[00:00:00 - 00:05:26]

Will Smith: In our world, we spend a lot of time imagining sellers trying to understand their motivations, get inside their heads. But for all that study, we rarely hear from them directly. In today's episode, you will. We have two guests here, the first buyer, Jared Leonard, who acquired great potential from the second seller, Dave Surwitz. So we get the journey of this transaction from both perspectives and hopefully you come away with a more concrete sense of that mythical theoretical thing, as Jared jokingly called it, the seller.

If you want to hear another interview with a seller, listen to episode 181 with Peter Wild, the seller of a tree business he'd founded in the 70s. In that interview, Peter's motivation to sell is retirement. In today's interview, seller Dave is only 42 and has different motivations, a good reminder that retirement isn't the only valid reason to sell a business. As always, we also learn about the subject business and industry Grade Potential sends in person tutors to family homes. It has a national footprint and does over $30 million in revenue.

Please enjoy this conversation with Jared Letter speaking, CEO of Grade Potential and Dave Surwitz, founder and Seller of Grade Potential. One of the most common structures used to buy a business is what we call a self funded deal with an SBA loan and investor equity. Probably the majority of Acquiring Minds guests have used this very structure, and if you don't really understand it, come to a webinar tomorrow with Tim Erickson of Shareholder Ventures and Acquisition Lab. Tim is going to present a primer on the financial anatomy of a self funded SBA search deal with investor equity. Topics to include PREF rate, liquidation, pref step up waterfall, how invested capital translates to common equity, what the market rate is fall of 2025 for these key terms, how investors evaluate your deal from an IRR and MOIC perspective, and much, much more.

It's going to be a fantastic session. Consider it required reading if you're a self funded searcher, that is. Tomorrow, Tuesday, November 4th noon Eastern. Link to register for the webinar is right at the top of this episode's show Notes or on the Acquiring Minds homepage. Acquiringminds Co. And speaking of SBA loans, you're much more likely to have success getting one underwritten for your deal if you understand how lenders evaluate risk when financing a business acquisition.

On Thursday, leading SBA loan broker Heather Anderson will host a webinar teaching the five key risks that lenders look for, how to spot them in your own deal, and how to mitigate them. Heather will cover customer concentration, buying into an unfamiliar industry seasonality businesses that require licensing and business valuation based on recent growth as opposed to steady eddy historic growth. Heather has years of experience doing hundreds of SBA deals, so come learn from the best that webinar is this Thursday, November 6th, noon Eastern. Link to register is right at the top of this episode's show notes or on the Acquiring Minds homepage. Acquiringminds co 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 that who do it.

Running payroll, paying your bills, closing your books, and producing financials. These are critical tasks every business owner must do or oversee, but spending time on them distracts you from the leadership in growth work you want to do.

So let System Six do it for you. Owned and led by a former Searcher, Chris Williams, System Six is a leading outsourced finance team for hundreds of SMBs, including over 50 searcher acquired businesses. Chris, Tim and the System 6 team understand firsthand the challenges, the opportunities of jumping into a business as its new owner. So whether you own your business already or have one under LOI, talk to System Six about how they can give you time back and improve your financial operations. Mention Acquiring Minds and they'll provide a free review of your books and Financial Ops, a $500 value.

Check out systemsix.com, link in the show notes or email hello@systemsix.com.

Jared Letter Dave.

Surwitz welcome to Acquiring Minds.

[00:05:27 - 00:05:28]

Dave Serwitz: Thank you sir. Good to be here.

[00:05:29 - 00:05:30]

Jared Lenner: Thank you for having us, Will.

[00:05:31 - 00:06:16]

Will Smith: I saw the two of you on stage at the CETA Southeastern ETA Conference.

At UVA a few weeks ago and I said to myself, man, I got to get these guys on the pod. Lucky me, you said yes. So in addition to being a great story with lots to learn, Dave, you.

Are the seller of the business that.

Is the subject of today's interview. And we in this world talk about you sellers constantly. But we rarely hear from sellers directly. So it's super helpful and fascinating to get a first person seller's account of a search story.

Let's dive in guys. Jared, why don't you kick us off with some background on yourself?

[00:06:16 - 00:07:13]

Jared Lenner: Yeah, thanks Will. And thanks again for having us. Born and raised down here in South Florida, and I did my undergrad in econ and political science, which we'll come back to kind of later in the show at UChicago.

Spent the early part of my career on a trading floor, so definitely not a typical search background, although I'm not exactly sure. What typical is or if there is typical, right. And I was actually out riding my bike, training for an ironman and I got hit by a car. And that was really the start of do I want to live in New York forever? Will my then girlfriend, now wife like me in five years when we have kids, God willing, someday, am I going to see them grow up?

Do I want to live in Manhattan forever? It's a great place, but those are not good. Nos redid everything about my life over some time. But that was the moment in time I looked up, said thank you to God that I'm still here. Decided to go back to business school.

Took a couple years to get there.

[00:07:13 - 00:07:15]

Will Smith: Jared, how bad was this accident?

[00:07:17 - 00:07:58]

Jared Lenner: You know, it wasn't great, but you know, I'm here. I walked away, you know, mostly unscathed, you know, broke my hand and wrist in three places and you know, a bunch of other stuff. But look, like I said, well, I'm really grateful to, to still be here, honestly. And sure, I try to bring that to work and into my life every day. Went to business school, the University of Virginia.

Spent some time working for a private equity backed company that repairs power lines. And you know, while I was in business school I kind of looked around and well, I grew up playing hockey and then I worked on a trading floor. You know, I looked around and said, gosh, like the corporate environment just isn't for me.

[00:07:58 - 00:08:10]

Will Smith: Let's do you next Dave and, and then we'll keep going back and forth between you. So tell us a little bit about your background Dave and, and, and the business and that, that Jared now is the running.

[00:08:10 - 00:08:44]

Dave Serwitz: We're a tutoring company. You know, I think as Jared says, I think we are the largest in person tutoring agency in the country. But anyway, I was never a great student myself and when I got to college I was looking for a tutor and it was like a frustrating, difficult process and, and you know, took me a lot longer than I feel like it should have. This is a long time ago. And just through my frustrations and getting it all arranged for myself, I did a lot of leg work.

And I was sitting there with my tutor after the first couple sessions and I was like, man, do you know.

[00:08:44 - 00:08:45]

Will Smith: How hard it was for me to find you?

[00:08:45 - 00:09:03]

Dave Serwitz: And he's like, really? Because like me and all my friends that you know, tutor math, we're always looking for more students. And I'm like, all right, here's what you got to do.

And I started like drawing out of like things that he should Do. And he kind of looked at me sideways and so I'm like, okay, I'm just gonna do this myself. So that's basically how we got going quite a while ago. But when was that?

[00:09:03 - 00:09:04]

Will Smith: When was that, Dave, when did you found this?

[00:09:04 - 00:09:05]

Dave Serwitz: 2002.

[00:09:06 - 00:09:07]

Will Smith: 2002.

[00:09:07 - 00:09:09]

Dave Serwitz: Yeah. So it's a very long time ago.

[00:09:10 - 00:09:11]

Will Smith: And the business is called what?

[00:09:12 - 00:09:23]

Dave Serwitz: Grade Potential Tutoring. We were originally called make the Grade and I had like a trademark. We weren't able to trademark it. And so that's when we ended up changing the name.

[00:09:23 - 00:09:27]

Will Smith: Basically, make the Grade became Grade Potential.

[00:09:27 - 00:09:28]

Dave Serwitz: Correct? Yep, yep, yep.

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Will Smith: Yeah. Which is what it goes by today. Great, Dave.

And so tell us about the business that you founded and. And what it does. Exactly.

[00:09:36 - 00:09:52]

Dave Serwitz: Yeah. So we are an in person tutoring company.

And so I founded it quite a long time ago. 2002, as we got going. And you know, we now service, you know, 40 plus states, etc, doing in person tutoring.

[00:09:53 - 00:10:08]

Will Smith: Fantastic. Great.

Okay, well, let's continue in parallel here a minute before the two of your life stories converge. Back to you. Jared, you're at Darden. I assume that's where you hear about search. Tell us about your journey into search.

[00:10:09 - 00:11:18]

Jared Lenner: Yeah, definitely. Thanks, Will. You know, I think a lot of people nowadays come to business school and they say, I'm searching for sure. I was not in that camp. I showed up, I had no idea what a search fund was.

I knew that working on a trading floor, like I said, was not what I wanted to do in my life. I knew that I wanted to reorder and change a lot of things about my life, specifically on the professional side of things. And I'll never forget, it's a funny story. And Timothy Bovard from Search Fund Accelerator came and he gave a pitch on what is a search fund? And I'm sitting there and he explains it and I just get more and more excited about it.

And I go home and I talk to my then fiance, now wife, and say, hey, you know, Renee, I think this sounds really interesting. It sounds really compelling. It feels a little insane. But I think this is what I want to do. And I guess my first piece of unsolicited advice for listeners is having a supportive significant other, if you have a significant other, is super important because it's a really long, hard journey.

And she, you know, she was supportive from. I wouldn't even call it day one day negative 100 or negative 300.

[00:11:19 - 00:11:24]

Will Smith: Jared, what. What were you looking for? That.

What itch did you have to scratch?

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Jared Lenner: Or.

[00:11:25 - 00:11:28]

Will Smith: Or maybe another thing. What were you trying to get away from in corporate land?

[00:11:29 - 00:11:57]

Jared Lenner: Yeah, you know, I think, look, I've always had a little bit of sharper elbows.

Like I said, I played hockey, I worked on a trading floor. I knew I wanted to bet on myself. That's, you know, why I left a. A pretty good job, you know, pretty. Pretty great job.

And, you know, ultimately I wanted to be the captain of my own ship and. And really, you know, try and, like I said, bet on myself, Will. I think that's probably a pretty common story you hear.

[00:11:58 - 00:12:23]

Will Smith: And so Tim from Search Fund Accelerator SFA presents at Darden. You love the model.

Fast forwarding here a little bit. You are an SFA searcher, so you did go with. With Tim and his team. There are other ways of doing this. Did you go with SFA because it was right there in front of you, or.

Tell us a little bit about the decision to do that, because that is a key decision point in a search of journey.

[00:12:23 - 00:14:41]

Jared Lenner: Yeah, it's a huge decision point. And, you know, I'll back up. Like I originally, you know, the first time I met Tim, he presents. He says, you know, well, what's the downside of searching with sfa?

And says, there is no downside. And I said, well, this guy's totally full of it. There's a downside to everything in life. And then I got to know Tim, and he really is who he says he is. He walks the walk.

And I think it's really important you believe that if you want to search with Search Fund Accelerator or any of the accelerators that are out there. But I would actually split it into two decisions, right? Like, decision one, do I want to take outside capital? And decision two, if I do, who do I want to take it from? Right?

And so for me, I looked around and said, well, this is already really risky. You know, the Stanford study I know, is, you know, traditional focused, but the statistics are what they are. And, you know, the idea of a personal guarantee was really scary to me, to be totally honest. I mean, I. I think it's unbelievable, the bravery some people have signing a PG with an SBA loan. So I. I knew that I wanted to take money at least my first go round for this.

You know, I think that led me to the second decision was who do I want to take it from? And, you know, I looked at the traditional model and the accelerated model. I met with, you know, great firms and in both camps, and ultimately, you know, like I said, I came from a trading floor and I started to think about incentive alignment and you know, if you look at the traditional model, right, they're backing 30, 40 people a year. And portfolio theory says there's two ways that you can improve your risk adjusted returns. You can increase the number of uncorrelated assets, aka invest in 30, 40 searchers a year, or you can increase the quality of your assets.

