Host: It's understood in our world that it's great to buy a business that provides non discretionary services. Services that the customer needs, not merely wants plumbers that unclog a drain. Allowing a family's water to flow again would be an obvious example. On the B2B side, think of certification services that are needed for a business to operate legally. While the non discretionary nature of these services is indeed powerful, they are still cost centers. Customers need to pay for these services, but they wouldn't if they didn't have to. Well, today's guest, Garth Fasano bought a B2B business that offers a profit center. Top Dog Sales center makes money by generating revenue for its customers and its customers are all in a single niche. They're dog trainers. It's a performance based outsourced sales function that charges its client only when that client receives a new customer. A true new customer that has actually themselves paid. So in general, Topdog's clients are happy to pay it for the service of making them money. You won't be surprised to learn that TopDog's revenue is quite sticky. Hard to find a dynamic like this, but it's a powerful model if you can. We spent quite a bit of time on it. And no, Garth is not sponsoring Acquiring Minds, although admittedly my enthusiasm for his service might make it seem like that. But hopefully in unpacking TopDog's model, it gets you thinking more about sales at your now or future business. Here is Garth Fasano, acquirer and owner of Top Dog Sales Center. Quick announcement everyone. An event you should know about In May, the M and A Launchpad conference is bringing together searchers, experienced business buyers, owners and private equity investors for one day to go deep on buying businesses. Walker Deibel, author of Buy Then Build is one of the keynotes, and 30 other experts will be on hand sharing their expertise. It's happening May 11th in Houston. The organizers are running a promotion just for us. $200. Off with the code acquiring minds go to malaunchpad.com and use the code acquiringminds all one word or use the link in the show Notes. 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. What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the acquisition lap, the accelerator in community for people serious about buying a business. But they represent just a sliver of the Lab success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions, and an active community of serious searchers. Check out acquisitionlab.com, link in the notes or email the Lab's co founder, Chelsea Wood. Chelseauythenbuild.com Garth Fasano welcome to Acquiring Minds.

[4:06] Guest: Thanks for having me, Will. Good to be here, Garth.

Host: You know, I'm enthusiastic about your particular business. It's not your typical searcher target searcher business. It seems differentiated in its own market, I mean, and it could actually serve some Acquiring Minds listeners, people who might buy a service services franchise business. So I'm looking forward to a very interesting conversation with you, Garth, and let's get started with a little bit of background on you, please.

Guest: Sure. So started most of my career in consulting, focused on customer service and sales. Worked at some of the larger consulting organizations out there and got to do some very cool projects in what is traditionally called call center or outsourcing space and for about five years had been doing a search before I found Top Dog and got to work on some very cool projects, but knew for a long time that I did not want to head down the long term sort of consulting partner route and found search as a really interesting way to explore exit strategies from consulting.

Host: So you now had you considered entrepreneurship, not, not ETA necessarily, but just entrepreneurship broadly as an exit from corporate life? Or put another way, if you hadn't discovered eta, would you have ended up just in corporate life for the duration?

Guest: I had explored some more traditional like zero to one entrepreneurship ideas. None of them ultimately panned out. There was also a strong belief in my family that to leave anything, whether it was a career or a job or a musical instrument, whatever it was in my childhood, you had to already have the next thing lined up and be ready to go. And that was sort of a big hurdle for zero to one entrepreneurship. So I did have some, some small ideas that generated revenue but were never and actually were profitable, but never anything meaningful. And so I probably would have stayed a more traditional course. And I think search was very attractive because I think, as probably most of the folks listening know, you get to step into a business that's already operating, has a customer base, has a proven market fit and that was a lot more appealing to me.

[6:33] Host: Yeah, I guess it was your family that your family's influence that led your search to be five years that I hear you were not, you are not going to leave that job until you found a business to buy. No full time searching for you. Thank you very much.

Guest: Yeah. Which hopefully is helpful to some of the other folks out there because I think it, I think it is an interesting option. I, I learned some stuff doing a year search. For the vast majority of the search I was focused on I think what were more traditional searcher type businesses and and industries but ultimately found a business that was, you know, very much aligned with my background and experience which I think what made you know, once I found Top Dog it was very easy to move forward but doing a part time search with a full time job it was. There was a lot of peaks and valleys where maybe you have a lull in your, your, your work traditional career and you can ramp up search. But, but that definitely extended the time period a lot. But I think that's okay.

Host: But, but wait, let me understand Garth. So do you think that it took five years And I, I don't mean to sound like I'm overly critical of that people's are on their own paths but do you think it took five. Your W2 was, was intervening or because you just didn't find the right business until year five or. And put another way, do you think if you had gone full time search you would have bought a business sooner or no because it took finding Top Dog which came on the market when it did, it would have been five years anyway to actually pull the truck.

Guest: I think had I been doing a full time search I would have found something sooner. Um, and would have been more, you know, more easily able to jump into an industry that wasn't aligned with my background. Um, I had a couple Lois in probably looked at about 125 companies. But you know I think that, I think that a lot of searchers need to do a very realistic gut check on how comfortable and how ready they are going to be to jump in. And if you're not doing a full time search, you know, I just don't feel like my ability to research and understand an industry was as comprehensive by doing it part time. And so looking back my advice to myself would have been to focus on the industry and space that I was in rather than looking outside of it.

Host: Okay, interesting. So some of these 125 I assume many of them you looked at and wrote off because they weren't quality businesses. This is a numbers game, as we know. But it sounds like some of them you wrote off because they weren't the right industry. You just couldn't get comfortable with you as CEO owner. Do I hear that right?

[9:13] Guest: Yeah, that, that's correct. I mean, I did get to the point of putting in, I put in three Lois during my search. And so for two of those, you know, I, I felt pretty good about the industry. I felt pretty good about the company. Ultimately those did not go forward. But I think, like, I think that it actually would have been pretty difficult to get myself comfortable to sign an apa even after an loi like, you know. And I think that's probably why a lot of brokers and sellers are cautious about Lois too.

Host: Great, Garth. So, and give us a sense of time frame or where you were in your career either by how old you are or otherwise. How many years out of college were you sure?

Guest: I had been working in customer sales and service for about 15 years, so I felt like I had pretty good background in sort of contact center operations.

Host: And where are you based?

Guest: Boulder, Colorado.

Host: Okay. And were you doing your search from, from Boulder? Is this, is this where you're from?

Guest: I'm, I, I didn't grow up here originally. I grew up in the New York area. But I was basing my search in Colorado and Boulder had initially started a lot wider and even looked at businesses outside of the state or parts of the state that might be a three, four hour drive. And after going through some early discussions with those types of companies, I, I really knew that I was going to have to hone the search in around the Boulder area. So I really wanted something that would be basically within a 30 minute drive.

Host: Well, that narrows things down considerably. Now. Boulder, 30 minute drive. Boulder is more than 30 minutes from Denver, right? Just over 30 minutes. So that means you didn't even include metro Denver or metro Denver, yes, but Denver proper, no, the, I could include

Guest: basically north of Denver, but not south Denver. And, and I think south of Denver is probably where there are a lot more companies and businesses. But I just, I knew we weren't going to leave Boulder. My, my wife and my family were pretty embedded here for the, our friends, the culture, the lifestyle. And, and so just after trying to look at a company that was up on what we call the, the Western Slope, sort of probably about an hour west of Steamboat Springs, and, and thinking it was a pretty good company, being very interested in it, but Just, you know, struggling to find the time to go meet the seller, go to look at their business. I just knew it was going to have to be really, really close. And I think that, I think that people need to be very realistic with what that extra time commitment means. Like if it's a hour and a half drive or an hour drive, are you going to really be able to do all that due diligence that you want to do in the purchase process and things like that? So really started to hone in.

Host: Great. And anything more to say about your search? If I were like in terms of your deal flow, where was that coming from? And anything else to give us a picture?

[12:04] Guest: Yeah, I went through, I think probably about every process out there. I'm sure there's many more processes now. But the classic big three, proprietary broker led and then ultimately just looking at Biz by Sell. So started with proprietary, researching an industry, finding target companies. Um, and maybe we'll get to this at some point. But actually did make an acquisition in that area that's, that's kind of unique and, and not a full time job as well. But then transitioned more to broker led and did not find a lot of momentum with that. And then ultimately just because I enjoyed the process so much and the action just sort of looked at Biz by Sell for probably the last two years of my search.

Host: And you enjoyed looking at Biz by Selling? Yeah, yeah.

Guest: I, I'm not on social media and that was sort of my, my replacement for social media and would look at companies, use that as a way to build an idea or a thesis. Find other similar companies, use the sims as a way to learn about them, then do some of my own research and you know, that's something I, I still do occasionally just because I, I thoroughly enjoyed in looking at the businesses and thinking about what makes them good or not good.

Host: Yeah, totally good. Good for. Yay for biz Buy Sell.

Guest: Exactly.

Host: Despite its reputation, it's such a, it's such a wonderful place to educate yourself and whet your appetite and get excited. Okay. Anything else to say about your search before we launch into the company that you found and bought?

Guest: Well, I think that the. Do you want to touch on the. The company that I did buy through a proprietary search?

