Host: Landscaping and snow removal. These are two businesses you hear about a lot in eta, but I was unfamiliar with the business of landscaping and snow removal brokerage. Well, today's guest bought such a business. Eddie Zakes acquired a landscaping and snow removal brokerage in Green Bay, Wisconsin. We spend time on the business model and its benefits, which are many. Eddie's business participates in the healthy, enduring demand for landscaping and snow removal services, but without being constrained by bodies and trucks as typical businesses in this industry are. Put another way, a snow removal business, but with scale. Also compelling is Eddie's success in growing the business. In two and a half years he's doubled revenue and taken it from a half dozen employees to over 20. Eddy bought the business using a traditional search fund, the ETA model he was most familiar with after his stint as Director of the International Search Fund center at esa. ESA is the Barcelona based business school that is sort of the academic center of gravity for search funds in Europe. Please enjoy this interview with Eddie Zakes, President and CEO of Earth Development. 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 Eddie Zakes welcome to Acquiring Minds.

Guest: Thank you for having me. Excited to be here Will.

Host: Eddie, you're about two and a half years into ownership of a business that you acquired using a traditional search fund. The business model of your business is not one that I've come across. It blends brokerage with landscaping and snow removal. Landscaping and snow removal being two services we do hear a lot about in the search world, but this kind of combination of the two was new to me. So we're going to hear about that and whether people listening should themselves look for a business with this model. But to get us started, Eddie, let's hear some Backstory, please. What led you to eventually want to go out and buy business?

[3:12] Guest: Fantastic. Great question. I think it's a strange path for every single search fund entrepreneur entrepreneurship. Their acquisition journey is unique and should be unique. And so for me, I grew up in a solidly middle class home, not from a titan of Wall street, had never heard of the idea of search funds before, didn't come from a MBA type background, and after a good 10 years in the nonprofit sector, decided I was going to go down the MBA path. And like many people at at IESE Business School in Barcelona, Spain, I discovered search funds. And at the time I was on a very different path. And it was like, this is interesting, this is weird, but it's not for me right now. And after graduation I had spent a little bit of time in and around the world of venture capital and IESE came and asked if I would become the director of their entrepreneurship and innovation center and lead their entrepreneurial programming for students, for executive, you know, mba, global mba, et cetera, and kind of run that program. And as part of that, maybe 10% of that job was running the international search Fund center. And so suddenly I was in charge of the international search fund center and had barely scratched the surface of what a search fund even was. And as I got deeper and deeper into the questions that I would get over the phone, over email, et cetera, I started to really, really like this idea. And when the time came, I was living in Barcelona with my wife and three children. At some point we wanted to return to the United States. And when that came, it was okay, what are we going to do when we go back to the United States? And entrepreneurship was the path that I wanted to pursue. And so it was what type of, what form of entrepreneurship should that take? Should that be early stage investing, venture capital, accelerators or incubators, corporate entrepreneurship, doing some sort of technology startup or a boring non tech, you know, startup. And my heart had fallen head over heels in love with the idea of, of search funds. And so that's the way that I went and raised a search fund. And here a couple of years later, I'm privileged to be leading a company called Earth Development.

Host: Awesome. Well, I have some follow ups there. Eddie. That was great though. First on our pre call you had told me that you had motivation to get an MBA that you thought might be a little different than a lot of people who kind of put themselves on a track. And the MBA is kind of one of the natural stages of that track. How are you different?

Guest: For me, like I Said grew up in this kind of lower middle class home and was the first generation of my family to go to college. And when I was in college, you have academic professors and you have practitioners, the lecturers, et cetera. And looking at them as an 18, 19, 20 year old, I was studying business and I thought even then, like, if I could grow up to be one of them, that would be so cool to be this, maybe an early retiree that was giving back to the next generation of businessmen and women. How can I do this? And so, you know, to teach at the, at the college level, typically you need to have an advanced degree higher than what your students are pursuing. And so in business this would, could be an mba.

[6:34] Host: How do we pronounce IESC in Barcelona?

Guest: It's IESE in English and in Spanish typically they say esa.

Host: Esa. And ESA is kind of known around Europe for having the kind of being kind of the epicenter of search fund education, kind of a, kind of a nexus. Right in the same way that Stanford and Harvard would be considered in the US at our booth.

Guest: Absolutely, absolutely.

Host: Great. So when you run the entrepreneurship center, having graduated with your MBA and now you're working in the university at the entrepreneur center running it, you're also happen to be in kind of the mecca of search funds for kind of outside the US at least, at least in this hemisphere.

Guest: And it's crazy because, you know, I've never done a search fund. I, you know, we were just talking before we started recording about, you know, those who, who can't teach and whether, you know, it's very strange, I would get calls and I can remember, you know, the search fund concept is very attractive from a return standpoint. And I remember getting a call from an international executive who said, I am interested in investing in search funds. I've heard about this mythical return profile and I have $100 million that I want to deploy into search funds. What should I do? And little Eddie on the other end of that phone call is thinking like, I have absolutely no idea. I've never done this before. I am not a search fund investor myself. I am a recent MBA graduate with no money because I've just foregone an income for the last two years. And so through tons of conversations with search fund investors and search fund search fund entrepreneurs, both searching as well as operating, you start to figure out kind of how to answer those questions and direct those calls and taking phone calls from search fund entrepreneurs who were rejoicing as they popped the champagne after a large exit. And they weren't sure who to call because they still weren't publicly announcing it. And getting that phone call where it's like, hey, I can't believe that I, like made the round trip and I've exited my search fund to entrepreneurs calling literally in tears and doing a zoom call with somebody on the other end in tears going, I just, I don't know who else to call. What do I do? This isn't like we're, this isn't working. And I, I need to figure out how to pull the plug. It painted a very real picture of the breadth and depth of, of search fund activity.

Host: And when you said, Eddie, that you fell in love with it and you, when you went back to the States, you were considering all the various flavors of entrepreneurship but realized you really in love with search funds, what is it that you like about it?

[9:12] Guest: Sure, I think you'll hear everybody talk and whether it's traditional search funds or any other form, about the community and the strength of the community, the collaboration that takes place. I think as an entrepreneur, you know, the company that I started prior to the MBA was a construction company. It wasn't sexy, it wasn't cool. It was bricks and mortars, physical goods. It was a service that I thought I could do as well as anybody else or even a little bit better. And, you know, I probably am not going to be the guy who starts the next autonomous vehicle company or artificial intelligence or augmented reality, you know, startup. That's not me. I don't have those technology skills. I like the community aspect of it. I like the alignment of incentives. It's not perfect, but by and large, since the early 1980s, the model has worked really well. I love that you have this sort of captive set of advisors and coaches that you're tied at the hip and they're helping you succeed and you're not going it alone. Whereas, yeah, there are many other collaborative environments. But to me, of the ones that I explored, this was one that really stood out to me, where the prevalence of search fund operators who have successfully exited than sticking around to return the favor for a financial reward, to be clear, but return the favor because they believe so heavily, so heartily in the model. You know, they're drinking the Kool Aid that they're pouring into the cup for you as well.