And as the asset, right, as the searcher, it was very clear to me that the incentive alignment with SFA is, you know, second to none. They bet on five, that they invest in five searchers a year and they have to get them all. Right? Right. And so to me, that was what pushed me over the line.

Obviously I got to know, you know, Tim Bovard and Matt Parker, who's the, the lead partner on, on my deal and, or our deal, I should say Dave and Sean and John o'. Neill. You know, the entire team is awesome. But you know, to me, the incentive alignment was night and day better from my personal point of view. Does that make sense, Will?

Is that helpful?

[00:14:41 - 00:15:32]

Will Smith: Yeah, no, that's a really interesting perspective. So traditional searchers invest, have a more of a portfolio approach. They invest in many more deals with the idea that some are not going to go well and some are going to be do great and it'll shake out in a really good way. But, but from, from you, the one receiving that capital, you want them to be a little bit, have more incentive for every, for you, your particular deal to go well.

And so because SFA is doing just five a year, they're not going to let one Sink because that's 20% of their portfolio or their, their deployed, their deployment that year. There is also, isn't there a lot of, a lot more involvement by the SFA team with the searchers? I'm, I don't. So, so tell us about what kind of additional services, if you will, are on offer.

[00:15:32 - 00:15:46]

Jared Lenner: Yeah, yeah, that, that's absolutely right, Will.

Right. So SFA has two offices, one in New Orleans, one in Denver. I moved to New Orleans. It was awesome. I, I joke.

It's my two year study abroad. I wrote a Mardi Gras float. You know, it was, it was amazing.

[00:15:47 - 00:15:48]

Dave Serwitz: Jared working really hard.

[00:15:48 - 00:16:30]

Jared Lenner: No, but look, jokes aside, Will, you know, I think the in person meeting, the in person relationship that you build with your investors, right?

Like you're not afraid to ask what might be perceived as a dumb question because, you know these people, right? Like I lived right next door to the new house that, you know, Tim was building at the time, right. And so, you know, I know these people really well. The Level of support you get is second to none. They're weekly check ins.

How's your search going? How can we help? What are you thinking about? What are you looking at? Help you build those reps, build that pattern recognition faster.

You know, I was sending emails eight days after I started my search.

[00:16:30 - 00:16:30]

Dave Serwitz: Right.

[00:16:30 - 00:16:35]

Jared Lenner: And I had my first seller calls within two weeks. Right. I think.

[00:16:35 - 00:16:42]

Will Smith: And you attribute a lot of that to the. It's an accelerator. So. So the whole process accelerates, I guess.

[00:16:43 - 00:16:43]

Jared Lenner: Absolutely.

[00:16:43 - 00:16:44]

Dave Serwitz: Right.

[00:16:44 - 00:16:58]

Jared Lenner: I mean you don't have to reinvent the wheel. Right. Like, I mean the silliest example, like you don't have to go buy a printer. There's a printer.

You don't have to figure out the tech stack. You don't. And you know, I think at the end of the day it's easy to look at the search and forget that it's, you know, buying a company is the starting line Will.

[00:16:58 - 00:16:59]

Dave Serwitz: Right.

[00:16:59 - 00:17:37]

Jared Lenner: I mean I know people say that all the time, but to me the support through this one time process of searching.

Right. And then post close. Right. Like SFA sits on my board like any traditional investor. Dave is in every single board meeting as well.

I'm sure we'll talk about that.

I have by choice, I have a weekly call with Matt at SFA and we talk about the company, we talk about the challenges that we're facing and the opportunities and you know, the support is unparalleled. Well, I mean it's, it's. I have friends that have run traditional searches and that, you know, some of them bought great companies and they're having a great time but the experience is night and day different.

[00:17:38 - 00:17:53]

Will Smith: And the economics for you Jared, are similar to traditional search fund economics. Right, so.

So you've contrasted accelerator with traditional search investor model. But in fact on the economics it's quite similar.

[00:17:53 - 00:17:54]

Jared Lenner: Yes, that's correct.

[00:17:56 - 00:19:04]

Will Smith: The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human Resources. It lays out the key items you should be thinking about as you transition into CEO and owner of the business.

You bough the link to download it.

Is in the show notes.

Aspen is a professional employer organization or PEO run by a searcher for searchers. Search fund veteran Mark Sinatra runs the company which provides HR compliance, flawless payroll, Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for a fraction of the cost. Go to aspenhr.com or contact Mark directly.

At mark aspenhr.com Dave, back to you. So you two, 2002, you said you founded the business and when and why do you start to think about selling? Or, or had you thought about selling you or. No, you get an email from Jared and that's what prompts the thought.

[00:19:04 - 00:21:06]

Dave Serwitz: I mean, I, I, I didn't think about selling for quite a long time.

I know maybe in traditional business school you're taught like, think about the exit from day one, but I, you know, never did. I'm super thankful that, you know, I've had a lot of experience within my like, immediate and extended family of running businesses and such and so, and pretty much everyone in my family, you know, ran a business for 20, 30 years. So it was not like a how are we going to figure out how to sell this business? That was like, I, I, I don't think I ever heard that once growing up anyway.

So, I mean, the reason I chose to, to do this was at some point, probably around I think maybe like 2017 or 18, I just started to become a bit less excited and engaged in what I was doing just because I had been doing it for so long. I did start another business around that time and I started focusing more of my efforts and my day on, on the other business. And I just been working on the same problems for so long that I decided I was ready to work on new problems. And so, you know, I, I knew it wasn't going to be short, you know, a short process to, to, to sell and, and I wasn't sure honestly what I wanted at that time or, you know, what a good experience meant to me. But anyways, we started, you know, you know, getting our books in order and like starting to kind of be on the horizon.

And I don't know if you want to get into it now or not, but I did have like, some searchers reach out to me around that time. But anyway, yeah, that's basically when I started to think about it as something that I was, you know, going to be doing as I just started focusing less on, on this company. Then of course coveted, and it was like, ah, crap, you know, and, and so I had to kind of like refocus some efforts here to make sure we didn't go down the tubes. But thankfully we came out like, even better and stronger, which is super awesome.

[00:21:06 - 00:21:09]

Will Smith: Yeah, I mean, Covid would have been a boon for this business.

[00:21:09 - 00:21:17]

Dave Serwitz: No, well, on, on whatever that mid March was when, you know, it was like, okay, this is a real thing.

[00:21:18 - 00:21:21]

Jared Lenner: Tom Hanks got sick and then the world fell apart. Right?

[00:21:21 - 00:22:50]

Dave Serwitz: Yeah, yeah. So we dropped off 85 in one day.

So that was very scary, you know, and maybe around that time or a few days before that, when it was like, okay, like, everybody, like, we're gonna probably. I think we decided we were gonna send everybody to work from home before it was, like, mandated. I'm not sure if that was a nationwide or just California or however it went. But anyway, so we started maybe we were like 40 or 50 people at that time. I'm not sure.

And so we started, like, sending like six or seven people home a day and, like, trying to get them set up. And, like, there's a whole host of challenges with that. But, you know, in the beginning, I did not know if it was going to be a boon. I mean, we. We have tutors in person, going to people's homes, and people were not about that.

Right. And so, yeah, so we literally. I mean, our lead flow literally dropped off 85% one day. So that was crazy. I mean, sadly, lots of furloughs and, you know, all that kind of stuff.

And in. In many ways, it was a. It was a. I hate to say good experience, but, like, looking back, I mean, I. I cried all, you know, 20, 25 hours a day I cried. But. But what was amazing was, like, the support that I had from our team members at the time.

Not all of them. Honestly, there. There were some that I expected support from that. That I did not get it, which was sad. But there was also lots of people that I got amazing support from that.

I also wasn't sure if that was going to happen either. So anyways, in many ways, it was a. It was a. It was a great experience, but. But very difficult at the time.

[00:22:50 - 00:23:20]

Will Smith: Yeah, well, certainly doing in person anything was not the business to be in in March 2020. But I guess the ultimate way Covid has impacted society and the way we do things, I just feel like things are more individualized than they. Than they were before. And so I would think that tutoring would be on. On.

On the upswing in person, one on one tutoring, after the actual. The initial scare and the initial lockdowns and so on. If they're going to get you on.

[00:23:20 - 00:23:27]

Dave Serwitz: My phone selling, Will, we're going to get you on the phone selling because you're doing my job for me. But that's the hope, man.

Yeah.

[00:23:27 - 00:23:28]

Will Smith: Okay.

[00:23:28 - 00:23:28]

Jared Lenner: Okay. Yeah.

[00:23:28 - 00:23:29]

Dave Serwitz: All right.

[00:23:30 - 00:23:52]

Will Smith: And so. So, Dave, this was 2017, 18, where you started feeling like maybe it was just time that this chapter was time to move on to another chapter. You'd start another business. You hear from other searchers what can you say about that story in brief and kind of tell us what your reaction was to, like, the. The first time you heard about what these.

These quote unquote search people were doing?

[00:23:52 - 00:24:23]

Dave Serwitz: The first one, I mean, I. I guess I'm being honest. I'm not sure if it was like the first one, but the first one that I took like a call with. Yeah, I think actually it probably. I think it was in Covid.

I think it was, I'm gonna probably guess, end of 2020 or something. I don't honestly remember, but I remember where I was and I wasn't in the office, so it had to be in Covid. And, you know, I. It was like, hey, we're interested in buying your business. And like, even though I wasn't like, ready, I was like, okay, let me get some reps in of like, what these conversations feel like.

Right.

[00:24:24 - 00:24:27]

Will Smith: And had you ever received emails like that day from private equity or anyone?

[00:24:28 - 00:24:52]

Dave Serwitz: Yeah, but nothing too significant or. I, I guess I honestly don't exactly remember. I hadn't really, like, engaged with any of them and.

Or. Or they felt. I. I don't want to, like, be disparaging, but, like, they felt like, low level was my ink was the way they felt to me, so I didn't. I didn't respond. But I don't know if that's true or not, you know, but anyway.

[00:24:52 - 00:24:54]

Will Smith: But these guys felt more serious. This email.

[00:24:54 - 00:25:20]

Dave Serwitz: I think it's just the timing, honestly. I don't know if they were more serious or not. It was just like, oh, like, you know, I. I'm starting to like, actually think about doing this.

So let me use this as practice. I mean, that was my mentality at the time. So if it had been anybody else at that time that did not appear, like, I. I don't even know how to describe what I felt as low level, but then I was like, okay, sure. I probably would have taken it just, Just for the reps, if that kind of makes sense.

[00:25:20 - 00:25:24]

Will Smith: That's what we always hear, is that just catching the seller right at the right time is.

Is.

[00:25:24 - 00:25:24]

Jared Lenner: Is.

[00:25:24 - 00:25:25]

Will Smith: Is kind of what it's all about.

[00:25:25 - 00:26:34]

Dave Serwitz: Yeah, yeah. And like, it probably was even pre write time, but, like, I've come to learn that I really like getting like, down and dirty with the details and so of like almost anything.