Host: Thank you for the, thank you for the reminder there, Garth. Rocky Mountain Huts. I do want to get to that, but I want to get it to it at the end because it's kind of to the side. It's super interesting. So we're teasing the audience here. It's super interesting, but I don't want to spend the 15 minutes on it now and have it interrupt the flow of the, of the top dog story. So we'll get to it at the end.

Guest: Perfect.

Host: So tell so anything, anything other than Rocky Mountain huts. Anything else other than hearing about top dog. Okay, so you find top dog on Biz by selling.

Guest: I found Topdog on biz by sell. Yep.

Host: Tell us about it.

Guest: So Topdog is a outsourced sales and service company. We have about 45 employees and we help small medium businesses increase their revenue by implementing a pretty sophisticated sales operations process to convert their leads into customers. When I bought it, we had about a hundred small businesses around the country that we were working with and it really just provides them consistent, predictable revenue every month. They know if they put X number of leads in the top of the funnel, we'll deliver y new customers for them. And it's, it's a 15 year old company and it's managed nearly a million B2C leads for its clients over those 15 years. And I think it's a, it's, it's something that's tremendously needed in small, local, small medium local businesses around the country. It's a revenue operations process that really is only available to I think some of the most sophisticated sales organizations and we can effectively bring that process and implement it in small medium businesses effectively, which is really, really powerful.

[15:29] Host: An SBA loan broker, as opposed to a direct lender, doesn't work for a particular bank. Instead, the broker pairs you with the right SBA lender for your deal based on industry terms, risk thresholds, then helps you navigate the process better than many lenders themselves do. Matthias Smith of Pioneer Capital Advisory is just such a broker. Matthias worked at two of the country's top 10 SBA lenders. So he's been on the inside of the SBA process and knows well the pitfalls and hurdles and how to avoid them. He struck out on his own to laser focus on the ETA and search space. Our niche is his niche. You'll see Mathias at all the ETA conferences. He's closed over 30 search deals since starting Pioneer in May of 2022, including some acquiring minds guests. To learn more and get in touch, go to PioneerCapitalAdvisory.com or, or click the link in the notes. Let's really get into really what this business is and does. So it's for a consumer service. I can either lead you or you can, you can tell us. So it's for a particular franchise. You know, I Think you know all the questions I'm going to ask. So give us very specifically exactly what you guys do and who, who your, your customer is.

Guest: Yeah. So every day Top dog sells about $100,000 of dog training.

Host: $100,000 of dog training. Okay, that's amazing.

Guest: So, yeah, today we have about 120 clients around the United States and Canada that are all operating small local dog training businesses. And every day their leads come to Top Dog. We put those leads into a salesforce CRM and manage those leads with a sophisticated telephony and omnichannel technology platform to, you know, educate and convert those leads into customers for our clients.

Host: And it's for these 120 clients are at a particular franchise.

Guest: They're all in one franchise. And yes, although we do have a new client in a new franchise who was a former classic guest of your podcast too.

Host: Yes, yes. Well, and we'll get to that. The potential of this business. But when you bought it, and as it kind of as it exists mostly to date, there is a single franchise that provides dog training to consumers, to owners of dogs. A, you know, the, the franchisee in Portland, Maine gets leads coming into their website every day from all kinds of sources, probably mostly digital, mostly ppc. And then you guys, those leads funnel into your salesforce in your team then works that lead down the funnel and closes and closes the. Closes the lead. And then that, that customer who is interested in dog training becomes a customer of the franchisee and you get paid.

[18:40] Guest: Exactly. Yeah.

Host: And what it is is that there's this special sauce. I mean, you guys know how to sell dog training, you know, and not only dog training, but this particular franchise, franchisors dog training. So you guys are super dialed in to how to, you know, this. And so this franchise maybe go ahead.

Guest: Yeah, please can jump in and maybe help out. There's really two sort of key components to what makes this model work really, really effectively in terms of like, Top Dog's capabilities. The first is Tap Dog is really, really good at sales and very good at B2C sales for other companies. And, and what I've learned over my first 18 months here at Top Dog is that this model actually works very well outside of our core, you know, offering for dog training. Yes, it's, it's very effective because we do know this, this client's business very well. We understand their processes, but we have a couple of use cases where we've applied it outside of that and the same flow and structure that sells B2C dog training services very, very well is also very good in other spaces that we've proven out over the, the past year as well. So there's a sales methodology that's very, very effective for B2C sales. The, the second part is that, and this is probably something I, I would, could have learned more about in my due diligence process, but the technology that enables this process is really, really important. When your sales volume is this high and you're getting, you know, 7,000 leads every 30 days, like this has to be automated and leverage technology. And so it would also not be possible without the very unique way that Topdog has a technology environment built to support that. And that environment was fortunately built by the seller in a way that also lets Top Dog accommodate other lines of businesses very effectively.

Host: So you could kind of, you can flex pretty easily. You could plug in new franchisees either within this network or even try other, other services. B2C services.

Guest: Exactly.

Host: Doing exactly. And kind of scale. I mean you've got scalability built in. Yep, okay.

[21:02] Guest: Exactly.

Host: And so I guess, I guess the opportunity here that the, that the founder saw and it took advantage of and you're not taking advantage of is that you're providing more sophisticated sales than a small business owner can themselves. So, so in some ways it's a lot like it's on theme with so much of what we talk about in eta, where the sellers, the original owners of these businesses that we buy aren't, you know, don't have maybe the sophistication. Often in tech we talk about it, they don't necessarily have the tech sophistication, but it probably applies to maybe many categories of their businesses and sales, sales being no exception. What's interesting is that I don't feel like it's come up much. I don't feel like the topic of sales, you know, good work, somebody down the funnel. Quota oriented sales is something that's talked about a ton of. Maybe I'm, I've just been negligent but talked about a ton in, in eta and search versus like you know, working in SaaS or something. People are talking about sales all the time. I mean there's, there's a whole podcast devoted to just sales and just different, different industries and categories. So how do you respond to that?

Guest: Yeah, I think that, I mean I come from more large sales deals having worked at consulting companies as well as in the, an outsourcer and as well as technology sales in the call center space. So I'm very used to that sort of extremely sophisticated pipeline management. Process. And what I think is you're completely right that that often does not extend down into smaller businesses. But you know, this matters so much for small businesses. When you might be an individual operator, you need to be able to predict your revenue. That's, that's your livelihood. And when you're also a smaller shop, like a small business, then if you're out delivering services, you may not be paying as much attention to sales. And occasionally we would see this in consulting where you're delivering a lot of projects and as a result your sales pipeline starts to decline. And so then you, you know, have sort of a, a period where there's not active billable work and you have to go sell a whole bunch and then you get a whole bunch of projects that drop and now you're too busy. And so effectively what we're doing is helping small businesses manage that workload and make it more consistent. Like if you put a hundred leads in every month, you know exactly what you're going to get out of it and you're going to keep your workload much more consistent, make your revenue more predictable, which I think is really, really important and often not available.

Host: Great. Well, that, that was well put. And I want to, I want to spend more time on this, Garth, but I don't want to get too far away from your story. So we're going to return to unpacking Top Dog and kind of the value prop and how to think about all of that and what we can learn about small business sales too from that in a few minutes. So let's go back to the business. You gave us some of the bullet points. Can you tell us what the terms of the deal were and what revenue and SDE or margins look like?

[24:14] Guest: Yeah, it was a, the, the deal structure was pretty classic. Like 80, 10, 10 ultimately ended up at close at 80155 so 5% with a seller note it was below the typical searcher target size and I think that that's what, you know, helped me find it. But I think most searchers are looking for something at with a floor of about 7:50 to a million on the SDE and this was below that but had been growing really rapidly. So the terms of the deal was about a 3x multiple on the one year SDE, which I think is interesting. I actually you and I in our pre call were talking about this. So I went back and looked at what would the multiple have been on sort of the three year and it would have been more like a 5X but and maybe we'll get into this a little bit more. But I think one of the things that was unique is, and maybe this is just my lack of knowledge about the SBA, but we were closing on the business in October 2022 and we basically had line of sight into all of 2022 numbers. But the deal was based on the 2021 financials. And so there was a tremendous amount of growth already built into the business. And so that's why I felt comfortable using a one year SDE number for the multiple.

Host: You had negotiated the sale price earlier in 2022 based on 2021's numbers. One year, just one year. As opposed to taking a blended average of the previous three years.

Guest: Exactly.

Host: That might be, that might make somebody nervous because the mo. The most recent year is often the strongest year if it's a business that's growing. So, so, you know, you're not, you're not kind of looking, you're looking at a tighter snapshot of time of the business's history, which can be riskier. However, the deal didn't close until October 2022, by which time you had seen nine months of 2022 performance and the business had kept growing. And yet it wasn't being retraded. You were still, you were still looking at the, the sale price that you negotiated earlier that year. So, so that gave you the comfort of just looking, just basically trading on 2021's numbers. And also it, you know, if you, if you kind of consider a multiple of what 2022's numbers were looking like they were going to be, you basically had a, you paid a, a lower multiple.

Guest: Exactly. So basically on the day I closed, we had visibility into all but about six weeks of 2022's revenue. And so if you use that as the multiple, it was Multiple below a 2x multiple.

[27:02] Host: Why was the business all of a sudden growing so much if it was 15 years old? Answer that. And then the obvious followup is, did you know? Was that a cause for concern?

