Host: One of the most difficult aspects of buying a business is the search for a good business to buy. Indeed, it's such an outsized part of the process that this whole space is often just called search. Well, what if you could sidestep the search? And what if you already knew the business well that you were going to buy, so the possible skeletons in the closet were far fewer and its strengths and weaknesses were already familiar to you? Sounds pretty good. Well, that's what it was like for Corey Viverka, who bought the $5 million business where he worked. It's a pretty appealing prospect. Lots of the risk that you see in a conventional small business acquisition is gone. Of course, you have to want to buy that particular business where you work. The owner, probably your boss, has to be open to it. So yes, the stars have to align. But something tells me that this might be a very real possibility for some of you. And Corey's story today will show you how one guy did it. And by the way, Corey has roughly doubled the business in the eight years he's owned it. He has refinanced out of his personal guarantee and is getting close to paying off the acquisition loan entirely. A fantastic outcome. And quick note. Corey will be one of the panelists on stage at next week's event I'm moderating in San Jose on the evening of Thursday, October 5th. The Silicon Valley chapter of EO is hosting a panel all about acquisition entrepreneurship. In addition to Corey, previous guests Nick Haschka and George Goetz will be on stage. The event is just for EO members, but Acquiring Minds listeners are invited as well. If you're in the area and want to come, email me for a free pass. Willquiringminds Co okay, please enjoy this conversation with Corey Viverka, owner of tvs. 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 Oberle 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. Corey Viverka. Welcome to Acquiring Minds.

[3:20] Guest: Thank you, Will.

Host: Corey, your story is a bit different than my typical guest. You bought a business, but it was the business where you worked. Now, I have a hunch that this situation is a little bit more common than I realized and that there might be listeners out there who are working in businesses. And it's occurred to them, what if I buy this business? My current employer. So really eager to hear how a deal like that might come about, how to put all that together. There's a lot to your story, so let's get right into it. Corey, please start us off with a little bit of background on you.

Guest: Sure thing. So I started out my career as a mechanical engineer. Worked for a big multinational engineering company. Kind of moved up through the ranks a little bit. I think I was identified as a potential leader within the. Within this company. And I got moved out to San Francisco to Which eventually led to me leading one of the departments for this engineering company. And the work was a niche part of the work in validation, making sure that pharmaceutical manufacturing facilities met regulatory requirements. So I kind of grew into some leadership side of things. Then a smaller company, tbs, the company that I own now, recruited me away. They needed some leadership. They needed, they had a big project, they needed, they needed somebody to come in and help them out with those types of niche services. And I had built up a little bit of a reputation in the industry. I knew the owner and I saw that as an opportunity to grow and that what was proffered a little bit was that I could, there, there might be a, an opportunity to transition. When I was recruited away and this was 2002, to take over some sort of running of the business, whether that was ownership, whether that was CEO at some point, there was some sort of transition plan that was given as an opportunity. I was pretty young, though. I was 29 years old or so at that time. It took a few years. It took about 13 years, but we did finally make that happen. We made the deal happen and we went through multiple iterations of trying to make it work. And one of those biggest sticking points that came up was how to finance that deal.

Host: Let me stop you there, Corey, because I don't want to get too far away from this back story before we get into some of that which we will deeply. The when you were approached by this gentleman, what's his name? What can we call him?

Guest: John John.

Host: So John was the founder, owner and ultimate seller of the business.

[6:04] Guest: Correct.

Host: Now, so John recruits you, you guys know each other from, from the industry. And he says, you know, the job is this, it's a great job for these reasons. And oh, by the way, you know, at some point I, in the near future I anticipate retiring, so there might be an opportunity for you to step into my shoes, buy the business. And he kind of, he says that, but it's. How seriously do you take that? Because that seems like a very. I mean it came true. So it was a real offer, but it also kind of feels like squishy.

Guest: It was squishy. There was like, maybe he goes and sits on a beach somewhere and I just send him, you know, royalty checks. But I run the business and you know, and take on the operations side of things. That was one model that we talked about as we started working together though. He realized that if he had his name on the company and he had the risk, he wanted to, he didn't want to just trust that I was running it and go sit on a beach. He either wanted to have it all or nothing. Right?

Host: Yeah.

Guest: So that's where, that's where the rub

Host: came and we're, we're going to pick that apart as well. So we're back in 2002. You're about 29 and are you somebody who has been entrepreneurial before? Are you somebody who expects to eventually be an entrepreneur? The idea of buying a business, does it seem crazy? Why do you think he extended this offer to you?

Guest: Yeah, so I think first off I was not very entrepreneurial. I was, I grew up in a note, great financial system in the homes, but I got a great education, parents provided a great education and that's where I wanted as I moved into engineering I saw that as get a good job, have a good living out of being an engineer. But I also had a couple things that I think set me apart a little bit. Was one, I was really into sports. I was an athlete, became a fairly high level athlete. So I had some of the discipline. I was put into leadership roles with within different sports teams, whether that was wrestling or rowing or track. I was put into leadership positions and I parlayed those into leadership positions in the engineering world as well and in the services side of things. So I think that came across a little bit when what John saw in me. So that's where that offer came from and I was in the. There's a local engineering, pharmaceutical engineering group, ispe International Society of Pharmaceutical Engineers. And I became a leader in that industry organization as well. So that's where I kind of built a little bit of a name for myself. And so that's kind of why I think he was tapping on me.

