Host: 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. Damon Clarson wanted to buy a business that was B2B, could be operated from anywhere. He likes to travel and had potential for scale. And he found a business that fit the bill in insulation distribution. Pacific Insulation Supply is the name of the business which he acquired in November 2021. We get into a lot of topics in this interview, including his thoughts on the size of business that he bought, how he zeroed in on what kind of business he'd feel comfortable buying and, and his mental health, which played a large part in his decision to do this. Here is Damon Clarson, the new owner of Pacific Insulation Supply. Damon Clarson, thank you for joining me today on Acquiring Minds.

Guest: Yeah, thanks for having me.

Host: You are the very new owner of Pacific Insulation Supply and insulation supply business in Salt Lake City. So it was November 19, November 20 that you acquired the business. So just just over a month in the seat, but by all accounts, numbers are going in the right direction. So seems like you got a good deal and a good business. So we're going to hear that story today. And as well as kind of what you got planned for the future, it seems like Pacific Insulation Supply could go in a lot of different directions. So we'll touch on that a little bit as well. But start us off, Damon, with you couple minutes on your personal and professional background and what it was that led you to want to go out and buy a business.

Guest: Yeah, so kind of some brief background. I was in tech sales for the last like five plus years. Started originally working for, we had a family business that sold tech to school districts and left that joined a couple different startups here in the Salt Lake area. One called weave, which recently IPO'd, and one called Bolt, you know, bounced around a little bit. Ended up back at the family business earlier this year. And that's kind of the professional side. But I really started searching about a year and a half ago. I got laid off from a job and it kind of was an idea that I'd had for a long time. I've been looking at, you know, financials and businesses for four plus years, but really got serious about it about a year and a half ago. And so I, yeah, I started looking at businesses and ever since then it's kind of been on my mind.

Host: What happened a year and a half ago that made you get serious about the search

Guest: yeah, just losing employment. So I was let go from a job during the pandemic. I was looking for work, but also was mostly just looking at businesses to buy and even things to franchise. Just something to do out of my own kind of realizing that the way to really build wealth was through equity. That was when things really took off for me in terms of looking at businesses and figuring out the process of dealing with brokers, looking at financials, getting your own financials in order. All that stuff really started happening about a year and a half ago for me.

[3:24] Host: So you had said that actually four years ago, the idea of buying a business kind of first was on your radar, and then you got serious about it a year and a half ago when you were laid off from the tech company during the height of COVID So obviously, kind of entrepreneurial leanings. Did you ever consider starting something from scratch rather than buying? Like, why buy versus and you're in tech, where people are probably kicking around ideas all the time, new ideas, and businesses you could start from scratch all the time. Why buy a business rather than start one from scratch?

Guest: Yeah, so when it comes to tech, I'm not really smart enough to do that. I mean, I don't really know code. I didn't have that. That side for me. And also, like, my background, my family was all in small business, both on my wife's side and my own side. My dad's a beekeeper, so he runs, like, a bee farm. And so I'm from a small town where a lot of people are small business owners. And so that kind of just made sense to me more than like, hey, let's build a tech idea and raise capital. And that just didn't really fit what I'd known. And then I did try to start, actually, a garage flooring business, but ultimately I just hated doing garage floors. And so, you know, really what it came down to is, like, you know, when you buy a business, you buy a ringing phone. And I figured, I have not heard that yet.

Host: That's a great. That's a great way to put it. That's a. I stole.

Guest: I stole it from someone on Twitter. It was a tweet I saw. I don't know who it was. I'm sorry. But basically, I knew, like, I had a better. I had a better chance of optimizing a business that ran than to start it from scratch. So that kind of is how that decision was made.

Host: And you had talked to me a little bit about the type of business that you wanted. Kind of, you know, we all Hear about the plumbing business, and none of us probably considering buying a plumbing business are plumbers. And there's always the question of, like, how can I buy a business where I really don't know, you know, what my team is doing? I couldn't, you know, I can barely swing a hammer. And that was. And some people get over it, and some people are really uncomfortable with that. So talk to me about that psychology for you because I know it was a big factor in your decision.

Guest: Yeah. So, you know, when I come down, when I can't, I guess looking at all these different businesses, the first thing I would do is I would try to put myself in it every day. So, like, what does that actually, that picture actually look like? You know, I'm helping my kids get ready for school and then I'm going to a store. Am I going to a storefront? Am I working from home? Like, what does that look like? So there were a few that I looked at that I just couldn't quite really wrap my head around. One was a fire alarm install business where, you know, they were doing fire alarm and sprinklers and was a really solid business, but I just couldn't imagine myself being there. And so essentially what it came down to is like, where do I want to work every single day and how do I want my life to look? And so this business eventually fell into my lap and fit that perfectly. But I knew based on my own lack of technical knowledge in a lot of different areas, I probably wasn't fit to manage people who had been doing plumbing for the last 20, 30 years.

