Host: Today's guest worked for years in commercial banking. During that time he would deal with local business owners, seeing up close the success they had, the lives they led. And he always felt like a supporting character, that these owners were the real protagonists. Quote, it was like, man, I wish I could do that, but I'm just the banker. Well, today Greg Bruns is doing that, owning and running his own business. Now, he's not a multimillionaire yet. He's only three months into the acquisition of a small hydro mulching business. But he's taken that first step, that hardest step, and I know you join me in wishing him success as he grinds the dream to reality. Because it is grindy. The business Greg bought is project based, tied to construction, vulnerable to weather, and since he's in Houston, which saw Hurricane Beryl blow through in July, revenue collapsed that month. So for that reason and others that Greg and I discuss, it is not easy. But he is off the sidelines and in the game where he wanted to be. Enjoy this conversation with Greg Bruns, former banker, now owner of Allied Hydromulch Announcements A webinar today, Thursday, October 10th which business should you buy? When it comes to buying a business, it's not all about SDE and recurring revenue. A key question any searcher should ask herself is what experience and skills do I bring and which sort of business would best benefit from those assets? This business Buyer Fit is taken seriously by Acquisition Lab and Managing Director of Acquisition Lab Chelsea Wood is hosting today's session on the topic. This webinar is also in office hours, so come with your questions. We're going to leave a good chunk of time at the end for Q and A. Which business should you buy? Today, Thursday, October 10 Noon Eastern Register in today's show notes or on the Acquiring Minds homepage. Acquiring Minds Co. Then this coming Wednesday, October 16th due diligence office Hours Max Lummis and his team at LCS return for a live session devoted to answering your questions on all things related to the process of due diligence. These due diligence office hours with LCS have been so rich, kicked off by a presentation from Max and his team, then followed up by great questions by you, the audience. You'll recognize Max's name. He's my partner in Mind's Capital and his company. LCS is a forensic accounting firm that does the quality of earnings for dozens of search acquisitions every year. So come get your due diligence questions answered by one of the most active diligence teams in the search ecosystem. That's next Wednesday, October 16th, noon Eastern. Register in today's show notes or on the Acquiring Minds homepage. Acquiringminds Co. Welcome to Acquiring Minds, a podcast about buying businesses. Mind 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. 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 Matthias 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 click the link in the notes. Greg Bruns, welcome to Acquiring Minds.

[4:48] Guest: Will Smith, Happy to be here. Thank you.

Host: Greg, you bought a hydro mulching business. We're going to learn what that is. You're only a couple months shy of three months into this adventure, so you are in the thick of your transition. We want to hear how it's going and to learn about your business and why you liked it. Start us off, Greg, with some background on you, please.

Guest: Yeah. And again, thanks for having me. As I mentioned you earlier, I'm a longtime listener, so this is, I guess you call it dream come true. I don't know, pretty fun being here. Wow.

Host: I appreciate that one, Gretch.

Guest: Dreams can come true, right?

Host: Yeah.

Guest: So a little bit about me. Born and raised in Texas, never left, have lived kind of all over the state, but I'm here in Houston. Great. Southeast Texas. And yeah, came from a very kind of, I'd call it upper middle class background. Neither one of my parents were entrepreneurs. They had corporate jobs. My dad was in banking for a really long time, which is kind of what I did after college. My mom was in the medical field for a long time. I will say, and I'd be remiss without saying this because it really did shape who I was as an adult. My dad did pass away unexpectedly at 16. And so that really did. And as we kind of go through this, I think that'll make a lot of sense as to why I ended up where I am now partially because of that. So that happened.

[6:15] Host: Well, that hardly gives you a normal childhood, Greg. That's a pretty good.

Guest: It was normal up until that point

Host: in an intense age.

Guest: Yeah, exactly. And with two younger sisters at the time, it really shaped who I was as a then teenager going into young adulthood. And like I said, we'll kind of probably get into that a little bit. But that really grew me up very, very quickly, more so than a lot of my peers at the age of 16. So then it was kind of focused on, oh, I like girls and sports and fast cars and that's it right to all of a sudden, oh my man, I got to grow up fast. Not that I needed to get a job to support my, my mom and my two younger sisters or anything like that, but it just, it really focused me at a very young age to where it was like, well, I guess I'm going to go to college and get a degree and get a good job and that's just what I'm going to do. That's what my dad did and that's what I'm supposed to do. So finished up high school, ended up going to college right out of high school, like many, many of us do, Many of your listeners do. And I said, yeah, I'm going to study finance. That's what you're supposed to do to be successful and make money. And you know, my dad was kind of in upper middle management at the time at JPMorgan Chase. What was then? Yeah, it was JP Morgan Chase at that point. So I said, I'm just going to be a banker just like my dad. That's what I'm supposed to do. So did the four years in college up at TCU in Fort Worth. Had a great time. You've had a couple of TCU guests on here, loved every minute of it. Graduated in four years, but graduated in the spring of 2009, as you probably remember, and I'm sure a lot of your guests remember that that was not a fun time to be graduating college, especially with a finance degree to get in the financial services space. So looking around, had good grades, had a good degree, but couldn't get a job. Well, fast forward a year and I ended up getting a job in banking. And pretty quickly I started moving my way up within the banking industry. And when I say banking, I want to be clear to the listeners that there's lots of different ways to get into banking. Whether it's investment banking, private equity, commercial banking, retail banking. I went to the commercial route. Started off as a credit analyst at a large regional bank here in Texas and really was exposed to a lot of small businesses, small and medium sized, mid cap businesses. And we'd always joke, me and my coworkers, like, man, it must be nice to have a parent or a family member who started a business and to be able to work in the family business. We're just the schlubs over here banking them, right? Never really understanding that because we'd get into the financials, we look at the financials, we'd see how much profit a lot of these companies were spinning off. And it was like, man, I wish I could do that, you know, but I'm just the banker. And started doing that and worked my way up, was carrying a portfolio by the time I was in my mid to late 20s and I was looking around the room, kind of having a quarter life crisis, right? It's like this was 10 years ago and I'm looking around and there's guys literally double and almost three times my age in the same room as me, doing the exact same job as me. And I said, I can't do this for another 40 years if I'm doing the exact same job you were doing as a 27 year old. I can't do this. So I quit as a banker and I didn't know what I was going to do, didn't have a family, didn't have any prospects like that. And I said, you know what, I think I'm going to start craft, not brewery, but a craft cider company. So I quit my job and tried to raise money to start a craft cider company. Well, I realized very, very quickly that when you have no money coming in and a lot of money coming out, that it goes away very quickly. And I had no clue what I was doing, no clue. I never raised money, I wasn't an entrepreneur, I didn't have plan hindsight. It set my career back quite a bit, even though I was really only unemployed for five or six months while I was trying to raise money and decided, hey, I to get back and get a job. It set me back a long time financially. But what it did do is it showed me that I don't have to have that security of being a banker, having a cushy W2 job in order to have a fulfilled life. Now was I making money? No, but I was having a lot of Fun. Just trying to figure things out. Then I realized quickly, okay, this isn't going to work for me long term, at least at the moment. So I got back into corporate America and that kind of set me on what I would call a 10 year journey to entrepreneurship. Bounced around, went to a couple different banks, some consulting firms, selling portfolio management, just kind of figuring out what I wanted to do, really, just kind of honing my skills as a business person and really just being exposed to so many different things. And then looking on LinkedIn, I saw some connections that had bought businesses. In fact, a former guest of yours, I saw he had bought a business, a former college buddy of mine, and I said, who is that? It was Shane Ursham. Phenomenal guy, really cool business he bought and a great podcast guest. And I saw on LinkedIn that he bought a business. And I knew what he was doing before that. I said, shane can buy a business, I think I can buy a business. He's a smart guy, but I think I'm kind of smart too.

[12:04] Host: But he didn't. But you had that thought because Shane didn't come from a background in buying businesses or private equity or something like that.

Guest: Exactly.

Host: So it's like he didn't have the resume that necessarily led to where the obvious outcome would be buying a business. So if he didn't have the resume and did it and you don't have the resume, maybe you could do it too.

Guest: That's exactly what it was. And it's funny, you know, I knew about the sba. I had done. I shoot, I had done SBA loans as a banker. I had plenty of clients that had gotten them. I didn't have clients. I even had had clients that had bought businesses with them. But I never, for whatever reason, even though I was around it, I never occurred to myself that I could use the SBA product to buy a business. So I did. What everybody else did is I picked up a book, buy, then build and just read it, read the Harvard Business Review, how to Buy a Small Business. And it just, it just clicked. It was kind of day one of reading that book. It was like, yep, this is what I want to do. I don't know what I'm going to buy. I don't know necessarily how I'm going to raise the capital for it if I want to buy big, which I did not end up doing. But I said, I'm going to do this. So I told my wife and she said, you're bleeping crazy. This is one of your harebrained ideas. And I said, no, babe, trust me, this is what we're going to do. This is what I'm going to do. She says, well, I'm not going to do it. I'm going to keep my job. But if this is something you really want to do, like, let's talk through it.

