is. And of course that was off the table for me. I was deeply committed to being near my son. And what that meant is I was somewhat anchored to Utah. I felt somewhat tied to Utah. And in the very kind of early days of that, what that meant is, well, I better make the most of it. You can still build a great company in Utah. There's great talent out here, there's capital. But also what that meant is if I'm going to retire here, what that means is I kind of want to go create a better Utah. I want to help shape creating a community where I want to live in it. And how can we convince folks to move from the Bay to Salt Lake over the next years and years and years? And so coming back to your question, relocating out of Utah has kind of always been off the table. But while I was seeing fulfillment in building something small and staying in Utah, I was feeling this sensation where I missed the part of company building where you're recruiting really bright people and you're working on really hard problems. I think that's one of the tempting and fun things about going into tech is you can recruit really great people, you're solving a really big mission and people will uproot their lives to come and work sometimes for below market Rate for stock options to go try and attempt to build something big. And building small business, sometimes it feels very different from that. You're not working with folks who are trying to go make a dent in the universe. You're working with folks who want a great work life balance, who want to take pride in their craft. So it's a different orientation. I felt like the pace, the rate of change was different in small business. So while it was fulfilling, I sometimes wouldn't feel as intellectually stimulated, to be honest. And I think that that was also a part of the genesis. We never vocalized that, me and Adam, but it was like, I remember at a point we felt like we had created a playbook and created infrastructure and systems that we felt like maybe were bigger than this one small business. What if we went and we applied it to a second business? What if we went and tried to create a firm, a holding company that had the structure in place that could go and help incubate, preserve, steward multiple small businesses? This was well before I had gotten onto Twitter and read the hundreds of tweets about the silver tsunami and the gap between all of these retiring baby boomer businesses and the number of buyers available. I wasn't even thinking on that level. I think what Adam and I were thinking was we were having the ton of our lives building a really beautiful small business. Our work life balance was great. It was throwing off meaningful cash flow. How do we keep this train going without just doubling down on this one business? And so that's how I think about that. It's a little meandering to your question there, but it's this culmination of all of these thoughts where small business needs to. Small business is critical to the fabric of a community. Small business is fulfilling to build, and yet we wanted to take on a bigger challenge. And I think those were some of the early seeds that eventually sprouted as we started to form Dakota Group and,

[27:46] Host: and to make sure that I, I took the right thing away from that. So doing a holdco of small businesses scratches a different intellectual itch than doing a single small business. Because now you're, you're, you're seeing into multiple businesses, multiple problems. You're a capital allocator. You can be adding and subtracting from the portfolio. Probably not subtracting in your case. I know you're kind of a hold forever, but you can be adding to the portfolio. So there's all this interesting. There's all this interesting kind of intellectual stimulation that goes on. Right. As well.

Guest: Correct. We sometimes Refer to it as a craft in small business mastery. Right. Is what does, like, what does an exceptional small business look like? How do they recruit? What are their financials look like? How does product development run when you're a team of 10 people and there's no head of product? What does marketing look like for a small business? And I think one of the things we're trying to go develop over the Next, you know, 10, 20, 30 years is what is small business excellence like? Is there, are there commonalities? How do we help create that? Because small business does have a disadvantage at the, at the same playing table of a larger corporation. But what are some things that we can bring to small business that give it that leg up, that give it that unfair advantage? And that craft, which is very similar to the same craft that a craftsperson who's making a suit or a craftsperson who's making a hat in some of our current operating companies, it feels similar to me. We're not craftspeople. There's no chisel. We're not working with wood over here. But it's this pursuit of how do we find mastery? And I don't think it's that ethereal white whale. I don't think we're going to find it next year. What is the proper way to build a small business sustainably over multiple decades? Even in this era of digitization, even in this era of Amazon, you know, even in this era of fill in the blank, what is small business mastery look like? And Dakota is almost a practice in how we go and uncover that.

Host: Well, I know that you are in regular touch with the folks over at Chenmark, and that sounds a lot like the kind of musings that come out of Chenmark about just the, the game, the iterative game of small business, the, you know, the inches of progress that you make that compound over time. So hopefully, you know, really nice financial outcomes, but also the kind of artistry of the entire project as well.

[30:14] Guest: Correct. Because yeah, if you think about where we're at today, skipping ahead a little bit, you know, five operating companies, it's almost five experiments. And if something works well in one company, our job is to help surface that to our other operators who are running our other businesses and see if we can cross pollinate the things that are working. Obviously, something that works in a construction company may not translate over to a fine art studio, but sometimes they do. And one of the things I've been struck by is despite having five businesses in five very different industries, there's a lot of common thread in between. And so I'm sure we'll get into that as we go. But I don't think I have this unique perspective. I think or Chen Mark, I think anyone who is in a seat similar to ours would have that similar takeaway of you're looking down on these operating companies that are facing very, very similar challenges and you can start to pull a common thread in between those and learn some of those takeaways. And so yeah, it does feel similar to some of the things that I've heard chenmark talk about and I think it's pretty built into the holding company model.

Host: Well, I'm interested to hear what some of these commonalities are. Certainly you hear it said a lot that a particular style of business like a crew based business or home services businesses or even broader categories, blue collar businesses have, you know, under the hood. They all kind of really feel similar. But you, but to hear you say it where there's a lot of similarities from across small businesses, whereas in to hear you say it, given that Dakata's portfolio is so much more eclectic word you, you, you like to use is is interesting to me because like you said like you know, small art studio to electrical service business. Like are there a lot of similarities? Sounds like there are. We'll get to that. Let's bring it back down from, from theory back to, back to the story for a minute. I'm sure we're going to get go back up into the clouds here in a minute, but for the moment. Okay, so can you give me any numbers around what Taylor was doing in terms of ste that gave you the comfort to go after this first acquisition and then, and then we'll hear about that first acquisition. What did the business look like from. In numbers?

Guest: Yeah, I'll say, I'll say broadly hundreds of thousands a year stockpiling cash trying to figure out what to, what to do with that capital. So hundreds of thousands a year that we were trying to figure out what exactly to do from a capital allocation standpoint.