[6:37] Host: So, okay, so you were able to rule out a bunch of different businesses. What was ruled in, what were your criteria?

Guest: Yeah, so I would say like the big three things I was looking for was a business that dealt B2B. I really was uncomfortable with the concept of selling to consumers. I've sold B2B for the last 5 plus years, so it made sense to me. And I feel like I know the sales motion a little bit better. I wanted something that allowed me to live flexibly. I like to travel, I like to, you know, go be with my kids and stuff. And so I didn't want something that, you know, was open till 10pm at night. I wanted something that was going to work regular business hours, which maybe that sounds like kind of picky criteria. But another thing that I wanted was something that I could scale to an unlimited degree so wasn't bound by geographical constraints.

Host: Yeah. So pretty obviously we're zeroing in on E commerce here. Virtual Flexible hours and unlimited scalability or worldwide market.

Guest: Yep.

Host: So, so was it E commerce? Did you go out looking for E commerce business or were you more just like anything that fits this bill, I'm

Guest: open to it was more anything that fits this bill and also like whatever came around. I wasn't doing any proprietary outreach. You know, I didn't have any way of, I didn't even know that was an idea or a thing. You know, I, I didn't even know that the SMB Twitter world existed that was doing this. And so I was mainly just talking to brokers and whatever came across my desk. One business that was really interesting to me was a high end audio business where they sold like really nice speakers and receivers and stuff because they weren't selling online, they were only selling storefronts. So I thought, well, if I could sell online that would be cool. Then within the first phone call with the owner, I learned that the brands he deals with, they weren't allowed to sell them online. So. Okay, well that kind of ended that. So it kind of started to make sense to do E commerce a little bit while I wasn't necessarily focused on it.

Host: Yeah, yeah. And so you know what I'm hearing is that you're completely self taught. You're on Twitter now, which is how I found you. But you weren't on Twitter then. You weren't reading SMB Twitter. Did you read any of the books that come up again and again, Buy Then Build or the Harvard Business Review Buy a Small business book?

[9:06] Guest: Yeah, actually that's how I was introduced to SMB Twitter entirely was. I started getting really serious about it and I was like, man, I should probably like read something about this. And so I looked up, I probably just googled like best business books about buying a business and Buy the build came up by Walker Dibel. And so read that pretty much in about a day and then looked up some podcasts that he was on and found a couple different podcasts and found those podcasts on Twitter and realized there was this huge community of people that were trying to acquire businesses and, and people that has successfully done it and that it was actually a really good way of building wealth. And so it felt good to have my thesis confirmed a little bit.

Host: Yeah.

Guest: But then also, you know, I can't say enough about like the people you can gain access to by being on business Twitter. It's, it's pretty amazing.

Host: Yeah. So the idea of buying a business, you know, that you had kicking around for some number of years, did anybody give you that idea because it's not, it's not the most obvious idea in the world. Typically like how I came to it, I always say is my, Before I learned the path that you're on, I just thought, I would have thought that buying a business was something that basically already wealthy people do or one company does to another or private equity people. But the idea of like buying a business as a, as a loan entrepreneur seemed far fetched to me. And the very brief Googling I'd done on like Reddit and stuff was people are like, oh, don't do that, that's buying a job. So I, I remember doing some early Googling and then dismissing it because it seemed like people on Reddit, you know, great credibility there. But the people on Reddit were saying it was a bad idea. So you know, I, it just didn't seem like a very solid or obvious path to me for a long time. What about you?

Guest: You know, I really don't know. One thing I can, I can think back to was in college I had a friend who, and I'm 29, so I graduated in like 2016, but I had a friend who franchised a business right out of college. Instead of doing anything else, he franchised something and he was looking at buying businesses. And so I'm thinking that was probably my first introduction to like a normal regular Joe trying to buy a business. And then I've just got some friends that, you know, we kick around business ideas all the time and Ty found biz by sell and you know, that entire world. So I guess it. And like I had seen family members buy businesses from like they're like, yeah, I saw my brother in law buy my, his business from my uncle and so I knew that like it happened. Yeah. But I didn't really like know how it truly worked until probably a year and a half ago. Like, okay, I gotta get an SBA loan. Didn't know what the SBA even was. Probably cool.

[12:02] Host: Okay, well you have made this decision to do it. You've got your criteria. What about your financial criteria? What size businesses were you looking at?