Host: So why now? Was it really just seeing Shane's LinkedIn post? Yeah, why? Why this particular moment when it sounds like years before you'd had the realization that you didn't want to do what you already doing? So this is now years later. And so what is the precipitating event? Shane.

Guest: Shane's post was, I think, the match that lit the fire. But really it was that combined with kind of just this post Covid environment and then honestly just kind of maturing. Growing up having kids, I really realized once my kids were born, like, I want to expose my kids to entrepreneurship, not meaning that they would necessarily take over the business. I don't know if I'll still have this business when they're of working age. But I didn't want to be the guy that when people ask my kids what their dad did for a living, oh, I don't know, he takes a briefcase and he goes to an office. Not that there's anything wrong with that. So my dad did for a long time and provided a good living for us. It's just I wanted something different to expose my kids to and to be able to control that. And so it was just, it was that, that LinkedIn post and then just it was maybe right time, right place and where I was at my, you know, where I was in my career. It was just, I kind of felt a little flat. I was making fine money. It just, it wasn't something I wanted to do for the rest of my life.

[15:17] Host: And how old were you? Gre?

Guest: 37 years old.

Host: You'll recall hearing about the inaugural M and A Launchpad conference on acquiring minds back in the spring. The event brought together searchers, seasoned business buyers, owners and private equity investors for a single day to go deep on buying businesses. Well, it was such a success, the organizers are hosting a sequel in October. Walker Deibel, author of Buy then build is keynoting, and 30 other experts will be on hand sharing their journeys to acquire, operate, scale and exit their businesses for significant returns. It's happening October 26th in Chicago. Use code acquiringminds@malaunchpad.com for a $200 discount. So if you missed the event in the spring, here's your chance to attend in Chicago on October 26th and with a $200 discount. Go to Malaunchpad.com or click the link in the notes and use the code acquiringminds. All one word. You were 37 when you saw when this journey started.

Guest: 36. Yeah, 37.

Host: And, and the other thing that I wanted to follow up with, Greg, was you talked about returning to banking and you being exposed to a lot of different areas and industries, I guess, and how, how that taught you what you like, that, that gave you a sense of some more concrete sense that I wasn't clear on what on, on direction or on industries that you wanted to be in. Did I, did I get that right?

Guest: You did, yeah. And when I say it exposed me to a lot, it exposed me to kind of that whole chain of business ownership from $500 million close to publicly traded or publicly traded middle market companies, all the way down to, you know, one to two million dollars a year in revenue, you know, couple hundred thousand dollars in EBITDA or sde, if you will. And to see that lifestyle of the business owners and to see the job creation ability that they had, industry agnostic. I mean, I literally have seen it all as a commercial banker, and it just exposed me to what that life could be like and the stresses and the risks that they take, but also the rewarding aspect of it. People hear a couple million dollars in revenue and it's like, oh, well, that's a tiny little company. Well, yeah, it is. But if you, one person owns it, then, you know, they could be doing pretty well for themselves and they could be, you know, doing well for their employees too. So it just exposed me to that, that, that true. Because I didn't come from an entrepreneurship household. It exposed me to entrepreneurs in a pretty intimate way. When you're their banker, you know, it's a very intimate relationship. You have a very unique vendor relationship.

[18:26] Host: So. Yeah. And was this one of these where you were seeing a lot of the business owners were actually blue collar guys and gals who had just started rather humbly and had grown their businesses over decades and were now multimillionaires. Sort of picture that we hear about a lot.

Guest: Absolutely. Nailed it. Everything that we hear, I mean, I witnessed that firsthand for close to 10 years. It's guys that started off as an H Vac technician or a, you know, a master plumber, and he bought the company or he started his own and just kind of grew it. And most of them would tell you, hey, I'm not necessarily the smartest guy in the world, yet here they are with, you know, two houses, three boats, sent their kids to private school, which is funny that the guys that didn't go to college end up sending their kids to private school and the kids don't want to work in the business, which always. That's what goes back to my point to me and my co workers, you know, they. We would see all these ungrateful kids of business owners. We're like, you guys realize how good you have it? Yeah, totally. And so, yes, a lot of that, a lot of that.

Host: Before you kind of tell us what your search looked like, can you tell us what the parameters of it were? If you were industry agnostic and you were kind of financially agnostic, figuring if you found the right company, no matter the size, you could take it down, assume you wanted to stay in Houston. What else?

Guest: Great question. So really the only thing I needed to do was stay in the Houston metro area because my wife, the whole plan was, my wife has a very good job, stable employment, and we weren't going to leave that and, you know, know starting to have roots here. Other than that, right or wrong, pretty agnostic. I knew, you know, kind of like what a lot of searchers say. I didn't necessarily want retail space. I didn't want something where I was going to have to be tied to a specific location. And people came to me. But other than that, I was, I was wide open, right or wrong. You know, I always read that and heard, obviously you go against your gut instinct and bigger is actually safer. And I knew that and I had known that seeing financials of larger companies versus smaller companies. But yeah, we had the ability at the time, if we were going to be 100% owners, I probably could have flexed up to about a 750EBITDA company, maybe a little bit more. That would have drained a lot of the savings, but I was willing to do that. Now I would probably had to get my wife a little more on board with that.

[21:05] Host: And with 750EBITDA, assuming that the enterprise value there, the purchase price is going to be in the 4 million range, correct?

Guest: Correct. Yep. Yep, exactly. And I don't even know. I never even brought any of those to my SBA banker. I know a lot of times you still have to have cash reserves. I mean, that would have been draining everything. That would have been all chips on the table. But I did look at even some bigger companies with the intention of potentially bringing on investors. But I never really fully had sold myself to that idea. I said, if I want to do This I want the juice of being the 100% owner and my wife and I being the 100% owner. And I know there's advantages and disadvantages to both. There's nothing wrong with bringing on investors. A lot of times they can be another voice in the room in a good way. But I didn't want that if I was going to do this. To me, the true spirit of it was to own and operate it myself. Quit my W2 job. I wasn't going to quit. I was not going to keep my job. There's anything wrong with that. I just didn't want to do that and operate it myself and be the 100% owner. So that's really what I settled on after a couple of months of looking.

Host: And so 750 was kind of the ceiling EBITDA, it was likely to fall somewhere beneath that. So half a million was probably of SDE was probably more your sweet spot, more where you were feeling comfortable and like that was going to be the path.

Guest: Exactly. Fully knowing that EBITDA number cut it in half, if not more your first couple of years. Fully understanding that and fully comfortable with that. I need to have some money to live on. But again, I wasn't looking to walk into a million dollars a year in sde. It would be nice, but that's not. Frankly, I think I was a little uncomfortable. Like I had managed sales teams before. I had had people underneath me. I had managed cash flows of business units. But I, you know, I think I had a little, I think I was a little afraid if we were being honest to come in and manage a 40 person company or bigger that had, you know, much bigger P Ls that I was that maybe comfortable looking at. But it's much different managing that. And I frankly I think I was a little intimidated by that. Right or wrong. Maybe I should have just dove right in. But I just, I like a lot of people, I just kind of fell into this like, well, I'm a little more comfortable with the smaller SDE and even though I have a higher risk tolerance than some people, I still have a banking background and a banker's job is to mitigate risk. Right. That's your number one job, is to mitigate risk. And that was kind of in the back of my head. And to me mitigating risk was not bringing as much capital to the table. I will leverage the heck out of this if I have to hold on Greg.

Host: So, but so less of your own capital means of course putting your less capital to work of your own capital at risk, but it means more leverage on the business. So it makes the business more fragile and therefore more risky. So, so I've actually never, I've never distilled it like that, but it's like you could argue less personal, less of your own personal capital at risk, but more risk in the business, which indirectly is your personal capital. True. So, so, so I feel like we could get philosophical quickly on that one. But, but anyway, in your mind, it was the less capital I can put here, the less skin in the game, as we call it, the less risk I'm actually taking, even though I'm burdening the business with more. A bigger loan payment every month.

[24:41] Guest: Exactly. And fully aware of the personal guarantee. Right. I was not naive to that, like some people might be, at least initially. But to me, I just said I'm willing to take on more leverage with less personal assets, at least up front. Even knowing that it's going to be there on the back end and kind of weighing over my head for at least 10 years. That's a risk I was comfortable taking. Having a little bit higher debt service, assuming a bank would be comfortable with it, and, and a little bit lower of cash up front from. From our nest egg.