Host: Yeah. 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@markspenhr.com Talk to us about the decision to do a traditional search fund versus self funded. And just to make sure we're clear, at esa, especially I guess due to the linkages with Stanford, the focus there was very much on traditional search funds. So it's kind of like what you knew. But so, so talk us through the

[12:21] Guest: decision to pursue that. So I think, I think that's, that is first to recognize is that you're the, you know, you're the composite of your four or five closest friends in your life or whatever and you study a version, or your friends have pursued a version of entrepreneurship through acquisition. That's the one that you know the best, you know the pros and cons of it, but it still is the one that maybe is the most natural fit for you because you're the most expert in it. And so for me, yes, that, that is absolutely worth acknowledging. Additionally though, being in my mid-30s and having three kids and having, you know, done this international adventure for about five years, having student debt, you know, I didn't, I wasn't a sponsored student in my mba, I was a debt funded student in my mba. And so the idea of doing a self funded search financially wasn't terribly realistic for me. I didn't have the same depth of a network in the self funded space. I had an incredible network in the traditionally funded space, both of investors as well as, you know, entrepreneurs. And so that was it. And then like I said, I think having the sort of dedicated set of investors, mentors, advisors, was a sort of security blanket where you knew that, you know, when push came to shove, these people should have your back. And in my case, they consistently did have my back. And there was so much other upheaval going on in my life. I think what often gets ignored in the sort of selection of should I be a search fund entrepreneur or not is how well you handle ambiguity and Uncertainty where, you know, you don't know. I didn't do a geographically constrained search. I have convinced my wife and my children are young, so they're along for the journey. But, you know, we could find a company in six months or in one year, or in two years or not at all. And depending on all of those outcomes, we could end up living in San Diego or in, you know, Portland, Maine. We could end up in the middle of the country. I live in Green Bay, Wisconsin now. Uh, and you could end up anywhere. And so having that stability that even comes from a shared ownership of success through the investor group and through other search fund entrepreneurs, I think that was really attractive to me.

Host: So you get back to the U.S. you decide to do a traditional search fund. You're. You land in Minneapolis, where you're from. Correct. You start your search, tell it, tell us some about your. Well, first, I guess raising the traditional search fund, I hope was a little bit easier for you than others, given your connections that you must have had at this point. Anything to say there just on raising the fund?

[15:08] Guest: Yeah, absolutely, it was. I will recognize that, you know, at times I felt almost bad by how easy it was and at the same time, not bad because I had worked very hard to earn those relationships and build that network. And so, yes, when inevitably you get tons of phone calls from prospective searchers asking questions, and one of them is tons of me about your fundraising journey. And I usually lead off that call with my path to. This would be very, very difficult for you to replicate. For me. Only thing maybe that I would comment on was, you know, I looked at it from three different buckets of investors that I wanted to have. In, in my case, I did not proselytize and add any non experienced search fund investors. All of my search fund investors in the search phase were, were mainline traditional search fund investors. And I looked at three buckets. I wanted to have a little bit that were institutional, a little bit that were OG investors that have been around the space for a long time. And then I wanted what, what I refer to as the young guns. And I wanted about a third of each of these. And an institutional bucket can fall into both OG or young guns. And so, but I wanted about one third that were, let's say, more professional corporate style investors that had a larger team and resources that would, would come from that environment. And then the sort of OG I wanted the maturity that comes from having been here for a very long time, that I have been through economic ups and downs. I have already been achieved a level of financial success that hopefully makes them unflappable. I don't need to speak in order for my voice to be heard because I'm, you know, that. That sort of mentality from the OG collection and then the young guns, I wanted people that maybe were willing to be a little bit more ambitious and swing for the fences that had something to prove that we're going to step up and maybe contribute in a different way. And then the fourth bucket that was then applied to all three of those, the institutional, the OG and the young guns was an element of diversity. And not to say that I was the perfect exemplar of this or anything like that, but feeling like because of my relationships, I had some degree of choice in who I partnered with. I wanted to, where possible, prioritize female representation in investing teams or other minority or underrepresented groups. And for sure, we have a long, long ways to go. But I think for those that have the opportunity to. To push and promote that, I think that's a. That was something that was important to me and that I took advantage of as best I could. Again, very imperfectly, and there's a lot of work still to do there, but it was, it was on my mind.

Host: And going back to Bucket, a. The institutional capital, would that be like a Pacific Lake? What is. Is that kind of a. Yeah, Pacific

Guest: Lake Relay, you know, these sorts of. These sorts of funds that are, you know, in both of those cases, they've been around for quite a while. You know, Sandro, you know, at Relay is. Falls very well in that OG Bucket. As a former, you know, search fund entrepreneur himself who's been there and done it, but today, you know, investing with a team that includes, you know, analysts and vice presidents and principals and. And so on and so forth, it's a. It's a slightly different perspective than, you know, say, a single OG investor who works more independently.

[18:30] Host: That was the mentality on Pacific Lake. It's a name that you hear a lot, particularly when talking about traditional search funds. What exactly is Pacific Lake? Just. Just tell people, you know, you kind of just give. Gave some details about it, but give people a picture of what it is and why this name is so closely associated with traditional search funds.

Guest: Sure. They're not, they're not an investor in my search. So I. So I have had very little interaction with them as I was raising my search. I had conversations with them and Pacific Lake as an example of others within this. You know, they're. They. They are a search fund investment, you know, firm that has outside capital as well as obviously capital from their partners, et cetera, within the firm that invests, as far as I'm aware, exclusively in the search fund space. And you know, as you're looking for sort of a lead investor, somebody that's going to have a lot of clout, they have a lot of capital that they can access relatively easily and in some cases that enables them to support larger deals. And I think we've seen the emergence in the search fund space of bigger and bigger deals. And so, you know, these, what, what I refer to is my nickname for them. I don't know that they would be defined as institutional from some, you know, investing industrial standard. I don't know because I don't come from that world. But in my head, they are the institutional type investors of our, of our space. You know, they, they operate, you know, with a, with a firm mentality. They, in terms of, they have different funds that are named and numbered, you know, and they would have typically some sort of a life cycle or a term to that, to that fund that they are thinking about because they have those LPs on the outside, limited partners on the outside that they need to return capital to.

Host: That's great. That's great. Thank you for that. So it sounds like Pacific Lake is essentially kind of the leading name in as a private equity. They're a private equity shop. Whose funds, the funds that they raise, they're basically laser focused on the asset class of traditional search funds that I

Guest: think that would be fair. Again, I don't, I don't work with Pacific Lake directly. So I mean that would be the reputation, you know, of, of them as well as several others that are, that are in the space.

Host: Great. Thanks, Eddie. Okay. Yeah. So you, you raise, you've raised your money, you have talked to your wife, kids are along for the ride. That, about the fact that you may end up, you really are truly geographically agnostic. And it sounds like you mean it. You know, one of the, one of the dirty secrets, for lack of a better phrase, among kind of being geographically agnostic and the expectation of geographic agnostic agnosticism among traditional search fund investors is that in fact, many traditional search fund entrepreneurs tend to buy a business close to where, where they're based. They don't actually go anywhere.

[21:34] Guest: Absolutely true. The other piece of it though is your, your access to the owner and your ability through that access to build a tighter relationship and, and build a stronger bridge. So I looked at about 200 companies around the United States at varying levels, and I Looked at companies from coast to coast, north to south, but ended up acquiring a company from Minneapolis in Green Bay. And part of that is, is if I were to fly to San Diego to meet with the owner. One of the things you're trying to do is establish rapport as quickly as possible and say, okay, I'm going to. Oh well, fantastic. I'd love to fly out to meet you automatically. That relationship that, that initial meeting takes on a different level of importance now. I am, you know, booking a hotel and a flight and they are hosting me and they're going to give me a tour of their facility and take me out to lunch or dinner. And the whole dynamic changes to a level of formality versus if you're searching within a short driving distance of where you are, you can just stop by for a cup of coffee. Let's just grab lunch. It's grabbing lunch or grabbing a cup of coffee or let's sit down and have a beer or whatever it might. Versus Let me. Are you free next Thursday for me to fly out to see you? And so I think naturally search fund entrepreneurs find success within a driving distance, like a half day driving distance. And I think the statistics on where searchers search from and then where they acquire bear that out.

Host: Yeah, that's a really interesting insight. I, I never thought about how just the rapport building has more kind of casualness and informality to it if you are within driving distance versus if you have to hop on a plane and, and it becomes this kind of production to visit.