Guest: Honestly, I wanted to buy something that was less than 700,000 at first. Just like anything over a million just seemed outlandish to me. And so I was looking at a lot of businesses like that. But the tricky thing about that size is they barely cover debt service and maybe paying yourself a little bit. And so I was looking at a

Host: bunch of thing about them for sure.

Guest: Yeah. And also they're a lot more unstable. And so I actually was, I Was never really sure what my size wasn't until, you know, I started looking at it and I was like, okay, anything under sub 5 I probably don't really want to do, and maybe I would now that I have kind of an anchor business. But at the time, you know, I couldn't think of. Of, you know, doing something smarter than that. So the way this kind of came together was I fell into this business and was actually looking at a business that was around 750,000

Host: enterprise value.

Guest: Yeah.

Host: Okay, so you're. And this is from a broker, right? So you're. You're reaching out to local brokers or did you. I mean, given that you wanted something ideally virtual real, you reaching out to brokers across the country or just in Utah?

Guest: You know, I. It never occurred to me that there were brokers across the country that I could like, that I could talk to. I was mainly just chatting with this one guy. There were a couple, I mean, some of the big ones that are nation, like trans world and stuff, but there's one in Utah that I was talking to a lot, and he had shown me probably like 10 or 20 deals. I don't know. I was a little bit nervous when I reached out because I. For the one deal that I didn't end up getting because I'm like, man, I've looked at so many deals. He probably just thinks I'm just kicking the tires on anything and everything. And I was really nervous about it. But we had chatted quite a bit and so he knew me. And so, yeah, it kind of threw a brokerage is where I found this deal.

Host: So, sorry, this one business that you keep talking about that you didn't get, what's the quick, quick story on that one? And then how did that lead to the one that fell in your lap?

Guest: Yeah, it was a commercial cleaning business that had a bunch of contracts with, like, local ski resorts here in Utah, which I thought was a unique niche. And so, yeah, I was looking into that. And when I called the broker about it, he was like, on vacation. And then I finally got ahold of him on like a Tuesday, and I was like, hey, I'm really interested in this business. And he was like, well, hey, man, I'm sorry, but that's going to be under contract in probably like an hour, so maybe we should look at something else. I was like, oh, dang it, I can't get my stuff together in an hour. So he was like, but I have this wholesale construction material business you could look at. It does better numbers than this, and it's probably a lot more easy, a lot easier to run. And I was like, oh, sure, okay, whatever. You're just trying to sell me something. But I was like, all right, sounds good. He's like, yeah, I'm going to list it tomorrow, but I'll send you the financials tonight. And lo and behold, it was the wholesale insulation supply business that I have today.

[15:20] Host: So tell us about it. What was it doing? What's the business model?

Guest: Yeah, so at first when he told me, he's like, they want 1.1 million for it. I was like, cale, that's way more than I want to spend on a business. But he's like, 1.1 million, but it's on pace to do 600,000 this year in net. And so I was like, okay, well now I'm kind of interested in 600,000

Host: in EBITDA this year, but being for sale for 1.1.

Guest: Yep. Yeah. So the, you know, he sent me the financials, and on the financials it had 2020's revenue listed, which was 2.2 million in sales and 380,000 in EBITDA. And I thought, okay, well even those numbers are pretty good. What's going on with 2021? And so I looked at 2021 and it was already at past those numbers. And so I was like, okay, this is much more interesting. And so I didn't really know what multiple to look for. I had read that around three or four is probably where you want to be. And so this one was priced at 3x of 2020's revenue. And so I thought, okay, yeah, that's probably good, maybe we can look a little bit closer in that. And so then also the debt service was pretty easy to cover on 380. Debt service is going to be around 120 on that. I can live very comfortably on that. And there's a lot of money left to reinvest in the business. And so the numbers started to fall into place for me, even though it was a little bit more than I was anticipating in terms of cost.

Host: Well, and as you now know, it's not even though it's precisely because the numbers were bigger that it all started falling into place. I mean, the temptation is to, for the first timer is to buy small because these 1.1 million seems like an outlandish amount of money. But you run the numbers and you quickly realize that it needs to be like that to pencil out.

Guest: Right, it needs to be like that. And also it gives you less chances of failing if you're going to get a business that's three years old and has only netted $100,000. You could probably start something similar from scratch and be there in a couple of years with a lot less debt. And obviously that's not the case for every business, but that's kind of the way I started to, to look at it was, okay, I'm buying something that's been in business for seven years, that has done at least 2 million over the last four years per year in sales. It's got a big name in terms of, I guess a good name, good SEO, good bones. So it became less scary for me and then I just kind of had to figure out how I was going to make the numbers work and what we're going to do from there. So yeah, I've got some opinions now on what size of business I think 1 million is the smallest I probably even ever go now.