Host: So. Well, Greg, the thing about feeling intimidated by a larger business, as you say, very common. And spoiler, you bought a smaller SDE business, smaller than half a million. We're about to get there, so we're definitely going to want to return to now how if you still feel the way you did now that you're. You're running a quite small business. And so we'll put a pin in that, but I'm eager to hear. Okay, so what. Give us a kind of a sampling of quickly of what you looked at as you were cruising biz by selling Houston.

Guest: Sure. So one of the very first companies I looked at was the company that I bought, Allied Hydro Mulch. But caveat, they were not quite ready to. To. To put pencil to paper even though it was for sale. So I said, okay, this is interesting. I like this company. Good margins, etc. But they're not ready. So I'm going to keep looking. I actually had an alloy out. I submitted two different LOIs, one to a. A steel, a steel company, kind of a steel distributor. I'm sorry, steel distribution company. They sell like railroad frogs, which are this kind of the switch deals here in Houston. They're big. You know, they're eight or nine million dollars a year in revenue. You know, one and a half million dollars in SDE Was going to have to bring on investors for that one. They ended up selling to a competitor instead that could just pay a lot more money than I was, you know, willing to. I looked at a very, very much. Even smaller than what I'm looking at now or what I bought just a regular landscaping company, just kind of pushing mowers that had been around for a long time. Realized, yeah, there's some advantages to that, but also that's just so fragmented. Nothing. I, I enjoy landscaping. I think it's interesting business. I think, I think there's a lot of low hanging fruit, but just too fragmented for me that the owner was very, very much in the day to day. You know, he was going out with the crews every day. It's hot in Texas, hot this summer. I mean it's hard to explain until you live it every year and July and August. I said I'm not gonna do that. I don't want to do that. So those are some of the companies I looked at. Looked at a feed store here in Houston that had been around for 20, 30 years. Really cool business, you know, retail, but different kind of specialty retail. Yeah. What else did I look at? Those are kind of the big ones. And again, I was not a full time searcher. I still had my very much, you know, nine to five job, eight to five job with a long commute at the time. Two young kids, you know, two kids under three, wife who works. So this was very much like weekends, nights, you know, at the office on bizbysell.com hopefully it's not blocked. You know, I was doing some outreach. You know, I had some of my customers I'm kind of calling, hey, would you sell your business? So it was, it was some of that, yeah, don't tell anybody.

[28:13] Host: Did any of those go anywhere that's interesting?

Guest: They, they didn't know. They didn't. Most of them kind of like, hey, that's pretty cool you're doing that. Keep me updated. But no, nobody was. You know, a lot of times, a lot of, a lot of times these guys, you know, they do have family members that they want to, you know, give it to the kids or so some of that. But yeah, it was in the back of my mind though. I always had this, this little hydro mulching company that I had seen on my first or second day on Biz by Sell. It was always just kind of in the back of my mind and I. This was call it July of last year. So a little over a year ago that I had found out at Hydromulch And I basically had six months where I was just kicking tires, poking around.

Host: So tell us about Allied Hydro Mulch. Why you liked it, why it stuck around with you for so long. What was it that was appealing about it? What does it do? First, what is hydro mulching? You had to explain that to me. I suspect other people might not know either.

Guest: Sure. Yeah, I. Frankly, I didn't know either. I'll never forget the ad on Biz by Sell. It just said Hydro mulching and wildflower seeding company for sale. And I said hydro mulching and wildflower seeding. Well, I like flowers and hydro mulching. Sounds interesting. So what hydromulching is, is. It is a. Hold on, how do I distill this down? It's a. A highly efficient and effective way to get turf grass onto large areas that need turf grass and erosion control. So think about any large construction site where most people see it is going to be driving down the highway on a new Department of Transportation project where they've seen the highway has been built. And then they see what looks like bright green spray paint on the side of the road, not on the, on the actual ground. And what that is, is that's hydromulture hydro seed kind of one in the same. They're a little. There's some differences, but what it is, is it's just frankly, fertilizer, seed, mulch and water and it sticks on the ground. And then within 10 to 30 days, grass germinates. So it's just.

[30:28] Host: And it's got a bright green color. This, this, this material that what is sprayed out or what is put on

Guest: the ground, the mulch is what has the color. And the mulch is simply just attack a fire. It's, you know, we mix them in these big tanks. You see that you haul behind trucks or they're attacked attached to big trucks. And yeah, the mulch is the tackifier and that's what makes it bright green. I think it's just dyed, honestly, just to make it look nicer than, you know, brown. And then the seed, the fertilizer and the water and it's mixed up and then you just spray it. I'm oversimplifying it. There's definitely more of an arch to it, but that's what it is. And then wildflower seeding, where you go in and you just drop wildflowers behind a drill seeder and a tractor plants the seeds. Same thing, right? You're just trying to. Here in Texas, wildflowers are really big. I Should say especially in the spring. And so Department of Transportation, neighborhoods, they all pay for this stuff to get. Get done every single fall. You plant them in the fall so you have wildflowers in the spring. So it's just another form of erosion control. And frankly the whole industry, it's actually a pretty big industry. It's called, it's just erosion control, which is massive now with the epa, that's everything from silt fencing to erosion control blanketing to the hydro seating. And it's.

Host: So this is. This Greg. Erosion control. Sounds like there's actually a utility to this. You're control, you're preventing erosion as opposed to. What I assumed was that it was basically beautification. You put in a new road and you want grass to grow on either side so it doesn't look like gravel or asphalt forever. Same with wildflowers. That it's an aesthetic thing. But in fact there's, there's, there's real utility here as well, 100%.

Guest: And in fact it is. Not only is there utility is it is required now with most building codes and state highway projects, you have to have it. Which is what kind of drew me to this. It's. If we're doing a residential project, then yeah, technically it's beautification. I'm still going to call it erosion control for lots of reasons.

Host: Yeah. Better. Better marketing than just making it seem like you're making it pretty.

Guest: Yeah. And for sales tax reasonings and things like that. Yep, exactly. So we. Every invoice I send, it's hydro mulch or hydro seed for this amount of acres for specifically for erosion control. But yes, that, that's. It's really dual purpose to make it beautiful and to prevent erosion. Erosion's a problem. I mean we've had. I mean we've seen it all over the country where roads are falling out all over the place because of improper erosion control. Like I said, the EPA is very much involved with a lot of these projects now and they can't. A lot of times these construction projects, large construction projects which we do, some of they can't get final approval from engineers until that hydro seed passes inspection. The hydro mulch and Sorry, I interchange. Hydro seed. Hydro mulch.

[33:34] Host: So this is, this is a space with tailwinds. This is a. This is a growing industry or growing. A trend. There's a trend here. Positive trend.

Guest: Absolutely. It's probably this process has been around for about 40 years, which the guy I bought the company from has been doing it for. At 40 years. Before that there was no way to do this. They invented hydromultures. I think the first hydromulture was invented in the 60s or 70s, so 50, 60 years ago and then it didn't really become commercially available until the 70s to be able to do this. And so as we've grown as a country, as we've grown from. With a lot more regulation, like it or not, I'm not a big regulation guy, which we can get into, but in fact it does kind of help my business. So I guess I talk out of both sides of my mouth there. Yeah. To answer your question, lots of tailwinds. That's why I liked the business. It's not going anywhere, in fact because there really is not a ton of competition and it really is kind of a low barrier to entry, which I'm probably now. There's going to be five people that listen to us. They're going to start a hydromulching company and the margins are so good, which we can get into. I don't know why there aren't. I think I have a sense of why there aren't more people doing it, why I don't have more competitors. But honestly, Will, there is more work and more business than we know what to do with and then more than my. What my competitors know what to do with, we are not going to be hurting.

Host: Well, that was going to be the. Greg. The question, Greg, is that it, like it seems while it's growing and there are tailwinds, it seems so niche. That might just be my ignorance that I didn't even know what it was until I met you. And maybe it's all over the place and it's actually a large market. But typically when you see a very specific kind of niche service that like a GC would sub out those market, you know, I'm reminded of let's say duct cleaning in, in residential. Like there's an industry there, but it ain't nearly the size of like broader H Vac. And so so those, those businesses, and because a couple of them been, one's been on the pod and I know another guy here locally, those businesses have struggled to get that big or eventually they hit the ceiling in their local market. So respond to that.