[9:06] Host: That's helpful. And then when he mentions this concept of baby transitioning, you buying the business, how does that, how does that land on you? Is that enticing? Is. Would you have taken the job anyway? Like what, How. How big a part of your decision to indeed go work for John, take this job was the prospect of buying the business?

Guest: The, the prospect of running the business was probably as much of the carrot as owning at the time. I didn't. The, the concept of owning, to me, I hadn't quite piece together what that meant. So that wasn't the particular goal, but the concept of leading a company, that was absolutely the selling point of leaving the larger firm with a slower growth path.

Host: Yeah. Okay, so we're getting a picture here of Corey at 29, which is not one of these lemonade stand kids who's always doing something entrepreneurial, however, a very strong track record as a leader. You were a leader from a young age in an athletic context. And then you said your company tapped you for a leadership program. So there were all these leadership experiences that you had had and that you put yourself in. And of course that is going to be very appealing to somebody who, who, who is looking for somebody to come lead their business. Back to the squishiness of this prospect of buying or running the business. It was. The spectrum was so wide that it might have just been run the business, not even own it all the way to own it and run it. It was anywhere in between there. It was just the boss in one way or another, who knows exactly what that looks like.

Guest: Right? That's right. Yeah. So as we went through the first few years of that it, I started to learn a little bit around about small business ownership. Um, there were other people in our, in my industry who also ran either competitors or complimentary service companies. And I started to realize, like, okay, the, the, the freedom that comes with that, the, the challenges that come with that started to become appealing to me. So I was then starting to, to lean more towards the ownership side of things. And John as well, the, the previous owner, he was also crystallizing on, okay, this needs to be a, a cut and cut and dry sale of the business. That's. That, that. That came clear to him as well.

Host: Over time. After you've gotten into the role and over, over years. I want to hear More about kind of the evolution of how, how you're actual buying John out. Right. Kind of crystallized. But before we get into. Once you actually take this job, what does the business do?

Guest: Sure. So whenever a new manufacturing facility is built that produces drug products, you have to show to the FDA and other regulatory agencies that the drugs that are being made there are produced in a facility and using equipment and systems that produce quality goods and produce quality drugs. A lot of these are injected. So we have to. There's a lot of testing that goes on to make sure that everything is. Is hunky dory. And so particularly in, in the follow on to a construction project for new facility, there's a lot of work that needs to be done, a lot of manpower to produce those test documents and assure things are working. And so that's where we come in. We make sure we put a team on a project. Yeah.

[12:42] Host: And you're essentially a compliant, kind of a compliance offering. Are you certifying or basically do you kind of generate the reports that are then certified? I guess it's always going to be a governmental or third party agency that actually gives the stamp of certification. But you're the ones who are kind of the liaison, the ones gathering up all the material, arguing the case for certification.

Guest: That's correct. That's exactly right. We work for the owner and we produce all of the documentation that a regulator would come in and audit and say, yep, you're good to go.

Host: And the nature of the business is project based. It is not recurring. As you said. They'll stand up a new facility and you'll come in and kind of do your internal audit that then generates the information that the certification agency needs. Right?

Guest: Sure. And it starts with a project. Oftentimes the client is happy with our services and our people and they'll turn into some recurring revenue as well over time. We also do outsourced validation departments as a small bit of our. Of our workload of our revenue. But the core of what we do is the project based.

Host: And one thing that my audience will be keen to understand, we always think about when we're assessing businesses is the nature of this revenue. Project based versus recurring. You said you have a little bit of recurring, but primarily project. But I know from our pre call that some of these projects are large so they can be healthy slugs of revenue and over long periods of time. So give a little more color there.

Guest: Absolutely. So we've done projects that are, you know, 20, $30,000 projects. Those are small for us all the way up to $5 million projects which run for two and a half years. So everywhere in between we've done those types of projects. Some of the manufacturing facilities can be very large and require big teams and over a long period of time. And so we're, we're staggering workforce over one and a half, two years. Can that, can't that can happen.

Host: And what's your kind of right down the fairway project, the kind of median

Guest: project, medium project is a half million to three quarter million dollar job for a new manufacturing facility. That kind of gets us that, that'll get a new manufacturing started up for a decent size project. Yeah.

[15:08] Host: And what's the engagement that? So 500,000. Over how long?

Guest: Over a year. Call it about over a year. So we have good Runway, we have good heads up that the work is coming. We're not reactionary because it's on the tail end of a design and an, and a construction. When we kind of come in at the end, we know when those projects are happening. And we're usually engaged early on in a project at a, at a leadership level. So one of our senior people, one of our senior PMs is on the project early and then we know when we need to staff up with our execution resources. So from that standpoint it's a very attractive pipeline that we don't need to have a whole lot of people on the bench just waiting for that client to call.

Host: Yeah, that is attractive because of course one of the reasons we all like recurring revenue so much is because it offers some predictability to future revenues. Right. And if it sounds like you can get that also, but in a slightly different way and for a different reason.

Guest: Right.

Host: And Corey, how competitive is this industry? Super Nichy. But that doesn't mean it might not be fiercely competitive.