Host: Okay. Okay, great. And you said it's a clothier. Is that, is it so is it more than custom suits or is it pretty specifically custom suits for men?

Guest: Yeah, that's the majority of the business is custom suits for individuals, men, women. We actually have a very large presence in the androgynous kind of non binary community. But yeah, custom shirts, denim boots, custom shoes. So it's a full fledged clothier. But primarily custom suits is where the bread and butter is for that business.

[33:09] Host: And do you believe that Sounds like a very fashion forward business. And I don't think of Salt Lake is a super fashion forward place. I live right outside D.C. also not known for its, its fashion forwardness. Do you think that a, a business like Taylor Cooperative can work in kind of any, any urban market?

Guest: Yeah, I, I think the city needs to be of a certain size. And, and while suit wearing is trending downward in society, what we luxury suiting is benefiting from that because while people are buying fewer suits, when they do want to buy a suit, they want one of higher quality that's a little more experience focused. So it's a fun business because our net promoter score has kind of fluctuated in the 60s to 90s over the course of the past seven years. It's a very fun product and a very fun experience. You come in for a fitting, a drink is poured, a clothier spends one on one for 90 minutes getting to know the background of the client, understanding are they fashion forward and they want to design every detail themselves or are they simply coming because they want guidance? As I just landed a new job, I want to make sure I look good. Please guide me through this process. So we have a team of trained personal clothiers who guide the client through that process. So it's a very experience driven business, which we like. And the primary product is custom suits. And despite suit wearing being on the downward trajectory, this business is growing organically. Really, really healthy in double digit growth. I think we grew 25, 30% year on year from 2022 to 2023. So it's a fun business. And yeah, that's the primary product.

Host: That's great. There was a business like that here in D.C. that started in 2012, 13 and similar thing. They had a really great space that they outfitted just at Dupont Circle, so a great location in D.C. and you went in and they poured you, you know, a great cocktail or. And you know, it had a very kind of refined, masculine vibe with, you know, antlers hanging on the wall, like a whole look. And just it was, as you said, it was very much an experience and it was the talk of the town for a while. It. They ultimately folded. I don't know what happened. They may have expanded too quickly. I think they were trying to take it to multiple markets. But anyway, I, I do remember having an experience like it myself and just thinking how cool it was. Okay, Chase, let's move on to this first acquisition. So you guys are, you've gotten this business, you've gotten Taylor Cooperative, which you've started from scratch. To hundreds of thousands of dollars a year in cash flow. You're trying to figure out what to do with this cash. Reinvest it in the business, or this acquisition opportunity falls in your lap. Tell us the story.

Guest: Yeah, that's right. So it's a business called Workshop slc. It's a fine art studio in Salt Lake City. It's an interesting business model. It's essentially a wework, but for artists, or that's what it was at the time. It was founded by a woman named Lucia Heffernan, and she's a prolific accomplished artist herself. She bought the building years before we bought the business and building from her as a space for artists, a space for creatives. So six or seven private studios in the back, and in the front was a classroom. And Lucia Heffernan, the founder of this business, her vision for this was as an accomplished artist. Artists are commonly taking classes from other artists. It's how you hone your craft. Even if you're an accomplished artist, you yourself want to be sitting at the hands of other artists and learning technique and sharpening your skills. And so there's this industry of art classes, art master classes that are commonly held in New York or LA or Florence. And she would go to those. And as a busy, accomplished artist herself, she got tired of having to be on the road to go to those classes. And her thinking at the time was, what if I just pay them to come out to Salt Lake City and host them out of this classroom and I get to attend the class and so do all of my friends. And that birthed the very beginning of Workshop SLC. Fast forward. We made the acquisition in 2021. Fast forward. We've since added a number of business lines to that business. We had this opportunity to come and really breathe fresh air into that business. She, as a busy artist, wasn't putting a full 40, 50 hours a week onto that business and wanted to stay focused on her art herself. And we began conversations with her about this becoming a second Dakata company. We had this playbook that worked at Taylor Cooperative, which was invest heavily in the customer experience, build a really great brand, and run a strong digital marketing funnel where we understand unit economics. We're advertising on Google, on Facebook at any given time and driving traffic to the website and converting it. And we saw this world where we could add on to Workshop slc, not just these destination artists who are being flown in from all over the world to teach, but also go build an introductory program for watercolors, an introductory program for acrylics, and oils, eventually a ceramics program. And we kind of worked to develop this vision and see if what worked at Taylor Cooperative in a very different industry could also work at Workshop SLC. We ended up closing in early 2021, and in the first 30 days of our ownership, we've spent more in sales and marketing than the previous owner had in the entire history of the business. We essentially moved forward with what we now call our kind of car wash integration process, where we are typically doing a full rebrand. We're implementing technology, we're building a website or rewriting the website, and we are investing in breathing life into the business. So the founder had a very clear vision. She wanted this to be a hub for creatives in Salt Lake. We loved that vision and what we wanted to do was bring more resources to the table to execute that vision with even more capital and support. And so it was a teeny business. It was doing a few hundred thousand dollars a year and we were able to five exit in the first year just by investing aggressively in that brand and in growth, developing out product lines, adding more classes to the schedule. And fast forward a year later, we were looking down and saying, you know what? This playbook is actually working. This is a great community business. We have more students than we've ever had. We had a phenomenal operator, her name was also Lucia, and an artist by trade, and just really excited about the prospect of building a multi decade art studio in Salt Lake City, Workshop slc. So fast forward a year later, the Playbook is working. And Adam and I were thinking it might be time for us to start adding to our collection and making our third acquisition. So that, that was the story of Workshop slc and that was the first acquisition we ever did and the second business to add to our portfolio and

[40:21] Host: chase this playbook that you're referring to. So I heard you say rebrand digital marketing, more product lines. So I understand that you could product that you could, that you could Playbook eyes a rebrand. You could Playbook eyes digital marketing. But product lines, that's. That's very idiosyncratic. I mean, every business is going to have different ways that it generates revenue. Is that part of the playbook or is basically the playbook like most small businesses probably aren't being as creative as possible about services or products that additional services or products that they could sell so will come in to an acquisition. Assuming there are new and interesting things that we can add to the current portfolio of services. Is that essentially how you would characterize that piece of the Playbook.