And so I'm like, great. Like, I'm just gonna like, try to like, learn what the mentalities are and start to like, you know, just get experience with this. That was my, My, My thinking. So anyway, so they you know, we had a call, blah, blah, and I was looking at their website and like, I didn't know what search for fund was at the time and like, they were kind of explaining it to me. And you know, I, I personally don't like all of the, or I don't feel spoken to by like half of the search fund websites that are like, carrying on your legacy, like, like buying one business to carry the torch.

And like, I always like, oh, dude, like, whatever. That doesn't speak to me. I'm not saying it doesn't speak to others, you know what I mean? But, but anyway, so I was like, I remember being like, you guys spun up a website just for this. And he's like, he's like, he's like, yeah, dude, it's like 30 bucks a year.

I'm like, okay, I guess that's true. Like, I felt kind of you, I mean, because I'm like, you, you're making a whole website about like I'm buying one business, you know, but whatever, you know.

[00:26:34 - 00:26:44]

Will Smith: And Dave, why didn't it speak? Why doesn't that legacy carrying on the torch stuff resonate with you? Because you think it's phony or it's just not that important to you, the legacy bit or both?

[00:26:44 - 00:26:47]

Dave Serwitz: Probably both. Probably both. You know, I mean, like, it feels a little phony.

[00:26:47 - 00:26:49]

Will Smith: It felt phony to you as a seller?

[00:26:49 - 00:27:05]

Dave Serwitz: I'm, I'm very skeptical, you know, I mean, I'm very skeptical.

I consider myself like a salesperson at heart. So anyways, when I hear these things, like, my immediate feeling is like rolling my eyes at like, you know, at like the sales pitch. But I mean, I'm not saying that's true for everybody, but that's the way I probably took it. Yeah, sure.

[00:27:05 - 00:27:18]

Will Smith: Do you think there is like something that you were looking for, that there's something that was resonate that would have resonated was it, was it basically going to come down to how realistic it was that somebody actually buy, could buy your business and for the right price?

[00:27:19 - 00:27:28]

Dave Serwitz: I guess. I mean, at that time, like, my, my, my, my thought process was not very flushed out, which is why I took the call. I'm like, let me see, let me start to get some, you know, experience with this. Right.

[00:27:28 - 00:27:29]

Will Smith: Great.

[00:27:30 - 00:27:32]

Dave Serwitz: And so I, so what you learn.

[00:27:32 - 00:27:34]

Will Smith: Talking to these guys? What you feel would you learn?

[00:27:34 - 00:27:44]

Dave Serwitz: Oh, I didn't, I don't feel like I, I, I learned, I wasn't prepared. I mean, like, I, I don't think I, I didn't learn a ton about Search, blah, blah.

But, like, they were asking me, like, good questions that, like.

[00:27:47 - 00:27:47]

Jared Lenner: You know, that.

[00:27:47 - 00:27:58]

Dave Serwitz: I didn't have, like, great answers for. And I don't mean that in like a salesy way of like, how am I going to spin this? I just mean, like, oh, like, if that's like, I can't remember, but I.

[00:27:58 - 00:27:59]

Jared Lenner: Remember, like.

[00:28:01 - 00:28:39]

Dave Serwitz: I remember like, leaving the call and they wanted a bunch of all this other, like, information. And I was like, I don't know if I feel like, comfortable, like, sending them all these. This information requests that they were asking for. Because I also, I. I realized during that call and with all the questions they were asking me that, like, this is not going to work out in a way that I wanted to because I didn't have, like, good, intelligent responses to all their questions. And so, like, if they had to figure all of that out with me on the sidelines, it probably wouldn't work out the way I want it to.

You know, I mean, and so, so that was what I took from. It is like, okay, I. I'm for sure not actually ready to be doing this.

[00:28:40 - 00:29:04]

Will Smith: How interesting. I'm actually, I'm not sure I've actually heard that dynamic, like, talked about in our world, Jared, that, like, if you get a seller, one way that you can scare them off is by making them feel unprepared to provide you the information or that, that just kind of like, in some ways they're not selling. They don't want to continue the conversation with you because you've made them feel a certain way about their own lack of preparation.

[00:29:04 - 00:29:04]

Jared Lenner: But.

[00:29:04 - 00:29:13]

Dave Serwitz: But that probably wasn't okay. Like, that's me being willing to have a call before I'm ready. That wasn't true.

[00:29:13 - 00:29:15]

Will Smith: This is all your exercise and getting reps.

[00:29:15 - 00:29:26]

Dave Serwitz: Yes. That's like, in my mind, I'm like, like I didn't know what I was going to take from it. But, like, this is. This is what it was. And I. Yeah.

You know, and so anyways, I'm not, I'm not saying this is a normal dynamic. I don't know what you think.

[00:29:27 - 00:29:45]

Will Smith: Well, but it's also, but it's also like, there is certainly a exit planning process that people go through. And so that is actually a standard part of the process. Usually there's even things called exit planners.

And you were just learning that about that you were going to need to, like, put some preparation and planning into this exercise.

[00:29:45 - 00:30:53]

Jared Lenner: Yeah, yeah. And I'll hop in for a second, Will. Right. Like, I also think Dave and I joke a lot of the time.

Like, we think about problems from the opposite direction, right? So like, Dave will think about, okay, if we're spending marketing dollars, if we spend this and we get a cack of that, what does that mean about what we're able to get in return? And I think about, okay, well, what is the total universe of people googling tutoring near me this month? And so we think about problems from the opposite direction. And I think, Dave, I know one of the things I noticed through the sales process was like, I think those calls were probably really helpful for you in, you know, I don't want to say getting you ready for, you know, the, the, the ultimate exit process, but like, helping you who had always thought about the business in a certain way, think about it from the perspective of someone like myself or, you know, a private equity firm is like, I think you, you knew all the answers, but like, you didn't really, you thought about it from a different perspective or, you know, use different terminology or whatever it may be.

Do you think that's a fair characterization, Dave? Partly.

[00:30:53 - 00:32:11]

Dave Serwitz: And like, I also, you know, I have like, no formal or very little like, formal business training. I don't even know what that means, but, or, and certainly on the financial side. So, you know, like, I mean, you know, I like, cheated in order to make it through my like, one or two financial accounting classes and whatever.

And you know, like, and so like, my financial skills were not good and you know, and so I kind of came up with all my own constructs very often that had like, similarities. Like, like, I like, you know, like, typically we get paid before the tutors get paid, right? So I always called that, like, oh, a positive cash flow timing cycle. Like that's what I called it, you know what I'm saying? And like, people in finance are like, oh, negative working capital.

Like, that's all like. And I'm like, oh, I don't even, like, what do you, you know what I mean? So, you know, I didn't have any, like, I think one of my biggest challenges, which one of my good friends always told me, he's like, David, you just kind of operate in a vacuum. You weren't interacting with like, smart, savvy people all the time, like, blah, blah, you know, outside of our organization. And so anyways, yeah, a big part of it was just I didn't, I had my own financial, like, paradigm and construct that I created that worked for me, but it didn't fit well into like, the mold of like, somebody doing analysis and diligence, you know.

[00:32:11 - 00:32:12]

Jared Lenner: On the company.

[00:32:12 - 00:32:16]

Will Smith: Yeah. Dave, where were you? Are you based?

[00:32:17 - 00:32:22]

Dave Serwitz: So we were in San Luis Obispo, California at the time, which is like, There's a college, Cal Poly there, which.

[00:32:22 - 00:32:22]

Jared Lenner: Is where I went.

[00:32:23 - 00:32:57]

Dave Serwitz: And you know, at the time we had like a call center environment with like cubicles and blah, blah. And so that I. I didn't think we could ever, you know, be anywhere else. And then, you know, we were forced to go home with COVID And so that worked so well that about a year into it, we just abandoned. I mean, I.

We probably had like a couple hundred thousand dollars of like office crap. And I. I mean, I had to pay somebody to, to get rid of it, you know what I mean? And so then we went fully remote, which was super awesome. I mean there's, there's pros and cons, but for us, I think the pros, like super outweigh the cons, which we get into, if you want.

[00:32:58 - 00:33:19]

Will Smith: Great.

Well, let's get back to Jared here. Jared, you. Have you mentioned the electrical line business of your previous employer? And I didn't realize that that must have been when you're where your first thesis came from, because I remember on stage you said that that was the type of business you wanted to buy. Tell us about your initial thesis and how it evolved.

[00:33:19 - 00:35:20]

Jared Lenner: Yeah, so, you know, I worked for a company that built, repaired and maintained power lines and power lines. You know, ultimately I thought, well, you know, I'm kind of know a little bit about this. And it's funny what you think, you know, on the way into a search. Right, well, but yeah, I thought to myself, well, trimming trees around power lines. Well, extremely non discretionary.

And the utility company, they get a rate base, right? So like if they have a billion dollars of, of assets out, which would be very small, but just for easy math. And they get to charge 10% based on the regulator, but they get paid on their uptime, right? So extremely price insensitive customers, extremely non discretionary. Seemed like a great company to buy.

We can talk for a whole host of reasons about why I am not the right guy to run that company. And you know, a whole host of other things. Utility vegetation management is the, I guess, the search niche, you know. But look, I think a lot of people, when they think about a search fund, they think about, they think about it backwards. They say, okay, you know, what is a really good niche?

And I'm going to outthink every searcher ever in the entire lower middle market private equity ecosystem for, you know, platforms or tuck ins or Bolt ons and I am going to think up a really great niche and I think that is the wrong way to think about it. Right. I'll spill the secret that would have saved me 12 months of searching. Although I'm happy it didn't because I'm really happy with the business I bought, obviously. Well.

But I would start with what you can bring to the table. Right. Is you have to remember, you have to replace the smartest person at the company probably. And the heartbeat of the business. And Dave is really humble.

Right. But let's remember there's survivor bias here. Like all of the Daves who aren't brilliant went out of business. He founded the business in 2002. They were out of business in 2003 or 2004 and those that were only kind of smart definitely went out of business in 2020 or 2021.

Right.

[00:35:20 - 00:35:20]

Will Smith: Yeah.

[00:35:20 - 00:37:41]

Jared Lenner: And so you got to remember like you are stepping into the heartbeat and the smartest person in the business. And that's not to say we don't have brilliant people, a great potential. We have an awesome team and I am incredibly grateful for the people that I. I guess I'll use the word inherited, although it feels a little strange.

But you know, I would say start with what you can bring to a company. And for me, I spent, like I said, the first six, seven years of my career on a trading floor. I spent some time building medium latency statistical arbitrage trading models in addition to that. And I trade eyeballs on Google. I mean, I'm exaggerating a little bit, Will.

Right. But the searcher company fit is very clear and I'll say sfa, I'll plug a little bit shamelessly, does a really, really good job of that and they help coach you to that. I also want to caution people that it may not be what it sounds like or looks like from the start. Right. Like I sat on a trading floor and I bought a tutoring company.

On the face of it, that doesn't make sense. And then you dig in the weeds and you realize, oh, like the trading model and the trading skills and understanding, you know, like I said at the start, I was a quant econ poli sci major at UChicago. Understanding, you know, how a dynamic auction marketplace works in Google and other digital ad acquisition, it's been an unbelievable asset. And you know, I don't think you would have caught that at first blush. So I guess I'd say like definitely have a thesis because it's a very bad way to raise money if you don't have one.

Like, don't go out with a PPM without a thesis in it. But my advice would be be willing to look at yourself 12 months into your search and say, gosh, like, am I really the guy that's going to be the right cultural and skills fit for a company that trims trees around power lines? And nine months in, I looked at, I mean, it was shorter than that, but I looked at other kind of similar ish stuff along the way and realized this just is not the right fit and started looking at daycares. I emailed probably every daycare with more than three locations in the United States that didn't have, you know, Christ centered in, in the website because I'm Jewish. And so that didn't feel like a very good fit.