Guest: Yeah, well, I think the, it didn't take much industry research to understand why the company was growing. There were a lot of pandemic puppies, and with the primary clients being dog trainers, you know, it was, the services were tremendously in demand. So the business grew significantly during the pandemic. Okay, but, but when you looked at the trajectory, it, it was. The business had a steady growth rate, then sort of really significantly spiked during the pandemic, and then returned to the previous growth rate. So we weren't seeing these declines or like a Big correction. It was just, you know, the pandemic just took the entire growth curve and shifted it up really, really quickly.

Host: So, and that's, that's a key point and a key sort of gamble, if you will, that you made that this, that this 2021 and 2022 growth was going to be the new normal as opposed to returning down. So any number of people who bought E commerce businesses made the same gamble and were burned because the numbers did, did decline back to pre pandemic levels. And so they bought these businesses at very rich valuations. Yours didn't. I wonder why yours didn't. I guess because when you buy a dog that's not, then you need, it's a much bigger purchase. And then you, and then, but you'd, you'd still think that, okay, there was this explosion of buying puppies during the, during the pandemic and then there would be the need, therefore the knock on need for dog training. But as people. And so there would be this swell of, of demand for dog training services, but that it would recede because the acquisition of pets, dogs would also recede. So why wouldn't it follow that?

Guest: I think down are a couple of other macro trends that are happening in the pet industry. But more and more as pets are viewed as members of your family rather than a pet, spending is increasing and much less discretionary. And so because of that, I think that, you know, we've continued to grow, although this year we're starting to see things likely, you know, flatline or just, or not necessarily flatline, but the growth rate is definitely declining from, from last year. I think another part of this is you got to go back and look at why what Top Dog's business is. We're supporting other small businesses and this isn't just like a hobby for our, our clients. This is their livelihood. And so they are very committed to this working because this is how they put food on their table. And so this, that, that's the sort of business system and the way we work together is very codependent. And so if a business is, one of our clients is struggling, we talk to them about their, their marketing, what types of lead sources are converting, well, what we can do together to, to help them. And so, you know, because each one of my clients is very committed to keeping their business running and continue growing, then I, I think it's, it's, it's actually the system sort of supports itself pretty well.

[30:31] Host: When you looked at this business and looked at the kind of sales methodology at the time, were you also making a bet on being able to expand this into other services or is that just an, was that more of, more of a nice to have rather than part of your core plan?

Guest: I think, I think two things. The first is that I definitely saw the opportunity to expand this outside of dog training and the core franchise that Top Dog operates with today. Company I had just come from was Task Us, which was a incredibly large outsourcer. Just went public while I was there, so just back in 2021 I think. And so I knew the process and how to help grow an outsourcing company and so felt very confident and still feel confident that Top Dog's use case applies to many other businesses out there. But I think that this goes back to the, what the beauty of searches is that you know, we don't, I don't have a growth mandate like a public company and you know, I, I know some types of searchers do have a growth mandate and I'm lucky I don't have one of those. And so even if Top Dog does not expand beyond the current franchise, still a very healthy and great business. I think, you know, the primary advantage to expanding beyond the current franchise is just more economic resilience for types of industries or markets getting headwinds or tailwinds. But I do think, I think that the market we're in, in the pet area has a massive tailwind and so I think that that's also something for searchers to look for.

Host: Yeah, it's such a strong point about self funded search not having a growth mandate. As long as you don't screw it up and you kind of chug along at rates of inflation or GDP growth, you'll be, it's, it's going to be an amazing investment. Exactly. It's great. Okay, so more, but a little bit more on the deal and on your diligence. The, the, the growthiness of this business. As I recall you'd said that in fact some lenders did, did disqualify the business for that reason. Their, their concern that we articulated earlier that that concern was, was a material concern for, in underwriting for some of

Guest: these banks you talked to there. I had, you know, during my search I had worked with a couple bankers and just sort of built a relationship and I think that this is something that I didn't completely understand at the time, but probably should have spent a lot more with some of the banks out there. And ultimately the one that I had been in discussions with for a while said that they weren't going to fund it and, and so the broker there, this was a, it was posted on biz by sell by a trans world. And so the broker there knew of another spa lender that he thought would like the deal and made an introduction there. And that worked out. That worked out really well. So Cross first bank funded it.

[33:38] Host: Cross first, yep.

Guest: I think that the lesson for me and, and I'm sure there are people who know a lot more about this than I do, but that there are some SBA banks are doing cash flow lending, some are doing more asset based lending. And so I just needed to find a cash flow lender because Top Dog's asset was this sales process and this technology environment rather than like trucks and equipment that might be other lenders would like to have those sort of assets backing the loan.

Host: But I, I thought, okay, so noted that you want to find an SBA lender that is cash flow based lending as opposed to asset based lending, which by the way, asset based lending was the traditional way that loans were made for small businesses and that lending on cash flow is a relatively more recent possibility. But still many, many banks are just kind of, kind of had that conventional orientation, the collateral they see as the assets in the business. So many of the businesses we buy or services don't have a lot of assets. Okay. However, I thought, but I thought what about the growthiness? I thought you had also said that how growthy the business was was actually a penalty in the eyes of, of some banks you talked to.

Guest: It probably was, but I actually know like for some of the folks that said no to lending, I didn't get detailed reasons or maybe at the time it was just so, you know, running around trying to find a lender that didn't pause at that moment to, to ask for more details there. But, but yeah, I didn't, I didn't get an explanation as to why, but I'm sure it had to do with some of that, that growth.

Host: Okay. And so, and then the other takeaway then, Garth, is you wished you had basically talked to a number of lenders. You'd shopped around your deal early and often rather than kind of going all in with somebody and then finding yourself rejected by them and having to scramble.

Guest: It was a pretty quick sale process though. I think I found out about the, you know, I found Top Dog in probably June, maybe July and had an offer in, had about 45 days from the LOI to get the asset purchase agreement in place and then we closed 30 days later. So it was pretty fast. So I think like, if you're going to move forward with the deal that quickly. Having more different types of lenders set up and ready to go might be helpful. So you're not scrambling around like, I had no opportunities to shop around for rates. Like I've heard some folks on your podcast say, oh, I've got a. I got a fixed rate and things like that. That sounds amazing, especially what's happening right now. But there was no moment to pause to try and look for that. It was just like, take the first thing that was available.

[36:12] Host: Interesting. Well, and that reminds me something from our pre call, Garth, that you felt like your deal team broadly. Maybe you just meant lenders, but did you mean also other aspects of your deal team that you kind of didn't have all your ducks in a row once things started moving quickly? I mean, five years of kind of nothing happening, and then all of a sudden it's moving Quick, tell us about how, how that felt and what you could have done different.

Guest: I think at the time it didn't feel as. As crazy as it probably seems looking back on it now, but definitely should have had more of my deal team in the process in place for that. I think also maybe to be a little bit fairer to me is that this deal caught me off guard. I was not looking for a call center, looking for something in my area of expertise. This was the only deal I looked at that was a outsourced sales organization or a call center, and so probably wasn't as like mentally lined up for that to be happening. But I would really recommend folks in this process to have a more of a deal team together. Know what they're going to be wanting to diligence for that industry and and be, you know, have that outline rather than put in the LOI and then go write that outline.

Host: Okay.

Guest: I think that there are a couple areas that, I mean, I got tremendous. I think a lot of folks on the podcast say that they got lucky too. And I definitely got lucky in that there weren't hidden landmines in here that, that were. That. That I didn't find that. You know, I've been very fortunate in that way.

Host: Yeah. Well. And given that this was in an industry that you knew so well, did I assume that mentioned diligence was really on point compared to if I had bought this business?

Guest: It's interesting. I was expecting you to ask a question like this. I would say yes and no. I think that a lot of the consulting and like, yes, I have a framework for looking at call center sales and service operations and I know, and I, and I applied that framework that I used on, you know, massive projects for Fortune 10 companies. But I think what, you know, and, and what you miss in some of that process is really digging and getting into the weeds on, on what's going on in a small business. And so a call center diligence process, even if you're, you've been in Consulting for 10 years in that space, it's not going to help you. It's not going to give you everything that you need to understand a small business and all the aspects of that. So I definitely could have rolled up my sleeves more and gotten into more of the technology. Like, I think I mentioned this earlier. Like, I missed how important the technology was for Top Dog. I thought it was more like, hey, we've got client contracts, we've got a good sales process, but the technology is incredibly important. And that actually does impact some of the way that you purchase a company and has tax implications of how much of the company is valued at goodwill versus, um, and I, you know, I think an asset. I'll let an accountant really correct me on that one, but I probably should have allocated a lot more of the business purchase to the technology environment, which, which would have been advantageous for me in terms of taxes and the process too.

[39:27] Host: Ah, interesting. Okay. Understanding that neither of us are accountants, but, but there would have been, there would have been some, some, some nice tax advantages to saying that, you know, from the, from the purchase price. A lot of this is, is, is in this technology rather than being a lot of it. Goodwill.

Guest: Exactly. Yep.

Host: Yeah. While maybe you wish you had, wished you had done that differently, discovering that there actually is a lot of kind of technical value here is a happy discovery. Right. Because that's a moat. That's not, that's not something that can be easily competed away. And I guess that primarily. Right.