[18:06] Host: Yeah, yeah, sure, I've heard that before. Cool. And so it was a seven year old business. And so is it essentially an E commerce business? Tell us a little bit about the business and the business model and what it sells and how it's. And to whom it sells.

Guest: Yeah, you know, sometimes it feels like it's all put together through paper clips and rubber bands, but basically what it

Host: is is welcome to the lower middle man.

Guest: Yeah, so basically we've got this, we've got a website, Pacific Insulation Supply.com. you go on there. The difficult part about fulfilling insulation in bulk is, you know, getting it to people. Right. It's not like I can just send it to a distribution warehouse and then they just fulfill it by Amazon. It's, you know, the installation comes and it's in these big warehouses across the nation. And so big it kind of has to operate like a local business but with an E commerce front end. So people call us up or text us or email us and say, hey, I'm looking for 2,000 square feet of this type of insulation. And then we have partners that house the material and deliver the material. And so then I have a team of salespeople who then call around to warehouses, see which warehouse near them, near the customer has the supply and then we organize delivery.

Host: But are you, is that your inventory or is it only your. No. So you're not really keeping any of this. Do you have any inventory?

Guest: We carry zero inventory. We don't carry any inventory. The inventory is all carried by our distributors and our partners. So that was another really attractive thing for me was it was a relatively low capex Business.

Host: Yeah, yeah. And so why are people coming to you rather than going directly to one of the distributors?

Guest: That's a great question. And this is something that I had to figure out on the fly. Was like, okay, who is my ideal customer profile? And basically the way these distributors work is if you're buying a lot of construction materials or insulation, you can get an account with them and buy directly and get contractor pricing, and it kind of eliminates the need for me. But if you're a small contractor and you're a small. Or you're a homeowner even, and you want to get better price than, say, Home Depot or Lowe's, but you don't, you know, you're not doing quantity. Yeah, we're kind of filling that niche. And so I get a lot of contractors who do everything rather than just like insulation contractors who only do installation because they're doing so much volume they can go directly to the distributor. Yeah, um, yes, we kind of fit that, like, middleman niche. But at the same time, during the supply shortage, there have been a lot of big companies who. Their normal supplier is out, but they don't have a relationship outside of that one supplier.

Host: Yeah.

Guest: Where we have four or five supplier relationships. And so they can reach out to us and then we kind of work as a middleman for them as well. So that's kind of the niche we feel. We feel. And that's why people would end up going to us as opposed to just the distributors directly. But sometimes the distributor directly makes the best choice for some companies.

[21:19] Host: So your customer is kind of like a general contractor with like a crew or two. Like kind of a small mom and pop general contractor who's not big enough to buy insulation in bulk.

Guest: Yeah, yeah. You know, they don't have a big warehouse where they're shipping materials and holding materials. They need it this week. They need it delivered to a job site and they need, you know, a certain quantity. Now, that's not always the case. I've had some big customers already, you know, where they're working on huge projects and I'm shipping to their warehouses. But that's a little bit more rare.

Host: And sorry, that's because of this supply chain issue with the larger guys who haven't been able to fill orders. So you're getting some of their. Some of their disappointed clients.

Guest: Yeah. Not to kind of diverge a little bit, but there was one really big issue in due diligence that I found that I had to overcome, and it was customer concentration. In this year, 2021, there was one customer who has done, who had done about a third of the revenue. And that really worried me. And I was like, hey, what's the deal with this customer after we close, should I go meet this person, try and get to know them? What's the deal? And he was like, oh yeah. They kind of came to us because their normal supplier was out, but right now it sounds like they're kind of all set. So I'm like, oh, well, okay, this huge revenue source now isn't buying from us. This is kind of troubling. And so that was one of the hurdles I had to overcome was understanding how to use the supply shortage to my advantage. But at the same time I had to get comfortable with this concept of like, okay, a big chunk of 2021's revenue probably won't be there or will be limited. How are we going to deal with that? So luckily I uncovered it before I closed, obviously. But yeah, that was one of the issues that the business did have was customer concentration this year.

Host: This year. Well, it sounds like to your seller's credit that he understood that and that's why he didn't price in. He priced based on previous year's numbers and was basically treating this customer concentration that was kind of a windfall, but kind of a one off this year as just that, as a windfall and not something that you could rely on necessarily going forward.

