Host: Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs. And on this podcast I talk to the people who do it. Ben Grossman and his brother are the co owners of a 11 year old company. Not only that, the company has been in their family from the very start. Their great grandfather started it as an envelope printing company back in 1910. So they're fourth generation owners. When Ben and his brother took over, they adopted a strategy of acquisition in order to pivot the company away from printing, which is where the majority of the revenues were coming from at the time, and position the company for the Future. They did seven acquisitions from 2013 through this year, 2021, and by all accounts, they'll probably continue along this strategy of acquisition. My conversation with Ben is all about those acquisitions and their approach to acquisition and what he's gleaned from doing so many of them over the last eight years. Here he is, Ben Grossman of Grossman Marketing Group. Ben Grossman, thanks for joining me today on Acquiring Minds.

Guest: Will, thanks so much for having me. I really appreciate it.

Host: You are the co president with your brother of Grossman Marketing Group. Grossman Marketing Group is a 1:1 year old firm and it has been in your family the entire time. So your fourth generation ownership, your great grandfather founded the company in 1910. It's just a very unusual, very cool story. But why we're actually talking today is because under your leadership you've conducted a number of acquisitions. Seven acquisitions since 2008. And as acquisition is the theme of this podcast, I really want to dive into that. The strategy there, your thinking there, any numbers and actual cases you might be able to talk about, whatever you can share. So that's really where we'll spend our time. But by way of background, why don't you give the audience a quick your own professional background quickly and then condense those 111 years of Grossman Marketing Group into about a minute or two as well. So we know the history of the company.

Guest: Excellent. Well, thank you again for having me with you today. I have a lot of respect for what you're doing and what you're building with Acquiring Minds and I'm honored to serve as a guest. So again, thank you for that kind introduction. So my name is Ben Grossman. I'm co president, like you said, of Grossman Marketing Group with my brother Dave. My background, I went to Princeton undergrad, I did some entrepreneurial projects in college, started and sold a small company with a Friend. Then I went into consulting after, after college and you know, in the strategy division of IBM and then went to business school at Columbia. And while I was at Columbia I was, I tried to expose myself to different fields that I was particularly interested in. So I did an internship at a venture capital firm. I also did a summer program at Goldman Sachs. Had an opportunity to go back full time and ultimately turn that opportunity down as I wanted to go into our family business and join my brother Dave, who I'm quite close with, and our dad Steve, who was running the business at the time and join a business that was 95, 96 years old and going through a period of dramatic change in the industries in which we operate. And to see if I could lend a hand. While I was in business school I always was thinking in the back of my mind about the company and about how what I was learning in class could possibly add value to our business. And I actually carried around a small Moleskine notebook and jotted down notes that whole, you know, that whole two year period. I still have that book and I still reference some of what I learned and you know, it was pretty relevant. So I joined the business 15 years ago and our dad Steve left the business about three and a half years later to pursue full time public service. So he ran for and was elected state treasurer of Massachusetts in 2010 and was sworn in in January of 2011. So I was sitting there in January of 2011, I was 30 and my brother was 34 and we were elevated to co presidents of the business the prior year when it became clear our dad had a pretty good chance of winning the race, which he ultimately did. And the reason why we are talking today and we've done so many acquisitions is my brother and I looked at each other and we were thinking about all the ways we could grow our business. We had an existing business that was solid, we had a good team in place. But we were trying to figure out how we could grow. And certainly we could grow through organic growth. We could grow entering new markets, getting into business lines. But we also decided that we wanted to try to grow through acquisition and start with tuck in kind of bolt on deals where we could leverage our existing infrastructure in place. And so we started networking with industry specific business brokers and intermediaries who operate primarily in our industries. So the main industries that we focus on branded merchandise, those are logo products, print management services, graphic design, direct mail, e commerce services. So we networked with some of those business brokers and you know, we started getting out there and introducing ourselves to those brokers, as well as doing some direct outreach to business owners. And the first deal that we did kind of under our administration was within the first couple years. And I'll remember that deal, and it taught, it really informed a lot of our kind of deal making approach over the last decade. But I sat with that business owner at lunch. It was our first introductory meeting. We were introduced through that business broker, one of those business brokers that I referenced. And she said to me, there are two things I care about in this transaction, this potential transaction. One, I want to make sure I protect my people, and two, I want to make sure I protect my legacy and my clients. And I looked at her and I said, and her name is Sally and she's fantastic and I have a lot of respect for her. And I made a promise to her, looked her in the eye and said, I promise you that if we do a deal together that we will address both of your points and that and that you won't have any concerns. And all of her colleagues made the transition, except for one. The commute was a little too long for that colleague. She found another job right away. But everyone else joined the company and most of their larger clients are with us today, almost 10 years later. And a number of her colleagues are still with us today, adding significant value. But what we learned from that deal is the importance of looking a seller in the eye and trying to understand what is driving them, what is important to them, what are their priorities, and trying to figure out a way to structure a deal that addresses their concerns and their priorities while also making financial sense to us and our organization. So just to, just to take a step back, my brother and I, we focus on different things in the company. I tend to spearhead more of our M and A efforts, though he is consulted every step of the way. But I started building a playbook basically for our acquisition efforts. It started out as a Google sheet, and every new task and every responsibility that we unearthed in that process has been added onto that playbook and we've added to it and over the last, as we've iterated on these deals. But I sort of act as the project manager for every acquisition that we, that we make. And I assign tasks to different colleagues of mine. But I look back on that first deal both from a softer side of structuring a relation, building a relationship with the seller, making sure that we are understanding what are their priorities, but also just from a tactical perspective, blocking and tackling, figuring out what are the tasks that need to happen and making sure there's an owner for each one of those tasks.