Guest: Yes. And it also changes, I think the dynamic of like your professionalism in terms of like somebody from another city. It changes it to a more private equity flavor where, you know, it's, this is a jet setting, young ambitious person who's going to fly out here and size up my company. It takes a different tone, I think as well, just from a sort of industry or professional thing. And I don't think all of that's bad. I think certainly you would like to present yourself as professional, credible, all the rest of those things. But I think many owners have their guards up because they are receiving inquiries on a nearly daily basis and many of them are from private equity. And many owners have a sort of

[24:03] Host: defensiveness.

Guest: Yeah, defense. That's a good defensiveness. Yeah. Suspicion of, of anybody, not just, you know, and certainly now increasingly of search fund entrepreneurs as well.

Host: Yeah, no, another, another great point. Not necessarily a bad thing, but it does position you a certain way in the seller. From the seller's perspective, if you're, if you're jet setting in on, you know, on a flight versus if, hey, let's, let's meet at the bar. Halfway between us, you know, you know, half an hour from me, half an hour from you, and we'll talk and we'll talk.

Guest: And you share the same sports teams or you have the same local news. You know, it's just different. Yeah, it's so much easier.

Host: Okay, so. And how far is Green Bay from Minneapolis driving?

Guest: About four hours.

Host: Four hours. Okay, so give, give us a quick snapshot of the search process itself.

Guest: Those early days, it was, it was, what have I done? I have absolutely no idea what to do in terms of how do you actually start and you don't have a good elevator pitch. And somebody says, well, tell me about my, my search fund was called Crosswalk Capital. Tell me, you know, what's Crosswalk Capital? And the first couple of calls, you're trying to figure out how to explain it. And, you know, how do I divide up my day? Is it, am I going to do prospecting from this time to this time? And you've never held this exact. In my case, I've never come from this sort of investor background. And so I've never done this job before. And there's no one that's there to actually train you. And so the first week, I probably stumbled around like a crazy person in the dark, bumping into walls, trying to find my way until I found a light switch. And it gradually, and it was a dimmer switch, it gradually got brighter and brighter in the room. I think another interesting sort of story from that era for me was in traditional search funds, you'll hear that commonly one or two of your investors or five, how many of your investors you'll naturally have a closer relationship to during different phases of, of your journey. And this was exactly the case in mine. And I've told the story enough times that I don't mind naming names because the, the, they know this and they actually are on my board today. Aspect investors, they, they wanted to have a monthly meeting with me. And there is, there has been a push and I don't know if it's. Maybe the pendulum has swung back a little bit more to, towards the center. But there was a stage where the role of automation in search fund prospecting was enormous. And I had peers that were using, you know, scrapers to pull all of this data down. And that was just the absolute opposite of my approach. And my call metrics and my outreach metrics were just a minute portion. And I would get on this call with aspect and with one of their, with one of their team members, B.A. and he would say, well, how many calls did you make this month and how many of this and how many of that? And I was mortified thinking I wasn't doing enough and that I, you know, we're, most of the people in this space, in the traditional funded space are MBAs. We're competitive by nature. In order to be competitive, you have to have a degree of comparison. There has to be a scoreboard. And you're used to comparing yourselves to others. And my journey was my journey and trying to compare my approach to anyone else's approach mentally got me into a bit of trouble. And it came to this sort of realization of like, I'm not trying to call the most people. That's not a contest that I need to win. I need to buy one company. And if I call 10,000 companies and buy one company, or I call 500 companies and buy one company, at the end of the day, the ultimate scoreboard is identifying and buying one great company for most traditionally funded search funds. And so very quickly what they were trying to do is they had a, they're just trying to make a conversation. They're checking in to make sure I'm doing okay. They weren't trying to, they weren't, their questions were completely benign. They were just, how are you doing? And the easiest way for them to ask that at the time were like, tell me about the calls that you're making and who have you talked to and how's it going? Are you making, you know, good progress? Because those metrics that activity input absolutely matters if you're faithfully taking the steps day in and day out, generally good things will happen. And they just wanted to make sure that that was happening. And as I started to share great conversations that I was having with owners, those conversations changed very quickly to like, how many calls are you making? To let's talk about this specific company. And initially, sort of my fear, my anxiety about trying to match what others were doing, that was really hard for me. And I was a solo searcher, so I didn't have anybody to talk about this with. And am I doing this the right way? Whatever the right way is, am I doing this the right way? And I don't think today, yeah, we have these methodologies that are being taught at schools, but we're talking about the search fund model and then how we actually execute it on a day to day basis, I think needs to be customized to every single search fund entrepreneur because Just like you should be coming into search funds or getting your MBA for a very unique and personal reason, the style of your search also should be uniquely tailored to what you want to. The professionalism, the reputation, the style that you wanted, the brand that you want to have as an entrepreneur.

[29:18] Host: But you persisted with your model. And so, and so what was your model of outreach? If it wasn't, you know, scraping and super high volume? What did yours look like?

Guest: So it was a highly personalized outreach. It was industry specific. It was a lot of networking and reaching out to people and asking them for advice. I'm thinking about buying a company in this space. What do you think? And so for me, Having spent about eight to 10 years in the nonprofit sector, both as a philanthropic fundraiser as well as an executive running a large private school and as part of an executive team, I was not the executive running that school. You know, I had this sort of specialty in ed tech as well as technology that would serve the nonprofit sector. And those were two sort of industry theses that I went down early on. And so I would just call or email and reach out very, very authentically and highly personalized. Not necessarily this short email, that's this like break down the door with this quick intro that's only three lines long. I'd write a small book and I'd say, hey, I'm interested in this space for these reasons. You know, what would you say to, you know, your 30 year old self if you were exploring this space? Is there anybody that you feel like I should talk to? Who is that? Can you introduce me to them? Can I get on the phone with you? Et cetera? Obviously not all of that in the first email, but that sort of methodology and that led to some great results. Early on I had an opportunity with a, with a SaaS solution for the, for fundraising that was being used in mega churches. And it was a text to give platform that had a subscription fee to use the technology, but then they were taking a transaction fee on every single dollar that was donated. And so when you see a hurricane strikes and then the Red Cross says, you know, text 1, 2, 3, 4, 5 to make a $25 donation. This was the sort of technology that was underpinning that, that gift. And so the cost of switching for these churches and other nonprofits was super high. Where they wouldn't, they didn't necessarily. They were concerned that maybe there was a better technology solution out there. But if there's any sort of automated giving, a recurring gift being made, as a churchgoer making A tithe or whatever that this would. That, you know, if we switch it, we've got to go back to our parishioner, to our congregation and ask them to resubscribe their giving. And they didn't want to do this. And so there was a tremendous pipeline of recurring giving that was going through that platform. Super cool. But yeah, early successes in that sort of space. And then maybe we'll go from there. I don't know. You're asking the questions, but I think the next question to me would be talked about the, maybe the pipeline of deals that were coming in. So this was proprietary outreach. This was me having an industry thesis. You have your sort of network where you're telling all of your friends and neighbors and aunts and uncles at Thanksgiving and all the rest. I'm trying to do this. If, you know, anybody trying to sell their business, very rare that something would come out of that like sort of personal network. And then the third one is opportunistic or broker deals or intermediated deals of some sort of. And ultimately that's where Earth Development came from. Was that intermediated space?

[32:25] Host: Okay, tell us how you found Earth Development.