Guest: That was a big question I had during my due diligence was why has this company been around for 34 years and why has it struggled to get over a million dollars a year in revenue in 34 years? Maybe in the 90s they might have had a couple bigger years doing lower margin jobs. So that was A big question for me, and I'm still. I still don't exactly have the answer to that. Right. I've only been doing this for two and a half months, almost three months. And I guess you could say I'm still in the honeymoon phase, though. July has been a terrible month for us, which we can talk about. June was great. July was terrible. I think the answer is. I mean, it's a bit nuanced, but there is enough work for everybody to do. However, it's easier said than done to grow it. I'm looking at this from a numbers guy and I'm like, okay, all I need to do is I need to spend another hundred thousand dollars on some equipment and hire a couple more people. Well, when you're a small company, $100,000 is a lot of money. I could leverage. I could go buy some more. And then finding guys that want to make 15 to $20 an hour, working out in the heat all day, every day that are, you know, legal, that can pass drug tests, it's hard to do. It's hard to scale these types of companies, not because of lack of work, but just because of the. There's no licenses required, but there's some technicality to it. So there's a learning curve. We'll get guys that are here for, you know, a week or two and then it rains for two weeks, like what's happened in July. And they're not making steady income and I can't afford to pay them a base salary. And they're on to the next job because they can't. They can't provide for their family, which I understand. I'm not mad at. So it's all these factors and, you know, we're subcontractors. And being a subcontractor, it's hard to grow. Cash flow management is real. I thought I understood.

[38:06] Host: Greg, let me, let me pause you there because we're getting into some themes I definitely want to spend time on. All good. So before we keep going. So you've said that it maybe there were a couple of years that it broke a million bucks. But this is a sub million dollar business. What was the revenue and what was the SDE, please?

Guest: Yep. So revenue when I for 2023 was one. Right. Over $1,000,000. Call it $1,050,000. The SDE on that, depending on how you look at SDE. Right. The broker would have told you it was 400,000. I think it was closer to about 350,000 SDE.

Host: Still pretty great margins for blue collar Gritty project based business which I would

[39:00] Guest: have not have bought it because it checks a lot. I should say it does not check a lot of boxes.

Host: Checks a lot of the boxes to avoid.

Guest: Exactly. Small project based weather dependent. However, I just kept coming back to those margins. So you're talking 35% net profit margins in a. You know, and that's. They ran some stuff through small business. Right. They ran some stuff through the company. The gross profit margins are phenomenal in this. I mean you're talking 90% gross profit margins, maybe higher. Really. So cheap material and not a lot of competitors for whatever reason. And I think I know why there aren't a lot of competitors. But that's really what drew me to this was were those margins plain and simple. Is that right? I don't know. Talk to me again in a couple of years. But I just saw there was so much meat on the bone and I saw that the previous owners had really just run it as a lifestyle business for them. You know, they're in their early 70s, they paid for their Astros season tickets and they had a paid off house and their kids were grown, they had grandkids. And I said you know what? This is a lifestyle business for them and they had long term employees. And it just checked all the boxes for me specifically it didn't have an office I had to go to every day. I didn't want to go to an office every day. Right. I'd rather go to job sites and work from home. So it just checked all these boxes for me and hopefully I could grow it.

Host: Yeah. And we should just be clear on the margins. That does not include any. I should be clear about this in general when talking about ste. But that doesn't include that Ste number paying you or somebody managing the business. So if you wanted to truly have a understand net margins it would add another hundred or take out another $100,000 for somebody who to run the business. So that then it's more like 250 on a million still for a business like this. Great margins. And you know if you could find somebody like that then you're really just cutting yourself a $250,000 check after you pay down your debt. So.

Guest: Exactly. And we can kind of talk about working on the business versus in the business. And even though this is small, why I did feel comfortable, this was more me working on the business. We can talk about that too.

Host: Great. Well, and. And I. And I want to get that to that the. But tell us about the terms of the deal. If you Would. And also just I know the project based thing was something that you talked to Live Oak, which is going to be a very familiar name to the listeners. And Live Oak didn't like the business for that reason. Correct.

Guest: There was a couple of banks that didn't like it for that reason.

Host: So. And so what? They were just like project based businesses. Too risky. And so you had to find a lender who just was. That was okay with them sort of thing or.

Guest: Yeah. You know, in every bank. So looking at this high level, this bank, it qualified for an SBA loan. Right. However, as you know and many of your guests know and I knew as a banker, every bank looks at credit very differently and everybody has different buckets for different types of industries and different cash flow requirements. And I think for them the cash flow was maybe a little bit tight. They didn't agree with some of the add backs that I thought were. That I thought were legitimate add backs, which I get it. I mean, you got to go off the tax return and yeah, I think it was industry specific. They just didn't like that it was project based. Let me go back. Even though this is a 34 year old business, I should say post Covid was really, really bad for these guys. 21 and 21 specifically was a terrible year for them. 2022, they bounced back a little better. 2023 was great. So if you looked at pre 2020 was okay, but if you looked at pre2020 numbers, great, fine. Checked all the boxes. 21, 22, not so good. 23, good again. So a lot of these banks want to go back. They'll go back three years and rightfully so. I've underwritten plenty of loan packages in my life and they looked at 21 and 22 and said, no, this doesn't support the loan. If you look at those numbers. Fair enough. So I found a bank that said, we believe in this business, we believe in you. You still qualify for the sba. We'll take a chance. So that's how I ended up doing that. I'm happy to talk about the specific structure and numbers around that too.

[43:35] Host: I would like to hear that. But who'd you use? Because I remember you were happy with them.

Guest: Sure. We used First Internet Bank. Sam Crealis was my banker.

Host: He's.

Guest: He's a pretty big name in the SBA world. I don't think he's as active on LinkedIn as some of the guys are, but he's good. I mean, I just saw he posted Yesterday he did $12 million in fundings and just in, in July alone. So he's a big time producer and my, the broker, not my broker, but the broker of the company introduced me to him and he had already looked at the deal. It wasn't SBA pre qualified but he had looked at it before and said if 2023 numbers are good, we can lend on this. So that's who I used. And he was great. The loan closures were great. The process was. It took longer than I expected. It always, they warn you it's going to take a lot longer and sure enough, it takes. It's not your fault, but it's always somebody's fault, right? It just took way longer than expected. We went under LOI and December of 2023 and we didn't close until May. So it just, it took and it was a small deal. It's under a million dollars. So it, it, yeah, that was a pain in the butt, but not the bank's fault. So.

Host: And Greg, the thing about the IT being hammered by Covid, my recollection is that like construction in kind of infrastructure construction, that a lot of the, a lot of projects in that kind of vein, people took advantage of doing them because it was an, it was like, you know, we, we have capacity now because the world has stopped. Let's do some of these projects. So I'm surprised it was actually so Covid vulnerable.

[45:12] Guest: It was Covid vulnerable in the sense of they didn't, the jobs didn't really decrease. They stayed busy. If you ask my employees, they're like, we were fine during COVID They don't have insight into the financials. What happened specifically with us. I don't know if you have a yard, a front yard or a backyard that you have to fertilize. Fertilizer prices quadrupled during COVID So our gross margins, or their gross margins, I should say, got hammered during COVID and they were too slow to adjust pricing. They had been the previous owners, phenomenal operators. John Hughes has a. He was the previous owner. He has more information downloaded into his brain about hydromulching and erosion control than I will ever hope to have. I don't think he was the most savvy, savviest businessman. And that's okay, right? I think that's the story with a lot of these guys that were operators turned owners. So it was that, you know, we did a, we do a lot of industrial sites, so plastics refineries, liquid natural gas plants, oil and gas terminals and those guys. Yes, there was work, but it was very much like somebody test positive for Covid or they're running a fever, can't work for two weeks, right. And we're a small business. And a lot of it, you know, they'd show up and one of the guys or two of the guys were running a slightly high fever, and they'd get sent home for a week or two. So it was a lot of that. Once that loosened up, and Really, I say 21 and 22 were bad. It was really two to three quarters that bled into the years, making both years look bad. And that's why I was pretty comfortable with it, because then once 20, 23 came back on, the spigot was turned back on, raw materials went back down. We adjusted prices a little bit, and the margins were back to that, you know, that normal price or that normal kind of normal feeling. And I think the bank was very comfortable with that too. At least the bank I used.

Host: Well, this is one of those, like, the story behind the story. So you see that it doesn't do so well on the. From a financial perspective. But if you poke at that a little bit and, you know, investigate a little bit, you hear, you realize, or you learn that in fact, demand for the service that you offer maintained throughout. And so there was these other kind of details that caused ste to decline. But you can rest assured that the businesses, the demand is robust, that even through Covid jobs continued on, that this is something that even in a pretty, pretty dark moment, there's going to be an appetite for the service is going to be needed. So. So in some ways, you emerge from that investigation almost reassured about the business, that it is kind of a pretty resistant, Pretty, Pretty, Pretty resilient. Thank you. Pretty resilient business.