You know Mark Andrew. Yeah, Jared.

[00:37:41 - 00:38:05]

Will Smith: Yeah, Mark Andre. He just, his episode just aired on, on this podcast. The kind of the subtlety of the skills that you have and how they can apply into a business is a great point.

You're not necessarily looking for an industry that you've already been in. You're looking for, for skills that you can transfer in, transferable skills. And those might be a little bit subtle to tease out in the child care example, what were the transferable skills there?

[00:38:05 - 00:39:50]

Jared Lenner: Yeah, you know, look, my dad was a school teacher for 20 plus years. You know, my sister runs a daycare.

I have multiple aunts who have been teachers for a really long time down here in Florida. And so, you know, I, I know the space really well. I, I had tutored and so I, I originally looked at tutoring and I got so many emails back saying there's no way you could afford me. I make a, you know, $100,000 bottom line. And I was like, okay, like there's nothing big enough for me here in tutoring.

And so, you know, I pivoted to daycares and Mark Andre was so nice. He gave me some of his time, which was really, really kind and generous of him. And we talked about it and you know, look, I think another thing, like if you look at the math Will, on how you get to 35% IRR, it's very different today than it was, you know, six years ago with very different debt and leverage environments. And you know, you can kind of look at it and you do the math and you can trust me or do it yourself, but you know, to, to hit a 35 IRR, you know, with an extra turn of debt and 4% cheaper debt five, six years ago, you know, you're looking at an 10% growth rate, maybe 8, I felt good I could grow a boiler repair firm that fast. I didn't feel good.

I could grow, you know, a lot of other stuff that fast. And daycares were really interesting because they're unit based growth. Right. You can add a fourth location and you've increased your revenue 33% if you, you know, fill it. And so, you know, it felt like a, a good fit for my family background and you know, I hadn't quite landed on the skills fit.

I knew ultimately that that was really important at that point in my search and you know, obviously really happy with the company we, we ended up buying.

[00:39:51 - 00:40:06]

Will Smith: But child care, sorry, it was mentors. Mentors didn't make sense because you were talking you, they get back to you and they were effectively one person operations. Then you go to child care, but you find your way back to, to mentoring broadly. How did, how did that happen?

[00:40:06 - 00:41:09]

Jared Lenner: Tutoring, I think. Yeah, sorry, sorry, not mentoring. Tutor. No worries. I knew what you meant.

Yeah, yeah, look, you know, around that time I had written off tutoring as a niche. And you know, I think this just goes to show that luck is a huge part of this. And Dave had responded to, I think it was my fifth email, something like that. And I'm sure Dave will tell a funny story about that in a couple of minutes. But you know, David said, yeah, you know, like, I fit in your size range.

And I was like, okay, cool. You know, we said, hey, you know, I already hired a banker. Would you be interested to see the sim? And I'm like, oh God, like, you know, you know, for searchers, a lot of time that's the, that's the kiss of death, right? Well, it's like, oh, well, it's, it's going to be a bank deal.

And you know, this is, this looks like a really attractive company, you know. So I said, yeah, for sure, I'd love to see it. But you know, at that point I had crossed my fingers and toes every, every single night for about three months until the SIM came out and you know, obviously all as well. That ended well, but I bit my nails for a really long time.

[00:41:11 - 00:42:16]

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Visit pioneercap.com or click the link in the notes.

And so what year are we now?

[00:42:18 - 00:42:25]

Jared Lenner: So this would have been December of 23. Help me out here, Dave, is that right?

[00:42:25 - 00:42:26]

Dave Serwitz: Probably, probably about that.

[00:42:26 - 00:42:27]

Jared Lenner: Yeah.

December of 20.

[00:42:27 - 00:42:27]

Dave Serwitz: Yeah, yeah.

[00:42:28 - 00:42:29]

Jared Lenner: So I think so, Dave.

[00:42:29 - 00:42:34]

Will Smith: So post Covid Dave, you had returned to the idea of selling and this time you were proactive.

[00:42:34 - 00:45:01]

Dave Serwitz: You had hired a banker.

It was like, you know, are we gonna make it? You know, I mean, I mean for the first few months and then thankfully like, yes. And then like, I feel kind of lucky that families were like canceling the appointments with their tutoring before they were canceling the billing with us, you know what I mean? So I got a little extra coasting room there, which was nice. And, but anyway, yeah, I, I, so, I mean that was like 2020 or whatever.

Again, like 2021, we did like pretty good and maybe 2022 ish time also. And then I was, I, I had a whole nother search experience which if you want I can go into. But you know, when, when that didn't work out, I'm like, okay, I, and by the way, like, if that had even progressed to the next step of the quality of earnings and all, all that, like, it for sure wouldn't have worked out because we have like, you know, to me, like there are some parts of our books and such that are like relatively complicated and I did not have a paradigm to explain them other than like, you know, how I always thought about them, which was not Gap and blah blah. And so I then got introduced by like a couple mutual friends to like, you know, a investment bank that specialize in education. And I, as I said at the CEDA thing, like, I generally am skeptical about these type of like professionals, but they like came highly recommended and I liked them.

And I realized I for sure was a bit out of my league. And so they ended up being like, super beneficial, helped me a ton, especially on the financial side, because that's my, I mean, I don't want to say like particular weakness, but it certainly is not like an area of strength or expertise. And so they, they really helped me there. And so yes, It. It was a.

It was a big benefit for me, including, you know, they encouraged me to spend, like, quite a bit of money, to, like, do a quality of earnings on our own selves, like, ahead of time and come up with a paradigm on how to explain things. Because at face value, there were a lot of unattractive things if you didn't understand the nuance, like, in, like. I just had, like, a gut understanding of the nuances, but I did not have, like, a spreadsheet way to describe them. And so they helped me do that. And, you know, it worked out good.

But, like, the first few people I talked to when I did not have that kind of like, ran or ran away screaming, and I tried to explain to them why they're wrong, but, you know, you know, they didn't believe me.

[00:45:02 - 00:45:27]

Jared Lenner: And you hired cds, right, Like a firm that everyone has heard of? Yeah, they did great work and, you know, really helped to put into numbers that someone like myself could understand. You know, exactly what we were looking at. And seeing, like a professional accounting firm having written those was really helpful for me in building my understanding and then obviously subsequently getting SFA on board.

[00:45:29 - 00:45:41]

Will Smith: Well, we're going to unpack the business and deal itself here in a minute. But, Dave, you glossed over the fact that there was another interaction you had with searchers that didn't go anywhere with anything to say about that, or is that aside?

[00:45:41 - 00:46:21]

Dave Serwitz: Yeah, I mean, I'll give you the high level. So I, like, I was like. I had like, maybe put together, like, my understanding of, like, books and like, cleaned up a bunch of like.

I mean, you gotta understand, like, my chart of accounts, like in QuickBooks, like, I probably made that like a few years in. And you know, I don't say it was horrible, but like, you know, it was just like, you know, that was. I put it together and so I had like, like, you know, I was putting everything in, like, almost like accounts receivable. So I'd like negative millions of dollars of accounts receivable, like, you know, anyway. And so, you know, it didn't really make sense, but it made sense to me, you know, and I wasn't trying to sell the business.

I was just trying to run it. So if it made sense to me, I was fine, you know. Yeah.

[00:46:21 - 00:46:21]

Will Smith: Yeah.

[00:46:21 - 00:46:21]

Jared Lenner: But.

[00:46:21 - 00:46:22]

Dave Serwitz: But anyway.

[00:46:22 - 00:46:27]

Will Smith: And by the way, Dave, like, every seller that we hear about and talk about on, on this podcast, it's the same thing.

[00:46:27 - 00:46:28]

Dave Serwitz: So cool.

[00:46:28 - 00:46:34]

Will Smith: You're. You're most.

Most founder owners are. Run their thing, their ships the same way that you are so you're not alone. Yeah.

[00:46:34 - 00:46:34]

Jared Lenner: Cool.

[00:46:34 - 00:47:22]

Dave Serwitz: So anyway, so I had these searches reach out to me, and this time I was, like, ready for another.

Like, did I think it was going to go anywhere? I'm not sure. I was like. I was like. I was like, great.

I'll take another at bat to, like, learn, and we'll see how it goes. But anyways, I really liked them. Like, they really impressed me. Their financial skills, like, maybe similar to Jared, were, like, really, really good. I was, like, very impressed with their, like, wizardry, like, on the fly, on zooms.

But it also made me nervous because I'm like, crap. Like, I won't be able to, like, validate this or not. You know, I didn't have the skills to do that, so. But anyways, I really liked them. And.

And we even signed an loi. And. And yeah, after, like, I don't know how long a while. And I would have been happy with the deal if it had worked out, but for sure the deal would not have worked out if they had done the quality of earnings, you know, and so I don't say it kind of almost like, saved us a little bit there. But, yeah, basically what happened is, why.

[00:47:22 - 00:47:23]

Will Smith: Didn'T the deal work out?

[00:47:23 - 00:47:24]

Dave Serwitz: Yeah.

[00:47:24 - 00:47:24]

Jared Lenner: So.

[00:47:24 - 00:48:08]

Dave Serwitz: So maybe I'm assuming they're like, more on the traditional side where they had, like, you know, 20 investors that were going to kick in a million bucks each or something like that. Right.

And before, you know, even though we negotiate the loi, which, to me, like, like, as I've come to learn, like, oh, like, you generally have three LOIs for every deal closed. Like, that hurts my heart because, like. Because I. To me, it was so serious. Like, like, like from my side of.

Like, from my side of, like, I don't say integrity. Like, Like, I'm trying to say I have, like, all this integrity, but, like. Like, I don't typically operate. Like, let me actually sign something and see how it goes. Like, to me, yeah, it wasn't a flippant letter of intent.

Like, a letter of, like, possible intent. This was like, we're doing this.

[00:48:08 - 00:48:09]

Will Smith: Yeah.

[00:48:09 - 00:48:17]

Dave Serwitz: Like, and this is the. You know, this is the outline in which we're doing it.

Like, that's the way I saw it. And so did it fall apart on.

[00:48:17 - 00:48:18]

Will Smith: Their end or on your.

[00:48:18 - 00:49:07]

Dave Serwitz: So basically, like, pulled. Who then they came back to me and they're like, hey, Dave, we were only able to get, like, you know, half of our investors to go into this, and so I'm super sorry, but, like, we can't do it.

Like they had already introed me to the Q of people that were going to do it, which again would have for sure fallen apart at that point. Yeah, I mean, but, but anyway, and so, yeah, I mean the bottom line was like, oh, they needed like sign off from maybe like 18 out of 20 people to make this happen. I don't know what the number was and I don't know. You know, they were, they're nice guys and so like, I don't know if they let me down easy or if they told me everybody thought it sucked. I have no idea.

You know, I mean, but you know, they basically said like, sorry, you know, we, we're only getting like half. We need like almost everybody. You know, we wish you all the best. You know, I mean, and, and I. And they ended up buying another company and I hope they're doing great and you know, I totally like them and all that.

[00:49:07 - 00:49:36]

Will Smith: But, and, and so Dave, at this point, so 2017, 18 is when you decide you open your mind to maybe selling and start wanting to get some at bats with these prospective buyers. Now it's a few years later, you've had another at bat. Are you. How are you thinking about the universe of potential buyers out there? Because there could be, you know, searchers, just one sliver of type of person entity that would buy.