Guest: Absolutely. Absolutely. I mean, I think again, definitely a happy discovery. It's a tremendous moat for us in our business. We've got about, like I said, nearly a million contacts in our database and probably about 3 million dogs. And we've got a. So we have probably one of the most sophisticated databases in the world on dog behavioral problems.

Host: Yeah.

Guest: And, you know, I think that, you know, it would be a very fun project for like a analytically minded MBA student or, or any student to go through that and figure out some very fun trends.

Host: Yeah.

Guest: But I, I think that, you know, an important part of this is that, you know, there are a lot of things that maybe you could have done differently, but Also, when you find a good business, you want to move quickly. And so I think that there's this interesting balance. Like I've said, hey, this was a fast deal. This moved quickly. I wish I could have done some of these things better, but at the same time, every time you delay buying a good business, you're pushing off the opportunity to start repaying that SBA loan. And so, like, while I wish some things had taken more time and had been able to do them more thoroughly, I'm also really, really happy that it moved quickly. And that was something that the. The seller mentioned a couple times in the deal, is there were negotiation points or things like that. The seller would say, well, you know, I'll just take it off the market and I'll post it again on January 1st, and, you know, I'll sell it for way more money because it'll be based on the 2022 numbers. So your call. And I think she. She was right in many ways. Like, I think she could have done that. So when you do have a good deal, I think you got to sort of trust your gut and move forward on that.

Host: Interesting. And there, as I recall, there, it was actually a competitive process. You weren't the only one in the running.

Guest: It was a competitive process. So. Or at least I was told it was a competitive process. And so I heard that there were at least two or three other offers that were put in. So from my initial loi, they came back and said, hey, we've got some other offers. You're not the highest offer, but we. We really like you. Or if you're interested in, you know, being in the running, please make us another offer. And so I did, and I. I brought up the purchase price. I think it was honestly less than 1%. Maybe I increased it 1%, so very, very marginally, and they accepted that, which. So I. So it wasn't clear to me if it was truly a competitive process or not, because I didn't really sweeten the deal that much.

[42:43] Host: What was the. Just curious about your negotiation psychology there. Like, 1% is. Is not much. It's almost. It's. Yeah, it's almost kind of like. It's almost a little bit like a. Like, I'm. I'm not actually increasing my purchase price here, but if you're telling me to, I'll. I'll dot your I and cross your T. Yeah, I.

Guest: It kind of felt like that. Like, I was very confident, given my background, that they wanted me to take over this business. This was. Yeah, you knew.

Host: You knew they wanted you.

Guest: Yeah, I felt very good about that and so wanted, you know, out of respect for it being a competitive process and wanting everybody to feel like they got a win, I made a higher offer and, but, but I felt pretty strongly that they would still pick me even if I wasn't the highest because of my background. This was not a, it had been around for 15 years, but it was started by a gal who was about my age and, and she was, you know, so this was not some multi generational, you know, business that she was trying to protect. But she did care a lot about the employees. We had a lot of long tenured employees. And so I knew that, you know, having the business being run by somebody who understood this industry in this space was very important to her to help, you know, protect those employees. And so I think that that's ultimately why it was picked. But also it's interesting that this was a seller that was of a similar age to me and she just, she knew she had a, you know, she explained it a couple times to me. She said when she was a lot younger she read a paper and it said, you know, your, your, your happiness sort of peaks out around $60,000 of income a year. And so she knew that that was her goal. She added a little bit to it and once she knew she could provide that for herself, she wanted to sort of retire. And so she's financially independent. Retire early believer. And, and she executed on that plan pretty well. So very excited for her too.

Host: Fascinating. First fire seller.

Guest: Exactly, exactly.

Host: Okay, Garth, just to round out. Well let, let me get a couple, whatever you can share on numbers. And then I have one final but important question on the acquisition. The diligence. So you had said that it is below the kind of 750 SDE that many self funded searchers strive for. Did you tell us what revenue was? Can you share what revenue was at the business?

[45:13] Guest: Yeah, revenue. The financials of the business was purchased on the revenue was around $2 million. And then since then it's grown at about a 30% CAGR. Wow.

Host: And that $2 million ish was for the 2021 numbers, correct?

Guest: Yep.

Host: So as we were going back to our previous topic. So by October 2022 when you were closing, it was, it was 30% or 20, 27% bigger. I mean it was about to be 30% bigger.

Guest: Yep. We had, we had line of sights about a $3 million number in 2022 on the day I closed.

Host: Oh, well, that sounds more like a 50% CAGR.

Guest: Well I, I was giving you a multiple, like a two year compounded annual growth rate. Yes. But it was, it was, it was all good, positive story and that, that was some of the, the stuff that got me comfortable on, you know, buying a high growth business and valuing it on a more recent multiple or more recent year of performance. And you know, I've talked with some friends in private equity about this and they're like, they thought it was crazy buying on a, on a backward looking financial number. They're like, we usually have to look forward and buy based off of the projected numbers in, in private equity. And here in small business, you've got to buy it off of something that was like nine months ago.

Host: Yeah, yeah. Lucky us. Well, they're not taking personal guarantees, so.

Guest: That's true. That's true.

Host: And how are the margins in this business?

Guest: So I'll give you sort of a range here of how to think about this. Traditionally in outsourcing and especially in, with a US Based outsourcing, what, which is what Top dog is all of our employees and labor pools in the US Margins are usually very, very thin. And so like having just come from that industry, typically the way those companies have higher margins is by using offshore labor, like in the Philippines. And there's much higher margins on that labor relative to the United States. So top dog sort of splits the difference because we also have a technology solution and technology typically has much higher margins. And so this landed kind of in the middle with you know, tight margins on the labor component of the business, but you know, higher margins on the technology component that sort of balances out in the middle.

Host: Okay, but it's probably, the margins are probably thinner than maybe what we're used to hearing from my guests, where high teens, 20 is maybe kind of.

Guest: Yep.

Host: The median, if you will. Okay.

Guest: Yeah, I think that's a fair, fair look at it.

Host: Okay, well, I'm actually going to return to that because your business model being so performance based is this plays into that. But Last diligence question. 45 minutes into our interview, there is what we call it customer concentration. Yes, I guess it would be customer concentration, sort of quasi customer concentration. So, you know, I don't want to belabor this. I think it's obvious to everybody you got one, your expertise is, is in this one service offering and with this one. So you've got all these relationships with all these franchisees in one franchise network. Seems like if the franchise somehow turned all their franchisees against you or there's pen stroke risk where maybe they Create a new rule. I don't know if franchise ors can do that. Create a new rule that there, there can no longer be Top Dog offering services or no outsource set, whatever. You know, my point is there's a lot of risk concentration here. How did you think about that?

[48:51] Guest: You're asking a really good question, Will. And this was something I thought a lot about early on in the process. And I think, and just to be clear, so Top Dog has, you know, when I purchased it, about those hundred contracts, those were all individual contracts with each business owner. And just all of those businesses happen to be part of the same franchise. And there's not, and there still is not a MSA or Master services agreement with that, that franchisor. So that definitely it was a little bit uncomfortable. And also in the diligence process, the seller would not let me talk to any clients, which I thought was kind of unusual, having seen some eminent deals in the outsource space. But, you know, this is me trying to reorient orient myself to small business. The way I got comfortable with this is that, you know, a couple points. The first is that every new franchise in the system for the prior 12 months and since I've purchased it, has signed up with Top Dog, which I think is pretty incredible. So as the franchise grows, all the franchisees have to go through a training program. This is pretty common for, I think all franchises. And 100% of the new territories or folks that buy and take over a territory have become Top Dog clients. We even have some groups of clients that as they help onboard other folks into the franchise ecosystem, they sign sort of other contracts. And in those contracts the requirement is that they use Top Dog. And that's, that's not a contract with the master franchiser. I think that, that, that really sort of hits home the value proposition that we provide. And, and it's, it's so, so it's still a little bit uncomfortable, I'll be honest. But things have been improving significantly over the past six months. I think that early on there was a tense relationship. And in Top Dog's history, there's a pretty tense relationship with the master franchise. And that has been getting better and better and better. Although there were some, some pretty exciting and interesting moments early on. And you know, wow, in my tenure, yeah, I'm putting in sort of fun ways like. And, and here's one of the examples of that is early on I got an email from the master franchisor and he said, hey, I want to see all this data for My franchisees. And I looked at this and it was really kind of, I think, a pivotal moment where actually started realizing this is what it means to run a company and not be a W2 is like, you look at this and you know that the easy thing to do is to answer this question, like, just give the guy what he wants, build a better relationship, something that you know, is desperately needed, yet at the same time that ask is puts you in complete conflict with all of your contracts. This, you know, my contracts, I have to protect my clients data. And so this is one of those first, like, I think, like real, real leadership moments. And I think you're going to have many of these as you step into this kind of world where you, you have to make a decision and you have to be ready to rely on sort of your values and, and, you know, a lot of the, the work that you've put in to identify who you are and what you stand for. And, and I knew I could would be able to sleep better at night if I just responded to this question, gave the data. I also knew that, you know, most of my clients wouldn't mind, but some of them probably really, really, really would. And regardless, the way I looked at it is in my contracts, I have to protect that data. And so, you know, that became the, the choice for me. And that, that led to some of those fetal position moments early on as that relationship got very, very tense because I wasn't willing to share data and breach my contracts with all of my individual clients, which when you say it like that, it makes total sense, like, of course you wouldn't breach your contracts, but, but it was a tricky position because like you said, this person has potentially a lot of influence on, on how I'm able to repay that note.