[48:05] Guest: Yeah. And frankly, the. The really, the downside risk here is, you know, we're tied to the construction industry. And sure, if 2008 happens again, yeah, we would be in trouble. A lot of people would be. However, I felt very insulated being in Texas. We are still very much high growth. The building is not stopping here. We're very pro business, so I was comfortable with that, even though I didn't have a construction background, which we can get into, too, which has been difficult. So, yeah, all that being said, I felt comfortable with the deal, and maybe I do have a higher risk tolerance than I admit, because I showed this deal to some of my banker friends, and they were like, ooh, I wouldn't do that. But here we are.

Host: 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 Lab, the accelerator in community for people serious about buying a business. But they represent just a sliver of the Lab's 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 Chelseie. Then build.com. well, Greg, I think one of the other things that maybe kept it in the back of your mind and kept drawing you back to it is that you kind of like you said, you, you kind of like landscaping, in fact, and flowers and, and working with kind of beautification. Like that's something that. So, so there was almost a je ne sais quoi to equality to it, where you were just drawn to the, the service itself kind of got you going a little bit.

Guest: The, the je ne sais quoi. That's a perfect way of saying it. And I've never thought about it in that sense, but yeah, going back to, you know, I've always liked being that guy, that dork, if you will, that has the greenest yard on the block. If my neighbor's yard starts looking greener than mine, I'm throwing more nitrogen on mine to green it up even better. Maybe it's the competitive nature in me, I don't know, but I've always liked that. I grew up listening to the Farm and Ranch radio here in Houston with my dad on the weekends, even though we weren't ranchers at all, you know, we lived in suburbia and my dad was a banker. But I just, I always liked that. And to this day, I still listen to the Garden lion radio show every Saturday and Sunday mornings. They have a new host now, but it's. Yeah, it's just something I've always liked. For whatever reason, I'm not necessarily a gardener per se. I just, yeah, I like that. I like green spaces, I like trees. We live in the middle of the forest now, so it's just, yeah, the genesis quoi. Something about it stuck in my mind. So great, Greg.

[51:17] Host: And so what, what were the terms of the deal, please. And then let's get into hearing what the transition and operations has actually been like.

Guest: Absolutely.

Host: So it was.

Guest: And I wrote this down because I knew you were going to ask. So the listing price was $925,000 and that's what I paid for. It was $925,000. Try to negotiate that down. But we ended up coming to a compromise on some other things, which I'll get to here. So of that 925,000, 225,000 of that was a seller note. So a healthy seller note there. And the kicker on that was, is I wanted it to be fully standby for two years because then the SBA could count it as equity. So I did $925,000 purchase price. 225,000 of that was a seller note. That was eight years or full standby for two years, amortizing over eight with an 8%.

Host: Nice, nice amortization there. It also spreads it out some.

Guest: Okay, that showed me too that the seller it. The seller was. Even though, you know, he's in his early 70s, you know, he was, he's still very much invested in my success. This was his baby. You know, he started this in his late 30s. He was about my age when he started it. And it's all he'd ever known. And you know, he's very proud, even though a small company, very, very proud of this company and what he was able to do over a 34 year period. And I think that showed me that he still had some skin in the game right now. I guess he could sue me if I didn't pay him or something. And I just still sign a personal or promissory note for that, but showed me he was very much still invested and involved, which made a big difference to me to see him do that, have some skin in the game. And then so we're at a $700,000 there because we the 225 and then $100,000 in permanent working capital was very important for me, for the, the bank, because we did do an asset sale. So they were taking all the cash, all the accounts receivable. And I knew with the way this business works, being in the construction industry, we're on net 30 terms and I'm not getting paid for 30 to 45, sometimes 60 days after we do a job. And I've had to make payroll, rent, SBA payment, pay my vendors. So managing cash flows is a big deal. And that $100,000 working capital was very important to me. So that was super helpful. And then I ended up putting down. We only put down $60,000 of our own money to fund this for the SBA, for the. The equity injection there. So my total financed amount was 740,000.

Host: With the SBA, do you feel the. That. That sense of risk mitigation where you didn't have to put very. You want to put it as little as. As in. As possible. As little skin in the game as possible. On the other side of this, do you feel like that's how you feel? 60 grand into a business that you bought isn't very much?

[54:17] Guest: No.

Host: You pulled it off.

Guest: Yeah. Essentially for a million dollars, we only put down 6%, right?

Host: Exactly. Yeah.

Guest: Hindsight, and it's only been a couple of months, but hindsight, I would do it this way again. Yes. Having the cash in the bank personally makes a big difference to me. Now, on the flip side, when I get that statement in the mail every month showing my SBA balance. Oh, that's pretty. I did a leveraged buyout of this company. There's a lot of debt on this company. But I look at it this way. Maybe I oversimplify things too much. I don't know if that's a good thing or a bad thing. But I look at it this way. My SBA loan payment is. Call it. With the rates the way they are today, call it $10,000 a month. And if we're doing $100,000 a month in revenue, which is $1.2 million a year, which is a little higher, but I think we can do that, and we've done bigger months than that. Even since I've owned it, I'm easily covering my debt. I'm easily paying my employees, I'm easily paying my insurance, and I can also pay myself a little bit. So that's how I look at it. Yeah, there's some debt on the company, but I've got plenty of cash in the bank. If something happens, if I need to inject more cash, God forbid I could do that. So I just. Yeah, I looked at it, like, even at 10% interest or a little bit higher, I'm okay with that. I really am. And there was so much margin in this business that I felt like there were enough levers I could pull that I would be okay to make that debt service payment every month for 10 years. When I say it that way, that sounds a little scary, but.

Host: And how much were you paying? Or are you paying yourself, Greg, out of the business? You said. You said a little bit. We know your Wife works. You know, you have, you've held on to some savings, so you're liquid. But still, how much are you allowing yourself to take out of the business to pay yourself?

Guest: Who. You're getting real specific, but I'll answer. I'm not, I'm not afraid of the questions. We, I know we joked about that before. Yeah. So I'm not a W2 employee of the company. It's a LLC and we're a disregarded entity. So just pay ourselves distribution. So in the two and a half months of owning it, I think we've paid ourselves like 10,000 bucks. So enough to pay some of the mortgage. And my kids are in daycare. Right.

Host: Yeah.

Guest: So basically that. So, yeah, I plan on when it's all said and done. I probably over a rolling 12 months. And to be clear, I also want to, I'm retaining my earnings. Right. Like I want to be able to buy some more equipment here in the next couple of months. By the end of the year, I want to be able to hire some more people so we can tackle some bigger jobs. So I'll probably pay myself $100,000 over the next 12 months, give or take, which is fine. Yeah, it's a pay cut. But you know what? Your entire life becomes a tax write off. When you own a business. That's something they don't tell you in business school. It must maybe major in entrepreneurship. Your entire life becomes a tax write off.

[57:22] Host: Say more. What are you able to write off now?

Guest: I mean, is my CPA listening? Is the IRS listening? You know, it's, it's everything I can. My truck, right. Like my truck is now owned by the business and they pay for it. That's a write off. I'm not a cpa. But it was funny listening to your interview, I think from Monday that just posted this Monday, he kind of did a deep dive on the, the bonus, depreciation and whatnot. When you do an asset sale just your entire life, you can run so much through the company and I'd seen that as a banker. But your tax liability. We were Both high earning W2 employees, me and my wife, and we paid a lot of money in taxes and we don't even have state income tax in Texas. And now it's like, okay, the business can pay for my truck. It can pay for, you know, business meals, it can pay for travel. It can pay for, you know, assuming you're doing it legitimately for business. I'm trying to think what else. Yeah, you're just, your, your life becomes A tax write off all the. Yeah, yeah.

Host: Well, when you go to sell this, Greg, there's going to be add backs that you tussle with your buyer over.

Guest: I will, exactly. Well, and that's the thing is if I ever, I don't plan on selling this anytime soon. Somebody making an offer, we'll see. But I understand, like, yeah, you kind of have to pump up the balance sheet a little bit. If you're gonna, you know, not pump it up, that's the wrong word. But you have to make it a little seller friendly. And I think that's what. Buyer friendly. I think that's what the previous owners didn't understand. And I saw that as just meat on the bone for me.

Host: Okay, Greg. And by the way, how many employees or how many people are working at the company? I don't think we got that number.

Guest: Good question. So because I do have hourly employees, it can kind of flex. I have four full time employees, so payroll is not a huge number for me. My main guy, Ray has been with us for 33 years and he's 53 years old. So do the math. Right. He started when he was 20 and I couldn't do the job without him. And then we have my kind of shift supervisor. He's been with us for 10 years. He's hourly, but I guarantee him hours. And then we have anywhere from two to five hourly guys depending on the projects we're doing. We have enough equipment that we could flex up to some more employees and be kind of split with our projects. And the demand is there, however, and we can get into this if you want. But the equipment wasn't working and we didn't find that out until like the day before closing. So now I'm kind of not fighting with, but negotiating with the seller on who's going to get that fixed. So pretty quickly I plan to grow on to at least 10 employees. So that's what we're at right now, though.