Like did you think about private equity or, well, competitor.

[00:49:36 - 00:51:39]

Dave Serwitz: I mean look, I, I think I just, this is maybe like I think about things in reverse order. Like I just knew what I wanted to do and I didn't care how I ended up there. Okay. And so like what I mean by that is like what I wanted to do was to focus more efforts on my other venture.

What I knew I wanted to do was to like stop riding two horses with one ass, as somebody on my other team likes to say that I did and you know, grade potential is it. There are so many positive characteristics about it, but like there are also negative characteristics about it which probably make it a not traditional search fund bought business. Like we are B2C. We do not have contractual recurring revenue. Like all these things.

Right. And so like that was wearing on me too because like where I was like focusing over here, like, like I feel like great potential. If you take your eye off the ball, it probably can get away from you quicker than other businesses is. I mean I've, I've only run one other business so I can't really say, but you know, that's my inclination. And so I was also ready to stop like having in my like I felt like Great potential, deserve more.

I'm like, dude, there's some really cool crap that we can be doing. And I had all these ideas, but, like, I could only do, like, a very small percentage of them across two companies. And I also knew that, like, if I started to take my eye off the ball too much, like, although from an outside perspective, maybe it looked like we were doing well and we were like, I always knew like, all, all of the weaknesses and I don't. It's not a house card, but, like, sometimes it felt like that. And so I just was like, ready to, to move on.

I wanted to be involved. And, you know, I have heard, like, a lot of people roll equity and this and that. I probably ended up maybe rolling a bit more than average or something. But, yeah, I was just ready. I was just ready to move on.

I felt like great potential, deserved more and, and that, you know, I, I was not, I, I was not doing it. It's justice and like, helping it achieve its, its full potential not to, not to be like koi.

[00:51:39 - 00:52:00]

Will Smith: Well, and one of the things that I'm getting at is just how you perceive these searcher, these weird searcher people who keep showing up in your inbox. Because, because we're often. The searcher community is often up against private equity or, you know, it's an unusual, especially for a business the size of yours.

Why don't we quickly tell the audience what did revenue look like? How big a business?

I think by the time.

[00:52:00 - 00:52:04]

Dave Serwitz: So we were like just under 30 million. I think an hour, probably about just under 30 million.

[00:52:04 - 00:52:21]

Will Smith: So that, you know, the idea that one person or two freshly minted MBAs would come along and buy your business. Yeah, I imagine would. Would seem counterintuitive to you. It'd probably be a strategic competitor or a private equity fund. Or maybe you hadn't.

Maybe you just hadn't really, because you.

[00:52:21 - 00:54:18]

Dave Serwitz: Said you weren't thinking about what my objectives were, which was. I mean, you wanted to sell. Were to be able to ride, you know, one horse with one ass. My objectives were to be, you know, less stressed about letting this fall apart if I wasn't keeping my eye on the ball and to have enough, you know, like, I, I had a mentor once tell me, oh, yeah, David, like, income's great, but like, you know, balance sheet, that's where you.

That's where you have, like, financial peace. You know what I mean? And so, you know, I was also ready, like, okay, if I could have, like, enough balance sheet, you know, where I can just be like, focusing on doing what I want to do because I want to do it and being creative and solving problems and like not like worrying about money. You know, I, I wanted that like what number that was, I wasn't exactly positive and I, I, I did want a quicker trend. The reason that it was attractive was it was a quicker transition than longer.

Okay. Like I talked to some private equity firms that were really good and I thought could be great but like, you know, like it was like hey, we want you for five years. You know what I'm saying? And I'm like, well that is a long time, you know, for, for two horses. You know what I mean?

That I'm trying to stop doing. You know what I mean? And so okay, well maybe we could live with three and like if you wanted it to be two, be all these like super hardcore earn out scenarios and blah blah. And so like the real, the number one reason other than liking Jared, I like Jared, you know, but like you know, and that matters. But other than that it was just the idea that like I probably could have a quicker handoff in you know, a, a more incentive aligned way.

Yeah, that was important to me that, that search that searchers could offer that other companies couldn't. There's maybe some other strategics that like claimed I could be out quicker but you know, who knows.

[00:54:20 - 00:54:26]

Will Smith: Dave, tell us the bit about how that email almost didn't show up. You almost didn't read.

[00:54:26 - 00:55:06]

Dave Serwitz: Yeah, so I do, I do actually think Jared did email me a few times and I was like, like so at this point we had, I had hired the investment maker.

It was a, it was a, it was a lot of work, a lot more work than I anticipated. You know, I'm saying getting, getting ready and to me it felt irritating. Like you know, I mean like what, like, like this, this is what we're, this is, we're highlighting this, we're spending all the time on this. Like you know, I mean so I, I didn't think it was all the greatest oftentimes but again I, I, they were, they were, they were actually awesome. Turned out to be awesome, you know, but took a long time.

I felt like I was running three businesses now for goodness sake. Honestly. I mean, and, and, but anyway, um.

[00:55:08 - 00:55:10]

Will Smith: I can't remember your Jared's email.

[00:55:10 - 00:56:03]

Dave Serwitz: Oh yeah, so, so I was probably getting other emails but I was kind of ignoring them because I didn't feel like I was like ready for like my next at bat.

And then Jared emailed me I guess a few times and I, I think I Told you. I was like, I literally remember, like, it was like, Jared Leonard. I'm like, ah. You know, we almost could probably be cousins, probably. And I was like, I'm like, I'm gonna delete this effing email.

I'm sick of hearing from this guy. And I like, literally, like, move my mouse up, like, and I was like, about to push it. And I'm like, ah, I'll respond to him. That's like, literally how it happened. And so I just responded like, hey, you know, hey, man, you know, thanks.

Thanks for checking in. We just hired investment bank. You know, if and when you're ready to, like, you know, be included in the dog and pony show, do you want to be? You know, and he said yes. And so I totally, I. I thought I was just being polite.

I totally did not think that it was going to continue on. But then, you know, however many months later, when things are ready, I. I included him and here we are.

[00:56:04 - 00:56:08]

Will Smith: And so how many other people look seriously at the business when you. When given the.

[00:56:08 - 00:56:11]

Dave Serwitz: Jared, during what I'm like, during this bank process.

[00:56:11 - 00:56:16]

Will Smith: Yeah, I mean, and Jared keeping his fingers and toes crossed. Yeah, like, how many people?

[00:56:17 - 00:57:49]

Dave Serwitz: Oh, gosh. I mean, they probably had a list of like 150 prospects. I probably had, like, Zooms with like 30 plus ballpark, you know what I mean?

And then maybe we got like eight IO eyes. I'm just like, ballparking this. I was bummed, like, there were some, what some potential buyers that I thought would be really okay. Look, I am like, I am a legion and sales guy at heart, like, for this business particularly. And we are very like, cac to LTV kind of business, you know, and so there were some, like, strategics that had like, oodles and oodles of like, existing customers that hopefully could be like, rolled into our program.

Like, that would have been great, you know, and. And some other businesses where, like, we could have been like a feature plugged into, like, platforms that already were servicing like a hundred times more clients than we have. And if we could only get 5% of them, we would crazy XR business, you know what I mean? And so there were some really good ones like that, but for all different reasons.

All, like, all. But maybe like, one or two of them weren't part of the IOI process. So I think we had like one or two strategics and then like a few private equity firms. And then, you know, like, I think there was maybe like, honestly one other searcher that gave us like an ioi. Okay, but Yes, I think, I think we got like eight IOIs or something like that.

And then, you know, it was basically. Yeah, that's, that's basically.

[00:57:50 - 00:58:19]

Will Smith: Jared, we're about to go back to you, but Dave, one last question. So you've, you've told us about how your own like financial knowledge was kind of, you were self taught and so you didn't have the exact vocabulary that all the people with finance backgrounds do. And you had a lot of, a lot of what you did have about your business was kind of gut feel.

Did you have a sense of like what your EBITDA was? So one thing searchers do is, is always like, well, well because, because sometimes owners, as long as I, I called.

[00:58:19 - 00:58:54]

Dave Serwitz: It profit, EBITDA bothers me. It's like so, I mean, because like, yeah, I didn't borrow any money, you know what I mean? So like EBITDA and profit to me was like very, you know, like the same and I didn't like to have anything to depreciate or amortize or whatever.

Right. So for, to me like EBITDA was almost profit. And however, you know, the way in which our cash flow works is unusual and maybe complicated. So that was the big, big, big wrinkle. But, but yeah, I mean, I mean, yeah, of course I knew what, you know, on a cash basis, what our profit was.

[00:58:54 - 00:59:04]

Will Smith: Yeah, yeah, yeah. Great, Jared, so you tell, tell us about the process of actually going, going through the process with great potential.

[00:59:05 - 00:59:21]

Jared Lenner: Yeah. So three months of fingernail biting later, I get back the, the sim and you know, obviously participate in the process. And you know, I'm thinking to myself, there's just no way that we're going to win here.

But if I don't try, I am never going to sleep again for the rest of my life.

[00:59:21 - 00:59:28]

Will Smith: And Jared, with that in mind, how are you going to try to differentiate yourself when what you knew was a very competitive process?

[00:59:28 - 00:59:35]

Jared Lenner: Yeah, you know, I asked Dave what was important to him and I listened. Right. You know, from very early on it was.

[00:59:35 - 00:59:38]

Dave Serwitz: And I hopefully was probably honest, which might be different than other people, but who knows.

[00:59:38 - 00:59:50]

Jared Lenner: Yeah, that's true, that's true. Much of the chagrin of your great bankers. No, I'm kidding. Obviously they were awesome.

They're great guys. Titan is the name of the bank. They're awesome. Matt Lavelle is the bank. He's great.

[00:59:50 - 00:59:51]

Will Smith: What did he want?

[00:59:53 - 01:03:33]

Jared Lenner: He wanted a quick transition, but an orderly one. He wanted, you know, specifics as, as far as cash and, and from very early on it was extremely Clear to us that Dave was extremely important in the business. Right. Classic founder led company.

You guys have known Dave for, you know, the length of this interview. And, and Will, I know, you know, one conference and he's, he's a force of nature. Right, right. So the huge shoes to step into. And so we knew that we, we needed to keep him around.

And you know, so we rolled Dave for just under a quarter of the company, which, look, Dave, I mean you, you always believed in the future of the company. You just didn't have the time or the energy to, to take it where it deserved to go and where it, it will be going, you know, knock on wood, obviously. Right. And so I think that was really attractive to you. Something you didn't mention is that second bite of the apple was super important to you.

And I really remember there are two conversations that stand out to me throughout the deal process. The first was I fled to San Francisco as part of the LOI process as one of however many LOIs that were IOIs that were selected to send Lois if interested and fled to San Francisco. And I literally brought the computer with me and we're in the hotel in San Francisco and I turned the computer around. I said, Dave, here's the amount of money I have, here's how much you make. I think you're going to keep growing because I think this company's awesome.

Here's the laptop, here's the model, here's how much I can pay you. And he's like, yeah, that doesn't work. But what if we moved this from year five to year one? And I was like, well, I can't do that. But what if we did it in years two, three and four?

He's like, yeah, maybe we can do that. And so it really was collaborative in the end of, here's a structure that works for Dave and we can do without putting the company in an undue amount of financial pressure. Right. Because we need the cash to grow and the company deserves the cash to grow. But I think just candor and honesty.