Guest: Yeah. I mean at a 50,000 foot view, the way I would maybe frame it is let's apply some of these zero to one principles of starting a business and trying to identify product, market fit and additional products and bring this intensity and fervor into the business that maybe the exiting small business owner, the seller didn't have for one reason or another, probably because they built this business around their lifestyle. They were attending their kids soccer games, they were skiing 50 days out of the year, they were fill in the blank. Whereas we can come in with this kind of increased fervor and the zero to one tinkering approach and iterate on launching those products. And so as we found successful products, what we typically don't talk about is all of the failed products that we experimented with along the way. So it's a lot of tinkering, it's a lot of coming in with capital to go burn down EBITDA if we have to, in year one, take it through a J curve where if we're truly interested in holding this business for multiple decades and we have conviction that we can get it there, what investments do we make in year one vis a vis a brand, vis a vis technology, an operator, a management team in order to go breathe that fresh energy into the business and allow it to be, for its potential to really be unlocked.

[42:19] Host: Yeah, yeah, that's great. And when you talk about the J curve, are you using the capital of the business or let's just take the case of Workshop slc. Was it the cap capital that the business itself was generating or did you infuse it with your own additional capital that was coming out of Taylor above and beyond the acquisition, the capital that you put toward the acquisition itself?

Guest: Yeah, we absolutely fueled it with our own equity beyond that to go and finance some of that growth. So we use debt. So. So we've now made four acquisitions. We've used bank debt and two of them, we've used our own equity in the other two with a combination of seller note on one of them. But what we bring to the table is the ability to, if we have conviction behind this business and behind our playbook is we can go above and beyond and we have the ability to go invest in that jcr, burn down ebitda. We don't have bank covenants, we don't have outside capital. We really can, if we so choose, go and burn that EBITDA down and accelerate that growth. So we kind of look at it as almost ripping the band aid off. We want to make some One time investments in time and one time investments in capital in order to go and really rejuvenate this business and accelerate it into its kind of multi decade strategy that we plan to take it through.

Host: Let's just get into something that, that you talk about a lot, Chase, which is when you kind of. One of your key filters that you put an acquisition opportunity through is we need conviction that we can 5x this business in five years. I have, actually, I have a quote here from some writings I found of yours online. You say it's why we've exclusively acquired businesses where we have conviction we can apply our playbook to grow the business quickly into more stable territory. So part of this 5x in 5 years playbook is also buying quite small businesses. So, so how do you get that conviction? Where does that, where does that.

Guest: Well, let me, let me clarify the strategy a little bit and then wrote me back to that question if I don't, if I don't end up landing there. But to start, unfortunately Adam and I are not independently wealthy nor do we have a rich uncle. And so what that means is we've had to fund each acquisition through cash flow of the previous business. And so we've kind of moved up the chain as we've gone. But like you said, on average we're buying businesses in the 1 to 5 million top revenue per year phase. So these are, when you compare to other holding companies, significantly smaller than what most holding companies go focus in on. That's not necessarily by choice. If I had it my way, I would go buy larger companies that have more cushion, that have more redundancy in place, that have more robust management teams, that have a little bit more room for error. Because when you're operating in this sub 5 million range, you're in what I commonly refer to as the small business death zone. Just like when you're climbing Mount Everest, you enter this death zone territory where you have to operate quickly when you're within it and get out of it as quickly as possible. It's when the oxygen levels drop and you have to just surface to the top and then get right back out of it. It's a little bit dramatic, but in the small business landscape under 5 million, you're 1 very big mistake away from closing the doors. It's just there is such a, such little durability. There are some durable small businesses out there that are under 5 million, I'm sure, but by and large you're one phone call away from a key person resigning to having to jump in and it sucks all the oxygen out of the room. And that level of risk is real. And it's why most people, if you're on ETA Twitter like you and I both are, it's why the common recommendation is don't go buy too small of a business because you want to have that cushion built in. We took a very different approach, mostly out of naivety and bold fervor that we could kind of push through and drive through that growth, but also out of this forcing function if we simply couldn't go afford a $10 million business, if we could, we would have done that. Instead we chose this idea of let's go buy five or four, let's go build a portfolio of five smaller businesses, learn what it's like to be a multi company holding company, accelerate those learnings, take on some of that risk, and to offset some of that risk, we need to have conviction that we can roughly 5x in roughly five years. So there's kind of two things driving it. It's one, we want to grow out of the small business debt zone as quickly as we can and it's buying businesses where we believe we can do that. So as we look at businesses, we want to have this viewpoint where we can pull certain levers uniquely well that the previous ownership wasn't able to. So whether it's the ability to burn through EBITDA to go plug in an operator and execute a rebrand, or whether it's today, now we have at the holding company level a shared services team across marketing, finance, hr, legal, where we can bring that on day one and go and implement GAAP accounting principles within the first 30 days of closing. And sometimes that's just never been done at that business where we can implement really great organizational health KPI dashboards where we can kind of help come through, plug in a process of company building that maybe you wouldn't find under that $5 million range, but go apply it for a one time investment of again both time and capital in order to get the business out of that death zone. We're in the middle of what I explained to our team is phase one strategy for Dakata Group where we are pulling aggressively levers of growth to Go build durable $5 million plus small businesses and ideally fast forward in a year or two from now, we're sitting on top of five really great small businesses that are profitable, that have that redundancy built in, have great management teams, have really great fundamentals in place and we're throwing off millions of free cash flow per year in order to go and acquire companies in phase two, where maybe we take a little bit more traditional of an approach. In other words, the Dakata strategy isn't to forever go roughly 5x businesses in roughly 5 years. The strategy is this is how we kind of earn our seat at the table of being able to be a self funded, bootstrapped, diversified holding company of small businesses despite not being independently wealthy. To us, it kind of felt like the only way we could go about doing that. And so that's what we look for. You asked like how we identify that Primarily, I would say one of our advantages is like implementing a really solid digital marketing funnel where we're spending aggressively on acquiring customers in a repeatable and sustainable way. We're learning those unit economics earlier of what the CAC is the customer acquisition cost and the lifetime value of the customer. And we're finding a way to just go repeatedly acquire customers. A lot of small businesses just don't have that because built in to being a small business is a small team. And what that means is you don't have a head of finance ahead of HR ahead of marketing. And so sometimes just the way we can pull those levers is by simply bringing those resources to the table. With Workshop SLC we saw opportunity to go and invest in a high net promoter score experience, implement a really strong digital marketing funnel, partner with a really great operator who knew the space and take it through that growth J curve. As we acquired Built by Design Construction, that was our next acquisition. It was a general contractor who had emerged as the specialist in ADUs accessory dwelling units, essentially micro housing structures behind a structure, the backyard structure that you can have for long or short term rentals. And they had emerged as that. And we saw opportunity to do kind of the opposite of what they had done to successfully build a multimillion dollar construction company which was saying yes to every type of job. And we had this thesis that we could help them come in and say no to every type of job except for one or two things that we would emerge as a specialist in. To us, that was our thesis. That's what we brought in that let's go sharpen a niche and let's go sharpen an area where we can become experts, find higher gross margins and drive a better process in a very crowded construction space here in Utah. That was our thesis there at Northern Electric. It was a thesis around digitization and digital transformation of can we take a very paper driven analog process, bring it digital and drive a more efficient and productive workflow where we can better Service customers. As an electrician with TAT and Baird, it was a very similar thing to Northern Electric. Can we help digitize and bring a really beautiful brand online? And can we create some kind of symbiotic advantages between Taylor Cooperative and Tat Baird? So I wouldn't say. Well, there's like one playbook that we go follow. It's more, we need to have conviction that we think we can. And even if we miss by a little bit, the goal is that we are driving that growth to build more durability and capacity while we're also accomplishing our mission, which is stewarding exceptional community businesses in Utah from owners who are ready to retire, who had a really great vision. And we feel like we can take that vision into its second chapter, if that makes sense.