Guest: Totally, yeah. And he was like, you know, it kind of just fell into my lap. Obviously we can keep selling to them, but you just never really know what they're going to do. And so I kind of pivoted it in my mind as to, okay, if one customer made this big of a deal to the business, what can I do to gain more customers like this? You know, there's got to be more customers out there, maybe not at the scale. This is kind of a household name when it comes to building homes if you're in construction, I guess. But how do I, how do I find more customers like that? I kind of viewed it as an opportunity, so.

[24:17] Host: Yeah, yeah, well, and that's you putting your sales hat back on, which is, which is your professional background, at least tech sales. And I want to ask about that. But, but quick digression. So, you know, I haven't seen this in the business press. I'm just hearing it through my acquiring Minds network and interviews. But I feel like a lot of, I've heard this a lot with smaller distributors, people who have acquired distribution companies like you, that they're the big large distributors that are the typical source of supplies in whatever industry are being really pinched because of the supply chain crisis. And so smaller ones like you, I saw this in a medical distribution practice and an ice distribution business are benefiting from that. So these kind of, it's this great moment for where you sit in the market, kind of a smaller player that those distribution companies are just receiving a lot of business because your much larger competitors are kind of dropping the ball or the supply chain crisis is cause it forcing them to drop the ball a little bit. So I don't know if you've seen that elsewhere or just in your own business, but I seems like a pattern that keeps coming up.

Guest: You know, I kind of have seen it a little bit in like, you know, in my day job with our family, the family business was, you know, education, technology, a lot of customers who weren't working with the business when I was first there a few years ago. And now I have come back after all the supply chain because tech is highly constrained too. They've gained a lot of customers because of that that were prior customers of bigger competitors. So I guess I could see that a little bit. And the supply chain crisis, whatever you want to call it, is stressful. But right now I'm trying to just lean into it a little bit. Okay. How can I gain more customers, build a little bit of loyalty and then once this is over, keep some customers.

Host: Absolutely, absolutely. Be opportunistic about any crisis. So you just mentioned a day job. Can you care to elaborate on that?

Guest: Yeah, yeah. So this is kind of awkward, but yes, I was working for our family's tech business. Basically I am now no longer with it. I've put in my notice and am done working.

Host: But you revealed your last name on Twitter.

Guest: Revealed my last name on Twitter. The big thing was at first I thought, well, maybe I can do both, you know, maybe I can find a way to automate a lot of this and do both. And then after I took over, it became pretty obvious to me, you can't do both or you're going to do neither of them very well. And so, you know, family business wanted to kind of resign. It was kind of a secret within the family. I wanted to resign and talk about it openly in person. So yeah, I did that over the holiday break and everyone was pretty excited for us. But yeah, that was one of those uncomfortable things at first was like, man, I'm really excited about this but I'm kind of have to keep it secret.

[27:21] Host: And this family business is your in law's family Right.

Guest: Yeah, my wife's family, it's a, like a supplier of technology to school districts. They do services, networking services, sell a lot of Chromebooks. Just whatever, you know, tech is needed in a school is, you know, what we sold.

Host: Mm. So you have, you gave notice, you told them that you'd acquired a business and now you're, you're full time in this and you know, when you said you thought you might be able to do both, were you thinking about Pacific Insulation Supply as buying a job or were you thinking about it as an investment? Like you put hours in the week into it, but you were thinking you kind of more of investor posture than entrepreneur operator posture?

Guest: I don't know if I was smart enough to really think about that. I think I thought, okay, if I can make some tweaks here from a tech perspective, if I can make it easier for customers to get quotes, maybe my employees can handle more of the burden and less on me. But then after I took over, I realized that really wasn't possible. Obviously there are some ways we're going to make quoting easier so we're taking less phone calls and fielding less texts and that's more automated. But in the short term, no, it is definitely a job. You know, when you buy anything that doesn't have a full time manager in place, you're essentially buying a job. And so now the question for me over the next six months is, okay, can we keep revenue at a place where I feel comfortable bringing on a manager so that I can do other things like, you know, growing the business and less day to day operations? Details work, because I don't like being in the details. I've, I've learned. Overwhelms me.

Host: Yeah, but right now you very much are.

Guest: Yeah, you're in every detail. Every single detail. Yep.

Host: And how many employees are there?

Guest: So there are four. They're all overseas? Well, there were three. I've added one. But yeah, so they're all overseas.

Host: And so you receive an order and you send it to one of your employees and they call around or email around the US I guess you kind of have a working list of distributors and you're probably called the warehouses or the locations that are closest to the client that made the purchase and then identify where the insulation is and they submit the order and have it sent to the customer. So you're managing them mostly or are you also receiving and processing some orders yourself?