And the second conversation right before we signed the loi, Dave, I'm sure you remember this and it's one of our company values now. You know, I picked up the phone, I called Dave, I said, dave, I have asked no favors of you yet. Right? I mean, I, we've, we've had a lot of great conversations and we've, you know, really, we're really excited about this and we're ready to sign an loi, but you know, I need to ask a favor from you. And I'm not going to do that often.

He says, well, yeah, what, like, what's up, man? And I said, dave, we're about to involve, you know, beyond the bankers, accountants and lawyers and, you know, tech due diligence people. And, and, and, and, and when. Not if, when your lawyers call you and say, dave, these guys are being unreasonable, they're being jerks, you know, I want you to say, okay, okay, like, hang up, call me. I will stop what I'm doing, and we will address it.

We need to assume positive intent from each other if this is going to work out. Right. And I'm not asking you to make me any promises about the deal, about, you know, indemnity, about anything. I showed you exactly how much I can pay. I' but honest.

And what I'm asking, I will show you that respect. But I'm asking you, like, can you do me that favor? And it saved the deal at least, Dave, two or three times. And we operate that way, the two of us together as well as, as a company. And if you take one thing away from this conversation with the three of us, to anyone listening, have that conversation right before you sign an loi.

It was incredibly impactful.

[01:03:33 - 01:03:55]

Will Smith: Assume positive intent idea being that it's bound to get sticky in a negotiation, and lawyers in particular are bound to maybe make it a little bit more abrasive than it needs to be. So the two parties need to say to each other, let's assume that the other one is acting in good faith, has positive intentions, and if you ever feel weird, just call me directly.

[01:03:55 - 01:04:04]

Jared Lenner: Yeah, absolutely. Look, we're both signing a little.

Why? Because we want this to happen. We want this to work. So if your lawyers say he's being an unreasonable jerk, call me and we'll talk about it.

[01:04:04 - 01:04:16]

Dave Serwitz: And like, one small distinction that I would say is you said, well, oh, we need to assume positive intent.

Like, to me, like, I feel like the reason it works is because we were both choosing to assume positive intent.

[01:04:16 - 01:04:16]

Will Smith: Okay.

[01:04:16 - 01:04:16]

Jared Lenner: Yeah.

[01:04:16 - 01:05:53]

Dave Serwitz: And like, I make that distinction because, like, one of my philosophies with our team, I think we're like 125 people now or whatever is like, I don't think I. Or I don't think anybody can make anybody do anything.

You cannot. I don't believe you can make anybody do anything. You can make them pretend to do it. You can make them to give appearances that they're doing it. You know, like.

But like, I don't think you can actually make anybody do anything unless they are choosing to do it. And so, like, that's my belief. Or maybe you can make them do something for a very short time or whatever. Okay. And so I guess what I'm saying is, like, it's not like these searches out there need to, like, make their potential buyer assume positive intent.

You know, that's. That's me, like, grabbing a throat. That's what I was doing. You know what I mean? But, like, what I'm trying to say is, like, like, you need to, like, you know, as you're getting to know these people, you can decide, like, hey, can we, in good faith, both choose to have positive intent with this?

And I. I feel like maybe I'm harping on something small, but, like, I. I don't think it's small because, like, it's a choice. And, like, we knew each other well enough that I believed it was sincere, and I had sincere intentions of doing that. And I had enough experiences to know that, like, yes, when these are highly complicated things with, you know, lots of things or, you know, lots of gravity at stake, that you could wonder if somebody was doing something in an underhanded manner or whatever. And so, like, choosing to assume that the person has positive intent, I. I think is. I think it's important to say that as opposed to, like, needing to make them have positive intent.

[01:05:54 - 01:06:04]

Will Smith: And so, indeed, it happens. There's a moment where what, Dave, your lawyer, says, oh, they're being jerks or something. Well, what was the example of the call?

[01:06:04 - 01:06:11]

Dave Serwitz: Maybe some of it was like, how the world equity would. Would or wouldn't get diluted or I can't.

I care taxes, or I can't.

[01:06:11 - 01:06:18]

Will Smith: But there. There was a moment where it was like, lawyers aren't getting along. Jared invited me to call him in just this moment.

I'm gonna call Jared.

[01:06:18 - 01:06:38]

Dave Serwitz: I mean, I would have called him anyways if he didn't invite me to. Okay. But there were plenty of times where it's like, hey, Jared, like, dude, we got to figure this out. Like, in, like, we got to figure out the spirit of this independent of what's being written down. We got to figure out what's the spirit, and can we navigate the spirit in a way that works for all the lawyers and such?

Does that sound right to you, Jared?

[01:06:38 - 01:07:18]

Jared Lenner: Yeah, yeah, yeah. I think it was about. There were a couple things about indemnity here or there that are super important, Right. Really material about risk transfer.

Right. Because risk is never destroyed. It's only transferred. Right. But I think, by and large, it was look like in the same way that.

Dave, you joke, like, oh, well, what if I deleted the email? I said, well, I would have just sent you another 20 emails. Don't worry about it. Right. I have no doubt you would have just kept calling me until I answered the phone.

But no, look, jokes aside, I think, you know, it's just typical lawyer stuff about stuff that's super important. And the lawyers are great, and their job is to protect each side.

[01:07:18 - 01:07:18]

Will Smith: Yeah.

[01:07:19 - 01:07:28]

Jared Lenner: In. In any deal.

But, you know, sometimes it feels like they forget that the goal is to get a deal done, not to argue and win points. Yeah.

[01:07:28 - 01:07:29]

Will Smith: Yeah.

[01:07:29 - 01:08:25]

Dave Serwitz: I think that that last indemnity point, Jared, I, I, that was like. I think that was even after San Francisco, and I think maybe I was driving back from San Francisco and I, like, pulled over to have, like, a last.

Not last, but like a very near the finish line zoom over, like a, A point that had become highly contentious. And it was like I was like, I was like, in a parking lot, like, with my kids in the back, like, on zoom on a phone with Jared and his lawyers and our lawyers and the bankers, blah, blah, blah. And, like, we were like, kind of yelling, you know, and, you know, and not. And, like, anyways. And so I get done, my wife is crying, and she's like, I don't like those boys.

That's, like, literally what she said, you know, and she loves Jared, but. But, you know, it's like, there's tough things to work out. Yeah, yeah, yeah.

[01:08:25 - 01:08:40]

Will Smith: Well, and, and by setting the positive intent thing, it's also like, not only is it, like, okay, call me if the lawyers make it sticky or whatever, but it's also like, we both want this to work, so even if things get heated, let's not give up.

[01:08:40 - 01:08:41]

Dave Serwitz: Yeah, for sure.

[01:08:41 - 01:09:04]

Will Smith: It's kind of like a reminder to, like, push through those hard moments. Yeah, it's good. It's great. Dave, we've. I've heard from you, I've heard from Jared just about, like, what mattered to you.

So. I don't want to beat this to death, but it is, it is key to the story. A, and B, it's, It's key to every search story, like, understanding what the seller wants. And so is there anything more to say?

[01:09:04 - 01:09:04]

Jared Lenner: You.

[01:09:04 - 01:09:05]

Will Smith: You kind of wanted to move on.

[01:09:05 - 01:09:52]

Dave Serwitz: That was what I wanted. I, I wanted enough money that if it, that if everything went to hell forever and I never made another dollar, that, like, we. Our lifestyle wouldn't change for the rest of my life, you know? I mean, so, like, that was important to me.

That's One thing that Jared thought was interesting is, like, you know, doing this deal, I probably got less cash up front than if I had done it in another way, you know, But I basically kind of worked it all out and I said, okay, can I make peace knowing that if I'm literally day two, like, after the close, like, it went to. It, you know, cratered, like, well, can I live with that? And I decided that I could. Not that I don't want, you know, the, the future earnings and such, but that was important to me. I just said, like, okay, is.

Is it enough upfront where, like, I'm not going to be like, financially where, you know, where. Where am I?

[01:09:53 - 01:09:53]

Jared Lenner: Where I'm.

[01:09:53 - 01:10:09]

Dave Serwitz: Where I don't have to worry about finances, right? At the.

At the. In the way that we live, you know, and we don't. We don't live on a budget, but we don't live like insane. You know, my dad said to me one time, he said, you know, you can always live bigger but not necessarily better. And like.

And so, like, that kind of stuck with me.

[01:10:10 - 01:10:11]

Jared Lenner: And.

[01:10:12 - 01:11:02]

Dave Serwitz: And I wanted a, you know, a transition that was like, faster than slower and, you know, those. And I wanted to enjoy my day if I'm going to be interacting with these people, like, somewhat regularly. And so, yeah, those things were met for me.

And so, you know, my dad also says, like, you can't ever get enough of what you don't really want. And so, like, what I'm. What I'm trying to say is, like, maybe I could have made more money somewhere else, but, like, I would still be the one turning the crank for the next five years. And so it's like, you know, if I want to be out quicker then later, and if it's enough money, then what. What does more money do?

It does nothing, right? Like, if you have enough, then, like, more doesn't actually change anything. So anyways, I mean, I don't know if this makes sense or if I'm rambling.

[01:11:02 - 01:11:18]

Will Smith: No, no, it is great because there's a point where it's kind of like as long as you're. There's a.

Not as long as Jared or whoever offers to buy your business meets a certain threshold beyond that, the. That that's a checkbox. And after that, you're looking for these other softer.

[01:11:18 - 01:11:37]

Dave Serwitz: That's how considerations of it. I don't know how other people thought of it.

You know, I'm also thankful that I had other things going on. So I didn't feel like this is like my one score and I was like, I'm not 70 years old. We're like, you know, this is, there's nothing else for me. You know what I'm saying? So I, I probably am a somewhat atypical seller, but for me that's what, that's what I wanted.

[01:11:37 - 01:11:57]

Will Smith: Well, and, and that is why this is a, a interesting wrinkle in the story, Dave, is because one of the best practices in our world is that we buy from retiring sellers where there's a real incentive that they're leaving. Because from Jared's perspective and all of ours perspective, it's like, yeah, but why is Dave really trying to sell? He's clearly still very energetic. He's young. How old are you, Dave?

[01:11:57 - 01:11:59]

Dave Serwitz: I'm 42.

[01:11:59 - 01:12:41]

Will Smith: 42. I mean he's got 20 years. And with your energy, maybe 40 years left in his career. If this business is so great, why is he, why is he trying to move on from it?

And by the way, audience, you're not getting it as, as richly as we got it at uva, but Dave talked, you talked very openly about just, you had grown somewhat tired of running this particular business and, and you've kind of hinted at that here, but that can happen. How did you, how did you think about that, Jared? That he wasn't retiring and that, and that his just, he's just kind of saying it's just time. We're taught as buyers and searchers here to be very skeptical of that reason.

[01:12:42 - 01:15:02]

Jared Lenner: Yeah, it's a question that we had a lot, honestly.

I think ultimately we got comfortable with a few things. Number one, Dave had a. Why he started a business in a non competitive space, as he puts it. Two horses, one ass. Right.

He, you know, really had taken a pretty big step, I don't want to say step back, maybe a step sideways into one foot in, one foot out. Right. And the fact that he was willing and interested and excited to roll and, and participate in the upside of the company and, and write, you know, a seller note kind of around the size that we typically see in the search space. You know, yes, he was selling, but he had skin in the game far beyond the day, the day zero or the day one, as it were. Right.