Guest: There's two or three like large national competitors that we have and we run into them on the west coast. We primarily just serve the west coast of the United States from Southern California all the way up into, into Washington. And what we've done is kind of become the, the high quality option. We're not the cheapest, but we are going to be high touch. We're going to integrate into teams, into the client teams. And so we have that reputation of high customer service and that's where our differentiator is. But there are a few competitors that are also local and everybody kind of positions themselves a little bit differently. We tend to be towards the top end of the, of the, of the cost side of things. But that's where we Differentiate is on

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

[18:32] Guest: Yes.

Host: Okay Corey, let's return to the plot. So it's 2002, you're 29, you get this offer from John, you take it, you get into the business. What does the business look like at that point in terms of revenue and headcount?

Guest: At that point we were probably doing two, two and a half million a year. And when I joined, part of the reason I was joining is because they had, John had just secured two major projects. So we really quickly ramped up to six, six and a half million or so a year for a couple years. And that that staffing level and that that revenue lasted until about 2008. 2008 we was a big economic crisis and everything capital project wise shut down at that point. And we survived through that downturn because we had the only capital project in the Bay Area and it was a decent sized project. I mean that was a two, two and a half million dollar engagement. We had other little things going on as well. But the, the by being that high quality and getting and being trusted, particularly in the Bay Area, we, we held on to that one big capital project and kept a staff of 13 or 14 or so going for through 2008 and into 2009 until things picked up, pick back up again.

Host: And and so when you came in in 2002 it was probably similarly sized. 12 or 12, 13, 14 people.

Guest: Yeah, yeah.

Host: And then grew when you got to six and six and a half million that grew to how many people?

Guest: Almost 30.

Host: Almost 30. And then back down to 13 or 14 people in 2008. So six or seven years have come and gone. You've gone through this hard economic cycle. You've. It's a small business and you were brought in at the leadership level. So it's John, then you, then everybody else, right?

Guest: Pretty much at that point we also brought in another, another really high, high quality, another leader from one of our clients. We actually kind of stole away, caught him at the right time. And so there were three of us. Arnold, John and I were. Became the leadership team for TBS.

Host: And okay, so after these 7ish years in the business, what of the possibility that Corey takes over the business? Where does that stand?

[21:07] Guest: So the biggest fear in my head at that point was like, okay, now we're talking ownership. Now I'm seeing I've just lived through one of the big downturns. Right. And so I kind of like, well, let me just pause a little bit on this because I wanted to see where the business was going and if it was going to recover. So we kind of got to about 2012, 2013, things started picking back up again. I was like, okay, this, this is, that was a, that was a once in a lifetime kind of opportunity. I know things could happen again in the future, certainly. But all right, this, I kind of understand the business. I understand where the risks are and how to mitigate those. So I was feeling a little, I was feeling more comfortable. So we did start having some discussions around, all right, how can we make a deal happen?

Host: And what year was this? You said 13. 14.

Guest: It's about 13. Yeah, 12. 13 is about where we started these discussions. Yeah, 12.

Host: 12, 13. And so you've now been at the business for 10 years and have you and John had any of that? Have you been having ongoing conversations or has it been the elephant in the room or has it kind of been forgotten? That was kind of a big if squishy feature of this relationship. And 10 years have come and gone. What's its role in your relationship?

Guest: Yeah, no, it was, it was always there. It kind of the discussions kind of happened one on one a little bit, and we're just kind of both feeling out where we wanted to be. At one point, John went to his bank even and asked, hey, could. Would. Would you guys fund a deal? And they said, no. The, that bank that he was using kind of said, nah, that's not something that we do. So he kind of. That actually put a little bit of a pause on things because John didn't see a way to finance the deal. And I didn't have money either. I didn't have a few million dollars to buy out the business at a fair price. So we kind of got stuck a little bit there for a while.

Host: And what John had sought was basically cash for him to take home and to finance and to provide the financing for you. So he was basically really. You would have taken that loan, bought from his bank to buy the business?

Guest: That's correct. He was. One of the, one of the things that was really important for him was that he not hold a note. Right. He wanted, if he was, if he had the risk, he didn't want to also hold onto the note and then have to come back and try to save it later. Um, that wouldn't. That was kind of off the table from his perspective. And I totally understood that. Right. Drawing a clear line was, was important to him. It made sense to me. So that, that between that 2012, 2013 timeframe, we were kind of stuck.

[24:09] Host: And was this discouraging to you? How much had you started putting your hopes and dreams in taking over this business?

Guest: At that point, I was, I was starting to like, okay, this is. I am very interested in ownership, in having something that belongs, you know, that, that I have the, the control over. And so, yes, I was looking at, I want to do my own thing. And so, yeah, I was, I started looking at, maybe I just go off on my own and start my own business. That was the, at that point, that was kind of fallback option number one.

Host: Well, I also imagine you're. You're kind of itching to be the number one guy, natural born leader that you are. John's been in the business the whole time. So you've been a deputy, but you haven't been that the top dog. And I'm not saying you're ego driven or something, but it's, it's naturally where you gravitate.

Guest: Sure, absolutely. That's, that's without a doubt.

Host: Okay, well, that's discouraging. And then what?