Guest: Yes. So that would be slightly. There's, I think, two different versions of this story, depending on who you ask. So one of my investors was the Cambria Group, led by Lou Davies. And Lou's a fantastic friend and mentor. And Lou, early on in my search, I think, was trying to give me a bit of an attaboy. This is my version of the story, maybe not Lou's version of the story, but I think he wanted to just check in on me, make sure I was doing okay. He knows that search fund entrepreneurship is lonely, difficult road, and he didn't want to reach out just to ask that question. So he attached a one page teaser for a broker deal and was like, hey, how you doing? Saw this and thought of you and wanted to see if this might be of interest. If it's not of interest, no need to even write me back, you know. So to me it felt very much like a, like a very soft suggestion. And so I, you know, kind of glanced at it and it was for a landscaping company, snow removal company, and Lou has portfolio companies. And the intermediary had reached out to Lou thinking that this was maybe a good, a good add on acquisition for one of those portfolio companies. It wasn't at all. And so Lou. The way that I heard it originally from Lou was that Lou kind of looked at the map and said, who is geographically the closest searcher to where this Deal is from. I don't love the deal, but it's kind of interesting. So I want to pass it on to someone. And so I was geographically the closest one. And so I get this from him and look at it and think this is kind of strange. Traditionally funded searchers often don't buy landscaping companies, is, you know, often is not a great fit. And so kind of slid it back onto the credenza behind me and said, eh, like that's okay, thanks. But I left it there and I kind of kept, you know, glancing at it every once in a while. And through a couple of phone calls, I don't know that it was readily apparent on the teaser, but through a couple of phone calls came to realize that Earth Development was operating primarily with a outsourced business model where we were brokering those services. We didn't own or operate the equipment directly and suddenly that changed the attraction to it. And as they say, the rest is history.

[34:47] Host: Great. Well, let's, let's hear now more about this business model. Why would somebody looking to hire landscaping services need call a broker and need a broker and not just go online or use word of mouth to find a local landscaping business?

Guest: Great question. And it is one of our challenges constantly. So traditional landscaping is route based, density driven, super, super fragmented. And especially in multi location organizations, one of their big challenges is consistency and just the number of vendors that they're working with. And so if you can imagine, you know, Walmart or some other large company needing to employ, you know, potentially thousands of landscaping companies, because landscaping companies don't tend to travel well, you know, I won't drive 100 miles to mow your lawn. As a result, there is a space for the sort of aggregator like Earth Development to sit in there that you know, when you go to McDonald's or Starbucks, whether you go to Starbucks in Paris, France, or in New York City or in Green Bay, Wisconsin, you're going to get the same caramel macchiato or the same Big Mac, more or less. This is about risk management. It's about operational and reputational risks, even more so during the winter. And Earth Development offers a one throat to choke sort of concept where you're receiving one invoice, one contract, one certificate of insurance, one point of contact with an account manager who knows what's going on at all of your sites. And we essentially are vendor procurement for your team. And we are using our expertise that maybe your purchasers don't have to vet, identify, vet and manage the contractors that are on your site.

[36:36] Host: That's Great. And so your target market is going to be multi site businesses. That's where this really becomes an acute need.

Guest: So yes and no. So that sounds fantastic. But this model works just as well for a single location. And so, you know, Earth Development was started in 1999 as a self performing company in Green Bay. And we cut grass and plowed snow using our own equipment and our own laborers for many, many years. And companies still call us because they know that when they hire Earth Development to do their snow removal or landscaping, regardless of who is on the site, it's going to be done with the, with the professionalism that they can, they know is the Earth Development difference. And so we continue to have many, many, many customers who work with us. That that multi site sort of advantage is not, doesn't factor in for them. I think what it changes though is the sort of access to resources. So if you have someone who is plowing snow at your facility and it's just a traditional contractor that works in your region, even maybe just your neighborhood of the city, and his or her equipment breaks down, or his or her equipment operator doesn't show up to work that day, the resources that they have to fix that problem are very limited. When Earth Development works with hundreds of contractors, we have an army of resources that we can plug in. And so the confidence that no matter what we can solve a problem is much higher. And I think that's very unique. And whether you're multi site or a single location, that's I think a very compelling value add that we can have. So in a large snow event, where it is snowing, you know, unless you're a very, very large site, very rarely will a single site have dedicated equipment. So if you're an Amazon distribution center, there would be dedicated equipment that we parked at the Amazon distribution center. But if you're a dental clinic, we don't park a plow truck in your, in your dental clinic. And so in a heavy snow event, that single plow truck is running a route and covering and trying to keep up with the snow as it falls. Inevitably, in a very heavy snow event, it can't keep up. And every snow company, including Earth Development, starts to have to think about how to prioritize. You know, we'll take care of the hospital, we're going to take care of, you know, the school, we're going to take care of this or that under some sort of scheme, while at the same time trying to satisfy and delight every customer. And so one of the strengths of Earth Development is because we're working across multiple geographies. We can shift equipment from one region to another to make sure that we're able to meet the demands of that storm at a higher level than, than a traditional snowplowing company or contractor.

[39:23] Host: Could you have kind of overflow capacity when a local flower or landscaping team shows up to a site of one of your customers, they're wearing whose T shirt? Their own.

Guest: Theirs? Yeah, there's. So we're running a two sided marketplace. So we have, you know, one of our customers is the end consumer of the services that we're rendering and then the other consumer of Earth Development's you know, model is the, what we call service partners. We very carefully call them service partners. They're not service providers, they're not subcontractors. And it's a little bit of semantics, but in our mind they are the key to our long term success. And so when we think about which side of the two sided marketplace, you can't exist without either side. And so it's not that one is necessarily more important than the other. But for those service partners, what we are doing is helping them to maximize their potential. We see ourselves as in a symbiotic relationship where when they do well, it boosts our reputation in an area where we are able to say, hey, look down the street, we're taking care of XYZ property. Can we take care of yours as well? But then when that happens, our likelihood of continuing to subcontract that work to that great service partner is, is very, very high. And we're typically signing three year contracts with most of our customers and we're signing those service partners typically to three year contracts as well. And so it's not an Uber type model where there's some sort of capacity flux where you're going to have a different Uber driver picking you up every day. In this industry it's too important, the quality and risk management is too important to be switching providers, you know, mid winter or whatever, unless there's an extremely compelling reason to do that. And again that's something, that's an advantage of Earth Development is the ability that if somebody was underperforming we have, we have the resources to make changes where typically in a, in another setup that, that wouldn't exist. And so yeah, we see it, we see ourselves as a form of outsourced sales and marketing for our service partners where you know, they maybe are at 75% of their capacity for the equipment that they have and we can help them fill that in their specific region and boost their route density. And they're, they're happy to do that because you know, they're essentially getting access to what are hopefully juicy red premium partnerships that maybe they wouldn't have the same path to themselves.

Host: Fascinating model. And so you just called it a two sided marketplace, which is a business model that you hear a lot about online, an Upwork or an Uber. You know, you're bringing together the drivers and the passengers or in Uber's case the, the contractor freelancers with the business person who needs them, the services. So one of the things certainly in digital marketplaces that you hear about is leakage where the, the vendor and the end consumer and customer eventually take the relationship off the platform and the platform no longer gets its cut or its take or however you want to put it. You probably have more diplomatic language for that or it's fee, whatever. Is that, is that a risk here? Especially in these long term contracts where if I'm seeing a team of landscapers show up or yeah, landscapers show up to my, my facility every week and I get to know them personally because it's been weeks and months that you know, I've seen them around, I've developed, you know, I say hi to them or whatever. At some point maybe there's a temptation among some customers to take that relationship direct and cut you out of it.