And so looked at it, I also, you know, I joked about this at uva. Dave is incapable of lying physically. I'm joking. I mean, and I do mean that as a compliment, Dave. Right.

Like buy your business from someone like that. Right. If they are willing to hide stuff or they're the sort of person that would, they will hide it better than you will find it as a searcher. And, you know, just the sort of person Dave is gave us a lot of comfort. You know, we got to know him.

He's honest sometimes to a fault. You know, I'd ask him, like, hey, like, what do you think about this? And, you know, through the deal process, he would say, like, oh, yeah, like, I totally see why you think that, but it's actually this. And that's slightly worse for you, right? So, you know, we.

We really got to trust him. And. And again, like, I just kept looking at this business and said, if I don't buy this business, I am never going to sleep. Or if I don't at least try, I'm never going to sleep again for the rest of my life. You know, we believed in it that much.

And I also think that's a testament to. To search fund accelerator, right? Like, there is every reason in the world not to do this deal, right? Like, Dave is. Is too young to have this make any sense.

The company's growing. It doesn't make any sense. It's a, you know, D2C company, right? It doesn't have contractual recur, Recurring revenue, right? Like, you could go down the laundry list.

And I walked into my. My weekly check in with sfa and I said, guys, I have never pounded the table, but we. We need to buy this company if we can.

[01:15:03 - 01:15:03]

Will Smith: So what.

[01:15:03 - 01:15:03]

Jared Lenner: What.

[01:15:03 - 01:15:08]

Will Smith: What was it that so turned you on, Jared? We. We. We know the weaknesses. What were the strengths?

[01:15:09 - 01:17:20]

Jared Lenner: Well, it had been growing and. And continues to grow, right? Like 20, 30% a year for three straight years post Covid. The tailwinds behind the business were extremely strong, right? Like, you know, I don't know if you have kids, nieces, nephews, other people with.

With little ones in your life that are special or near and dear to you, but Covid was not a great experience. And so, like, you know, to give you the elevator pitch, right? Like, we're in person in home tutoring, we send a tutor. You know, a tutor shows up at your door, right? And our largest competitors are.

They say tutoring in the comfort of your own home. What they mean is zoom tutoring. So you have a young, especially young person who fell behind because of Zoom school. And so the broad market solution is Zoom tutoring, right? It just didn't make sense.

We felt really strongly about the preponderance of academic evidence showing that in person, education matters, and that Covid induced learning loss was real and persistent. And, you know, clearly I'm not cheering for that. Will. Right like, you know, the kids are the most important part and that's what's exciting to us, is that we got to help, you know, somewhere between 20 and 30,000 young people be excited to go to school again in the last year. But every piece of evidence pointed to this business has been growing at an unbelievable clip.

Almost unbelievable clip. Thankfully believable because we bought the company, obviously. And. Right. It's clear that if we did some of the things that David didn't have the excitement to do, the upside was huge.

And I don't know about you, Will, but like my parents would have said we're having hamburger instead of steak for dinner this week before they would have cut tutoring for me growing up. And I was a volunteer tutor on the south side of Chicago when I was at UChicago. Like, I understood the business, I understood the market, I understood, yes, we are D2C but we are the last luxury someone's going to cut. Basically it's like mortgage, like cheap dinner tutoring and then everything else. And so we felt really good that yeah, it is D2C but it is the last discretion that a parent is going to cut.

Does that make sense, Will?

[01:17:21 - 01:17:30]

Will Smith: Yeah, it's great, Jared. And, and so what tutoring? What age group? What subjects is this?

K through 8, 9 through 12. All of it. What?

[01:17:30 - 01:18:07]

Jared Lenner: Yeah, everything we'll, we'll tutor, you know, K through, you know, we've tutored a master plumber exam. I think is, is the funny one one that I've picked.

You know, majority majority is, is, is K through 8 and, and you know, vast majority is K through 12. You know, we feel really good about that segment too. Right. It's not the same thing to stick a third grader in front of a Zoom tutor and say, you know, learn as a college student. Right.

And so the demographics were also favorable for us. And you know, if we can extend that, that lifetime value a little further out, you know, that's, that's really attractive. So a lot of interesting and exciting growth levers.

[01:18:07 - 01:18:20]

Will Smith: And Jared, return to flesh out a little bit about your, the skills that you were going to transfer into this. You said something earlier about your quantitative background and how the Google PPC arbitrage or something.

So, so expand on that one.

[01:18:21 - 01:18:24]

Jared Lenner: Where did you. Yeah, yeah. Not exactly arbitrage.

[01:18:24 - 01:18:24]

Dave Serwitz: Right.

[01:18:24 - 01:20:16]

Jared Lenner: But like Dave had always flown the plane by gut and done it unbelievably well. Right. But we also had kind of come to realize that the way we were bidding on digital customer acquisition, while it was clearly it ain't broke Will. And so we didn't touch it for quite a while after I got in the chair. And as I started to learn and watch and understand, you know, it became extremely clear to me, even pre acquisition, but even clearer post acquisition, that what we really needed to do was, was build something akin to a trading model for PPC advertising and start to be more data driven, start to think about, you know, how do we pay more, quote unquote, for the right customers who are higher value for whatever reason.

Maybe they, maybe it's the. The Octomom has eight kids, right, Versus someone who only has one kid. Google absolutely knows that you googled diapers by the pallet. That's probably a good tutoring. Probably a good tutoring student.

Right. And so, you know, obviously I'm being a little silly here, Will, but these are the sort of improvements and enhancements that I felt really confident with my data driven and you know, trading background. We could take some really transferable skills, bring them in. I also, like I said, I read and continue to read a lot of CEO self help books, definitely do that. I've picked up a lot of skills from there.

But, you know, I think the core revenue driver being something I felt really, really confident in making substantially better within two to four years of acquiring the company. That was something that you asked Jared, like, why'd you feel confident to walk in and pound the table and say, if we don't try to buy this, you know, I'm never going to sleep. Like, hey, I think I can make the core way we get customers in the door way more efficient. That, that's a pretty good reason.

[01:20:17 - 01:20:18]

Will Smith: Yeah, sure.

[01:20:18 - 01:20:32]

Dave Serwitz: And as Jared likes to say, one of his analogies and I have picked up many Jared isms, which is, which is cool. But is Jared's always like, oh, David, like you just want to pick lemons but you're, you're not squeezing them that good, you know, which is true, you know, for whatever analogy that may be.

[01:20:33 - 01:20:36]

Will Smith: What does that, what does that mean exactly? That you.

[01:20:36 - 01:21:38]

Dave Serwitz: What it means to me is I just like trying to find new lead sources such as new lemon fields and like getting customers, but I am not like maximizing the value of each customer.

And Jared's like, hey, look, Dave, like, honestly, I feel like I'm like a very small business. I have like a very small business mindset in like a not so small business anymore, you know, which has like pros and cons. But like, you know, I, it's not that long ago that I was like literally walking around college campuses, like putting up flyers myself. Right. And so I, Jared's like, hey look, you know, we're at the size now where if we can make this 3% better and this 2% better and blah, blah, blah, like it makes a material difference.

Where I had, I struggled to focus on that. I just wanted to be like, where can I get new customers? You know, I mean, and that. So not that Jared isn't looking to get new customers, but you know, like, I think he is much better suited at trying to figure out like how to like extract more value from what we're already doing in addition to just getting new customers.

[01:21:38 - 01:22:03]

Will Smith: Well, it's also kind of the life cycle of a business where initially it is all about new customers and later once the business is established, it becomes more, or at least much more about optimization.

And Jared is of course doing both. As you said, new customer generation never stops. But, but now there, there's this great opportunity in many of these search stories, Dave, and, and yours is probably no different for optimizing what you've already built.

[01:22:03 - 01:22:05]

Dave Serwitz: Totally, for sure. For sure.

[01:22:06 - 01:22:22]

Will Smith: Jared, what about the obvious threat of AI or supposed threat of AI? This seems like the, this seems like the, the anti AI bet here because you're, you're basically betting on human, the human to human interaction.

[01:22:23 - 01:22:25]

Jared Lenner: Yeah. I mean, look, is that, is that it?

[01:22:25 - 01:22:26]

Will Smith: Basically, yeah.

[01:22:26 - 01:24:45]

Jared Lenner: I mean to over summarize it, yes. Right. I think to provide a little more detail, which clearly you're asking me to do here. Well, I think a couple of things. First, in person matters, right?

A preponderance of academic evidence shows it. If you think what I colloquially call chat, GP Tutor is not coming, you are dumb, a liar. We're both right. It will affect us, right? You know, perhaps the first cut at oh gosh, I'm stuck at math will be, well, have you tried the AI tutor?

Right? Like these LLMs are unbelievable. Google VO3 is unbelievable. It's not going to be long before someone smashes those two things together. You know, some of our biggest competitors are basically betting the entire company or the farm that they're going to be the one first to market for that.

And that's going to be a billion dollar company. And that's awesome, right? That's not who we are and that's not what we're trying to compete on. We are in person, in home and that human connection matters. And Will, I'm not going to ask you to believe me, right?

I've taken meetings with companies that are funded by VCs. You've heard of that, have asked us like, hey, like how can we partner? Because AI can't teach a kid what to study. It can't say you're on the right track. It can't teach a kid study skills.

It can't teach, you know, emotion. It's okay that you're frustrated. Stay on it, stay on the right track. It can't make sure that they're not on Roblox, right. Or Fortnite instead of doing their homework.

Right. And so I think the bet here is not that AI isn't coming, it's that in person matters and it's the 20% better that a human being is at tutoring your kid matters to parents. Right? Again, is it coming? It's absolutely coming.

Will it affect us? I bet, you know, the, maybe the average hours purchase per customer goes down a little bit or maybe, you know, whatever one of these things may be, it, of course it'll change things a little bit. But I guess I'd leave the listeners with a question for those of you with kids or those without. Ask your friends with kids or you know, family members with kids. Do you want more or less screen time for your kids?

[01:24:48 - 01:25:01]

Dave Serwitz: And you know, Jared introduced me to the concept of like Blue Ocean, you know, and you know, are we going to be a billion dollar company? Like, I don't know, you know.

[01:25:01 - 01:25:02]

Jared Lenner: Okay, I wouldn't complain.

[01:25:02 - 01:25:45]

Dave Serwitz: To be clear, Dave, I wouldn't complain. Okay.

But like, you know, even if we get like one tenth of the way there, you know, it doesn't suck for everybody. Right. And, and, and so you know, this is a Blue Ocean type of setup and like everything Jared said's true. And in addition, like I just think like there's also always going to be preference. Yeah.

I mean like, like what percentage of, of parents like all things being equal, even if it was, you know, as efficacious and cheaper, but like. Nope. They want a human being role model that their kid can feel good about seeing and actually enjoy and not be like, you know. Yeah, watching YouTube on, on the other screen or whatever.

[01:25:45 - 01:25:45]

Jared Lenner: Yeah.

[01:25:45 - 01:25:50]

Dave Serwitz: I mean, so I think it's just preference too. Is, is, is something. Yeah, yeah.

[01:25:51 - 01:26:04]

Jared Lenner: And, and look, I think to build on that, right. Like sometimes parents want a bad guy.

Right. Like the tutor is making you do the homework, not me. Right. Or so, you know, there, there are tons of reasons that a parent may choose to have a human being come to their home.