Guest: Yeah, so then I'm a big Golden State warriors fan. So I listen to sports talk radio on and so I'm listening, talking about the warriors. And radio ad comes on and it's Comerica bank and we do SBA loans to finance owner buyouts of their existing company. I'm like, oh, really? That's a thing? So picked up the phone like I'm driving and I like scribble down the note, the phone number, call up and talk to the, to the head sales guy who. Or lady who picks up the phone and she's like, how did, how did you get my number? I was like, oh, I got it on a radio ad. And she's like, really? We have radio ads?

Host: So yeah, right. My, my reaction exactly. And that it worked. Not only a radio ad, but one that actually worked.

Guest: Exactly. So she started probing into what the business was, what the revenue numbers were, what the EBITDA was. Kind of gave her some, some parameters. She said, what would, how would you, how would you lead it? I said, well, I'm looking at bringing on a, I would also bring on the other member of the leadership team, Arnold as well, and we would take over and run it. So they felt really comfortable with that transition and they said, yeah, we can, we, this is something we could do. So I went back to, to John and said, hey look, I think, I think I can get some financing. Let's work on some numbers and how the deal would be structured. And actually at that point as well, I had a friend who is in EO in Entrepreneurs Organization and I kind of told him what was kind of going on and he's like, oh, well, I'm going to give you the name of a lawyer who can help you with this. I got a name of a financial consultant and CPA who can help you on, on, on tax efficient structuring of the deal. And so all of these things started coming together with various connections. And so I started to build, was able to build a team on my side to, to help guide me into making sure that the deal could work over the long term.

[27:23] Host: Yeah, great. The, the momentum is starting to build. And Corey, what, what you had said that the woman that picked up your call started asking you some of the bullet points of the business. Can you share those with us? What did revenue look like? What did margins EBITDA look like? Headcount. Yeah. In 2013.

Guest: Sure. In 2013 we were doing about 4. Yeah, about 4 million in revenue and we were doing about 25% EBITDA. So it was, so we were, it was about 1.25 in, in EBITDA at the, at the bottom line. And, and so we were looking at, you know, various multipliers. Industry standard is kind of in the 5ish range for what, for, for some of our competitors. And we finally settled on a pretty good discount on that just from an inside sales perspective. And we settled on a valuation that was right around 4 million as the, as the value of the goodwill value of the company.

Host: So. And you said 1.25 million was what it was cash flowing. So 4 million is, that's a, whatever 3 and you know, it's actually just a little bit over three.

Guest: Yeah, exactly.

Host: Yeah.

Guest: Right.

Host: Yeah. Great. And no seller note.

Guest: Right.

Host: Even, even, even at 10%. Because in our world, Corey, so many of the listeners are going to be used to hearing about a 5 or 10 or 15, sometimes even a 20% seller note, not only because the buyers often want that, but often the banks require it because they want to see some lasting skin in the game by the seller to ensure that there's a good transition and that they set up the buyer for success. So Comerica didn't require that.

Guest: No. So at least at the time, our understanding was the SBA wanted no seller input, no seller involvement. So it was a clean break. We also bought, just to add on to the structure of the deal. We bought accounts receivable, at least the net accounts receivable from him as well, which is about another almost a million dollars that got added into the note. But that just allowed us to keep the cash flow going. Because our accounts receivable in our business are sometimes 90 days, like we have 90 day payables, which is after a payroll period. So sometimes we're at 120 days or so between when we pay out salaries and then when we collect from an invoice. So, so that was very, that was critical for us to be able to, to survive through that transition. And so buying those receivables so that we just collected everything was important to us.

[30:21] Host: Sure, sure. Working capital. Well, you were, that's often something that first time business owners get wrong, small business buyers get wrong. So obviously great that you, you didn't. Now Corey just kind of like so, so where are we? We're still in 2013 or 2014. When does the deal consummate?

Guest: The deal consummates. 2015. September 2015. Yep. And it took a long time to negotiate this. There was, there were some, some wrinkles around some non competes because John, the owner was fairly young, also had a competing business on the east coast. So there was all sorts of negotiations that around how to protect ourselves, that he wouldn't just come in and take our territory. But we worked through all those. It just took a little while.

Host: Yeah. And given that John was already somebody that you had a 10 year relationship with. Did once you got into some of these stickier negotiations, I assume that that 10 years of experience you had with him really was helpful. When you're negotiating with a seller, it's very delicate. You can offend them, you know, anything, any kind of Little detail might spook one side or the other, but because you guys had, you know, a rock solid 10 years under you, that, that was probably a little bit less delicate.

Guest: I, I, I think that did absolutely helped. There were, there were strained times in that relationship during this negotiation because just like you said, there were things that we were concerned about that he didn't think were that, that he didn't see as a, as a problem. There were things that he, he was concerned about that we're like, that's not a problem for us. But there were little breakdowns in trust about how we use some of the language and you know, but we got through them because, you know, John is a friend of mine. I talked to him yesterday. Sorry. So we still have to this day. We have a great relationship and even partner on certain things. So but that, that relationship with him absolutely was key to, we were able to always able to kind of step back and say, okay, at our heart I trust John, he trusts Arnold and Corey that we're going to do the right thing. So we did get through it.