[42:40] Guest: Absolutely. It's a risk. We deal with it regularly, as in periodically. It's not something we battle day in and day out. It's not, it's not. And again, that goes back to that idea of partnership. If we're identifying and selecting the right customers and identifying and selecting the right service partners, it surprisingly gets solved pretty well. And if we're demonstrating the value that Earth Development creates as the, as the middleman, as the broker in the relationship, as long as we're demonstrating that value, I think both of them want to continue to partner with us. So a service partner also contractually is under a restrictive covenant that would include non solicit and non competes related to the sites that they serve. We obviously, as with them being independent contractors, we can't restrict their ability to grow their businesses outside of Earth Development. But poaching, poaching, I don't know that I have very diplomatic terms for this, but I mean, yeah, poaching or stealing our clients would be a big no no for, you know, our service partners and amongst, you know, the vast, vast, vast majority of our service partners, we don't, we don't have that. And part of that compelling thing is hey, if you stick with us, our ability to help you grow your business with together is greater than your ability to go it alone. Yeah, you might get that relationship and your margin or your profitability might grow, your revenue might grow on that single customer. But you lose access to the pipeline of work that Earth Development can provide you year in and year out. And that's a, that's a bigger deal hopefully for most of them. So I think it's pretty shortsighted on their part to do that.

Host: Fantastic.

Guest: And illegal according to their contract, to be very clear. And at times we have, we have had to chase that with, you know, legal remedy.

Host: Yeah. Okay. And again about this model. So are you guys kind of the only. Was this an innovation of the Earth Development founder or are or is this a business model? I just didn't realize it is that are there lots of Earth developments around the country? And also if you'd answer that, both in your space, but in other services. Yeah, services spaces.

Guest: So not 100% unique. It's certainly would be considered rare. It's not, it's not, it's not very prevalent. It has been attempted on several other, on several other cases by other landscaping companies. And in some cases they have earned terrible reputations for Earth developments type the contractor, the overarching broker, winning a collection of sites and then looking to find a subcontractor to do that work at the lowest possible price in order for that for the contractor to keep as much of the money as possible. And Earth Development, you know, while we're a business and we're trying to make as much money as we can, we can't do that at the cost of, of, you know, our service partners being able to make a respectable living. And so yeah, that sort of respect aspect where we have to make sure that we leave enough on the table for our service partners. So it's very common that you either are 100% self performing or pursuing a hybrid model. Almost all of the larger snow plowing or landscaping companies are pursuing some sort of a hybrid because inevitably what happens is you're taking care of a customer in your home geography and that customer is multi location. And they ask you to even take care of a site that's 25 or 50 miles away. Well, if it's snow plowing and it's snowing outside, driving 50 miles to clear even a fairly large site is not terribly realistic. And so then you're having to ask should I buy another truck, another trailer, another lawnmower staff that up with three or four crew members to take care of one single site. Well, if I hit a critical mass where I have enough sites in that location, I can open another branch there and pursue this like hub and spoke branch model that can be common in some of the larger companies. But then there still are going to be those outliers where you say, okay, I want to keep this customer and delight them. I want to be the holder of that relationship. And so in that 25 mile or 100 mile or in some cases 500 miles away, you, you're going to find a subcontractor who can take care of that site for you. So the hybrid model is extremely common. Then the pure broker model that we currently use is far more rare. It does exist in our space. There are others who do it. We'd like to think that we're trying to do it better than them. And yet it is a very competitive space. The model exists in other industries as well. So there are several companies. Well, I don't even want to say several. There's probably many companies who do this with facility management in general on the broad side. So we have a competitor that does everything from doing turnarounds and dark store management and from painting to plumbing to electrical to H vac to whatever and landscaping and snow removal through a brokerage model, certainly in the custodial or janitorial space. This model exists as a pure play within, within custodial as well. So it exists in various forms, you know, all over the place. And, and then again in that self performing and hybrid model for a custodial company as well. I clean offices in this city. And then the property management group says, well, can you come to the one that's 25 miles away and be like, no, I don't really want to unless it's worth my while.

[48:10] Host: Thank you, Eddie. Well, let's, let's hear some stats about the business and then return to the plot of you buying it. So you already mentioned that the business was founded as a. What's the word? Self delivery, self, self fulfilling, self performing, self sufficing, self performing, traditional landscaping business in 1999. It evolved over the years, so it's about 24 years old now. How big was it? What can you share about. About size?

Guest: When I acquired the company, it was around $8 million in revenue in the previous year. And from an EBITDA standpoint was. You know, I heard recently the idea of agreed upon EBITDA as opposed to adjusted EBITDA or anything else. I think that was very relevant in our deal where maybe the True, EBITDA in hindsight, was lower than what was agreed upon. But you're in a negotiation and you're trying to get the deal done. So that EBITDA that was agreed upon was right around $2 million. And there were some adjustments made because our business is impacted by weather and so you know, how much it snows absolutely can change what our revenue is, what our profitability is. And so an adjustment was made on behalf, a positive adjustment to EBITDA was made that favored the seller. That in hindsight was probably a bit higher than it maybe should have been. And at the same time, two and a half, three years later, it's sort of immaterial other than that, maybe the baseline when you're talking about the growth of the company, if you accept that the EBITDA base was lower than what you wrote on paper, it maybe helps you sleep better at night by the growth or the trajectory of the company. So, you know, today earth Development's around 16 million in revenue. And, you know, our EBITDA is more or less flat from where we, where we came in. In that time, though, we've gone from working in five states. When I arrived here, it was me plus five employees or six employees. And today we're working in 14 states, have grown our client list, doubled our revenue and are around 23 or 24 team members, built a executive team that is, you know, obviously expensive from a total payroll perspective. And so, you know, that sort of classic J Curve story is alive and well at Earth Development. And, you know, this year we are expecting to see our EBITDA begin to rebound to, you know, the same sort of, you know, let's say, maybe slightly lower margins than the former owners had. But what we think is a healthy and sustainable EBITDA margin for our company. We're in a space, I think, that margins are really interesting discussion around, as a sort of paper contractor, as the broker, what sort of margin should you have and how much should you be able to take in that spread between what the customer pays you and what you pay the service partner? And that's something that, you know, we're, we're still, I would say, trying to get to the right size. Certainly we don't think that, you know, if it was $8 million and 2 million in EBITDA at acquisition, again adjusted and agreed upon EBITDA or whatever, you know, that's, that's, you know, 25% EBITDA margins, that would be, that's, that's an inflated, that's an inflated number. That you know, for us to be in the upper teens is probably, you know, more realistic, hopefully.

[51:51] Host: Okay. And the $8 million of revenue when you bought the business, for anybody who is a marketplace nerd like me, they might be wondering or just want to confirm that that was true net revenue to you. It wasn't all the money flowing through because. Because. So if one of your customers pays $100 for landscaping, a hundred dollars flows through you. You don't. But you don't count all 100 as your revenue. You count your take. Let's call it 20%. We don't know what it is, but let's call it those $20. The $20 your take as your gross revenue.

Guest: No, we're talking, we're talking gross revenue is pure dollars in the door at the very top line for us. And so $8 million in total. In total gross was, is how we, we've always thought about it because of our former history in self performing etc and sort of the hybrid that we've gone through. It has always been pure top line gross. Gross revenue, not net.

Host: Oh, interesting. Okay, so you've got, you're selling $8 million of landscaping and snow removal services.

Guest: That was correct at that time. Yes.

Host: Yeah, they're right. And when you acquired it. Ah, interesting.

Guest: And. And your method is not, is not, is not. I, I don't think that your, your way of doing it is a bad way of doing it. It's just not how we do it. Because I think what we're trying to do then is. Yeah, our, our cogs essentially are the cost of our, of our service partners to us.

Host: Right.

Guest: And then our operating costs are what it costs for, for us to run the business on, on a day to day basis with our, with our own internal team.

Host: But I guess I'm having a hard time, Eddie, if you, if your margins, let's cut, we're around 20, 25%.

Guest: Mm.