[8:38] Host: Sure. Well, and let me. Before we dive into more about how you conduct these acquisitions, let me just step back and understand a little bit more about the firm and the firm's history. So Grossman Marketing Group started as an envelope manufacturer or printer.

Guest: Printer.

Host: Printer back in 1910. And so when you became involved in 2005, 06ish. What was the business doing and then what was the transition that you saw potentially ahead of you that you and your brother chose to pursue? Like what was the strategic thinking then? What was the company doing then?

[9:14] Guest: We were already in the brand and merchandise space, but it was a small piece of our business at the time. It was probably about 10 to 15% of our sales. And now it's the overwhelming majority of our sales come from brand and merchandise logoed products. We had a significant print operation in house that's been dramatically scaled back. Though no one lost their jobs, we transitioned those colleagues into E commerce pick pack fulfillment roles. So we were quite proud of the fact that no one lost their jobs in those transitions. But we tried to figure out a way to play to our strengths and the areas of our business that we're growing. So the vast majority of the deals that we've done have focused on the areas of our business that we have prioritized over the last 10 to 15 years. E commerce services, branded merchandise, some print management and some creative services. But less in the day to day commercial printing space, though we're still committed to that. Those industries that's been the minority of the transactions and the minority of the kind of revenue that's come on board.

Host: And when you and your brother considered how to grow and you landed upon acquisition, was that simply to grow revenue or was that actually also to diversify your offering away from the 85% that was, that was pretty strictly print at that point.

Guest: Both it was to grow to get bigger, but we had a purpose in getting bigger. It was to diversify away from more legacy mature businesses that were not growing or were, or really were shrinking. I mean it's, you know, in. It's a sort of a classic business school case study that we learned that other folks, many other people have learned that you try to use your cash cow business, your mature business that is either plateaued or potentially declining, and reinvest proceeds from that into other areas of the business that can be growth. So the mature business for us were envelope related products and services that we still do a significant amount of revenue in that Space, it's flipped. Whereas that was probably the but half of our business when I came on board. It's a much smaller sliver of our business now because we have reinvested the proceeds from that business into branded merchandise and e commerce services primarily.

Host: That's really interesting. So you have effectively completed this pivot, for lack of a better word, over the course of the last decade, decade and a half, through these acquisitions. And then let's talk a little bit about the sourcing of your deals. So you mentioned when you and David decided that you would pursue this strategy, you started putting yourself out there, reaching out to brokers. Has your deal source strategy been the same since then or tell me how you're finding all of these deals.