[1:00:08] Host: Oh, great. Okay. So how would you say it's gone? We've heard you talk about the weather, we've heard you talk about. You just mentioned the machine issues. But start wherever you want. What does it now feel like to be in this business for two and a half, almost three months?

Guest: It has been a. It's definitely a roller coaster. You know, people say it every day is very, very different. And people ask me, how's it going? Do you love it? And I said, well, it depends on the hour. You know, ask me tomorrow. It's gone. Well, you know, we started off In May. And we were just gangbusters, busy as could be for those first six weeks. May all the way into June. You know, we did almost $200,000 in revenues in June, which wasn't a record for us. But you annualize that out and that's a phenomenal month for us, phenomenal year if you can annualize that, even if it's only half of that. And then July 1st hit and this little thing called hurricane barrel hit Houston. Half the city, no, three quarters of the city didn't have power for a week. Everybody's trying to dig themselves out of that. Then it's raining, the ground's too wet, we can't do any work. Construction projects have stopped. So that was through mid July. And then just week and a half ago, we had literally another week where it rained. I mean, I think we got another 10 inches of rain in the Houston metro area in a week. I mean, we've gotten more rain this month than a lot of places get an entire year. So we've just been very, very weather dependent. And then we've got all these jobs that are backed up, but they're not ready for us. And it's everybody's, oh, next week, next week, next week. So I'm sure they're all going to hit it once. Right? But it's been a learning curve. Will, when I bought it from the employer or the previous owners, his husband and wife, she handled all the books, kind of standard. He was kind of the general manager, did a lot of the bidding, never went on the job sites or anything like that. He's not out there on the sprayer. But there's all this stuff I just didn't even realize was involved from, from safety procedures to just dealing with all these different types of customers, from tiny little construction companies up to massive multi billion dollar construction companies. And you're just a little sub and the cog of all of this. And it's a lot. I'm one guy, I've never run a business before. Here I am doing payroll. Here I am trying to learn how to hydromulch and what goes involved with it, you know, figuring out. I didn't even know what a certificate of insurance was. I mean, I knew what it was, but I didn't realize that all these people needed it and bonding with these projects, it's just, it's been, it's been a learning curve. As I like to tell my buddies that don't have not bought businesses, but are kind of interested in it. I always say, you know, buy A business, they said it's, it's, it's, it's, it's, it's been, it's been really, really interesting and it's been this education and cash flow management. I was very.

[1:03:17] Host: Talk to us more about that, Greg.

Guest: Sure.

Host: Because, because you having your banking experience, you saw that time and time and time again. You knew to ask for another hundred thousand, get another hundred thousand dollars of working capital yourself. So this is the, the, this is the almost a cliche on acquiring minds. Now that everybody knows how important it is intellectually, but only once you get in your business and really feel it experience, do you really then kind of get your stripes in working capital.

Guest: Understanding cash flows is one thing. Living it and doing it on a daily basis in a, especially in a business where I'm not paid right after the day I do the work is an entirely different ballgame. You feel like you're constantly robbing Peter to pay Paul, which anybody that's run a small, like a very small business understands that it's very much, it's what you do. So I knew, I kind of did back of the map. Map, I'm sorry, back of the napkin calculations. And that's kind of for right or wrong. Even though I'm a quote unquote finance guy, I was never, you know, I've kind of always flown by the seat of my pants, which is good, which is good and bad. I hope my wife doesn't listen to this. Now I'm playing. But really though, I had realized that, okay, if I didn't have any revenues come in, my fixed expenses are about $30,000 a month, give or take. So I need about $100,000 for three months of working capital. Well, that is true between my debt service, between my payroll, between. But guess what? We start doing jobs and then I've got terms with my vendor that are only 30 days versus 60 days because we did an asset sale. We can get into that. I'm having to pay my vendors off. I'm having to make payroll. I'm having to pay for upfront for bonds, surety bonds that my customer is going to pay for, but they're not going to pay me for 30 days. I'm having to pay rent, I'm having to pay for machines that break down. I'm having to pay for new tires on trucks. I've got employees asking me for $500 loans. You know, it's, it just, it hits you in the face and you can, you can kind of stress it out and model it all you want. But until you're actually running the business, it, you know, there's very little left over to pay yourself sometimes. And when you're sitting there at the end of July and I'm looking at my bank account kind of just dwindling and I've got people that have not paid me yet, I've got $150,000 in accounts receivable. That's great. But none of that's in the bank, right? Accounts receivables out the window when I don't have cash in the bank. Now they all end up paying and then it builds back up, but then it's just going to shrink back down. You know, the old adage is you talk to a lot of subcontractors and on Tuesday they got 100 grand in the bank and by Friday they're broke again. Right. That's just the nature of it. And how do we. I think that's a broader conversation within the subcontractor world is how did we become the banks of these general contractors? I mean we're banking these guys a lot of times. And I get it, they can't pay us necessarily until they've been paid. But one of the advantages and one of the things that I was comfortable with, and it's proven to be true with my business specifically in erosion control and hydro seeding, is that at least I'm usually the final thing that's done on a project to get final approval. So a lot of times the general contractor has their pants on fire for me to do the work so then they can get final approval and then they can pay all the other subs, including myself. So that has been a good thing for my business specifically within the subcontracting world. However, it also creates this problem where you talk to these, your customers and they're like, I'm not ready, I'm not ready, I'm not ready. And then all of a sudden eight of them have their hair on fire to get you out there yesterday. So it's this business specifically is not for somebody that like structure. You have no idea when the guy's gonna call you and say, yep, that hundred thousand dollar job that I need you to do, that's gonna take you three days. I need you out there tomorrow at 6am when you've got three other guys that need you out there tomorrow at 6am so roundabout way of saying the cash flows have just been. It's just been a learning curve and how to manage those and just knowing that I might not be able to Pay myself next month or I might be able to pay myself $20,000 next month. Month. Just depends. Yeah, so.

[1:07:54] Host: And is this. You had mentioned earlier your lack of construction experience and how that's contributed to the learning curve. Is that what we're talking about here? How. How cash moves around a construction project or something else?

Guest: It's that. It's that. But it's even more so people in the construction industry, and they'll tell you this, they're a very different breed. I came from white collar America, where, yeah, I've got no problem being confrontational or having tough conversations or tough negotiations, but it's still white collar America, right? The construction industry. And I'm not even saying blue collar versus white collar, for whatever those terms are worth. I'm saying specifically in the construction industry, these guys got no problem. MF and you to kingdom come. It's just a totally different. You've got to be very comfortable being punched in the face and rolling in the mud. And I kind of knew that. But until you experience it, it's just, you got to put on a totally different hat than you do as a banker. Or it's all prim and proper and you're a little boy scout, right? Or corporate finance, where you're dealing with the treasurer of a Fortune 500 company. Yeah, it can be contentious and tough and they're very intelligent people. But this construction industry, it's a whole different ballgame. I was telling a buddy of mine that's been a long time project manager, and I said, you know what, man? I realize why you guys are always so grumpy all the time. He goes, yeah, now you get it. You know, it's just. Everybody's just grumpy. But it's fun. You know, it's. At the end of the day, you're all creating something and you're all kind of all working to a common goal, and it's a bunch of good old boys. It's a good thing. It's just, it's tough. And I, I'm an outsider, right? Like my, my employees call me. They're like, oh, he's a numbers guy. I'm like, I'm not really a numbers guy. I'm just another guy, just like you. But you're very much looked at as an outsider. Oh, there's this fancy pants former banker coming in here, even though I'm not that. So it's just totally cultural, actually on

[1:09:50] Host: that point, Greg, do you feel like there has been any friction there in terms of them you not having the credibility where the seller was the founder of the business and he'd be out there spraying himself and he was, he was of them. And you're not in. This is, of course, this is a classic thing that we see with, with people who buy blue collar businesses. Do you, despite the fact, is there more than what you just said where you feel at times a little excluded? Do you feel like it actually impacts your ability to, to lead and to get them to do what you want them to do?