Host: Those are the margins of. Those would be good margins for just for a self performing landscaping business. So you guys have to pay for landscape, third party landscaping, your service partner and, and they have to be making their own margin internally and you've got your own operational overhead and you're still

Guest: at 25, 20, 25% margins at that time. Yes. And again there's some, there was, I mean again, talking about adjusted and agreed upon and maybe different accounting methodologies, et cetera. This is a story that is not. Before we started recording, we talked about. This is a story that's not finished being told. And there's a part of me that, you know, as I was, you know, thinking about, you know, what I wanted to share today or what questions you might ask, a sort of hesitancy of like, I don't know how, you know, I'm, I'm two and a half almost three years into this, and I don't know how this is going to end up and to presume that I have it figured out or that I'm doing it the right way. I don't know. I don't know. And I don't know how this is going to be in 5 or 7 or 10 or 25 or 30 years. And certainly those margins at that point were a bit unrealistic and probably even were, you know, whether I was naive, you know, entering or there, there was, you know, accounting practices that we have since changed and cleaned up and done differently. You know, there's a variety of different ways to kind of cast that story. And, and, you know, today we're, we're, we're not at 25% margin, to be fair, to be very clear. And, and at the same time, you know, the snow side of, you know, everybody, not everybody, many people are attracted to landscaping companies. And snow removal is a very different financial game than landscaping. Snow removal is risk management as opposed to maintenance or beautification. It's not just creating an attractive place, it's making a safe place that can, you know, a storm can shut down your facility and make it so you can no longer do business. And so, you know, in landscaping, technically, let's say again, using the hypothetical Walmart, you, you, you know, a kid with a single trailer and a truck and a push mower. I don't think this would be a good idea. But hypothetically, that kid could mow an entire Walmart. String, trim, backpack, blow an entire, entire Walmart and keep it looking good by him or herself. That's totally possible. I don't think it's a good idea, but it's possible. And so you're competing on the landscaping side against somebody who is willing to be a single sole operator, a small, it could be a small town operator, it could be a very large company, but with a very different overhead structure to that single operator. When you get into snow removal, there's no way, even if it's a very well equipped single operator, that a single operator can take care of an entire Walmart when it's snowing. An inch and a half or two inches an hour on Black Friday, with tons of cars in the parking lot, keep the sidewalks looking good, salt everything and everything else. And so, you know, the switch from light equipment like a riding lawnmower and a backpack blower to, you know, a front end loader or a skid steer or you know, you know, a five yard dump truck is a very different, is a very different pricing dynamic. And so the revenue on the snow side is significantly higher than the revenue on the landscaping side. The other part that comes in there is different in terms of revenue format is different contract styles. And so, you know, classically in search funds we're looking for heavily recur repeating or recurring revenue, true recurring revenue. And so, you know, when we look at the contracts that we have and thinking about margin in different years and how one year you could have significantly better or worse margin, you know, one of our contracts is a seasonal contract where you pay me $100,000 for the year to plow your Walmart. And I, you know, depending on how much it snows, you know, I am keeping more or less of that money. If it snows a lot, then I'm obviously my expenses are, can fluctuate even maybe above that hundred thousand dollars. And so the timing, you know, we would never try to like time the stock market and we would also generally not try to time search fund investments. But in my case, you know, I acquired the company on a, on a low, on a year that had high EBITDA and relatively low revenue. And you know, I would say that, you know, the, the structure of contracts is a sort of hedging mechanism that again, most owners in a, in a landscaping company wouldn't probably use hedging as the term that they would throw out there. But effectively there's, there's hedges against different snow scenarios or landscaping scenarios.

[58:33] Host: Tell us about actually buying the business. What did the transaction look like?

Guest: Yeah, tricky is the first part. So the, the, the, I think all of them are difficult. The, this one was tricky because first of all, landscaping business, not mainline traditional search fund company, just having it be a snow removal or landscaping company, there are some investors who are like what do you want to do? And why don't you know that we don't typically do this? And I'd have to almost start from like, well, hold on a second. This is not a normal landscaping company. We're employing a different business model so that, that selling of the investment opportunity to investors was an initial challenge. Working with the sellers was a second challenge. It was a husband and wife and they were running this business very successfully. I mean it was a great entrepreneurial success story for them. And as they were Thinking about selling the company, they worked with an intermediary, with a broker to sell it. And I participated in that initial sort of path. And it was a very traditional indication of interest, set of management meetings, the preparation of an loi, a pre LOI data room, and then a more detailed post LOI data room. And in that first phase, I submitted an loi, and it was a competitive process. And they decided to go forward with another. With another buyer. And I was absolutely devastated. I had no idea. You know, they. Everyone would tell you, like, don't get too attached to your deal. You know, they can always fall through. Deals fall through all the time. And you know this intellectually, you know this, but there's no way that if this is the right company for you, that you shouldn't be getting at least partially, you know, emotionally attached to it. Like, you should be starting to dream and think about, if this is my company, here's what I would do. And naturally, that's what happened to me as well. And so In August of 2020, the deal fell through, and we were negotiating the LOI. Post LOI. It had not been countersigned, but we were negotiating deal terms and it was feeling really good. And then they decided to go with this other buyer. And I'm left trying to figure out how to pick up the pieces and move on. Start, you know, and they tell you, keep other deals warm while you're doing this and all that. Great advice, great advice. But as a solo searcher, I'm trying to juggle all of this. And my pipeline was pretty dry. And I spent another week kind of crashing around in the dark, trying to find my way, and hung around the like metaphor of, like, hang around the rim and try to get the rebound because their deal could fall through too. And so kept kind of pinging, you know, every couple of weeks I would ping the broker. And ultimately the deal did fall through. And one of the things that is tricky is to this day, I don't know exactly why the other buyer walked away from the deal, but that really damaged the confidence in the transaction process for the seller. And so they were a bit paranoid about how I was going to walk through the transaction. And I bore the consequences for the bad behavior of the previous buyer or the proposed buyer. And so it was not an easy negotiation. Again, there was a lot of secrecy around. We don't want to share this with you because if ultimately it falls through, we don't want you to have this information. And at the same time, I can't buy the company Unless I have this information. And there's a long back and forth. So from the initial time that I found the company through Lou forwarding me this teaser that was probably in May of 2020 and the deal was done in late March of 2021, I ended up searching for just about a year. In the end, I submitted one loi from which was that original loi that got rejected and then edited that loi after the first buyer fell through and acquired one company. So this idea of like spray and pray and send out lots of Lois, again, that deep personalization and shooting your shot with a, with an owner, with a seller trying to find your way into these deals, that was my methodology through and through. And again it worked for me, but doesn't mean it would work perfectly equally for everybody else. And so, uh, yeah, so you go through this process and you're trying to figure out, you know, these, the sort of like what would be the deal killers? What information do I have to know in order to be confident that this is the right one? And this one had a several strikes against it. You know, is highly seasonal. You know, at the time, maybe 85% of our revenue comes from snow removal.

[1:03:04] Host: How much?

Guest: 85%. Wow. And you know, obviously that falls from, you know, this month to that month. And you know, all of your revenue comes in during that phase. The seller had deprioritized, actively deprioritized landscaping. Didn't really like landscaping. He enjoyed taking out his RV and enjoying and traveling during the summer and wanted to be sort of on autopilot with a skeleton crew during the summer. And so unless the customer essentially demanded that we need one supplier for our landscaping and snow removal, we didn't chase. We didn't really chase landscaping prior to my arrival here. So wow, highly seasonal. And I think from my perspective, you know, buying a seasonal business that's highly predictable is okay. So I could, I would feel comfortable personally buying a Christmas tree stand or a fireworks store because you know that yes, maybe all of your revenue happens in November and December for the Christmas tree store, but it's going to happen every year. And you can feel pretty confident in that. Add to that not just seasonality, but variability. So when you add in, how much is it going to snow and how does that impact your revenue? That got really tricky. And it was a stumbling block. It was a hurdle. I don't know what you want to Positively, maybe it's a hurdle. Negatively, it's a stumbling block for investors to wrap their and for me to wrap my head around and what's tricky is that the easiest measure of that would be snowfall inches. And so, you know, in Green bay we get 40 to 65 inches of snow every year, averages about 54 inches of snow. And how much revenue do we get if we get 54 inches of snow? But will remind me where you're based.