[12:13] Guest: Great. So here's some of what we do. We do a lot of industry networking. So this is industry networking with business brokers, but also just suppliers. Suppliers are actually a great source of business intelligence because they have very transparent conversations with business owners on the sort of distributor side, the folks who are buying from these suppliers, and they have good relationships with them. So I mean, generally speaking, whenever I talk, whenever I have an opportunity to talk to supplier partner of ours, I don't let those conversations go without asking, hey, have you heard of anyone that might be interested in either exiting their business, retiring, bringing on a partner? So those conversations are very fruitful and wide. And I've written about this as well and other friends of mine have too. We try to treat our suppliers like gold. You know, we, we pay them quickly, we try to treat them with respect. We don't fire drill them unless it actually is a fire drill. And so these suppliers like to do business with us and they know that we're generally pretty honest, pretty solid people. And so although it's, you know, it's certainly a great thing for them to sort of, you know, to make introductions, they're not going too far out on a limb because they know that we're never going to make them look bad. We've also done other things and more automated things, sourcing lists of owners and brokers and intermediaries. In our space, you know, this space, like we talked about, marketing services, we have a great data partner that we work with who just helps us with very, you know, highly bespoke data and then plugging that data into tools and, you know, doing kind of a B tests, you know, outreach, emails, gauging response, collecting data and kind of iterating on those. And generally speaking, whenever there's a response or indication of interest, I then handled the follow up personally. So that's sort of, you know, that, that's, that that's sort of from a sort of data perspective in terms of like how we source opportunities. And I'll tell you, from the brokers and intermediaries that we've gotten a chance to connect with, they're fantastic. You know, some of them are more fantastic than others. But what we found is that when, you know, they, when we clearly articulate to them what our industry focus is, we get in their databases, they then will follow up with opportunities that may or may not be appropriate. And so we're seeing kind of warmer deal flow from them in a personal outreach way, which has been very helpful. And in fact, one of the two most recent deals we did came from a broker that we have a relationship with, that they know who we are, we have credibility with them, and that when we indicate interest in the potential opportunity that they have, they know that we're a real buyer, that we have the ability to close, that we have the capital behind us to make a reasonable and fair offer, and that there's no kind of risk of not being able to close on the transaction.

[15:34] Host: You know, brokers, business brokers have this troubled reputation. And I wonder is that because many people deal with brokers who themselves are really just tire kickers or not serious buyers. And so they don't get the call back because the business broker can tell that they're maybe going to be a waste of time. So is the secret to your success working with brokers what you just said, where like you need to communicate to a broker clearly A, what you're looking for and B, that you have the wherewithal to pull it off. Is that, is that a fair assessment? Any other tips on working with brokers effectively?

Guest: Well, you mentioned that, that some especially sort of in the small business Twitter space, people talk about brokers and you know, they'll sort of make kind of snide comments and look, don't get me wrong, I mean, I, I've had some of those experiences where, you know, rather than optimizing using tools like DocuSign, they're sending you a document that you need to literally print and sign and scan and send back to them. And the, Even though, you know, some of them, you, I try to articulate our focus and then they send me opportunities that aren't appropriate at all. But, you know, but you, but just the same way, in my business there are players who are fantastic and players who are less so. I think in the, in the broker and intermediary space. That's, that's the case as well. Some are better also. Some are just more appropriate for the deals that we do. And some have other areas of focus who focus more on main street businesses or focus on really, really big companies. And we sort of fall, fall into the middle of the sort of corporate business opportunity brokers.

Host: So part of it would be really identifying a business broker that is active in your niche, not thinking that any broker is going to be able to deliver opportunities that fit for you.

Guest: We've had productive conversations with brokers who don't focus on our niche, but you want to make sure that they focus on businesses of the kind of size that you're looking to transact around. So for us, our sort of sweet spot of business size is where we've done the most Transactions are between one and a half and $5 million in revenue. We've certainly gone above that and we've certainly gone below that. But that business size so is where we are. We find that we are able to add the most value and where we're able to absorb deals like that because we do self fund, you know, we don't have, you know, private equity backing. So we're, you know, we're financing the deals ourselves. And so we, my brother and I joke around that some of the deals we do are kind of deals on training wheels because no one deal is going to sink our company in year 111. But with enough reps and enough times up to that, you can look back a number of years later and see a significant, you know, business impact from a growth perspective and a business mix diversification perspective. So both sort of general business brokers are useful. But then yes, absolutely. There are industry specific niche business brokers and they're very helpful because they also know a lot of the players, they're in touch with these sellers, they're in touch with the buyers over a course of many years.