Guest: Yeah, so the way it kind of works is two of them have been with the business for a while and so they're fielding phone calls. They are working front end with customers as well. And I really like it. Every time I see an order come in that I had no idea what's happening. That's like my. I love that. So that's the goal.

[30:16] Host: That's when the magic starts.

Guest: Yeah, yeah. And so that's kind of the way it's been working out for them. And then the recent change I did was I was calling around, like, the first couple of weeks, I was calling around all these distributors, and just on the phone constantly between the customer and these distributors, trying to figure out where stock is and when we can get it there. And one of my salespeople was, I wouldn't say just struggling, but just sales weren't happening for her as fast, and her region was a little bit more constrained. So anyways, I asked her if she would want to just do fulfillment for me, and so decided to kind of break up the jobs, the job duties. And I plan on doing this even further, but I kind of shared this on Twitter. But basically, like, you know, in software sales, there's the predictable revenue model, which is essentially, there's an SDR or a sales development rep who is cold calling, setting appointments to an account executive who then works the deal, closes it, passes it on to a customer success manager or integrations team who then manages that, and then the account executive goes back to square one with someone else. And so it's kind of broken up like this because you can specialize, and it's easier for an SDR to just, you know, make a ton of dials, set appointments, and then just forget them, and then an AE to just close deals. And so I kind of decided, all right, right now, this, we're doing way too much of everything. Our salespeople are receiving phone calls, trying to send quotes, calling distributors, doing order fulfillment, making sure that things are being communicated to the customer on time. And so it was just leading to kind of a bad customer experience, and honestly, a bad employee experience. This is not fun to do all this calling and coordination. And so the first step in that was I asked the salesperson, hey, do you want to do order fulfillment for me? And so whenever I get a text or I'm actually working with a customer, I figure out what they need, and I just ask her to go find it. She finds it, she puts the order in, and then she communicates the details. And so if there's negotiation, I can still handle that negotiation, but the things that I don't want to do, I don't have to do. And I don't like doing logistics. That's not my thing. And so eventually, I want to break it up to where all of our salespeople have order fulfillment in the back end that are making sure orders are processed, fulfilled, paid, delivered on time, and the salespeople are only making sure that they get a yes on the order.

Host: Yeah. And so in her case, her strength was not in the sales, but in fulfillment. So every new employee will be, you know, their strength will either be sales in closing or fulfillment. And you'll just separate the teams that way.

[33:05] Guest: Yeah, yeah. So I realized, okay, she's pretty organized, and she's good at that sort of thing, so let's let her do what she's good at and let me do what I'm good at. And I figured out a good bonus structure for her that works. So she's still getting some incentive to fill orders, and not just, oh, well, we're out of stock. Sorry. Still kind of incentivized to try and pick and pull things from different warehouses to make things work. But, yeah, so it's working out so far. Made my life a lot easier. I feel like I'm working a lot less just over the last, like, two, three weeks, but.

Host: And so now you know, your specialty being sales, and you basically doing sales, and she's doing fulfillment for you. Are you. Are you out there proactively trying to close new business and, for example, the big customer concentration, that big new home builder that represents whatever, a third of revenue in 2022, 2021. Have you communicated with the CL? Are you out there just pounding the pavement, or what does it look like? How are you applying your tech sales to your job now?

Guest: Yeah, to be completely honest, I don't really want to pound the pavement ever again. I've pounded enough pavement in my day. Instead, I'm trying to figure out a process that I can hire people to do that. So my top sales guy, he asked me to buy him a list. He said, buy me a list of, you know, construction companies that I can call. And I haven't done it yet, but that was, like, last week we had this conversation, but I plan to do that. And I want to basically create a separate arm that is only outbound calling. And so that would probably bring on me and bringing on other people to do that, because we really are kind of at capacity in terms of what we can handle just on inbound inquiries right now. And so I feel like if we added a new section of people that are only cold calling and then passing those on to our seasoned salespeople to continually manage. I think we could find some success doing that, but we just haven't done it yet. I'm still buried. So hopefully I can get unburied and start doing some of the things I want to do. And that's kind of what I've noticed, is when you buy a job, all the ideas that you have of fixing the business are just ideas, because you actually just have to run the business. And then once it's running, you know, you can maybe start to think about changing things. But, you know, the thought of change at this point feels almost kind of scary because I'm like, man, I just feel like I got the. I'm figuring out what I'm doing here, you know?

Host: Yeah, well, you're only, what, a month and eight days into it, so. And all of the wisdom that I hear from more experienced acquirers and acquiring minds is that even if you had the capacity to start making changes right now, Damon, you probably shouldn't. You should probably just hold fast for three or six months and just observe, observe, observe, observe. And then when you're really wise and you really have your arms around the business, really understand everything in six months and have the capacity to do so, then start making changes. My unsolicited advice, never having done it myself, just regurgitating what I hear from my guests.