Host: I'm in Arlington, Virginia. So we get, we get like one or two big snows a year generally,

Guest: but there's a really big difference in those snowstorms of whether it's wet and heavy or light and fluffy. And so are we getting, you know, to 10 inch storms for, for 20 inches or are we getting 102 inch storms? And so our revenue is not just going to be, you can't just look at how many inches of snow you've got, but the composition of the snow, the ground temperature, the air temperature, moisture content, all the rest of these things. And so, you know, trying to kind of map that out there, there for me, I reached a point where I saw it more like a farmer, where we know that, you know, these acres are going to produce this many bushels of corn on a normal year, in a year where there's drought or an abundance of rain, that number is going to go up and down. But we know that sort of, there's this baseline expectation and therefore there's this baseline expectation of revenue. And while climate change is impacting us, we think that it will continue to snow for, you know, the foreseeable future where we are in the states where we operate. And if anything, climate change is impacting us with not necessarily less snow, but a broader range of storm scenarios. And so for the well prepared customer who values the service, having the right vendor is, is more important than ever because whether we just, I'm in Green Bay and we, we received snow on October 31st and in Appleton just down the road, they got four and a half inches of snow on October 31st, smashing every pre existing record. And you know, last year we received snow all the way into April. And so, you know, blending this together there's a, there's quite a need for what we do. And so getting your head wrapped around the variability attached to the seasonality was a, was a big push the transaction.

[1:06:36] Host: I want to circle back to something you said where they were not wanting to share information, what they considered sensitive, sensitive information with you because they are now scared that they've had one buyer, one transaction fall apart. And I guess they have now trust issues with buyers. How did you convince them to indeed share with you? Or did you just actually have to forego getting every single piece of information that you would have liked?

Guest: Great question. Probably a little bit of both. So, you know, I think that there was always some gaps where it was, you know, they were very hesitant to provide certain chunks of information. Really nervous to show me actual contracts that were, you know, signed contracts with customers. They felt that, you know, their pricing methodology was proprietary and so they didn't want to share how they priced the services that they, that they rendered until very, very late in the process and would give me sort of roundabout answers to these things that showed that there was a methodology that was, that I should be confident in, but not necessarily unveiling, unveiling the information they were comfortable sharing their top 10 customers, but customers 11 through, you know, whatever they wanted to keep them with the customer ID on them, but were willing to give me multiple years of data that had the same customer ID so that I could track revenue and churn and the other, you know, sort of traditional recurring revenue metrics over time, expansion, et cetera. And so while I didn't necessarily know who every customer was, there also was a point where it's like, okay, if these numbers are accurate and they have been, you know, through a Q of E and you know, I worked with Boulay for the Q of E and for tax stuff, you know, if the lawyers are comfortable with this, then maybe I have. There's that everybody's going to talk about the relationship with the seller and feeling like, you know, I'm going to discover the skeletons in the closet at some point. If you can help me discover them faster, this is going to go better. And so I felt like there came a point where, you know, while they were blurring information, I reached a point where at least I was comfortable enough to, to keep proceeding.

Host: And can you tell us anything about the acquisition price?

Guest: Sure, yeah. Acquired the company for $12 million, which was just under. It was like maybe a 5.7 or 5.8x when, when it was all said and done again, talking about agreed upon EBITDA and. Yeah, so right in that, right in that range.

[1:09:12] Host: Great. I understanding that their margins before or pre transaction were inflated or they were just destined to come down in one way or another. It's still an impressive business. I mean, five or six employees generating around $2 million a year of, of profit.

Guest: Yeah. And on the other hand, on the other hand, you know, I stepped into a company where, you know, the newest iPhone in the Company, this is 2021, the newest phone that they had on their desk was iPhone5. The newest laptop was. Maybe we had one laptop in the company. All the rest were desktops, in most cases with single or in some cases dual monitors that were 20 inch or 21 inch monitors, etc. There was a lack of investment. I think the seller had reached a point of satisfaction in terms of the investment that he had made to get the company to where it was. This entire. Another piece of the transaction puzzle is this entire transaction happened during COVID And so the first time that I ever met the sellers face to face, like in person, live in person, was the night before the transaction was to be completed. The signatures were already in escrow and I drove to Green Bay and we went out to dinner and we finished up dinner at maybe 8:30, 9 o' clock at night. And as we're walking to our cars to go our separate ways, the seller's wife said, hey, do you want to see the office before tomorrow morning? And I was like, oh yeah, that'd probably be a good idea. And I had seen a shakily, you know, filmed, you know, vertically filmed tour of the office. I knew that it existed, you know, it's essentially asset for free sort of business. And so, you know, the office actually didn't matter all that much whether it even was real or not per se, you know, and so I knew what the office was, I knew the layout of it, I had a blueprint of it, but I never actually went into the office until about ten o' clock the night before. The deal was supposed to be done at 9 o' clock the next morning was when I walked through and was like, ah, that's where I'm going to be sitting. And that's where so and so sits. And that's where so and so sits. And so yeah, super small. And every single team member was beyond their maximum capacity. Many team members were, you know, one of the early stories was, you know, our, the gentleman who is today our VP of operations, his name is Matt, he came to me about two weeks into the, my ownership and our investment team's ownership of the deal. And I think it was Thursday night or a Friday night and, and everybody had gone home for the day. And I was sitting in my new office, corner office, bright eyed, bushy tailed, young CEO. And he comes in and he's shaking and his voice is quivering and he says, I don't know how to tell you this Eddie, but I'm moving to Madison, Wisconsin. And that's, I don't know, two and a half, three hours Away from here. And I'm sitting there and I probably flabbergasted, mouth down on my chest and, you know, close my mouth and okay, I've accepted it. I have another job opportunity there. And my one on one with the seller, the transaction was announced on a Monday morning. And on Tuesday he was going to have his one on one with the sellers. And in that meeting he was going to announce his resignation and that he was planning to move. And so here I am two weeks into it and I've circled in my diligence process my key man risks. And I particularly circled Matt and said, if this guy leaves, I'm. I'm up the creek. Wow. And here comes. Here comes Matt marching in and says, I don't, I don't know how to tell you this. And he knows, he's key man. He knows he has this thing and he has been scared for about two weeks to tell me this. This whole two weeks he's had his, you know, he's been, he. Well, can I, could I get you to stay? Well, I actually have already bought a house there. Oh, okay.

[1:13:14] Host: So it's not a negotiating tactic.

Guest: When are you, when are you moving? The end of this month. Well, could I convince you to stay longer? And we ended up working it out so that he ended up staying for about four months before he moved there. And today he still, he works fully remotely. He comes to Green Bay on at least a monthly basis and spends about a week with us here in the office. As we've grown our team, he's continued to be just exceptionally faithful servant leader, supporting our growth. But these sort of early things, and part of the reason that I believe he moved to Madison was because the amount of stress and strain he felt that we're running this entire business with just five people. And a lot of that weight was on his shoulders. A lot of the processes and procedures that you would find in small businesses or. Or absent in small businesses. That storyline is definitely an Earth development story where we've grown our team to allow our team to have redundancy. So that in an industry where we're working 24. 7 during the wintertime, Matt was on 24. 7 call all winter long with no backup. And so if he got sick or if he did anything, he was the only person who could do parts of his job and that just wasn't healthy. So, yeah, a lot of early stories, a lot of early adventures that we had along the way, but it's amazing.