[51:41] Host: Yeah, yeah. No, it does, Chase. And the reason I want to press you on this is because to your earlier point that, you know, don't buy small, buy as large as you can because small businesses are so fragile, you're one phone call away from losing your operator. Whatever. You're, you know, you're one sneeze away from the whole thing collapsing.

Guest: Right?

Host: So we all, we all know this principle and it's a solid one. But it's interesting that you guys have, you know, have really, really made a playbook of going after these, even if it's just by necessity. You've, you've gotten a certain, you've built a certain expertise and comfort with these businesses. And so what's interesting and what I think would be just interesting for the audience is like, you know, small, very small businesses under, you know, 5, 1 to $5 million in revenue. So whatever the STE is, 2, 3, 4, $500,000 in STE, those are plentiful. And so if, if there's some way that, that people listening to this, searchers listening to this could, could get similarly comfortable or build similar conviction around these business, around a business they see like you guys have, you know, that might really compress the time that they search because everybody, so many people out there are looking like, no, I'm just going to buy that 750,000 SD, 750,000 above SDE business. And that's why it takes them so long to find a business. But if, and many of them don't, and so they eventually just have to lower their standards. Kind of like you guys were forced out of necessity to buy your smaller business. So, you know, I just think it's, I'm not sure there's more to say. You may have already answered it, but I just love, it's just very striking to me that you've built a holdco out of buying these quite small businesses that we're all told to avoid, you're having success at it. You know, it'd be great if I'm. If I'm somebody out there who, who like Dakata can find, can get conviction around a $350,000 STE business and feel pretty confident that I'm going to grow this thing 5x in 5 years.

Guest: I feel strongly that we picked the right pathway for us. Whether I would be comfortable saying it's the right pathway for any searcher, I'm not sure. I think we had 10, 15 years of operating experience of really entrepreneurial curve balls being thrown at us every day for 15 years. The chaos of company building was not unfamiliar to us. What I usually say is if a searcher is the profile of having a proclivity for company building and operating and they've been in operations themselves, jump in, reduce that searching timeline and go jump in and drive growth, it's fulfilling. You'll find ways to be successful. If you're the profile where maybe you're coming in without that entrepreneurial experience, maybe buying a business where the, the strategy is less about driving growth and it's more about not breaking things and preserving what's already working and paying a price premium for that, that might be the better strategy. I just think going in with your eyes wide open is important, especially today when interest rates are through the roof and you have to really think about what kind of risk you're taking on as you acquire a business. But for us, we always optimize for moving quickly. We would rather not sit, we would rather go operate and learn. We could have potentially bought one larger business and then we would have two companies. Today we chose again, perhaps naively and unintentionally, but we chose the path that led to faster learnings, a little more chaos. But I think we're going to look back in several years from now and say that was kind of our unfair advantage as we were able to accelerate all of these learnings. And if we're successful, even if we only emerge with four companies in a few years driving significant revenue and EBITDA that was self funded, we're in a very advantaged position to go and take down our next acquisition. And so I would be careful, Will, to kind of just prescribe what's worked for us will work for everyone. And not because we're particularly gifted, just because everyone needs to kind of assess what Their advantages are and what they kind of bring to the table when you're looking at an acquisition. Because one last thought here is one of my biggest pet peeves is the general attitude that I sometimes see of man. Small business is so easy. And I'm just going to come in and buy this boomer run business and bring it online and it's going to be a breeze. How could we mess this up? And every small business owner I've met with has been remarkable at running their business. They have learned it over years or sometimes decades. They know how to fly that machine, to use the analogy of an airplane, that they know how to fly it blind. They've gotten to the point where they can run this thing really, really well. And so to have this presumption that you can come in and buy a small business and run it better, you should check yourself if that is your thinking. But if there's comfort with chaos and willingness to get dirty and willingness to go build, I think buying at a smaller SDE level is something I would recommend because it allows you to get in the game sooner. And as you're successful in finding ways to unlock growth, it's one of the best ways to learn. Learn by doing.