[53:05] Host: Yeah, it's one of those, you know. Yeah, I think you, you ch. You chose well, Garth. And, and, and probably it seems like the obvious path in retrospect, but. And that when you're first confronted with it, it's tricky. The, it sure seems awful presumptuous of this franchisor to be like, hey, I'll take that data now, thanks, sort of thing.

Guest: Yeah, I think they're yes and no in I think most franchise contracts. And what he's told me is that he has the right to inspect all of his franchisees businesses. So he's told me that that's baked into his agreement with all of his franchisors. And, and, and so I've offered and outlined a process that I'm willing to take with him where we put together a master services agreement and then, and then go through the right steps where I get data authorizations so that I can share data with him and you know, basically put that decision onto each of my clients. And there are many, many reasons why that should move forward just because, like I said, I have tremendous data on lead flow, what sources are converting better than others, you know, what markets might need help and how regions are performing relative to others. So I'm sitting on this trove of data that would tremendously empower the organization as a whole to make decisions about, you know, marketing products, service offerings and things like that. And you know, today we're able to give that to individual clients, you know, either because we notice something might be an opportunity for them, like for example, leads are significantly declining. So we can give a client a call, let them know that their leads are declining and you know, talk them through, you know, what some strategies might be to help work through that. So in much more than just a sales organization, we're also essentially providing, you know, go to market advice for a lot of our clients too.

[55:03] Host: Yeah. Looking at how Top Dog's methodology could, could penetrate other markets and you could take this model to other markets is not only an offensive strategy of yours, but it's also a defensive strategy. It helps diversify away the risk of being to having this platform risk, if you will, being wrapped up with one franchisor. So you've got double incentive there to make that happen. So a couple of things before we return to the business, the business model, the value prop. One thing that you said in our pre call, which I found really interesting, is that this was. Top Dog was a great business to buy, not a great business to build from scratch. I think, in fact we might have talked about that in the context of like, could the franchisor or somebody just, just do what Top Dog's doing and get all the franchisees to come over to them. And so you, you had said that this would be a really hard business to, to build from scratch. And so it's, it's interesting just in the context of your story, relationship with a franchisor, but also testament to ETA overall.

Guest: Yep.

Host: Please

Guest: Top. I don't think we've touched on sort of Top Dog's economic model, which is, I think really important to help answer that question. Well, so the way our contracts work with our clients is that we are effectively commission based and so we only charge when we produce revenue for our clients and in fact we only invoice them until after they have collected the revenue from their clients. And so it's a very outcome based contract model. And that does a couple really amazing things in terms of aligning incentives. Like we are not, it's not good business for us to, you know, sell clients that don't really want the service or don't really need it because they ultimately might not show up for the, the lesson or the appointment they might cancel. And because we have this outcome based model that actually doesn't create any revenue for us either. And so we've tremendously aligned incentives which are, with our clients, which is, is really, really powerful. But then on the flip side, that makes it also incredibly hard to start a business like this because you have to be so convinced in your ability to sell these services and deliver value. And that's very, the word choice there, as I'm tying in makes it sound kind of like a jab at outsourcing, which is not intended but very uncomfortable for many outsourcers to be so heavily committed to delivering value in that way. What they're used to is economic models where it's X dollars per hour that's provided executing a certain task. And so for our clients that would actually probably be really scary. It'd be like, hey, every month you got to pay X dollars regardless of how much Top Dog sells. That would be really uncomfortable for them because they're small business operators. And so Top Dog operating at a small scale is just, is, is not a good business. There's, you know, not enough room when it's that small for things like, you know, investing in our teammates, providing 401ks, providing the management overhead to make sure that we're executing the process as well and when we're not coaching our teammates to do that. So at a small scale this would be incredibly hard to build. And we have seen a few folks try in this specific space. But, and, but often our clients come back, they go test it out for a couple months and then they come back to Top Dog because our services are better.

[58:43] Host: Well, this point about. So you're basically pay for performance as you said. And this was one of the things that so intrigued me about your model because you're delivering, you're delivering business. And in some ways that's, that's my, that is my business model. I mean the publishers, that's often the business model publishers who have sponsors, they need to deliver to their sponsors an ROI on what the sponsors pay them for the sponsorship. And you'll often see and I've, I've run businesses that are publishing related for years and you'll all I'll to. To to date and then throughout my career have often been approached by would be sponsors saying hey how about you run my ad for free and then I'll pay you a cut. You know basically pay pay for performance. And have you said yes to any of those? I have. You know as with, as with all things it's depending on your own, your strength of your own position. Yeah but, but rarely do I have I said yes and and once I'm and I wouldn't and for example with acquiring minds I would not say yes now and so anyway but it's just far less appealing for obvious reasons I'm absorbing all of that risk that I'm going to get paid based on the performance of the sponsor and how good the sponsor is. I mean some of that risk should be on me because I should be delivering them to the right audience and so on that will actually has the potential to convert. But so much of the funnel is in their hands how well they convert, how much they follow up et cetera the service they deliver. And so I'm absorbing, I'm taking all of that risk onto my plate. Right. So very unappealing. And you could actually, you could actually just talk about the entire kind of digital marketing industry. So you know there's digital marketing agencies are a dime a dozen and they're probably are pay for performance digital marketing agencies but generally they're not. Generally I don't their models are, you know, percentage of spend. It's like whatever you're spending in Google PPC they're going to take 10% of that or 20% of that. Don't quote me, I don't know what that what it is but they're definitely not just going to, they're not going to. Most of them are not like I'll only get paid if I actually deliver you paying customers. You are absorbing all the risk. And this is just very as I see it, as I understand it for my own career. That's very rare.

[1:01:10] Guest: This is very rare. Yes. But again I think this is goes back to you. Having that industry experience before stepping into a company like this made me very comfortable with it. When I worked in the outsourcing space my first year there one of the goals was for the company to have I think you know, five outcome based contracts like what Top Dog does and they weren't able to achieve that. And I think a lot of organizations are trying to move towards or outsource organizations are trying to move towards outcome based contracts. Because broadly in outsourcing, there is tremendous pressure on margins. It's very competitive. And, you know, often the deals that win in those processes are the deals that are the lowest cost. And so by having an outcome based model, we actually get to shift away from these conversations about like, how do we make it cheaper? It's how do we help you make more money, how do we increase your revenue?

Host: Yeah.

Guest: And then also because top dog has outcome based contracts. But we also got to that because we own the technology. That's also very uncommon for outsourcing organizations. Typically, if you're providing outsourced services for another organization, they actually give you the technology that you're supposed to use to execute those processes. And sometimes they even give you the computer. And then the other thing is, because we're doing sales and not just like customer service and password resets, we are a revenue generator versus a cost center. And by being good at sales and owning the technology, we're able to implement improvements in that process that deliver value for our clients. So one of the examples of this is historically we used leads from our clients, used leads from thumbtack, which is maybe people are familiar with it. It's a way to get generally home services to come to your house and you pay per lead. The conversion rate on those leads was terrible. It was about 2%. And generally those leads cost around, say 40 bucks. You know, I don't have the numbers exactly in front of me, but for many of our clients that were using it, their customer acquisition cost was about $750, which is just way too high. And because we own the technology in the sales process, we took a look at these and you know, essentially it was a hypothesis like thumbtack's a big company, there must be better conversion rates from this lead source. So what's, what's happening wrong here? And we took a look at that and it was really speed to lead. So we built a new technology integration to automatically process those leads into salesforce. We built a different contact follow up, essentially a different sales structure for those leads. And we got the conversion rate up to 14%. So basically 7xing the conversion rate on that lead source, bringing the customer acquisition cost down to like 100, $150. That was incredible value add for our clients. Now we've unlocked this whole nother lead source for them at a reasonable price point to help them diversify from, you know, Google, adwords and at being their primary lead sources. And SEO, just giving another attractive lead source is really powerful. So when you're in an outcome based contract and you own the technology, you have the ability to go make decisions like this and go try things out and test them out and see if they work and then deploy them to your clients and then it creates value for everyone. So yes, this is incredibly risky relative to getting paid, I don't know, $45 per, per hour of seat time you're providing for an outsourced agent. But if you're getting paid $45 an hour for seat time, you're never going to go and build this new process to create value like that for your clients or you wouldn't be incentivized to do it. Maybe, maybe you still would.