Guest: I. I think it does to an extent. I think at the end of the day though, they recognize. Well, that answer is kind of twofold because my employees are different than my customers. My employees, they realize I'm the one signing a paycheck at the end of the day and maybe this is just my experience. So they have up to this point at least been very loyal and have done what I've asked them to do. There's been very little pushback. Now I've also taken kind of the thought process of don't make any changes for the first six months or make very, very minimal changes, which is hard for me to do, a lot of us to do because we're people of action. Otherwise we wouldn't have bought companies. But I feel like that's really smoothed out the transact transition and the fact that I'm willing to go out onto a job site and I don't go to every single one, but I'll help them load up those bales of mulch, which are heavy. You know, I'll get on the truck and spray with them if I have to. I'll get my boots dirty if I have to. Now I don't typically have to, but I will. And I think they recognize that. And I think they like my communication style. I think they like that I've involved them in some decisions that maybe the previous owner had kind of kept them out of. So I feel like they have accepted me from the sense of that I empower them a little bit more perhaps. But at the same time, I still think they look at me as a white collar fancy pants boy, you know, which is okay. I'm not really concerned about that because they've done up to this point what I've asked them to do. Now on the flip side, my customers, I think there is some of that, like, who's this guy? Who are you? Where's John at? You know who, you know, John's the one that quotes me.

[1:12:04] Host: He.

Guest: He knows what he. You don't even know what, you know, what this product is or what it does. So there's, there's some of. I feel like it's been less so the transition on with my employees, more so with my customers which a lot of them are long time customers. So there's.

Host: Well that's actually, that's actually a higher stakes vulnerability there obviously because if you start, I mean that's what, that's one of the first things that we, that we consider in a business is the quality of revenue and how relationship is that revenue relationship based and how, how you know the nature of those relationships. And so it sounds like you're experiencing firsthand transitioning a business where a lot of those relationships were very personal and the customers really liked the fact that John was their guy, that John built this business, that John knew this stuff. I mean he was like, he was you know, a former guy out spraying himself.

Guest: Yep.

Host: So I don't know if there's anything more to say there and, or if you could, you know, it kind of is what it is, but it have you. I guess, yeah, I guess I would ask like, has it. Other than them just being like who's this new guy? Has it actually led to any lost revenue, lost business or just that I sleep?

Guest: Not that I can tell yet. And John is still very much involved with the business. He, we negotiated for him to stay on for nine months, which is longer than most business owners. And he's already stated that after the nine months he'd like to potentially stay on for longer if I'll have him, which has been good and bad. Sometimes he makes me want to pull my hair out. I don't think he's going to listen to this. But other times he has been a very, very valuable asset to me. But sometimes I feel like he'll be like, oh, I got a call from so and so and we're going to do this job. And I'm like, well, that guy needs to be calling me John. Like he doesn't need to be calling you. But at the same time it's still a very delicate relationship because he's got these relationships and yeah, I mean it. So no, to this point I have not. I don't think I've lost any revenue because of it. And he tells them like, oh, I've sold the company to Greg. But he still has these relationships. And so that does keep me up at night. And you know, John 74, I don't know. He's not going to be around forever. So I do have to be able to take the reins and if that Means having a tough conversation with John. But I also need to be careful because, you know, John told me one time he coaches adult league softball, older guys. And he said, he said this to me, he said, greg, the only people more sensitive than 12 year old girls are 65 year old men. And he laughed really hard. And I said, I laughed with him. And I thought to myself, do you know you're talking about yourself, right? So it's a sensitive relationship. But at the same time he, he very much wants me to succeed and he wants this company to succeed and he's called his employees. He said, these guys are like, john didn't have sons, he only had daughters. He said, these guys are kind of like sons to me, the sons I never had. So he very much wants the business to do well. But he's still just, he's so old school and he just, he's very inefficient sometimes. So I have to be able to, as the leader of this company to be able to manage that delicate relationship for the both of us and for the what's best for the company.

[1:15:18] Host: So great, Greg, thank you for that. We're going to start wrapping up here. But one thing that you felt strongly about was asset sale versus stock sale. This was an asset sale, which is the typical in a self funded search like this. But what are the strong feelings that you have about that?

Guest: So yes, I did an asset sale and it was, I understood the difference. And I know there has been some talk on your podcast and you can read about asset sales versus stock sales. And when I first started having the conversations with the broker and then the owners, it was like, no, we're going to do an asset sale. You know, kind of. He kept calling it an all cash, no debt deal or no cash, no debt deal. I'm sorry, no cash, no debt. And they had a little bit of leverage on the company, mainly just equipment and trucks. It wasn't a ton of. But they had some good accounts receivable, they had some cash in the bank. So I said, you know what? I didn't love the way the previous owner, the way she had done the accounting. I didn't love any of that. So I was like, all right, we'll just start fresh. It makes sense. Sure. Well, you start realizing really quickly. And a couple of your guests have talked about this. But I'm a brand new entity, brand new. So I've got to get new credit lines with my vendors. Right? They had 60 to 90 day credit lines with their mulch and seed suppliers. Right. I didn't get that. I got 30 day credit lines. I tried to get 90 days and they'll say, we'll get you 90 days eventually, but I'm not there yet. So that affects my cash flow. Insurance, all new insurance had to be completely underwritten again. And we've got expensive insurance. That's our second biggest line item behind payroll. It's a big number for us every single month to pay insurance. And my price went up because I'm a new entity and I don't have any insurance risk history there. What else? Yeah, just with banks. I couldn't go get a line of credit right now if I wanted to. And lines of credit are very important in this business. Thank God I have permanent working capital, but I couldn't go to a bank. I mean, I have a good relationship with my bank and they would laugh at me if I said I wanted to get a line of credit right now. Talk to us in a year. So it's those little things you don't think about. Oh, another big thing which I can talk about briefly here is. So we did not have much at all contract revenue. Very, very little contract revenue. However, some of these big projects do have contracts associated with them. And the previous owner, John, was in talks with a very large engineering company out of Houston for almost half a million dollar deal for us when it closed. And him and I both said, no, you keep negotiating it. Let's not tell them we sold it yet. We don't want to muddy up the waters because I'm a new entity. And John's like, oh, it'll be fine, it'll be fine, it'll be fine. Well, we close on the business and we tell them, hey, there's a new entity. Nothing's changing, just a new entity. And this big engineering firm said, no, the contract is with the previous owner. We don't know who this new company is. He was Allied Hydra Mulch. I'm Allied Hydra Mulch tx, llc. We don't know who that is. We don't have a contract with him. We have a contract with you. So that has been a big learning curve. He's going to have to keep his LLC going. I'm gonna have to be a sub of him. He has to keep his insurance. I have to have my own insurance. So it's just been. That kind of stuff has just been. The point I want to make around asset sale versus stock sale is make

[1:19:01] Host: sure

Guest: you 100% want to do an asset sale before you actually do that. I'm not saying I regret it. There are some advantages to this of doing an asset sale and there's tax advantages as well, but. And if I had to do it again, I would still probably do an asset sale. Just be very, very careful. Ask all the right questions. Just know that you are in the eyes of banks, in the eyes of vendors, you are a brand new company. You are not the same company. Doesn't matter if you have a dba, doesn't matter if it's the same employees, you're a new company. And that until I actually lived it, I. It didn't make. It didn't compute with me, so.

Host: Well, it's also such a good and important point you make that this isn't just a paperwork headache. It actually affects your cash flow because you're getting worse terms with some of your vendors. 60 to 30, from 60 down to 30 days. That is for somebody who's, you know, robbing Peter to pay Paul. Every dollar counts. And all of a sudden now you've got much tighter, you know, money that needs to go out the door faster than it did under the previous entity.

Guest: Exactly. Well, and I remember you had a guest one time talking about. He had a, he did an asset sale and he had a vendor that like doubled the price or something like that, or his Reese went way out.

Host: Yeah.

Guest: So that's just stuff you just gotta be very. Yes. That's just something you have to be very, very careful about. And I just, I wasn't. You kind of just. You don't know what you don't know. I'd never bought a business before. And so it's just, I urge guests because it's so easy, like, oh, it's an asset sale. That's what 80% of sales are. That's what you do. And that's not always the case. So.

Host: Well, and what we typically hear about the pain of it is that it's just transferring all those accounts and how, you know, day one, you're just there basically navigating red tape and, you know, calling 800 numbers to move, move accounts. And that's a pain and unpleasant and takes away from, you know, precious hours and days, but it's basically you just kind of power through it. But here it feels like there's actually a real material effect on the business. And also, even. Even though Nick Hashka recently pointed out that moving the bills, moving the accounts, all that stuff also actually shouldn't be underestimated, it's not merely a pain in the butt. He had done asset, asset purchases before and recently did A stock sale and like the ability to do the stock acquisition and just walk in and just. The business just keeps rolling seamlessly the next day as you as new owner was actually a thing of beauty compared to services. Extreme friction of transferring everything over 1-800-you-

[1:21:42] Guest: know, comcast.com trying to get the Internet bill. And then. And then you talk to half the people. We've got all these vendors on the safety side and whatnot. And half the people say, transfer it over. Half the people say, no, you're a new entity. You've got to create an entire entirely new account. And even for a small business, there's all sorts of this stuff. And it's just Google Ads like that kind of like, it just, it's the, the. The website domain.