[36:28] Guest: No, I think that's. I think that's exactly right. That's what people have told me, too, is like, as an entrepreneur, you want to be active, right? You want to, like, you know, get your hands around it, put your fingerprint on the business. But you have to, like, take a step back and just kind of let things run the way they've been running. And sometimes I tell myself that, too, when I'm frustrated about something. As I say, just remember, this isn't your process. You're still doing someone else's process. Eventually, this will be your process, the way you want to do things. But, yeah, that's kind of the way. It's kind of crazy. It's only been 38 days. Feels like it's been a lot longer than that. But, yeah, it's like a time warp.

Host: You have mentioned on Twitter just your mental health and how that's played a factor in this whole process. Talk to me a little bit about that. What is your kind of mental health history?

Guest: Yeah, so I'm super open about it because for years I was very secretive about it, and I felt like it built up, made it worse a little bit. But, yeah, When I was 17, I was diagnosed with bipolar disorder, or kind of a mild form of bipolar disorder. And that basically means swings of excitement or hypomania, mania, whatever you want to call it. And then periods of depression. And mine are kind of more longer and more pronounced than, like, on a daily or weekly basis. Mine happen in months. And so I've been taking medication for the last almost 13 years now for this condition, but it still kind of affects your life. And so I still struggle a lot, even daily with anxiety, even being medicated. But basically I went through these phases where I would get really excited about something. In college, it was whatever I was studying or some career path I wanted to do in my career, it was working for a certain company or doing. Working on a project. And then I would sometimes bottom out. I would get really, really excited, really high on an idea, and then I would crash and I would bottom out. I would discard the idea, and I would move on. And so I actually had this happen with a couple different business ideas. And once I decided to make the acquisition, some of the internal dialogue that I had to work through was, okay, what part of me wants to do this? Is it all of me? Is it truly me? Or is it the. Am I having an episode here? Am I just really excited about it? Yeah. Having a manic episode where I think I'm going to take over a business and go and make all these changes? Or is it really me? And so it's a conversation I had a lot with friends and my wife and therapists trying to work that out.

[39:20] Host: How do you work that out? How do you find out if it's the real you or the hypomanic you that's whispering in your ear?

Guest: I think the biggest test is time.

Host: Yeah.

Guest: If it sticks, if the idea sticks with time, and if it can endure the ups and downs. And so I started to realize, like, okay, I'm not, like, blind to some of the flaws here. I'm not blind to how hard this is going to be. You know, I'm not creating a sensationalized version of this in my mind. It's very realistic to me. It's like, okay, I know this is going to be hard. I know this is going to be a big life change. Even though I wasn't necessarily, like, sure what that would entail. But it wasn't just this, like, sensationalized idea. So I started to realize that it was different than in times past, but also I was in a different state mentally. I wasn't having swings, really. I spent a good portion of 2021. Just trying to get mentally healthy in

Host: preparation for this acquisition or just because you needed it?

Guest: Just because I needed it. Honestly, 2020 was a bit of a

Host: year for people, I've heard.

Guest: Yeah, some things happened. So, yeah, it's kind of not to digress too much, but basically, early in the year, it became apparent to me that I was not doing well mentally. I was kind of holding things together, but I wasn't doing. I wasn't excelling. And so I kind of had. I had spent some time away from work, even the spring, just kind of trying to get mentally right and kind of had just recently gotten to a place where I felt that I had three or four solid months. And then, Cam, I found this great acquisition. So I've got to make sure I'm ready and healthy and prepared to take it. And so, yeah, I can't say that it's been all roses ever since taking over. I've had a lot of really strong anxiety or extreme lows, but also extreme highs. Not necessarily in a manic way, but in a, wow, this is so fulfilling. This is amazing. But at the same time, those depressing moments can be really depressing when you're overwhelmed or just really bummed out about something that happens. So it's a constant dance and something that I hope I can continue to share more about with people because I think a lot of people struggle with it and don't know they do. Or maybe they do and they're scared to admit it.

Host: Well, especially entrepreneurship. Entrepreneurship itself is a bit bipolar. Even for the most steady person, it can make them feel bipolar because you have a good day and you're on top of the world and you have a bad day and you think everything's crumbling. So it just kind of. Yeah, it kind of makes somebody feel. It imposes these swings upon all of us who have done entrepreneurial things. Yeah. Well, Damon, you know, if you do have a rough month or whatever, revenue doesn't hit what you want it to do what you want it to. Just this is being recorded, so playback yourself, yourself on December 28, 2021, saying that you recognize that there are going to be really hard moments, and the revenue is not always going to do what you want it to do, but that you were prepared for that. You went into it eyes wide open.