[1:05:09] Host: It makes a lot of sense, Garth. And as I hear you talk, I, I, I am thinking so much about digital marketing agencies. Again because a lot of the work that you just described, I mean I, I, where you, where, where Top Dog and quote sales begins and digital marketing ends, like that's a, that's a, that's a blurry line I guess. And because we're basically this is all about the funnel, you know, and the funnel sales is, is one part of the funnel and marketing is, is the higher up that funnel. But it's all the same funnel. It's working customers down the funnel. And so to, to really get a funnel working magically you got to optimize the whole thing. And so you got you at Top Dog will always be kind of pulled higher and higher up the funnel to optimize forever optimize more higher and higher up the funnel, which soon you're going to be up there higher in the funnel which is digital marketing. And so, so what I wonder is where I'm going with this is I wonder if I was wrong when I said that, that digital marketing agencies don't offer this model. Maybe they, maybe they do, but if they don't and I was right, like why? Why? I guess forget Call Center Land, which you've explained why they don't do outcome based, outcome based models. But like why don't digital marketing agencies do this? We're a Google PPC shop and will only be paid when you actually we deliver you actual customers. Why wouldn't the arguments there be the same ones as for Top Dog and whereas you know, it's like we're going to, yeah, put the money into Google PPC and choose the terms and stuff but we're also going to like help dial in your marketing stack your tech stack so that the lead flows well and that the structure is Right. And we're going to build your. Basically help build your funnel. Sorry, long winded, long winded question here, Garth. But I'm just trying to understand why part of the reason I was so intrigued, intrigued by your business is because it makes so much sense and yet I feel like I haven't encountered it. And I've been in, been in and around digital marketing and digital marketing is not new. It's 20 years old now. So why don't we see more of this model?

[1:07:18] Guest: There's a couple questions in there. Why, why don't we see more of this model?

Host: And then express myself here, please.

Guest: I think there's two things there. You're saying you have a question about digital marketing and actually my answer there is, stay tuned. We are not a marketing company today. We are not actually actively trying to tackle that area, especially for our current clients, because there are some good vendors in place already providing that service. But we are talking with digital agencies about how we would create a combined offering. And so instead of, I think what you said is true, that digital agencies, it's typically there's they, you pay for ad spend and then you pay a percentage on top of that. And so we're actually looking at how do we bring that together with Top Dog, with our sales process, with our technology, we could very effectively optimize across your marketing stack and lead sources. And so I think that at some point there will be a really interesting offering there in terms of why is no one else doing this or why haven't you encountered a business like Top Dog before to answer that question? I think that the main answer is that a business like Topdog doesn't really work subscale. It has to be working across a reasonably sized similar client pool to make it effective. Um, and, and this just gets down to sort of like basic call center economics and, and how that works. But if, if you only have one or two people working in a day, like when someone calls in on the phone, it's probably not going to get answered. It's going to ring a really long time. There's going to be highway times. You're not going to be getting back to customers quickly, which ultimately is going to impact your conversion rates. And so to get to the appropriate scale is very, very difficult and, and very, very expensive to provide the level of service that we provide. And so you might flip that back on me and say, well, Garth, your, your whole grosses or one of your growth thesis for Top Dog is that you'll be able to apply this to other Industries and other spaces. And the answer is, I still think that we can, but we're going to be investing in those areas, especially up front. And I think as a. As a searcher without a, you know, some crazy growth mandate, you know, those are decisions that we can make. And what we've learned over the past, you know, year and a half, or what I've learned is to be very careful about some of those decisions and because we are going to be investing upfront, make sure we're placing bets in the right spot.

[1:09:56] Host: So have you tried other industries? And it proved that the model doesn't. It's not as extensible, maybe as it seems.

Guest: What I would say is, yes, we have tried in other industries. Pretty much within three months after I got here, one of our clients referred us to a Med spa franchise that needed help with their customer service. And so we started providing sales services there. And what we proved is that the sales model actually worked really, really well. We happened to have some teammates that had experience in med spas, and we were able to sail very effectively. Our conversion rates were really good. Our price points were really good. We were able to use our sales flow to effectively educate and communicate to customers about the services that they would be getting. And, you know, we had fantastic feedback. Where it did not work was that we essentially overran the operations of the Med spot, Like they could not hire enough people to give availability for us to continue booking services, and so.

Host: Worked too well. Don't tell me it worked too well, Garth, is what you're telling me.

Guest: I had a crazy call with. Yeah, I feel like you don't believe me, Will, but yes, it worked too well. There's a mo. Every week we'd have a call with their marketing team and they would tell us what they were going to be promoting for the next month. And we challenged. We're like, why are you promoting this service? They said, oh, it's a great product market fit. It makes a ton of sense. We said, you only have four spots available next month, and we were going to sell them at full price, and now you've cut them by 50%. They're like, what do you mean we only can sell four of those next month? We said, well, you don't have anyone working next month at that particular location. So within 30 minutes, I was on a call with their CEO and CFO. And because we get so into a client's business because that's. We have to. The CEO and CFO were asking me like, hey, how do we not have availability Next month, like who's working at this location? And I'm pulling data from their data sources and telling them, well, like, you know, I think it was like nine of the 25 days you're paying for somebody to come in and turn on the lights, but there's no one there that can produce revenue. And you know, pretty quickly after that they were super appreciative of that call. It helped them identify a bunch of challenges in their business. But you know, we knew that, that we weren't going to be able to work together much longer. And at some point that may work when they are sort of more operationally sound, but at that time it wasn't going to be working well. And that was the moment that I learned I wanted to target searchers for Top Dog because I want my clients to have a personal guarantee and if I'm able to drive them more revenue, I want them to be very committed to working incredibly hard to being able to deliver the operations for that business to make that all work. Because if we're going to have an outcome based model and I'm bringing a best in class sales organization, I need to have a best in class operational team too.

[1:12:52] Host: One of the themes that's come up, Garth, recently in a number of conversations is how difficult home services has, has become. So it was very hot for searchers. Still is, but it's, it's actually a very, very competitive market, particularly in the large trades. A lot of PE money, a lot of real marketing sophistication. The, the John Wilson interview that aired on Thursday, we, we talked about that a lot. Are those, you know, some big H vac roll up where there's private equity money behind it and real marketing sophistication is an organization like that using outsourced sales. I mean how unique in the world of B2C services is top Dog? That's not a softball. I want to. Honest question. Honest question without an answer.

Guest: Yeah, I, I think it's pretty unique. Having been in this industry before or spent my whole career in this space, I haven't seen much like this. I like if you've, you mentioned John Wilson and H Vac roll ups. I, I think that if you've listened to his pod, then you, you know that they use some outsourced like more answering services. He's also mentioned that they've tried outsource centers. I think it's really hard to get right. And so I think that this is unique and I think H Vac actually does have a particular challenge that we have not Spent the time to get our hands around at TopDoc yet, but it is on our roadmap and list. There's two things that I think make H Vac and plumbing and electrical interesting is that dispatch is really has a lot to do with their revenue center and you have to be very tightly integrated with who's working that day, who's available, what's the expected price points per job. The other thing is because Service Titan has sort of taken over that space. Service Titan does have a call center solution and we do have teed up some projects likely in Q4 this year where we're going to be spending time with some of these types of organizations on Service Titan and really learn how Service Titan works from some of our initial work and sort of exploration with H Vac companies. My hypothesis is that Service Titan is not an effective sales and call center solution. And so I don't know for, for any of the zero to one entrepreneurs out there, I think a call center layer, a sales component to that might be really interesting. But again I'll know more after I'm able to dig into Service Titan more.

[1:15:35] Host: Okay, and, and then what about the average sale, average order? What's the average order value? I guess that's E commerce, E commerce speak. But, or, or lifetime value maybe in the case of dog training. Does, does Top Dog only make sense in a, in a market where they're, you know, the average lifetime value is. What is it in dog training? Hundreds of dollars? Maybe thousands.

Guest: Yeah, it's in the, it's in the thousands of dollars we're testing out now with one of the guests on your, on your podcast. And it's not based on, you know, it's, it's a much more recurring revenue business versus a big payment upfront like our clients in dog training. And, but it's also an easier sale. So I think has to be balanced versus the relative difficulty, the conversion rate, the quality of the leads relative to the, the dollar amount if you're going to do sort of this outcome based model. So it definitely still works but the numbers and the financials might change a little bit.

Host: And you said you want to be working or you kind of identified searchers as good candidates to work with Top Dog because they're incentivized, because they have personal guarantees. They got it all on the line. What about scale of a new customer? So with the existing, with your existing customers you're already in this franchise network so tacking on another one, you don't have to learn a new industry or Anything, I mean they just plug right in. If you get a new franchisee from this, from the existing.

Guest: Exactly.

Host: Operating in. However, Sam, Sam a searcher and I bought some other business completely outside your franchise network, completely outside dog training. How much scale would I have to have for it to make sense for you to invest in learning my industry and working with me? Probably a lot.

Guest: Yes and no. I think, sorry to give you sort of the classing it classic, it depends answer. But you know, we're right now working with one new client in a new franchise and it's not going to be operating at scale for Top Dog this year. And that's okay. We're learning the processes with this, this, this franchise and I think, you know, we'll prove the model this year and then next year we'll be able to sign on some more franchises from that particular group and so very willing to make investments to build those capabilities, improve the value. Because I think that's when you're in an outcome based model that's super important for everyone to see the results and make sure that it's good. And so this is a nice way to sort of dip your toe in the water. But that being said, like would we go do a one off plumbing company or something like that? Let's say we had all the service titan stuff figured out. I think the answer is maybe because there's also the possibility that we could group similar plumbing companies in different geographic regions or something. I just, I just pick plumbing as an example. And so as long as we're able to pool some of these together to serve them effectively because essentially what I want to make sure is that I've got enough scale to answer the phone and follow the sales process and the way that delivers the, you know, high lead conversion for you. And so if I can find ways to do that, then I'm very comfortable moving forward. Franchises are an easy way for us to do that because the sales process, the offering, the services are going to be so similar. And so that does let us scale very easily.