[56:47] Host: Wow, that was phenomenal. Jason, that's such a great point that you made that the experience that you and Adam had was comfort and chaos because you'd been in zero to one land and so you weren't easily shook by the unpredictability of all these very small businesses. And so for a business buyer of a different background, of a different profile, that might not be the case for them. So that great point of difference that you make there, you know, I will say just the other thing about buying small is that the ups, I mean, the upside can be potentially better. I think it's fair to say it's much harder to grow a business doing 15 million in revenue to 75 million exactly, versus a business doing 1 to 5. And yes, you've still got, you know, you've still 5x your, you know, your investment rough, roughly, let's say, or at least the valuation. I mean, there is that going for it. I should say, like if you, the, the upside over a shorter amount of time could be better because a, you know, a very small business can maybe kind of grow a lot faster than a pretty mature business can.

[58:03] Guest: I completely agree.

Host: Yeah. So chase on this point about size again and your point about, you'll see people say, oh, I'm just gonna buy this unsophisticated boomer business. And go in and, you know, apply my, my, my youth and make it better. Right. And, and I think most acquiring minds listeners, at least people who've listened to a few episodes, will not be so naive. Hopefully what people will hopefully have heard more from my guests and for me on this podcast is that this is really hard and that you're signing up for a rocky road no matter, no matter the business, you know, so, but, but the really, really small businesses can be more of a bloody knife fight than the more mature businesses. Right. And so, so that's what I really wanted to, to ask you. You started one, you've acquired four quite small businesses. Do you feel like they have been bloodier knife fights for their size than, you know, other searchers out there who bought bigger businesses?

Guest: Yeah, and I think for two reasons. One, yes, as a product of their size, but two, because we have this growth strategy. I think if, if we were content maintaining them at that smaller size and maybe growing with inflation or growing 10, 15% a year, it wouldn't be quite the knife fight. But in order for us to get to this next mile marker that we feel is a really critical juncture for Takata's multi decade strategy, we want to escape that death zone and we are driving growth. One of the things I've talked about before is growth presents challenges and it forces you to get very clear on what matters as you're growing, especially as you're growing at 20, 30, 40, 50% year on year. We had two businesses grow over 100% year on year last year. You're outgrowing a lot of things, you're breaking a lot of things, you're implementing process and then you're finding yourself eight to 12 months later going and having to rebuild that process because it no longer works. You're outgrowing people, which is a really difficult place to be. So growth drives a lot of challenges. And so yes, I do believe we signed up for a knife fight that sometimes feels bloodier than the average searcher's day to day. Adam and I view that as a one time investment that we are making into Dakata. We're financing Dakata through blood, sweat and tears, not someone else's money or not our own capital. We're doing it through sweat equity. But yes, I think it's a byproduct of because they're smaller, but also because we're trying really hard to get them into more stable and durable territory by driving that growth

[1:00:42] Host: chase. Do any stories, any particular knife fights come to mind that you might Share out of any of your forecast acquisitions. Just to give people a feel and a picture of what the real deal can feel like. What could be like.

Guest: Yeah, I mean, I think one of the trickiest things about our line of work as a holding company is the operator component. If I kind of think about the hierarchy, if you picture the Maslow's hierarchy of needs, our hierarchy of our responsibility as a long term holding company, the very base of that foundation, the first chief, most job we do is we should be good at buying great companies, number one. The second thing we layer on top of that is really great at hiring and retaining great operators. The third that we talk about is assisting those operators in building a great management team. The fourth being assisting the operators and their management team in pulling the right levers and running the business properly as a hands on advisory board. And then the fifth is realizing that long term mission of the business, that original founder's vision. And so we have to be good at buying great companies. The second is the one where we are, where we've seen a lot of challenge. And as I have a peer group of other holding company CEOs and we talk about this all the time, it is very hard to hire operators and particularly when you're growing at a 60% year on year growth clip. In one of our businesses, I'll have to be a little bit broad, but in one of our businesses we went through two operators in a 12 month period. And if you imagine the team that went through that journey, we had a day where we announced to the team, we're the new owners. We're so excited to partner with you in this next chapter. We've promoted from within. This is your new operator to fast forward six months later. And that operator chose to resign and kind of had a personal life event that forced them to step out of the company. We went and we searched for a really great operator. We found someone that we thought would be a great fit and lo and behold, we actually plugged in the wrong person. We're learning a lot about what a good operator looks like sounds like and how to best support them to be successful. And so I would say the number of issues that come out of the transition of picking the wrong operator and the issues for the team on the ground as going through that much change and that big of a transition, it's really, really hard. All the while we're taking these businesses through this car wash process of going through a rebrand, implementing technology. And so I think that there could be a strategy again of go Pay a price premium for a great business that you don't need to change, that already earning well, has a great management team and you're not changing much. That is so different will compared to the strategy that we currently have as this phase one part where we're coming in and we're breaking so many things, we're changing so many things and that be really, really hard on the people. And that can be a lot of change. We try really hard to over resource at the Takata level so that we can be there on the ground with our companies helping navigate that change when an operator transitions come in and run that business while we go search for another operator. But I could come up with endless examples. But I think the hardest has been dealing with change on the people side. That's the number one ingredient in company building. And if you get that wrong, it can create so many downstream cascading effects that make it harder. And so the way I think about that kind of Maslow's hierarchy of needs is if we're not good at buying good businesses, the next job of being good at hiring and retaining great operators gets harder. Because no good operator wants to run a bad business. And so if we buy a good business and we find a good operator, but they have a bad manager. So it's like we're trying to take our businesses through this hierarchy of needs. And one of the most foundational pieces is recruiting and retaining really great operators and helping them be successful. And that is an art, not a science. And we've gotten a lot better at that over the past two and a half years. But I still think we're in chapter one over the next 20 years of like really becoming exceptional at that part of being a holding company.

[1:05:01] Host: And just to be clear, so when you have found yourself operator less in one of your businesses, you or Adam have stepped in and served the role of operator. Like you guys can do that in each of the businesses. You have enough, enough knowledge that you can get in there and run things, Correct?