Host: Right.

Guest: And it's just stuff that. Yeah. It takes away. I feel like the last two and a half months, half of my time has been dedicated to that and I'm still not done. And we're a small little business.

Host: Yeah.

Guest: And. And so it's. Yeah. That it's just to not underestimate that. And it's. It maybe doesn't get talked about enough for right or wrong or maybe, I don't know, maybe I'm just an outlier and it's been more of a pain in the butt than I thought it was going to be. But it's. To your point, it would have been nice to roll into just operations day one. However, I still think there are some advantages to an asset. It is nice knowing that I did start with a clean slate. So there's pros and cons, if you will. So.

Host: Yeah. Greg, Anything that we didn't get to. Anything I didn't ask that. You wanted to make sure the audience heard.

Guest: No, I think that again, you know, I'm still very much in the honeymoon phase in the sense of, like, I'm really glad I did this. No, you know, no sleepless nights. So. Well, it's been so sleepless. No. What's the term you use?

Host: The

Guest: fetal position?

Host: Fetal position moments.

Guest: No fetal position moments yet. They could be coming or maybe they won't come. But a lot of guests.

Host: Well, I have to say, Greg, if you're this far into the transition. Two and a half months, not so far, but it's not day one here. You're, you know, your employees, you know, your customers, you have a feel of your arms around the business, and you've just gotten through. We're on August 1st today, so you've just gotten through a brutal month. It does feel like if you haven't had a fetal position moment yet, hate to jinx it, but maybe you won't. Not to say that it's easy, but maybe you, maybe you've escaped the fetal possibilities here.

Guest: I hope so. I certainly hope so. And I think there's enough meat on this bone that, you know, I've got big goals for this and I do think it's easier said than done. But, you know, I'd love to be able to open up a second location in Houston. We've got enough work to keep us busy. I just need to hire the right people. I need to be smart with my, my Cap X investments in buying new equipment. Because as Ray, my superintendent, says all the time, he goes, man, Greg, I've seen this and now I've seen it now just in July of where you buy all this equipment and you hire up and then all of a sudden guys aren't working for two or three weeks because of the nature of what we do. But how do I diversify the revenue? You know, do I open up a sod yard where I'm selling sod to people as well? Like, there's all sorts of different avenues we can look at. And, you know, as I empower my employees to help me with new ideas and I get more acclimated to this industry, which I was a total newbie to, I think those ideas will come and hopefully good revenue will come from that. Because even if I just double this thing, which easier said than done, you know, you're looking at a really nice cash flowing business and it could be as easy as just getting more jobs, hiring more people and buying more equipment. One thing I did want to mention, and I think it goes without saying, but I want to say it again because a lot of people do, is it's not for everybody. It's not rocket science buying a business, but it's. There is something to be said. I remember that first week that I didn't get a paycheck. It was like, oh, okay, I don't have payroll. You know, I don't have, or I don't have a W2 income coming in. That's scary, right? That blanket's gone. And you have to be very comfortable, especially if you buy small, which I did. You have to be very comfortable knowing that like not every month is going to look the same. And you have to be comfortable in yourself, your own skin, in your own personal finances to be able to weather some of that. And the SBA process is hard. It's not like you just Wake up one day and you're like, I'm going to get an SBA loan. It's like a mortgage times 30. It's difficult. That being said, you get the right people and all your listeners are intelligent go getters. You can do it. You just got to really make sure you want to do it. Because it's not waking up, going to a job. Even if you manage people, even if you manage a P and L, it's not the same as having 5, 10, 100 employees looking up at you every single day saying, all right, like, we need to support our families. Let's go. You're a leader. That's tough. And it's. I welcome it, Greg.

[1:26:24] Host: And you reminded me I wanted to make sure we got back to. So, final question. Big versus small. You're kind of feeling intimidated about. Buying a bigger business is something that everybody can really relate to because that is people's first reflex. Let me buy something smaller. You know, this is the first business I'm buying. Feels more comfortable. Now that you've done it, now that you're on the other side, do you. Do you feel that that sentiment was correct for you to feel or would you tell your. Your self of nine months ago, no, go for a bigger business? It seems intimidating, but it's still going to be worth it. Maybe it isn't. Maybe, maybe it is more of a challenging, but ultimately it's going to be worth it. What do you think or not?

[1:27:07] Guest: I think the answer is if I'm really being honest with myself and we're going to be honest with ourselves here. Will. I would say I would lean towards, at leave today, on August 1, 2024, I would lean into, say, buying a bigger business. If you have the cash flow or if you have the assets to do that. I would say this would be my caveat. Me personally. Buy as large of a business as you can comfortably own and put money down without investors. That's what I would say. Doesn't say that's the right answer for everybody, but that's me because I want that control. But I also would like a little more cushion on the SDE standpoint. That being said, everything that people say about small business is also true. It's a little easier to scale. I think at least you can start rolling off profits and you can pay that SBA down, the SBA loan down faster and have less leverage. So if something were to happen with this company, I think my wife and I, I don't think we would have to file for bankruptcy, you know, I just listened to your one today and from this morning and that was a sobering story. Right. And I don't think we would have to do that now. It would be terrible, it would suck. But I don't think we would have to file for bankruptcy. So I do have that, I do have that kind of that blanket on top of me. But if I had to do it again, I wish I could buy this company that was a little bit bigger. Right. If I had to do it again, because I really like this business. But yeah, it's.

Host: Well, and it probably also means that whenever it is a couple years since maybe when you go out to buy another business, unless it's just kind of a bolt on to this one, you will very likely buy something bigger. You'll know what you're doing more, you'll feel more confident. And so all of the, all of the appeal of buying something a little smaller will kind of be gone and it'll just be go time on a bigger business, I suspect.

Guest: Exactly. And I have that feeling as well. And to your point about bolt on, I think roll up is a phenomenal kind of growth plan for me. It's like, do I buy more equipment and hire more employees or do I go buy a similar sized competitor to me in the Houston area? Because there's a couple of them out there. And to any searchers out there in Houston, don't be buying my competitors. I want to buy them first. I'm just playing. We need more searchers in this industry. So yeah, to answer your question, you're right. I think if anything I wanted to get in the game. Right. And I did. And I've done it and it's been fun and I don't regret a single second of it. It's just, it's different. It's just different. Man, I'm laughing because I don't even know like what else to say. It's just, it's what you expect, but it's also not what you expect at all. So.

[1:30:13] Host: Yeah, yeah, like having kids, you probably, you know, you can, you can read all the books and hear from countless of your friends who've had kids and. But until you actually experience it, it's just hard to feel it. That is so many things in life.

Guest: Perfect analogy. It's just like I have not thought about it in that term. It's just like having kids. You can have an opinion on it, you can think, you know what you're doing, you can read the books and, and then until you do it and then your experience is going to be totally different than the guy that also has kids or owns a business be totally different experience than his or hers. So but that being said, it's been, it's super fun and, and also to, you know, you're a huge credit to this to me and I'm sure to others like I've probably listened to, I don't know, 60 or 70, if not more. So that's what I mean. Hundred or not hundreds, but 100 hours of listening to you and a lot of the questions I credit a lot of my due diligence, whether I did it right or wrong, I credit a lot of that to you and your guests to be able to ask questions that maybe I wouldn't have thought of or maybe avoid something that I maybe wouldn't have thought of. So hopefully my interview can help other people that are also searching to kind of think about things from a different and challenge yourself from a different mindset. So.

Host: Well, that's phenomenal to hear, Greg. Very, very gratifying as you might expect. And it's, it's what we're here for and it's, and I so appreciate all my guests who come on. They're so transparent just as you've done with us today, Greg. So of course, really you shared a lot with us and I really appreciate it as I'm sure the listeners will, well, they reach out if they want to get you on a zoom or on a call to ask some questions about a deal they might be looking at or otherwise.

Guest: Of course. So my email, it's pretty easy. It's Greg, Greg@AlliedHydromulch.com email is really good or I'm pretty active on LinkedIn. I don't post a ton but I'm active on there. I'd like to post more and yeah, Those are the two best places to find me or LinkedIn and my email address. Happy to talk to anybody especially thinking about the erosion control industry because it is different. So, and I'm not an expert but we're getting there so good deal.

Host: Greg, thank you very much for coming on. Sir Greg Bruns, congratulations. Almost three months in, long way to go but I love that despite the challenges you, you said I don't, I don't regret a single second of it. So very, very encouraging.

Guest: Absolutely. Thanks. Will appreciate it. Sam.