[1:19:04] Host: And they all talk to each other. I mean it's so powerful. You kick butt for one customer and that customer goes and tells all of the, all of his or her buddies throughout the network. I mean it sounds like that's exactly what happened in, in your existing network.

Guest: Yeah. And the, so the objective for this franchise that we're, we're working with right now is to get him on the leaderboard. So most franchises either monthly or weekly send out leaderboards of, you know, who signed up the Most new clients, who has the most xyz. And so, you know, our goal is very clear to get our client on the leaderboard. So people call him and say, hey, what are you doing? That's different this year. This looks pretty, pretty interesting, Garth.

Host: You know, this seems to be so powerful really that I just got to wonder if your current business model is the best way to unlock value for Top Dog for you as its owner. You know, does it make, does it make more sense rather than being the outsourced sales solution to all these individual business, does it make sense for you to go out and buy some franchisor or something and, and just, you know, and, and part of the value add that you'd offered all your franchisees is this model and then you collect more of the economics or, or, or, or, or just buy tons of marketing. Digital marketing agencies do kind of a marketing agency roll up and own, you know, the, the top of the funnel and then offer, offer more of a funnel. So I don't know, I'm just spitballing here. Yeah, but like this is so valuable somehow keeping the economics for yourself rather than giving them, not giving them away, but rather than selling them, you somehow bake them into an, or a larger organization that you also own.

Guest: Yeah, that, that thought has absolutely crossed my mind. And, and it appeals to the part of me that, that loves evaluating businesses because I see a lot of opportunities that way. But I think that the, the fastest way to create value as an organization for Top Dog is to continue to grow in this space organically. And so that is definitely where I'm, I'm focused for the foreseeable future. Again, there isn't like I don't have some massive growth mandate. And I think that that's really puts me in a powerful position to take time, pick very carefully the targets that we're going to start to work with and prove whether or not we can, you know, create as much value for new client types like we have for the core business? If that starts to work, then it's going to be hard for me not to consider exploring, you know, buying into a franchise or something like that. But definitely staying laser focused on Top Dog and growing this capability because I think it's something that small businesses around the US Tremendously needed, will benefit from. I think that that's, that's the fastest. Even though there's not a goal to be fast, that is the fastest way to create a lot of value for searchers, small businesses and communities.

[1:22:12] Host: Garth, you've talked a lot about the Tech and, and how that's kind of one of your, kind of part of the secret sauce or special sauce. But what about the actual people who are going to be doing the selling? What does your employee base look like? Are these all master salespeople? I mean, how. Yeah, what does that look like? How do you train them up? How do you. This playbook that you developed for Med Spa and that you're now doing for another acquiring minds guest and are envisioning doing for other industries. Like is it Garth that writes the playbook or do you have master salespeople in the organization who you, who you guys collaborate to write the play? Just give us a picture of, of the actual human capital at Top Dog because that's, that's obviously as important as the tech, if not more so.

Guest: It's, it's, it's huge. And I should have hit on this sooner because it's tremendously important. Top Dog, I think because it grew so slowly over time, does have a very. Like, this is all. This is not some outsourced person that we hire to come in and consult with us on how to sell. And it is Top Dog sales methodology. And it's been developed over 15 years and a million leads of testing. And while I think that the original seller and founder, like, I don't, I don't think it was like as data driven tests, but she had so many repetitions of this. Like she was originally on the phones doing sales. And so she developed a process that works incredibly well and incredibly powerfully. And, and so that is a Top Dog capability and it works across multiple industries. Now how do we train folks on this? We're not hiring super seasoned sales folks. And maybe to clarify, we're generally looking for people with one to three years of sales experience. Occasionally we'll hire somebody that has five years of experience, but we often find that we have to retrain on bad habits there. And so we have a 90 day training program that's pretty intensive and we're handing over this sales methodology to our teammates to help them provide value to our clients through sales. I think what, what, what I really hope for our teammates is that this might be a stepping stone to a larger career in sales because having been in consulting, sales, technology sales, outsourced sales, I think that's a really fun and exciting career path for folks to transition from doing this B2C sales strategy at Top Dog. And you know, maybe at some point in their career they can be doing, you know, larger B2B deals and things like that. And so I do look at this as a great step for our teammates on a career path. Although, you know, when I came to the company, we had one person who'd been there basically since the beginning, so had been 10 plus years at the company, another person seven plus years, another five. And so there are some very long tenured folks at Top Dog as well. And I think that's because it's a work from home company and that gives people a lot of flexibility. And so there's also a lot of value for our employees in that as well.

[1:25:17] Host: And when you say one to three years of sales experience, so I'm getting less comfortable using the distinction white collar or blue collar for, for a variety of reasons, but for lack of a better framework. So, so they're, they're obviously people who are not working with their hands. So if that's your definition of blue collar, they're not blue collar, but they're also, but it sounds like one to three years of experience. They're not super experienced professionals. You've already said that. They're not, you know, 20 year sales veterans either. So, so what is the kind of the profile of, of a top Dog hire look like? Yeah, give us more color other than just the one to three years thing.

Guest: So I, I would say maybe do like a couple different Personas, but generally across the board, everyone loves animals. That, that's sort of a requirement. There's a lot of dog puns. You've used a couple. But that's definitely important to fit in here. Then we have a handful of folks that are sort of newly minted college grads. We also. And so they sort of come to this as their first job sometimes. And we're putting them and training them up on sales, which I think is actually great. Like, if I had gotten this level of sales training early on in my career, I think I could have done some pretty amazing things in, in sales instead of sort of like backdooring through consulting and being a, a practitioner in consulting and then learning how to do sales as you rise through the ranks. Another profile is folks that, you know, maybe this, this might be their sort of third career path. This is, you know, they've done a handful of other things throughout their life and, and they've chosen this because it gives them the flexibility to work from home, spend time with their grandkids, and not have to commute to a job or maybe relocate to where their family is. Since we're operating in, in about 20 states. So we have employees all over the United States. And so we Let people move.

[1:27:14] Host: So you have, you have people who are in their early 20s, up into their, I guess, 50s and 60s.

Guest: Yes, we do. Yep.

Host: All selling great, great. Really neat. Perhaps one of the reasons that outsourced sales, to the extent that it exists, doesn't do well is because it's, it's too outsourced to arm's length. The outsourced sales provider doesn't really become, doesn't have a strategic voice within the business, within the business they're serving. So they have some script and they just go through the script and it doesn't work very well. You actually influence and affect the pricing, the listed pricing of your clients at the franchise. Talk more about that.

Guest: We do, we make recommendations to our clients about pricing. I mean, sometimes it's us reaching out to them, sometimes it's them reaching out to us, but we often look at, you know, how far out they're booked. So essentially what's their forward looking, you know, utilization or their forecast and make recommendations to change the price to help them balance what they're trying to achieve. So some of our clients prefer to be booked out for many, many weeks because they find a lot of comfort in seeing that their schedule is full. So they have a lot of confidence in the revenue that's coming in. And there are other folks that like to have higher price points and may not be booked out as far. And honestly, that's an individual decision for each of those business owners. But you know, while we're looking at their, their leads, their quotes, their conversion rate, we can also make a lot of recommendations to them about what's working, what's not working, and what changes we might make, such as their, their pricing to help them achieve the outcomes that they're looking for. So this is definitely a lot more than just a sales service. There's a lot that happens in terms of recommendations in the business and, you know, even things like, you know, we might have a client that calls us and says, hey, I want to change my schedule, I don't want to work these days and I want to work these days. And we can sort of talk them through what that will look like because we're the ones communicating with a lot of their customers. And so we know certain days will book better than other days. And so we can say, hey, you know, we're happy to make this change for you, but you're probably going to lose X lessons, Y revenue because of that. You know, is that really what you want to do? Or, you know, if you adjust your schedule this way, we probably will, you know, maintain your current, you know, business operations level. And so we coach people and we, we help them make these decisions. And we have a tremendous amount of data across all of our clients to, you know, not just tell them what we think and feel, but to show them aggregated data and what the implications could be for their specific business. So that's, that's really powerful.

Host: Yeah. And like, how about another example, say a new franchisee who wants to work with Top Dog calls and, and you look at, you Google them or you ever, you see what their profile is online and they got terrible reviews. You know, they've got two stars out of five or something. You know, I assume you check things like that. And so other glaringly obvious things they're doing wrong are these things you weigh in on or, or what, again, going to, like how strategic you become as their coach?

[1:30:21] Guest: Yeah, I mean, that specific example hasn't come up because either you're a new, you're brand new and so you have zero Google reviews, or you're purchasing another territory. And trust me, we don't have anyone with two star reviews. That would be pretty devastating, I think, in the current market. But like, if you are a new franchisee, we can make a recommendation on what price you should be at because we might see people in similar markets. And so we can kind of guide you on that. We can also give you recommendations about availability, what types of payment models to take, just tons of advice on essentially everything on the sales aspect and the product market fit. We're not making recommendations on like the, the service and like how our clients train and things like that, but everything about how that's priced, how that goes to market and the payment options. Those are things that we, we get a lot of coaching around.