Guest: Yeah. And as we think about that lack of redundancy inside our operating companies, we try to go over rotate for that at the holding company level so that if that does happen, God forbid, we do have some capacity at the holding company level to go step in and do that. It's not a good permanent solution, of course, but it's a good temporary solution for us to get back into the business. Sometimes that helps us get acquainted with all of the issues that were happening unbeknownst to us underneath the water. And sometimes it's just a great way for us to be there personally and emotionally during a transition because that can be really hard. When a small business loses its leader, that can be a disorienting transition. And so, yeah, that's a part of what we do is we step in over time, we'll build out this kind of portfolio operations practice. We just hired a chief of staff and his responsibility will be over the next few years building out a portfolio operations practice where we have that. So it's not me or Adam having to step in because when we step in, that comes with a real cost. We're drawing down time that could have been there to support other companies or go look for the next acquisition. So we're continually looking for ways to build more and more redundancy. But yeah, that's one of the wonderful parts of the job is if we do get a call like that, Adam or I are going to go parachute in and go run a company for

[1:06:29] Host: a few months and chase with if either with the story you just gave where you lost the two operators. I guess the first, that first operator had a personal issue. In the second one, it just didn't work out. Either that case or another case where you may have lost an operator. What did you learn from that? When you post mortem, what had you done wrong or what had you misread about the operator or the operator business match that proved wrong?

Guest: That's a great question. I think we have recalibrated a lot on how hands on or hands off to be with the operator role. So if I kind of zoom out and speak philosophically for a second, the operator role is tricky because a really good operator wants autonomy. They're in that role so that they can go, effectuate, change, tinker on the business and play that fun company building role that we were talking about at the very beginning of our conversation earlier. And autonomy is something we want to be able to give too much rope though, and we can find ourselves in an issue if we selected the wrong operator. That's where I think we, of course, Adam and I have tried really hard to finesse that right rhythm, that right balance of how frequently we meet with operators, what role we play. Do they see us as their manager or do they see us as their partner? And what are we doing that contributes to that? We have a rhythm today where we do board meetings every six weeks with the operator. We do a manager's meeting with the operator and their management team every six weeks. It's a great opportunity casually to get to know the management team and for them to get to know us. We have frequent one to ones with our operators. We do these kind of strategic off site planning sessions. Once or twice per year, quarterly we get together and we have leadership summits across the full portfolio. So we've been tinkering a lot with how do we provide that autonomy so that a really great leader has the control that they want. But we have some guardrails in place so that they don't accidentally walk down a trail that we've walked down before that doesn't go to a good place. And so it's kind of this never ending tug of war. And so you asked for specifics in the second operator that didn't work work out. We were kind of experimenting with this model of giving more autonomy than we were comfortable with, a little bit more rope. And we learned that if you don't have the right person in place for that, that can actually take you to really treacherous water. And so we've had to be adaptive in how hands on, how present are we and what kind of relationship do we have with our operators. I kind of talk about it often as we want to be the ironman suit around our operators at the Dakata level where through shared services, marketing, finance, hr, that's elective, they can purchase shared services from Dak and we can support them in that way. But also just through the phone calls of like if they need a shoulder to cry on or advice or a sounding board on a really critical decision, who to hire, who to fire, what strategic initiative to really invest in a re budgeting exercise. We want to kind of ideally come into those conversations as that sounding board and that helpful coach to help ensure that collaboratively we reach the right decision together. It's a really tricky balance, especially because in the first 15 years of my career I was the front person of my companies. I was the one calling the shots. And I didn't have a, you know, I had boards of directors. But over the past few years, one of the most fulfilling components to building Dakata has actually been not being that front person, instead being this empowering behind the scenes role to our operators, letting them be the front person, but being there as a source of camaraderie, you know, breaking bread as well as guidance when the moment calls for it. And it's a really, really fulfilling day to day. I truly feel like I could spend lot of time a next 20, 30 years doing what I'm doing because I love that role that we play with our operators. But we didn't Land on that on day one. And we've had to really learn by fire on how much rope is too much because a good operator also wants support too. They want someone they can call. And so that's, I think, the number one lesson we learned in that part of the journey.

[1:10:21] Host: Well, the tricky thing is, the additional tricky thing is that there probably isn't a single right answer because every operator is different. So every operator is going to have different capabilities and a different appetite for your support and a different appetite for autonomy. So it's not like you'll arrive at the, you know, one day you and Adam will be like, we got it, we cracked the puzzle. Here's the answer. It'll always be, it'll always need to be kind of conforming to the, the operator of the moment. So it's completely right.

Guest: It's the serial journey.

Host: There's an analogy here to parenting. Not to say that your operators are your children, but there's an analogy here to parenting where, you know, that push and pull, how much autonomy, how much authority is, is something every parent goes through with kid number one. And then if you try to apply what you've learned from kid number one to kid number two, who's a completely

Guest: different, may not translate right.

Host: And often you'll hear that it's just, it just does it at all. And so, you know, different techniques for every human. So.

Guest: Correct.

Host: Okay, this is fantastic, Chase. Well, we, we're, we're bumping up on time. I want to make sure, I want to circle back just to the types of businesses that you like. For Dakata, we talked a lot about size, but a lot of searchers out there, you know, there's the, the familiar checklist of ideal characteristics of a business, recurring revenue, recession resistant, you know, etc. It's a business to business, et cetera, et cetera. And we all know that there's no perfect business. And so you decide what you're comfortable, which of those criteria are comfortable sacrificing and which you're not, and so on. And every searcher goes through this kind of thought process. Does Dakata have criteria like that where you won't touch X and you, you gravitate toward Y?