Host: Yeah, well, that trust is invaluable. So Corey, let's zoom out now and, or kind of talk a little bit. Emotions where your head's at. So as you said in 2002, when this opportunity, opportunity presented itself, one of the big appeals to you is, was to take over the business because you were drawn to the leadership aspect of it. I assume that is still something that was really desirable to you now in 2014. 15. What about the financial aspect of this? Because now that it's more immediate, it's in front of your face, you're looking at becoming the owner of a million dollar enterprise, a $4 million enterprise. Is that exciting to you? Talk to talk to us about money and your relationship to it.

[33:20] Guest: Yeah. So as I mentioned before, I didn't grow up with a lot of money, but I was pretty good at, I was pretty quick at assessing risk. So I saw the deal at its core as being a good risk as a, as a good bet. I also had to work with my wife and we had to make sure that we were on the same page about taking on that risk as well. Because our home was put up as collateral on the note. Right. So this was a shared personal guarantee. Yeah, yeah, we had a personal guarantee on it. So that was good conversations with Tanya, my wife, just to make sure that it was a go. But that also created some strain and that added some weight. The, so the first, generally the first year was pretty good. Like we, we cash flowed. We we were able to you know, make all of our payments that that was never an issue and made, made all of our payrolls. So everything was pretty good. We and actually pretty quickly picked up a pretty major project I think in that first year. And so towards the, the 2016 was, was, was pretty good. And so we're thinking that we're, we're, we're on the right track. We got a little loose with things in 2017 and bank kind of came and knocking a little bit and was like hey you guys are, you're, you're hemorrhaging a little bit. You're not, you're not holding up to the numbers that we, that we, that we were expecting. Still didn't miss any note, any, any payments or anything like that. But it, that lesson in 2017, in that second year, maybe it was the third year, but it was that when we had a little bit of a down to downtick in in, in revenue made the bank a little bit nervous and it kind of sharpened our, our eyes a bit moving forward as well, learning what the bank was looking for in terms of ratios so that we could, we could match that going forward. But in terms of the relationship with money, it started to feel since we are cash flow positive, including paying the note, which is a 10 year note, it started to feel pretty good. We are starting to see a little bit of personal benefit in terms of a few distributions to start off with and yeah, that absolutely felt great.

[36:09] Host: Yeah. Well, and one thing we should be clear about, let's just return to a few, few bullet points of the transaction itself. You bought this with Arnold as you said. So you're not 100% owner. There's an ownership split, but you are majority owner. Can you give any more granularity there?

Guest: Yeah, we're 6,337 is our, is our ownership split.

Host: So you had 63% and the final acquisition price. I'm just looking at my notes. I don't think that we said this is, was 5.4 million because it was 4.2 million for the, the business, the goodwill and then then an additional 1.2 million is how you valued those accounts receivable. So in total 5.4 million.

Guest: Correct.

Host: So you're the 63% owner of a five and a half million dollar business to be crude again. You're looking at assuming everything goes well and you pay down this note, you know, basically becoming a millionaire. And what's so interesting to me about it is that if, if John hadn't come Knocking way back in 2002 that might not have otherwise happened. You might have continued on in a successful career and probably been a leader. And because that was just. You seemed destined but not necessarily had built wealth and this, this is a real wealth building opportunity. So I'm just trying to draw you out on that kind of happy accident of your career.

Guest: Yeah. So I didn't even like it. It, it didn't, the numbers hadn't quite sunk in as to what that meant to, to be an owner and to be able to build that wealth. Like, and I remember John had asked me, he's like well what do you want? Like at that time that what was big? I said what's your number? Like what did you want? So I kind of was like well you know again, If I have $4 million or so, I should be good, right? And I was kind of doing like if I could just have a, if I could just have a take home of 150, $200,000 a year or so, I can be comfortable. And it kind of shocked him. He's like, but that must be on top of the value of tvs, right? And I'm like yeah. So I was thinking of it as like, just as a path to being a millionaire. Absolutely. With, with enough money to kind of live a middle class lifestyle. That was my kind of goal at the time. And then as I kind of started thinking about it, well that's a whole lot of risk to take on to just have that type of lifestyle because I could have done, I could have had that kind of lifestyle without the risk just moving into a leadership position and just kind of carried that on until I retired. So I still talking with other entrepreneurs after I joined eo, I was like okay, no, I need to think about this in terms of wealth building and how to, how to structure all of that to make it really pay off. So that evolution for me as a kind of middle class growing up into entrepreneur and realizing the benefits of the risk that I took on became a crystallizer as I went through the process. Yeah.

[39:27] Host: And Corey, what about the again trying to get inside your head back in this time, the fact that you were about to buy a five and a half million dollar business, you said that it required some convincing with your wife, but also like did you just need to at some point be like wait, what am I, what am I really doing this? And let me maybe provide a little bit more context. A lot of listeners are going to be interested in buying a business if they haven't already and they if they're listening to acquiring minds, they probably listen to multiple. They've heard multiple stories, they probably read the books, they've. They're probably really getting up to speed with all the content out there about what this looks like, and that helps normalize it for you. You know, the idea that you'll buy a $5 million business, when you first hear that seems crazy. Then you hear 30 stories of people who've done it seems less crazy. But you were kind of a lone wolf. You know, you were responding to the radio ad. You weren't immersed in a community. You hadn't read the books. You didn't know that this was a thing. You were really kind of piecing it together yourself. So I feel like the leap that you had to make in terms of self confidence, in terms of, like, convincing yourself that this wasn't a crazy thing to do, was. Was. Was a longer leap than many of the listeners might have to be. Might have to take. Do you agree? What do you say to that?