Host: Garth, I could keep going all day about Top Dog. I mean, I just think it's a really fascinating business with a ton of potential. So. But I'm going to have to control myself here and we're going to have to move on. But before, and I want to make sure we have time for your Rocky Mountain Huts story. So we're going to close with that. But just before we move off Top Dog altogether, Garth, give us one more sense of the numbers here, how many leads a day and give us a sense of the funnel. You shared the funnel with me. This many leads come in, this many converted. Can you do that for us?

Guest: Yeah. In the general numbers are that for every 100 leads we give about 65 quotes. And then of those, depending on the price point, in the market, we're converting generally about 30 to 40% of those into bookings. We've learned, as we've explored in some other industries, this is very dependent on the industry. So that's. That's sort of a broad range. And so there can be some ways that that shifts. But every 30 days, Top Dog is getting somewhere between 6 to 8,000 leads that, you know, my team and our team is working on behalf of our clients.

Host: And so 65% quote, and then 40 of 65% is whatever that is. 25. 25% sound right.

Guest: So.

Host: So 20. 25% booking rate from those leads. Very roughly.

Guest: Very, very roughly. And then, you know, what clients see, typically see that, you know, maybe in the franchise system and then haven't been using Top Dog. And when they come onto Top Dog, typically their conversion rate doubles. So that 25%, you know, would have been half if they had been taking their own calls. And then we often increase their prices by about 20%.

[1:33:12] Host: And they see that. I mean, that's not just increasing prices to give you guys negotiating room. They actually see more revenue per customer.

Guest: Yep.

Host: Great. Thanks for that, Garth. Okay, well, fascinating. Really, really neat business. So we'll leave it there. Let's close with Rocky Mountain Huts. This is another acquisition that you did give us, give us this story of buying a very unusual business and a very unusual search. Please.

Guest: This was. So this was a process of. Much more of a passion project, I'll be honest.

Host: Yeah.

Guest: And in Colorado, we love backcountry skiing. There's a hut system that you can go and rent these properties that are typically somewhere between 10 and 12,000ft. And you, in the winter, you snowshoe or ski tour into them and use that as sort of a base camp for. For skiing in the winter. Just sort of noticed that they are completely booked. So essentially 100% occupy occupancy rate in the wintertime. And so realize that there might be something more to this and also just happen to love these. My wife and I got engaged at one. We. I was skied out of one yesterday, and I'm going to one next weekend. So they're a ton of fun and a really unique experience. And sort of, after learning about proprietary search, deployed those tactics to see if any of these might be for sale in Colorado. And so essentially would pull up a topo map of a valley in a basin, see if it looked like there was good skiing in there. And if I felt like it would be good skiing and was relatively accessible from a metropolitan area, would look to see if there was any private property, then pull up a satellite image and see if there was a cabin there and find out who owned it and write them a letter and see if they wanted to sell it. And after about a year and a half, finally got a hit and purchased one of these properties in. I think it was 20, 21. Yeah. And.

Host: Okay, okay, hold on. So first of all, is this. Is this a business acquisition or a real estate. More of a real estate acquisition? I mean, I understand there's real estate. The real estate is the business, but what's the framework to think about it?

Guest: It's a little bit of both. It's not a traditional real estate acquisition because you can't get a traditional home loan them generally. Like, it is so hard to get to this property that I. You can't get an appraiser to drive to the property if you have a problem like you. If something big goes wrong there, if a big piece of equipment breaks there. Like, the road is so rough, it probably requires a helicopter to get the equipment there. So the property we bought sits at just below 12,000ft underneath the continental Divide. And which also is a problem to get a helicopter up to 12,000ft, too. So. But the road is tremendously rough. There are cars that get completely wrecked on it. And so you need a. Either need to be a really good driver or have a very customized vehicle to get it to it.

[1:36:18] Host: And the idea, in fact, with these huts, the people who are going to be using them are skiing in and skiing out anyway. People aren't driving. Users of them, the end users not driving in.

Guest: Correct. Yeah. So the primary use case is in the winter and the. After we bought it, um, we did one Facebook post. It was the most. I'm not on social media. I go on like once a year to let people know that the hut's open for the next winter. And it was a post. I got more feedback and responses than anything I've ever put on social media. And within 72 hours, every night at the hut was booked for the next winter, which was just wild. So that was tremendous validation that we were doing something that people wanted. And I think, you know, I think there was a good takeaway from. From this that I think is helpful for a lot of searchers because this had sort of a triple win outcome, which I think is something a lot of folks should be looking for when they're trying to do this. The hut makes money. It makes some money. It doesn't make. It doesn't make anywhere near enough Money to live on, but. But it doesn't cost us money. We love going up there and we love getting to use it ourselves. And it's something that gives us a ton of pleasure and joy to get to go skiing up there as we were this past weekend. Then the third thing is, like, it's neat. Like, our community wants this and appreciates this. And so there's three wins out of this. And I think even if it didn't make money and we got those other two or even one of those, it would still be really valuable for us. So I think as people go on these searches, making sure you've got a lot of win scenarios, because I think strange things can happen. And so as long as you have multiple outcomes where you feel like you're winning and you're making the right decision, then this is a really good thing to go and do. And I think to tie that back into, you know, Top Dog and search, that this is a big lifestyle shift for. For everyone. Like, you're going to be working harder than you ever have before, but it's not going to feel like work. And so just make sure you've got a lot of win outcomes regardless of how things go for you. You've had a variety of guests will. Some that have done extremely well, some that are struggling. But I think, like, what I've learned from going through this process is that even if Top Dog weren't to. If it. If it hadn't have worked out, like, there's no way I would do anything else with my career. Like, this is what I will continue to do because it is so much fun and to, you know, impact your clients, to change the lives of your teammates. Um, and to get to lead a company is. Is such a unique experience that even if something were to go south at Top Dog, I will have already won. Like, this was totally worth it. And, and now, like, having gone through this search process, I have no fear about career in the future. And like, I will do this again if. If I have to get another job ever, which I. I hope I don't. And so I think that that's also a really cool thing for folks to think about. Make sure you've got a multiple win outcomes, and I think search is a really great way to do that.

[1:39:18] Host: And. But just double clicking on the last thing you said, like, you will do this again, even if Top Dog had a horrible outcome and you had to go back and get a job you've built.

Guest: I won't get a job. I'll go buy Another company.

Host: Yeah. Yeah. You've built the skill to. To buy a company. You've now run a small business and you love it so much that you just see that there's a. This. This is the path. Even if it's not Top Dog forever and ever.

Guest: Exactly. I mean, just to be super clear, like, the plan is Top dog forever. No, Like, I have no intentions of. Of selling or anything like that, but. But definitely embedding myself into the search community, which. Which also is, I think, you know, as maybe many searchers do, they want to give back. So we've started to kind of create a community here in the Front Range of Colorado as well. Around this. I started a small group and we combined with another meetup group. And now on the first Wednesday of every month, we have like 50 searchers show up for a happy hour. And the community is really growing and building in. In this area, which is also really, really fun.

Host: Well, I feel like I know a bunch of these Colorado folks. I mean, I do you, Adam Markley, Matt Barnes, Sean Moore, probably forgetting others, but it does. And Shannon now is going to be teaching at. At Boulders Business School. At Colorado's business school.

Guest: Yep. We should definitely plug this. We got good news, actually. Fifteen minutes before we started recording, I got an email from Shannon that we're getting some more MO momentum about teaching and bringing an ETA course to University of Colorado Boulder. So that's definitely something we've been working on. I did my MBA there in and excited to bring that. They've got a very strong entrepreneurship program and so hopefully we can teach this at CU too. So I think, you know, this has been a. ETA has been a transformative experience for me and so really trying to, you know, be a good steward of Top Dog and for all of our clients, but also share this with. With other folks and help build a community around it here in Colorado, which I think has been a little bit of a open space for. For a bit, but that's. That's closing rapidly. As you mentioned, there's a tremendous amount of searchers here, so looking at ways to provide more on ramps into search for those folks, looking at ways to potentially get them capital if they need it. And then also we're looking at creating more of a. An owner's group to help coach and mentor folks that have completed an acquisition, because I think you get to touch on some of this stuff. But, you know, once you're sitting in the owner's seat, you have a whole unique set of challenges and having a peer group and that you can go to for advice and, and finding resources is incredibly valuable.

[1:42:07] Host: More to talk about, Garth, but I gotta let you go. This has been great. What's the best way for people to reach you?

Guest: Email Garth topdogsalescenter.com or LinkedIn.

Host: Garth Fasano, what a neat business. What a great story. Ski huts, everybody. Oh, no, sorry, that's not the takeaway.

Guest: But you can book it@rockymountainhutts.com Rocky Mountain

Host: Huts.com that's a, that's a really neat one. Cool. All right, Garth, well, thank you very much. This has been a fantastic call. Really eager to see what you do with Top Dog. Such a neat business. Thanks for your time and your transparency.

Guest: Thank you. Will appreciate it. Sam.