[18:59] Host: Yeah.

Guest: And you know, it's important to maintain those relationships.

Host: Yeah. And so how large is Grossman today in terms of employees?

Guest: We have just shy of a hundred employees in a number of different locations. So our main operations in Massachusetts, and that's where we have the majority of our colleagues. But then we have a number of colleagues in the New York, New Jersey area, New England, the Midwest and then Southeast, you know, Atlanta, Florida, et cetera.

Host: You had prior question mentioned that your acquisition window kind of is a million and a half to $5 million in revenue. Although you've done bigger and you've done smaller. Are there Any other details you can provide about kind of what your average or median deal looks like? Maybe on terms do you have, having done so many acquisitions, do you have kind of a standard term that you offer? Any kind of visibility into? The actual deals themselves would be great.

Guest: Every deal is different and we've gotten pretty creative in our deal structuring. So some deals we've done, we've actually done one where it's been a sort of split net profit in a business unit with a previous owner. But the majority of our deals are based on either a gross profit multiple or an EBITDA multiple. And we generally put approximately a third of the deal value upfront in cash at closing. Sometimes the, sometimes it's more, sometimes it's closer to half, sometimes it's less, depending on a number of variables, whether or not that that business is growing or shrinking, whether or not there are any client, significant client contracts that might be renewing in the next six months to a year versus those client contracts have multi year arrangements already in place. And then the majority of the deal value is generally based on retained sales over generally a three year period, you know, so it's generally retained gross profit. And we're very transparent, you know, with the owners that we transact with. They get the same data that I get. They get the raw data output from our, from our ERP system. So they see every order that we do, they see the cost to sell, the gross profit, any ancillary costs or fees or you know, sources of income that could benefit them or that would take away from that earnout. But we try to give them the exact same data that our management team sees and are the relationships. What I find, what I'm probably most proud of in all of the deals that we've done is that whenever I talk to a new prospective seller and they are trying, they're, they're, they're, they're gauging us and they're trying to kind of size us up. And I say to them, hey, I'm happy to give you a list of every deal that we've ever done and any owner that you want to speak with from any deal you choose and I'd be happy to connect you. And these are, some of these owners are still with us and some of these owners have long retired, but I am very confident that those conversations will be positive ones because we try to communicate with this with the sellers the way we'd want to be communicated with if we were ever to sell, which we have no interest in doing right now. But you know, where we always, it's all about trust and, you know, treating people with respect and being very transparent. And if we make a mistake, if for some reason an earn out payment got sent late or there was an error, for some reason, we own up to it. We explain exactly what happened because we're not perfect. I mean, although we have good systems in place and we have good, good team, there certainly could be an error. Sometimes a vendor will send us sort of incorrect costing that goes into the earn out and then later there's an adjustment and we have to own up to that and be very, very transparent. And I think for us, if we do make a mistake, we own up to it, we apologize and we explain what happened and what we're going to do to ensure that doesn't happen again.

[23:13] Host: Yeah, it's something that I just, I hear over and over that to really be successful in this doing an acquisition strategy, being a high quality buyer is paramount. And transparency and sometimes acknowledging mistakes seems to be a key part of that. You have had a little bit of buyer's remorse, I believe, on a couple of your acquisitions, or maybe temporary buyer's remorse to the extent that you can talk about it or tell us the stories. But if you can't tell us the stories, what were some of your lessons from those harder deals, those difficult deals? What did you learn? What can you tell people who are learning how to do an acquisition? How can they learn from your mistakes?