[1:12:16] Guest: Yeah, I mean, we're intentionally diversified. And so what that means is we're not a roll up. We're not an accumulator. We're not focused on one space. We are in the process of building platforms within Decada. So Built by Design and Northern Electric are the beginning to our trades. Platform and residential home service and so we plan to make acquisitions in plumbing, H Vac, larger electrical contractors over the coming years. And that platform, that should be a very meaningful part, part of our portfolio. But we will continue to make acquisitions in very unrelated spaces. I think life's too short not to. We just have so much fun getting to know the industries and the businesses as they surface. And as we kind of get inbound deal flow and have the opportunity to look at businesses, I think there's definitely some things we're sensitive to. We're really sensitive to avoiding high customer concentration, significant owner dependence. So we want to see a world in which we can come and replicate what the owner's done very well and build that into the business as a business asset, something that's actually transferable. So there's certain things that we definitely are sensitive to, but aside from restaurants, there's really nothing we won't look at. I think if it were a highly sophisticated aerospace or life sciences business, we don't have any business running that. So it has to pass some sniff test. We have to have conviction that we are unique, uniquely suited to be good owners to this business. But sometimes really the way we are uniquely suited to be a good owner is our long term hold, our ability to really not have to make significant changes to the original founding intent. And so I think there's something very powerful about a willingness to burn down EBITDA and take it through a J curve, but then have this long and patient time horizon with no intention to sell that allows us to be uniquely good owners to small businesses. So that's kind of what we look for. We want it to be a really remarkable community asset. We want there to be something that could be distilled into what makes this company great, that we can enhance. And then from there, in an ideal world, in a few years from now, we're simply a matchmaking service between operators that we've built over the years. Kind of our Rolodex of potential operators and small businesses here in the community. There's a really big advantage to being geographically focused the way we are, which is as we're out there making acquisitions, getting to know brokers, serving on nonprofit boards, being involved in local chambers, Takata is nowhere near a name brand by any means. But when someone is thinking about selling, there is a chance that Takata's name comes up as a potential suitor. And so we're starting to get some inbound interest. Interest. And so that's good because that allows us to look at a lot of opportunities and be Selective about what makes sense at this stage. So diversified add, but pretty agnostic to what we're really going after.

[1:15:13] Host: Yeah, well, I imagine that this local focus, this SLC focus will part of the. There's just a lot of flywheel to that. And I think one of the most powerful aspects of that flywheel is the one that you just said where your deal flow. Maybe not yet, although you're starting to see it, but eventually, like if you really become known in town and. And you're just the first call that any retiring business owner makes. I mean, incredible. An incredible place to be. And I feel like that could be pretty realistic for you to get there.

Guest: Correct. I think that would be a significant advantage if we can get there. And I think the way that we get there is we have to run a sharp and disciplined organization. We have to be good owners. We have to build a really great reputation of being good to our sellers, you know, being, you know, really good stewards of these businesses. And so that stewardship is one we've started to use a lot more of because Adam and I have done that zero to one game for so long. We respect how damn hard it is to go build a business from nothing to something. And so that allows us to really appreciate that and bring it into its second chapter, all the better. And so, yeah, long term, I think we want to be seen as a destination home for small business owners ready to either move on to the next project or ultimately retire.

Host: Great. How powerful? One thing I do notice about your business is, I think, unless I'm missing one, is that they all are consumer. They're all B2C, are they not?

Guest: Yeah, they are. That's right.

Host: But that's just by happenstance, not by strategy.

Guest: Yeah, I think it's more coincidence. There are definitely some B2B businesses we've looked at and gotten close to pulling the trigger on. But yeah, I think we have a natural proclivity toward that, but I don't think that's an intention. We won't do a B2B business. It's more just coincidence and a little bit of a proclivity as we're looking at deals.

Host: Chase, we're, we're getting tight on time, but I don't want to let you go before I ask, just for the 30,000 foot view of the electrical business, because we hear so much about plumbing, we hear so much about H Vac and we hear about electrical as kind of the third big trade out there, but it's so much less common to hear about it. From in our world of search and in small business acquisition, can you give us just the three minute primer on buying an electrical business, what to look for, what you liked about it, et cetera?

Guest: Yeah, well, I should say Tim, the previous owner and founder of Northern Electric, he came to us when he heard that we acquired Built By Design. He had done a lot of business with Built by Design. They had a really great relationship and a part of our interest in acquiring a construction company, which is typically not a favorable business to go by if you're talking to holding company types or investor types. Construction is a very challenging industry. One of the things we loved about it though was the close proximity to all of these trades companies, all of these plumbers, H Vac companies, electricians. And Tim approached us not a few days after we closed on Built by Design and we were not interested in doing two acquisitions in three months, which is what we ultimately did. But sometimes opportunity strikes at an untimely moment. And so we loved that. We had that relationship already established, so it allowed us. So in other words, I tell you that story because it's not like we specifically said, let's go buy ourselves an electrical contractor. It was an electrical contractor crossed our plate. We loved Tim, we loved the business, and we saw opportunity to go pull some levers. So it's a traditional electrical contractor. It does a mix of project work and break fix. Residential service. We're very bullish on residential service and that's what we've been investing aggressively in. It's a trades company. And so what that means is it's one of the hardest companies I've ever been close to when it comes to recruiting great people. It's a shrinking trade. There are fewer electricians every day in the state of Utah. It's very, very difficult to get a quality electrician to want to come work for you. And even harder when as an electrical contractor you're on the smaller end of the spectrum in size, but also on the lower end of the spectrum on price. When we acquired the business, it was well below market on average hourly rate that was being charged for services. We saw that as an opportunity, but it's also been a significant headwind as we've moved that average price point up to deliver higher quality service to higher quality customers so that we can get into this virtuous cycle. We try to do this in each of our businesses where charge a price premium so you can have quality margins to hire folks at or above market rate rate so that those quality people can go deliver a quality service so that you can justify charging a price premium. It's this virtuous cycle we're trying to get Northern Electric into. And it was hard to do because it was vastly underpriced. It checked a lot of the boxes that I think a lot of searchers look for in a trades company, primarily analog, run by an owner who had been kind of running at 20 to 30 hours a week. So not investing aggressively in growth and pushing the envelope. 40, 50, 60 hours hours significantly analog. A lot of paper process and underpriced. And so it checked a lot of boxes. We were really excited about this business and it's been a really fun trade to get to know. And I would say the short of it is trades companies we're learning are very hard to recruit for, but they're very simple businesses to operate in terms of. Like simple, not easy from a building block standpoint. You're selling time and you have to deliver billable hours productively in order to drive profit, profitable revenue. And so it's not a complex business model. And so as you can drive productivity, as you can drive demand and as you can afford to hire, that's kind of the three legged stool of our electrical contractor. If you can successfully do that, growth is inevitable. There's constant demand for it. As you indicated earlier, it's largely recession resilient. It's a very beautiful business. And so I'm really bullish on the trades. I think two things I really didn't know about, three things I maybe didn't really know about the trades that were now very clear on very hard to hire for. We thought we would come in and clean up on our digital marketing experience. And we kind of had this naivety that we could come in and kind of out advertise some of the competitors. Not true. It's a very competitive marketplace for acquiring customers profitably. And then third, the valuations are incredibly steep right now to go and build out our trades platform. And so in a high interest rate environment with really high price points and strong demand for trades companies, there's a headwind. But as we're getting to know this electrical contractor and how it functions, there's a reason why you see H Vac plumbing and electrical typically being rolled up together. It's a very similar go to market motion. And I'm really looking forward to taking what we've learned at Northern Electric and applying it to future acquisitions.