[42:40] Guest: Yeah. So it's kind of being comfortable with the concept, but then you have to actually be willing to live through it. So I'm sure there will be months. Right. So far, we've exceeded my expectations. So we'll see what happens once we hit a couple of low months, which I'm sure we will.

Host: Last question for you. Just about the future of the business itself. So I think the obvious expansion here would be into different categories beyond insulation. And there's of course an entire giant ecosystem of stuff related to building materials and construction. So it seems like you could, you know, bolt on whatever. I think, I think actually you mentioned to me roofing interested you. So talk to me about when you get to breathing room, what, what that strategy might, might look like for you.

Guest: Yeah, so that's part of the goals for the year, I think within, you know, six months or so. And I can hopefully bring on a manager that'll give me time to open up the second category. So, yeah, I'm trying to figure out who, who my customers really are and get to know them. And right now I'm finding that I have a lot of roofers, people who, you know, reinstall roofs, have to do a lot of insulation work. And so the distributors that I work with, they carry a lot of different material. And so I have accounts and I have the infrastructure ready, all ready to ship these materials. And all I have to do is essentially spin up the products on the website. And so, yeah, so I'm still identifying what it's going to be, but it seems like roofing would be an obvious fit. Metal siding could also be. Or siding just in general could be another fit. Sheetrock drywall. I'll probably just look and see the markets that I'm in and see which of those categories is a little bit more thin than the others and kind of bolt it on. So I think at first it's going to start out just cross selling. So we have a insulation person. We ask them if they need Sheetrock or if we know they're roofing customer, try and just get in on the action there too, and then kind of grow from there. So we're going to try to take it organically and then once I find some traction, we'll actually launch something.

Host: Well, it's so great to already have. You know, you're basically kind of a marketplace. You've got the suppliers on one side and the end customer on the other. And you already have all of those relationships in place and you could just start. You're basically a channel and you can just start sending more through the channel and you don't even have to acquire the inventory because your suppliers are doing that for you. So you can just mention roofing and start, start generating revenue from roofing it's pretty great position from which you can start kind of experimenting without much financial investment.

[45:27] Guest: Yeah. And I kind of look at it like maybe I bought three businesses. It's like if I can find two more categories to really grow in, it's almost like house money at that point. So we'll see what eventually happens. But, um, I definitely like being in a niche. It's nice because it's, it's easy to build things out on just insulation right now. Like, you know, I kind of am becoming smarter every day and what insulation, what people are going to need or how to best sell it or. Which sounds kind of funny for just insulation. But yeah, I like the idea of being in a niche. I think every business I start from here on out will be in a niche rather than just general. It's kind of cool.

Host: Very last question, we had talked about how your financial criteria for the size of business evolved over time. Do you think that. So you paid 1.1 for this business? 1.12. I think you said you added 20 grand to the purchase price to make it yours. Do you think that you could have handled a $2 million acquisition, $3 million, like if you, if you could have raised the money, do you feel like now that you've sat in the seat of a million dollar business. Oh, I could have done two or even three.

Guest: I mean, not having ever done those other ones, I look at it like maybe they would be easier. Like there's probably more infrastructure in place and like it's a train that can keep moving. Right now I'm shoving a lot of coal to keep this train moving. So I think there's a lot of places I can fail where I think like a bigger business that has more things in place and more employees that have a role, a specialized role, might be easier in some regards, but at the same time, probably I would have been too scared to do that. So that's an interesting question. But yeah, I think like buying yourself a business where you're going to have to be the star player is kind of scary, so. And hard, you know, it's kind of hard because you're not like an absentee owner. You're a very active, okay, if I don't do this, it doesn't get done type of owner.

Host: Yeah. Damon, what's your Twitter handle and any other way people can feel free to contact you online?

Guest: Yeah. So probably the best way is on Twitter. Umberyard Damon.

[48:02] Host: So the Lumberyard Damon.

Guest: Yep. The holding company I'm creating is called Lumberyard Capital which actually was created before I even knew I was going to be in construction, so it's very interesting. But, yeah, Lumberyard Damon. Yeah, I always open to chat deals or whatever, so.

Host: And you're a great follow. Relatively recent to the platform, but you've already put some really good stuff out there, which, of course, is how I found you. No, Damon, thanks for. Thanks for sharing your story and including the personal parts. And we'll see each other on Twitter.

Guest: All right, sounds good. Thanks.