Guest: We've had situations where we have issues with a seller. We had one in particular a number of years ago where we sent an earn out payment a few days late because the our colleague who was responsible for payables was on vacation and it just wasn't properly planned for. And that seller started in talking about using legalese, you know, per contractual requirements, this and that, and, you know, I don't want to have to talk to my lawyer. And again, generally speaking, we're able to take a step back, calm down, not get defensive. Understand that a lot of it stems from control, that they gave up control in their business and they're having a tough time grappling with that and what the new normal is with their sort of what they're going to do with the rest of their lives. And that's generally what drives a lot of the challenges. It's sort of giving up control and than those sellers sort of trying to find ways to criticize or undercut. Look, we're not perfect. We make mistakes too. Like I mentioned, I mean, we send an earn out payment Late. We try never to do that, but it happened.

[25:13] Host: And there has to be some reasonableness on the other side as well. Some space for understanding. Like a mistake.

Guest: Yeah. And again, not every one of our deals has been a smash success. Some have been more successful than others from a financial perspective while still having some of those sort of, sort of the softer side challenges like I talked about and then some. There have been no sort of personnel challenges, but they just don't perform as well. And so you know, the nice thing is as my brother and I are, are maturing and our management team is, is more robust, we have the ability to onboard companies and you know, kind of smoother. And I think probably more importantly we can reference back to all of these other deal situations now. Okay, what went wrong with that transaction? How can we make sure to put in place systems and processes to ensure this doesn't happen in the future. But some of it will be just sort of softer side, personality driven, kind of more psychological in nature rather than. So they're more subjective issues versus objective issues.

Host: When this seller who went ballistic when they didn't get their earn out payment for two days or whatever was there. When you looked back at your interactions prior to that episode, could you have foreseen that this person might fly off the handle like that or was it just a total surprise? I mean, are there what, you know, have you developed a radar for this sort of thing?

Guest: That's a great question. Yes. That particular deal we, without divulging too many details. Yeah, I mean our radar did go off a little bit. You know, where we, we thought, you know, this personality a little challenging but it was a really great business opportunity and it's, and it's been very profitable for us that, that transaction. And once we worked through those sort of personality driven issues, it's been smooth sailing. But absolutely in the sort of in the, in the relationship building phase prior to letter of intent. Well and then especially kind of between letter of intent and asset purchase agreement stage and closing. We did start. Our radar did go, to use your word, our rate or our radar did go up a little bit. We decided to ignore our radar because the opportunity was good and the timing we really wanted to buy that business. They had a really good client mix in a region that we were committed to. And then I'd say one other time of these transactions we've done, our radar went off as well and it proved to be correct. But we ignored our radar as well because it was a good opportunity and we to wanted. Wanted to try to build and grow our company. So. But we're, My brother and I have resolved that in the future, we're going to try to listen to our radar better, though we may not, may not be all the time.

[28:26] Host: SMB Small Business Acquisition, as you alluded to, is really hot on Twitter. I believe that's actually where I found you. You might have been participating in a thread that I was reading on this topic. And so it's talked about, it's evangelized, and it's really an enticing prospect. But now there are people on the other side, detractors who are saying, oh, this you're romanticizing this small business is difficult. And then if you're acquiring, if you're acquiring somebody else's small business, it's more difficult still. So stop talking about, this is like some, you know, smooth and great path to entrepreneurship. Where do you come out on that, on that debate?

Guest: Probably somewhere in the middle. You know, it's, it's. I see both sides. You know, it's certainly, I understand why owning your own business is romanticized because you kind of are in charge of your own destiny and you kind of run, you run your, your, your life. I mean, you're obviously responsible to your colleagues and to your customers, but if you have a diversified basket of customers, you're not beholden. Any one customer, no one customer could sink you in your business. So if you want to be in charge and you feel like you have the skill sets to run a company and make proper sort of resource allocation decisions and stay relatively calm under pressure, that's great. But I also see the detractors of that because some folks will say, look, you're buying that business, but really what you're doing is buying a job.

[30:08] Host: Exactly.