[1:22:09] Host: And why do you think we see less activity in electrical among searchers versus plumbing and H Vac?

Guest: That is a great Question. I think electrical tends to find themselves more tied to new construction and larger projects. And typically when you look at a plumbing acquisition that the sweet spot is where they're doing a lot of break fix residential. So you have a lot of high volume jobs as opposed to very few large project based jobs jobs. And electrical can oftentimes be in that kind of area of the marketplace. I think sometimes it's daunting. You're working with power, there's significant safety issues. And so it's a trade that you have to know really well. You have to take safety incredibly seriously. H VAC and plumbing, you have to take safety seriously. But I think on the electrical side of things, you're dealing with people's lives and there's significant safety protocols. So I don't have a perfect answer for that, but I would, I would assume it's for those two reasons.

Host: Right? Yeah, that's great. Chase. I want to close out with just as you look back at what you built with Takata and how you've just been become so immersed as, as somebody in the world of small business and community businesses versus your years of chasing moonshot unicorn, zero to one VC style entrepreneurship. What muscle has grown? What muscle have you grown in? What muscle has atrophied?

Guest: It's a great question. I. I think I've had to get comfortable moving at a more slow and intentional pace where we're optimizing for incremental progress versus transformative change. And, and I think that is, I'll give one answer for both. I think that is a muscle that's potentially atrophied is the ability to move fast and break through things as the cliche out of Silicon Valley is. But it's also a muscle that's developed the most is really honing in on a more intentional, overarching long term strategy. So making decisions more slowly, not having to pivot constantly, but instead kind of picking those kind of key inflection moments that you're building toward and reassessing strategy once you get there as opposed to when I was in the zero to one space, it felt like we were reinventing our business model weekly. And most entrepreneurs that are in a zero to one space will relate to that. So some of this is a product of being in the 1 to 2 arena where you're making progress, you're professionalizing, you're slowly making incremental change and to kind of tie off where we ended. For me, that is very fulfilling. It feels like we are shaping this bust. We are making progress and we're seeing that daily as we go. This sculpted bustle. Yes. And so it's fulfilling. Sometimes it can feel slower than the days when we were chasing our tails and reinventing our business model weekly. But it's a really fun place to be. To be able to be that intentional with company building.

[1:25:15] Host: Well, I wonder if that's an illusion. I mean, you have acquired four businesses in two years, after all. Chase, you're not inching along here. And so I wonder if the illusion is when you're in 0 to 1 and. And you're pivoting every week, if that frenzy feels like a lot of progress. But. But it's actually just frenzy, and that's a fair point. And. And as you're. You're moving ahead here linearly and things aren't. You know, you don't. It's less Tasmanian Devil and more kind of like one foot after the other. But it's still very. It's still very real and quite quick progress.

Guest: Sure. I talk about the. There's two different types of risk that you take on if you're in 0 to 1 or 1 to 2. In 0 to 1, there's so much risk in whether your venture succeeds at all. You referenced this kind of common. I don't even know if it's true either. But nine in ten businesses fail, and it can be due to timing or due to just the product not being right or the team not being right or running out of capital. There's not that kind of risk in 1 to 2. I mean, that risk is still present, but the risk that we take on, there's not as much existential. Will this business cease to work next week? It's like, no, this business has worked. Northern Electric, we acquired it. It'd been around 27 years. We would have to do something pretty stupid to go take it off that winning track record. But Adam and I have personally guaranteed a few million dollars in debt. And if something does break and not work, we have a lot more on the line. And so the 0 to 1, it's. You feel like you're in constant risk of existence all the time. Time. I don't feel that at Takata Group, but it's a different type of risk where there's. There's a lot more on our shoulders. We have a larger team. We have more people under our employment. We have more debt that than, you know, we. We have a lot more to consider. And so I think that's related to it as well, is it doesn't feel like we are at risk of dying. You know, every day we feel like we're in a more controlled, controlled risk aspect of our journey.

[1:27:12] Host: Right, right. But the stakes in some sense are less little bit higher in the sense that if things do go south, you have millions of dollars, personal guarantee, you have people who's, you know, you're responsible for, you know, you feed their families. So it's like, in some sense, the stakes are realer than in Silicon Valley land, where if the business completely collapses, nobody's going to, I mean, capital will have been burned and I guess the employees of the business will be out of a job. So I don't mean to downplay that, but in some, in some sense it's, it's a little bit monopoly money in Silicon Valley.

Guest: Exactly right. I think there's risk in all forms of entrepreneurship. The risk is just different depending on which stage you're operating at. Yeah.

Host: Chase, how, if people want to reach out, how do you prefer that they do that?

Guest: Twitter is probably the easiest, best way to reach out. I'm just at Chase Murdoch and I would be happy to connect if, if there's interest in reaching out. So thank you for the opportunity to be on the show today. Will, it's been fun talking to, to you.

Host: Thanks. Thanks for so much for coming on Chase. What a, what a really cool thing you and Adam have built at Dakata. And, and we'll be eager to watch for, for the decades that come. It's in the name. So thanks a lot, sir, and I'm sure we'll have you back on here sometime next year.

Guest: Thanks, Will. Appreciate you, Sam.