Host: So you've retained him the whole time?

Guest: Retained him the whole time. And of that initial five or six, one gentleman was kind of already on his. I terminated a gentleman pretty early on who kind of already had one foot out the door and we knew that. And then another team member when I arrived was going to school to get her real estate realtor license. And so that was not an unexpected departure. But of that original group, I think four of the original six are still a part of our team. And when you talk about acquiring a business, you know you're buying hopefully a healthy business. And what are you really buying? You're buying the team. And the potential, in my case that has been been extremely true where it's like a big bet was on the people. We don't do anything that's. There's not a secret sauce to cutting the grass. We don't do have a technology that makes us wildly better. We're not a pharmaceutical company with, you know, intellectual property or a secret formula. What makes Earth Development better is our team and making sure that, you know, they're delighted with the opportunity to work here, see potential in their future, etc. That's what I spend a lot of my time on today is just building the absolute best team for our future that we, that we're going to need.

[1:15:47] Host: Well, I, in, in build a team you have because if you went from six, five, six people to over 20, you've quadrupled the team. And if in fact you lost two people and it was down to four and four to 20 and above, I mean you've quintupled it. Is that it? Is that all basically just to give the needed capacity, I assume. No. You've also added in a layer of management. Tell us a little bit about what the team structurally looks like different now than it did before.

Guest: Yeah, absolutely. So when I, when I arrived we had, I was serving as the president CEO. It had previously been the husband and wife kind of in a co. You know, while this seller husband was named the CEO and the wife was, you know, vice president or whatever her title was. They effectively in my opinion would be CO CEOs mutually leading the company. And then this gentleman, Matt at one point was serving as a general manager of the company company. And prior to my arrival they had probably in part for hygiene and sellability had hired a, a head of sales to probably create not necessarily the illusion that it wasn't seller that the owner was doing all of the selling that was, he was not doing all of the selling but I think in order to increase the visual that he was not doing all the seller selling, they had hired a very ineffective head of sales. And so that was the gentleman that was let go very quickly after I got here. And, and they had also hired a fine, I think he's called accounting manager. And so, you know, essentially there was one salesperson, one head of sales. Why do you need a head of sales when there's only one salesperson? I don't really know. Um, but head of sales and a salesperson, Matt, as the head of operations, a finance accounting person, one person whose title was account manager, who did all of the customer support and customer service. And then one person who was worked with our service partners to coordinate our service partners again across five states at the time and 450 locations or whatever we were serving, we were taking care of that with that team. And so today, you know, we have a VP of operations, which is Matt. He continues in that sort of capacity. We've shifted his load to make it more accurately the role of a VP of operations. So he's not doing all of the things that he did when I first arrived here. We have a team member who is our cfo. We have a head of sales and marketing and then myself and so a three person executive team. Four when you add me into that. And then yeah, we have, you know, let's say three or four divisions and again, small company, but we have a sales organization that has salespeople as well as account managers who manage the ongoing revenue life cycle management post acquiring or winning the sale. We have an operations team that's basically split into three pieces. One of them is customer support and serving, you know, meeting the needs of our customers, field operations supervisors who make sure that our service partners are doing what they are supposed to be doing. And then service partner recruiting all fall into our operations team and then accounting. And our accounting team is made up of all the normal functions that you'd find in accounting. And so yeah, that's the core of it. And then we have a gentleman who serves as a project manager and is helping with sort of the growth initiatives and making sure that we keep pushing the boundaries of what's, of what's capable.

[1:19:21] Host: Well, speaking of what's possible here you have, so you've, you've built out your team, you've doubled revenue, although j occur. But these investments, this J curve means that EBITDA is about flat, but you're primed in position to really push that ebitda. Now this is a traditional search fund. So you have investors, investors who would like to get a their capital back and be more capital on top of that original capital. So that is one of the features of traditional search funds, where there's a bit of an expectation, or maybe more than a bit of an expectation that there will be an exit event, although not a requirement. These things are all very circumstantial. So what does a great outcome look like for you on this adventure, Eddie, as a last question?

Guest: Yeah, so I think, for me. So first, like I said earlier, the story isn't finished being told, and so I don't know how this is going to turn out. And it's like, like you just said, like, there's a lot of different permutations that can take place. So certainly there's that expectation of return, but there's a lot of different ways to deliver it right now. And I mean this with all sincerity. I get asked this every once in a while by a team member, by, you know, friends in the Green Bay area, et cetera, of like, what, what, what's the plan? And for right now, it's, you know, focus on building a great place that I would like to continue to work at for the rest of my professional career. And by doing that, it will be an attractive place for somebody else to come and work and join my team or for somebody to come in and ultimately acquire us or, you know, however that would look like. I, right now can't. I don't know what I would do that would be more fun and more challenging, more stimulating, more rewarding than what I do today. So, you know, the idea that after five to seven years, you know, you're going to have a, you're going to have an exit and you're going to make a bunch of, of money and sail off into the sunset. Like, I, I really like what I do. And, you know, imagining that, okay, I'm going to go out and do this again or become an investor or, you know, maybe pursue that plan to become a professor, a lecturer at a business school or whatever, or at a college. Those are, those are all things that, you know, that that's possible. But, you know, I, the journey is like, I can't. It's hard to almost envision some of that because, you know, to be a young person, you know, I'm 40 now, and so, you know, to be 45, what are you going to do for the next 25 years, next 30, 40 years, you know, and what would be more fun and more rewarding than what I'm doing now? I don't know. And so for right now, keep your head down, focus on building the very best place to work, that I like coming to work every day. I like the people that we work around, work with, that we're achieving things together. That's the, you know, and, and build a killer team and, and that, that's the dream right now. And, and keep pushing the boundaries every day.

[1:22:20] Host: Eddie, if people want to reach out to you, how do you prefer they do that?

Guest: Probably LinkedIn is easiest. Eddy Zakes, Eddy Z A K E S. You can find me there. And yeah, I love talking search funds going back to those days at iesc. I find the topic endlessly interesting and love seeing the growth of the model. And thanks for the work that you're doing, Will, to share these stories. And yeah, my story is only my story. And so everybody's going to have their own and they don't need to do it the way that I did it. You know, I used to say, like, I need you to. I would pretend and slide across a release waiver and say before we talk, you know, I need you to sign a release waiver that, you know, that my advice is often bad, that my experience is only my own, that you're going to talk to more people than just me and you're going to get, you know, ideas from a wide range of people and get a lot of perspectives and so happy to share my perspective, but it is only my perspective. It is only my experience. And all of your listeners, all of your audiences has agreed to my release waiver by virtue of continuing to listen to this conversation.

Host: Was there anything, Eddie, you wanted to say or share that? I didn't ask you.

Guest: I would just say a hearty thanks to all the people who have helped me to get to where I am. I consider myself extraordinarily privileged and I don't know that in foresight I could ever have imagined being where I am. And, you know, if you looked at the back of the tapestry, you know, the front of the tapestry, you know, went to a great business school, you know, had this stint in venture capital, worked in the nonprofit sector, did this entrepreneurial thing before the mba. Grew up in a family business environment that wasn't my family. The story is. Looks beautiful and it makes perfect sense kind of from the front of the tapestry. And if you flip the tapestry around, those threads are just a jumble of chaos. And there's so many people that, you know, took a chance on me and invested above and beyond in my success who said a kind word and offered a smile, offered a kick in the pants when that was what was necessary. And to all those people, I would say a big thank you. And then, you know, hopefully I've made you proud. And yeah, thank you to all of those people. That would be, that would be very important to me.

[1:24:39] Host: Eddie Zakes, thanks very much for coming on and sharing your story.

Guest: Absolutely. My pleasure. Thanks, Will.