Guest: I do. And it was that one friend who's an EO member before I bought the business, who, when he helped me build my team for, To. To. To structure the deal. Those conversations with the financial planner, with the lawyer, they. They provided that normalization of the process. And there was three major people that were on that team that had done many deals of a similar structure. And so that kind of gave me the confidence that it could be done. And they were giving me guidance around, looking at the books about how to think about cash flow and how to mitigate what kind of numbers you want to look at to analyze the feasibility of the deal, you know, what's. What would happen if clients started going away.

Host: How.

Guest: How much revenue do I need to survive to keep the business going? So knowing those downside risks and what the upside benefits were was absolutely critical to making me feel comfortable. It allowed me to tell a story to my wife and to Arnold to say, here's what the deal can look like over time. And so that's where I kind of got the confidence to proceed and move forward, making the deal happen.

[42:29] Host: Did you have a family at the time, other than your wife? Did you have kids?

Guest: Had one kid at the time. At the time, 2012. Daughter would have been 8 at that time. So we were looking at, you know, another 10 years or so of. Of Runway of being responsible from a financial state standpoint. So we, we were actively, you know, saving for college and all that as well. But so I knew that I had at least 10 years or so of, of payback, that, and wanting to be in the business as well. And that aligned with my family situation. So now my daughter is off on college and is spreading her wings and succeeding. And so that's where we are today. And so I'm feeling pretty good about the deal. Looking back now, eight years in.

Host: Yeah, that's phenomenal. Corey, congratulations. Well, one of the other things, as you're wrapping your head around doing this, you're at a disadvantage because it doesn't seem as normal. It probably seems intimidating everybody in your circle, you've got to convince your wife, you've got to convince Arnold. So that that's kind of a disadvantage you have compared to some of my listeners for whom this already seems normal. But one of the advantages you have, and this is, this should be kind of a central takeaway for listeners from this conversation, is how risk mitigated it is to buy a business that you're already in and a leader in. So you knew this business really well. And one of the hardest things, if not the hardest thing about buying a small business is all of the unknowns and how much diligence do you do? And we all realize you can't diligence away all unknowns and all risk. And you've heard it, you'll hear it time and again for my guests. At some point you just have to kind of step off the ledge. There's just going to be a moment where you got to jump. But if you buy the business that you're working in, particularly if you're on the leadership team and you really know the business front and back and you've been there for 10 years, all of that, I mean, there were probably very few, if any unknowns to you. What, what, what did your kind of, how did you feel like your knowledge of the business was at this point was kind of perfect information?

Guest: It was pretty close to perfect. Not 100%. We. One thing that the previous owner that John did was he kept the books separate from the operational budgeting. So going through tax forms, through the due diligence process once we had signed the LOI was eye opening. So that was another level of, of, of discovery. But we ran things on a pretty, you know, spreadsheet basis. We never really got into true P and L. And so that was one thing that I definitely had to pick up is kind of the accounting processes because I, that was, that was not familiar to me in the, in the running of the business because we have a, it's a relatively simple process in that we, we have Two major inputs and outputs, right? We have, we have salaries and we have bill rates. And if we can keep salaries reasonable and keep our bill rates high and keep people billable, good business. So at its core, I knew that stuff inside and out. Adding on some of the, more, some of the other accounting inputs and outputs into that, I definitely had to learn. But it wasn't a huge stretch to do that. And then just in the community as well, in the, in my industry community, I was pretty well known. I built myself up even further through the leadership of tvs. Some people even thought I was an owner at the time already. So from an outside perspective standpoint, I had become kind of the secondary face, if you want to call it that, of tvs. So that just helped so much. Clients knew me and had built up a relationship with all of our major clients and there aren't that many clients in our niche business in the, in the Bay Area and on the West Coast. So I had, you know, one or two levels of separation, connection to just about anybody that would be utilizing our services.

[46:55] Host: And you'd also, going back to 2008, seen the business through an entire cycle, a terrible cycle, in fact. And granted, you recognize that if such a bad cycle happened again, maybe, you know, it could, it could be catastrophic. But at least, you know, you've been through a season of stress testing this business. And that's, you know, one of the other big questions during due diligence for anybody buying a business. Is the business I'm buying enduringly profitable in a bad recession? What is, what happens to this business? How recession resistant is it? I mean, it's one of the classic, one of the very kind of first boxes to check or leave unchecked when you're looking at a, looking at a business, analyzing a business. So that was, it was good that you hadn't just been living at the business for, you know, an easy decade. It had been up and then down and then up again.

Guest: Yes, absolutely. And to be fair, we're kind of going through one of those downs right now. And so we're, we're trying to apply some of those lessons that we Learned back in 2008 with a slowdown in capital expenditures in this last year and probably going into next year. So we're in a mitigation phase right now through these, through this next, through these next couple, this, this last year and this year coming up.

[48:09] Host: And, and, and how bad is it?

Guest: It's, it's fairly bad. We're down about 40% or so in top line. Revenue and the, in terms of bottom line profit, we're, we're barely scraping by right now, but we see it, we see the, the light at the end of the tunnel. And so we're, we're, we're scrambling to, to survive and keep as many people on staff, those high, the high quality resources that we have and we're, we're, we're surviving and getting through.