Guest: And so I definitely see that criticism. But if done right, it can be fantastic because, you know, and especially for someone who's coming in, who doesn't own a company and wants to buy an operation and potentially use that as a launching pad to. By other companies or just to buy a company and run their business. You see a number of folks who leave finance, you know, who leave Wall street and who work in bigger organizations with a lot more hierarchy and bureaucracy, and they want to cut through that and be nimble and make a bet on themselves. So I can see the pros and cons. I'm clearly on the pro side because I run a small business with my brother and I enjoy that. And I left sort of the bigger corporate world to, to come after, you know, to go after this opportunity and try to help steward a business that, you know, is in the fourth generation and is now 111 years old. But we try to, you know, never look, what we. What we say to folks is in the family business space, but also just in business in general is never, ever take anything for granted, because markets change and industries change. And if you don't evolve with the times, you will be left behind. And really, from working with clients, you're only as good as that last experience that they had with you. And if they had a positive experience or negative experience, that can have a dramatic impact on your. On your business in the future and the health of those client relationships. And that's why it's important to invest in your people, to have a good team with you, because in the detractors are right, you could buy yourself a job. But if you're just doing everything yourself and all roads lead to your desk, that's a challenge. So you need to have colleagues who you trust, who you trust to potentially make mistakes and take risks and, you know, without which you probably will get left behind or at least have a culture where people may not speak up or highlight challenges in your business.

Host: Yeah. Yeah. Well, I look at your story, and even though you and your brother had the. I guess the cash cow, to use your earlier term, for what the business was in the mid-2000s, so you had capital that you could deploy into acquisitions, and you didn't have to get outside financing, you probably could have to pursue this path. And that's, of course, what many people are. What you see on Twitter, people are pursuing outside financing either through the SBA or friends and family or maybe something depending on the size of their ambition, maybe they'll find private equity to back them. But I feel like even though you guys had something of a platform or source of capital in your own business, if you hadn't had that and you just came in cold, you still probably could have executed the strategy that you did and made seven acquisitions and grown what you guys have grown. So I think there's. Even though you kind of. To start, you had a little bit of a different story than probably a lot of acquisition entrepreneurs. I think there's still. Your path could be followed, except for that very first acquisition where you had your own capital to go with.

[33:34] Guest: Yes, you're right. We had modest capital. We didn't have a mountain of it. We, you know, certainly modest capital. But no, I think getting into this business, if someone wanted to do what we've done, you know, there are folks who start marketing Services businesses from scratch, get some credit from a supplier, get it, get a bank line, get an SBA loan, build a business and then use the cash flows from their business to potentially make bolt on acquisitions. So we were certainly fortunate that first deal we had the capital. But you know, look, we try to be really careful with our, with our, with our capital. It's very precious and you know, my brother and I run the business for 10 years and basically there's been a financial crisis and the pandemic bookended a few good years in between. So it's, we're, you know, we, we're always sort of waiting for this other shoe to drop and, and trying to be really careful stewards of the organization so that we can make it in the year 112 and 113 and maybe one day it'll be a fifth generation business. Maybe not. We don't know. I mean we still have hopefully plenty of time. We're just trying to, you know, appreciate what we have for the most part. And the sometimes when we're mired in the day to day. Yeah. That we sort of, that we sort of don't appreciate it as much. But you know, look, we have a great partnership. He and I are, we have very complimentary skill sets. And I'd say for anyone who's thinking about having a business partner in sort of either if it's, if they're starting a search fund or you know, you know, trying to buy a business or what other model you want to make sure you and your partner, your interests are totally aligned. And my brother and I, our interests are completely aligned. We want the same thing and without which it wouldn't work. But thankfully we are aligned. And if we hadn't been aligned, I probably wouldn't have joined the business 15 years ago.

Host: Yeah, yeah, that's a great advantage and probably has all kinds of richness to it as well. Just having that relationship with your sibling. Well, Ben, this has been great. As I said, I found you on Twitter, I believe, so you're active. Somewhat active on Twitter at least. What's your Twitter handle?

Guest: My Twitter handle is I Grossman and I have a personal website that's bengrossman.info okay, great.

Host: And what about, what about Grossman Marketing Group where if people need marketing services.

[36:02] Guest: Marketinggroup.com It's Grossman marketing.com Grossman marketing.com Great.

Host: Well, this has been great. Ben, thank you very much for coming on and sharing your experience. A really interesting story on many levels. So maybe we'll have you back and dive into one of these other subtopics. More deep.

Guest: Excellent. Well, thanks again. I really, really enjoyed the time together today.

Host: Great. Thanks be.