Host: Great. I'm glad to hear that, Corey. And, and why don't you actually also just fill in the gaps now? So you've had eight, you're basically eight years in the business. Kind of give us a sense of what your tenure has looked like and, and, and, and then where is the business today in terms of revenue and headcount? Understanding that you're in a rough patch at this very moment.

Guest: Sure. So we, we kind of peaked out at about 9 million in revenue last year. Last, last full, full year and was in the low 20s in EBITDA. So we were doing pretty well. Yeah, I'd say we were doing great. And then this year came and it was, yeah, we're down to, I think we're targeting maybe 6, 6 million or so for this year. And because we've, we've tried to hold on to our, our staff where our, our bottom line numbers are scraping the bottom, but we're, we're getting by and maintaining our notes, note payments and so we have, we could, we're investing in our future, moving forward by keeping on our high quality resources.

Host: Well, if you got to 9 million last year, recognizing that that was a peak year and that that's not necessarily kind of the average, especially since you're having this dip now. But it sounds like you've doubled or kind of almost doubled directionally the size of the business from when you acquired it.

Guest: Yes, that's absolutely true, both bottom line and top line. Yeah.

Host: Well, that's, that's pretty exciting, Corey. Yeah, no, it is.

Guest: Great.

Host: Good, good. And what of your loan? So you're, you're, you, you should only have a couple, not very much left on it.

Guest: Yeah, we actually refinanced last year. The SBA loan was variable rate. Right. And so we kind of saw the writing on the wall. The interest rates, interest rates were going to be rising. So we refinanced into a fixed term, locked it about, I guess that was a little, about 18 months ago or so. And we got a little over a year left to go on that refi. And so feeling looking forward very much to not having to write those checks every Month to the back to the bank. Yeah.

[51:08] Host: And you were able to refinance into a conventional loan because you'd been paying down your loan so reliably and had grown the business and you were just a healthy borrower. I guess that's why they were kind of willing to let you do that.

Guest: Yeah, we, we had, we had good balances on our, on our bank accounts, so they saw that we kept a lot of cash because, you know, we just did. So they saw us as a good investment. We had, we had a great relationship with our, with our lender. And yeah, there was just a level of trust there that we could take our houses off of the SBA loan and move it into primarily a loan that was backed by the cash flow of the business.

Host: Well, that's an enormous milestone. So you no longer have this pg, this personal guarantee guillotine over your neck.

Guest: Yeah, yeah, that's. That, that was, that was a huge motivator. On top of the rising interest rates. That was a huge motivator for us to refinance as well, just to have that weight off. So feel really good about that.

Host: Great. Well, congratulations, Cory. And so you are. Okay. So let's be optimistic. And in a year or two, you'll have paid down your, the loan that you refinanced into so you won't have any more debt on the business. Can I ask how old you are now?

Guest: 50. Turning 50 this week.

Host: So you're 50 and you are 60. Whatever. 40. What was it, 64%?

Guest: 337. Yep.

Host: 6,337%. Owner of a $9 million business in a good year. What is your role in the business today? Is it the same as it's always been or what? And then. So answer that and then I'll ask the follow up.

Guest: Sure. So we've actually done some restructuring within tvs. So Arnold has become, has moved into the president role and I've become kind of the visionary CEO type role. The stuff that I like to do and I'm good at is providing direction, strategic vision. The things that Arnold is really good at are operations day to day, making sure everything is, is running, running smoothly. So we've, we've, we've shifted our roles a bit into that, and we're looking at different options moving forward. We're looking at Arnold maybe taking on more ownership stake and buying more out of me. We're looking, we've, we've, we get offers just about every, every couple weeks of somebody looking to acquire our business. So that depends really. Yeah. We, we get, I get calls.

Host: I mean you say you seem like a natural target, but I wouldn't have thought that often. But I don't really, you know, I've never presided over a nine million dollar business. So go ahead.

[54:05] Guest: Just. We're fairly well known on the west coast and so we have competitive. The larger competitors are, are knocking on our door often. We have private equity that, that is looking at different things of packaging us with different types of companies to create new, new entities. And so yeah, I've gotten dozens of, of calls about different options moving forward and right now we're just kind of, we're going to keep, we're holding those off at, at bay right now.

Host: What about your personal. How do you envision the next 10 years for you personally? Corey?

Guest: Sure. The, the what I Right now my vision is to continue to be that visionary strategic direction. I love working with clients and closing deals with new clients, but that's. So that's where I want to spend my time. I want to spend my time in tvs, in living at a little bit of higher level and, and out of the day to day stuff and not running projects and overseeing staff. I, we, we built a great leadership team. We have great staff, great project managers. So the vision is to let them grow within the company.

Host: What's the headcount today?

Guest: Today we're at 24. We have 24 staff down from a peak of 32, 33 or so from last year. Everybody that we have on right now is super strong and looking forward to, to rebuilding where we were last year.

Host: Yeah. Get back up to nine and beyond.

Guest: Yep.

Host: Corey, given that you've got into this business as owner via an acquisition, have you thought about acquiring yourself as a way of growing the business?

Guest: We have, there's actually a target that we have an owner of a similar type of business that provides resources that is looking to retire, wants to keep his staff busy. And so we're, we do have a target. Yeah. To acquire.

Host: Well, Corey, I want to close out our conversation with, to try to see if there are any takeaway, any kind of like actionable takeaways for somebody who might be listening to this and has thought about buying the business that they're an employee of.

Guest: Yeah.

Host: You know, your, your situation was very particular. So you know, it might be hard to generalize. But if you have any thoughts or any advice. I mean, I guess one takeaway I'll, I'll call out is just that, you know, people in our community of buying small businesses all know what the SBA loan is and that you know that it's an option. But let's not assume that anybody else knows what that is or that, you know, the owner of the business knows what that is. So they might not perceive that you listener could buy their business because they're like, well, this person doesn't have $5 million to buy my business, so they're not a candidate to buy it. They might just need to be told that there's a, that there's a vehicle here, that you can use the SBA loan to get it done. So that strikes me as a, as a key learning from your story.

[57:24] Guest: Yeah. So the, the thing that I would share or give advice on, on that side of things is that the SBA loan is absolutely fantastic. It's 10 years. So when you're buying a company at 4.5x multiplier, you have enough cash flow to take a little bit off the top maybe and to be able to pay your note right off in, in that time. So. And the low down payment that, that the SBA requires is just fantastic because we did look, we did look at private non SBA funding options as well and they were all looking for five year terms and it was just like we, we would be just scraping by to be able to make those notes, make those payments at five years. It just, it did not pencil out. So yeah, would absolutely point people towards the sba. It's fantastic. The other thing is building a team to help you guide through the, through the transaction, making sure that your legal bases are covered, that you're doing things that meet, that align with the SBA's requirements. Right. Because the SBA has, you know, very strict requirements around that on how the deal can be structured, what the owner, the previous owner's role can be. So someone who understands building a team that understands what working with the SBA means.

Host: Yeah, yeah.

Guest: And tax efficient strategies as well for buying the business because those can be very beneficial as well. So we, we bought the business, bought the, the shares of the business as, and were able to depreciate those. So we have 15 years of depreciation from the purchase price that has allowed us to defer quite a bit of taxes and allowed us to cash flow positive. Made it much easier to cash flow positive as well.

Host: Oh, that's, that's fantastic. I feel like I only have a very, I barely know anything about that and only because. Are you saying it because you're saying it? Am I even reminded that I have heard something about that? So I need to educate myself I

Guest: think it's a 791 allocation or assignment. Forgive me, forgive me if the number is not exactly right. But create, you depreciate the, the asset over. I think it's 15 years on a, on a straight line basis. That becomes a deduction on your taxes every year. But then when you sell, you're selling that depreciation, you're paying more, you're not paying capital gains anymore. You're paying regular income on more of the regular income as you go along. Right when you sell. So if there's downsides on the, on the sale side.

[1:00:21] Host: Yeah, yeah, yeah. Okay, good call out. And Corey, what about the transition? So, so one of the big themes for this community of people who buy small businesses is that you buy the business in day one. Day two, when you transition to the business, you walk into a room of unknown employees and say, hey guys, I'm the new owner. And how does that go? And it's you, you can imagine it. It's, it's intimidating, it's nerve wracking. It can go well, it can go badly. So it's always a big kind of feature of these stories. What does it look like when you're already in the business, you don't have to go around and introduce yourself to anybody. Also, you were happily or kind of, I assume, making things more easy. You were already a leader in the business. So it's not like you leapfrogged over anybody who might resent you. You were already at the top. In fact, people in your industry already thought you were an owner. But give us a picture of what the announcement to everybody on the team looked like when you guys were like, I'm the new owner. Me and Arnold are the new owner team.

Guest: Yeah, yeah. Arnold and I got to stand up at, at a, at an all hands meeting and say, hey, we're, we're buying the business and we're, we're going to be transitioning. And everybody's like, oh, cool. So it was pretty nonchalant. It was easy peasy. You know, John had done a really good job. One thing I really appreciate about the previous owner is he giving us that space to become the face of the company and build that rapport with our team was just fantastic and allowed that very, that smooth transition.

Host: Well, anything that, to your story that the audience needs to hear that I haven't asked Corey.

Guest: The one thing I'll add is that ownership. When you go through this process of becoming, moving from an employee into an owner and this is somebody that somebody in eo told me this is that ownership of a company is kind of life amplified. So the highs are higher and the lows are lower and the stress of ownership pushes both ends up and down. And I learned that really quick. When, when a company is, when, when a one of our clients isn't paying on time and it's like, oh, it amplifies those concerns as an employee. It's like, oh, that's somebody else's problem. They'll, they'll figure it out.

Host: Yeah.

Guest: But it, it becomes real and becomes real real quick.

Host: Right.

Guest: So. Right.

Host: Both on the upside, but also on the positive side, the highs are higher.

Guest: Absolutely. Without a doubt. Yeah. So I don't regret it at all.

Host: Great. Corey. Well, thank you for coming on to share your story. You are going to be one of the panelists in San Jose for the October 5th event at the at EO Silicon Valley, the Silicon Valley chapter of EO. So we'll see each other there and for those in the audience, they'll get to hear more of your thoughts on this and more pieces of your story. But really appreciate the time, Corey, and I guess I'll see you in person in a few weeks.

[1:03:19] Guest: Awesome. It was a great conversation. Will.