[01:26:04 - 01:26:04]

Dave Serwitz: Right.

[01:26:04 - 01:26:10]

Jared Lenner: Like we, we've seen unbelievable numbers of academic studies that it matters a lot.

[01:26:10 - 01:26:11]

Will Smith: Yep.

[01:26:11 - 01:26:38]

Jared Lenner: Not only from the learning side. Right. Which we talked about a couple minutes ago, but also from the emotional development side.

Right. Like that, that, that, that age range that we're looking at. And you know, look, the dollars are great. And you know, I'm not going to say that we're not excited about them because of course we are. Right.

Like no one runs a search fund because they want to be a nonprofit. But I think to me, the most exciting thing is the mission, which is helping as many kids as we possibly can. And the dollars will take care of themselves.

[01:26:40 - 01:26:51]

Will Smith: And so, Jared, now that you are running the business, why don't you give the audience the elevator pitch of what in 2025, great potential does.

[01:26:51 - 01:27:37]

Jared Lenner: Yeah, so we are great potential tutoring to the best we can tell, we're the biggest company in the country that will send a tutor to your house.

Right. We are currently in 65 major US metros across, I think 40 states at this point. And we've helped 20 to 25,000 students be excited to go back to school in the past 12 months. We are growing and tutor everything From K through 12, you know, all the way up to a master plumber exam. So if any aspiring plumbers out there.

But look, jokes aside, we are. You know, I think that's what differentiates us is, is the human element and the in person, in home element.

[01:27:39 - 01:27:51]

Will Smith: Great. And I, I noticed that the second time I've heard you say getting students excited to go back to school. That's an interesting way to.

Way to put the value prop. Say more about why that language.

[01:27:51 - 01:29:02]

Jared Lenner: Yeah. You know, I think a lot of times parents call us right, like my kid failed the test or you know, my kid, it was their turn to read in class and they mispronounced a word and now they're not confident or, you know, the one of the kids in class has made fun of them and they're just not excited to go to school. And it breaks my heart.

Right. Of course, you know, performance on a test matters, but at the end of the day, right, like what parents really want, like, they don't care about the B or the A or the C. What they care about is that their kid is excited to go to school, that they are excited about their future and they feel like they are building toward the future they want for their kid. And so to me, if we help a kid be excited to go back to school or be excited to go to school again, you know, the grades are going to take care of themselves. Not to say that we don't have unbelievably high quality tutors who do a great job, you know, instructing students and helping them raise test scores. But, you know, I don't think of us as a company that does that.

I think of us as a company that helps students be excited to go to school again.

[01:29:02 - 01:29:03]

Will Smith: Boy, I love that.

[01:29:04 - 01:29:04]

Jared Lenner: That's.

[01:29:04 - 01:29:38]

Will Smith: That's subtle, but that's a really. A deeper, Deeper kind of why or value proposition.

Really, really nice. And by the way, Dave, congratulations. I mean, a $30 million business top line. I mean, that's. Yeah, that's a lot of revenue.

And I feel like I have a really good finger on the pulse for that because I've done so many interviews and understand, like, you know, the tiers of getting to the first million and then to 5 and then to 10 and then beyond. I mean, it's. You get into more and more elite strata there, and I'd say 30 million is pretty elite. Yeah.

[01:29:38 - 01:29:38]

Dave Serwitz: Thanks, man.

[01:29:38 - 01:29:39]

Jared Lenner: I appreciate it.

[01:29:39 - 01:29:40]

Will Smith: Does it feel that way?

[01:29:42 - 01:29:45]

Dave Serwitz: Just a harder kick in the nuts every day, man. You know?

[01:29:46 - 01:29:47]

Jared Lenner: Yeah.

[01:29:48 - 01:31:37]

Dave Serwitz: No, I'm kidding. I mean, like, you know, it's.

I mean, sometimes, I mean, it's like, it's. It's hard not to see past just whatever challenges you're facing, you know, but then, like. And I wasn't like, I. I like, looking back, I. I always tell myself I want to, like, more, like, celebrate the wins and, like, be proud of where you come from. And it's like, it's. I. I do want that, but it's sometimes hard to do that, like, when you're, like, in the mix, you know.

But maybe similar to what I said at Darten is like, you know, like, when I look back over a, like, longer period of time, the aggregate is like, damn, that's amazing. Like, or, like, I remember, you know, there's all these, like, poignant, like, memories of, like, shifts in the business. And like, I remember, you know, some big shifts that we made and, like, kind of strategizing them or like, on a super long trip back, driving somewhere with my wife and I'm like, pull out a notepad, you know, I mean, and we were just. I would just, like, I had some new way of doing things and, you know, when she would, like, help me, like, flush them out and whatever. And, you know, these are like fundamental shifts that, when you look back over the course of a couple years, like, damn, like, we actually did that.

Like, maybe not exactly, but we, like, kind of did that close, you know, and. And, yeah, that's super awesome, but, like, you know, so I feel good about that. But like, in the. My personal day to day experience, always was, not always usually was. I just always felt.

I say this to our team too. Like, you solve a problem, you just bump up against the next higher order problem. Great, we solve that problem. Ah, we're getting here now. We're getting.

Yeah. I mean, so it's like I never felt like, fantastic. We just, we're cruising now. It's just like you just immediately or. I always felt that.

I immediately just was now confronted with like the next higher order problem, which is better to have than the one before it, but it is still now the problem that you're working on.

[01:31:38 - 01:32:17]

Will Smith: Well, Dave, let me press you on exactly that. That's such a good. I'm so glad you said that. Because when that wire hits your bank account when you sell that, shouldn't that be one of the very few moments in your life where in fact you can just be like, wow, there isn't another problem waiting ahead of me.

Yes, you rolled equity. Yes, you're going to be involved, but really it's Jared's problem now. And you just made millions of dollars. That would have been the moment to be like, wow, I really looking around, I really now, I guess you were right into your next business and so you're worried about that one. That's why selling is so magical and becoming rich is so magical.

We, we. We are told.

[01:32:20 - 01:34:20]

Dave Serwitz: I'm serious. Thanks. I. People would ask me, when did you feel like you were making it? I'm like, I'll let you know if and when you.

I mean, like, okay, like, people would ask me that question. But you know, gosh, I feel, I feel like I'm like doing like a humble brag to say that I had a lot of those feelings. Yeah, I mean, but like, and Jared knows this and Jared has like, I don't say, talk me off the ledge many times. But like, I felt so much responsibility for, like, this to go well for Jared, you know, that, like, I did have a lot of those feelings you're talking about, like, from, from dollars in the bank, from balance sheet, you know, from straight up, you know, financial side. But like, and I said this at Darden too, you know, when Jared says, like, oh, it's like, like it's scary to like, pg.

Like, to me, I. It's more scary that other people's money are relying on this. Like, to me, that gives me much more anxiety, you know what I mean? That like, now other people have to gain or lose because in the past, it was like just me and my family, right? And like, if I fucked up, I would be mad at myself and that would be that, you know, I mean, but like, now that like other people's money and other people's futures were involved, like, that like, really feels, not heavy in a bad way, but like, feels like very, a lot of gravity with that.

And like, I felt, and still feel like significant responsibility to make sure I was giving Jared, like, the most solid foundation I could and that if anything happened, I wouldn't have to ask myself, like, if I gave them something crappy, you know, I mean, and so, so I partially felt that, but I also, I partially felt a, you know, relief, but I also partially, very much felt this like, different new type of responsibility.

[01:34:21 - 01:34:53]

Will Smith: I don't know if you know the how well you know our world now, but seller fraud is the top reason why search search acquisitions go sideways or south. And you might say, well, obviously, but actually it's, to me it's quite surprising that there are so many people who are willing to take millions of dollars from somebody knowing that they're sabotage, that this person is set up to fail. And I'm not saying it's commonplace, but when you look at the reasons that search acquisitions go south, that's the number one reason.

[01:34:55 - 01:35:06]

Dave Serwitz: Yeah, I, it's like, I hear that and like, what is fraud?

What is fraud? Right? Because like, to me it's like a continuum. To me it's like a continuum because it's like if there's now get scared, Jared.

[01:35:06 - 01:35:09]

Jared Lenner: Now gets back to biting my nails.

Now I'm joking.

[01:35:09 - 01:36:01]

Dave Serwitz: No, no, like, what I'm trying to say is like, you know, I am learn. Like, like maybe there is somebody that is literally lying in like every step of the way, actively defrauding. I'm sure that happens. I mean, you would like to think that a savvy person would like, not be, you know, would not have that gloss over them.

But also, I am sure there are like white lie fraud and like, omissions and like, well, they didn't ask me about this, so I'm not going to say anything. You know what I mean? So like, like I, I don't know, like where these fall into, but like, I can see the second type happening because, you know, if there's a lot of money at stake and blah, blah, blah, blah, I can see people behaving like, less than optimally.

[01:36:03 - 01:36:04]

Will Smith: And, and then.

[01:36:04 - 01:36:09]

Dave Serwitz: Maybe after the fact, it looks like overt fraud. I. I don't know. Yeah, I mean, so I'm no, but.

[01:36:09 - 01:36:33]

Will Smith: It'S actually a good point because, because there is part of this that's like if you're as the seller of a.

Business, of course you want to present.

Your business in the best light. So where is the line between presenting your business in the best light and being dishonest and, or even fraudulent and, and that's probably a, that's probably a harder question than we buyers give sellers credit for. Jared, what do you think?

[01:36:33 - 01:38:26]

Jared Lenner: You know, I think first we have found zero fraud.

Less than zero fraud. No, I'm joking. I mean, I am serious. We didn't buy your business from someone incapable of lying, who's a really good person, who cares almost more about whether you succeed than how much money is at the table when they close. That was beautiful.

Dave, jokes aside, right? Like I think the temptation to lie is very big when you know every dollar is multiplied by four to six or eight or ten if you're looking at a SAS deal potentially. Right. I think, you know, you hear stories about people who, you know, there's a related party transaction that you know, you did. They didn't.

Seller didn't realize that they were supposed to say or didn't know that that's what that meant. Or you know, I thought I was doing my taxes the right way, but I wasn't. Right. Like, you know, I think Dave's point of a continuum is well taken where it's like the pressure is high. I can only imagine for a seller, right.

The stakes are magnified and this is their, like this is a seller's first time. These are not folks who come from a private equity background who understand what is required, what is a material non disclosure. Right. So like I would, I'm not shocked to hear that. It's common.

I've heard, you know, a couple stories of like outright actual lying from people who knew better. But you know, most of my friends who, who've ended up, you know, acquiring a company and you know, finding out, oh gosh, you know, this isn't what I thought it was or what I thought you said it was. It's usually one of those other ones where it's a misunderstanding or a miscommunication or hey, you know, I thought that, you know, or we, we thought the APA meant this and. And you thought it meant that. Yeah, you know, as opposed to outright, you know, fabrication or.

[01:38:27 - 01:38:28]

Dave Serwitz: Agreed, agreed.

[01:38:28 - 01:38:28]

Jared Lenner: Misleading.

[01:38:29 - 01:39:00]

Dave Serwitz: Yeah. Now I don't know if you were trying to lead me into that. I, I did have, you know, at close, so I had always told my wife So I, you know, I wrestled growing up and I'm involved in some businesses that are related to wrestling too.

And I had always told my wife, I wish in business that there was a moment where I could like fall on my knees and cry the way like wrestlers do if they, like win the NCAA tournament or Olympics or whatever. My wife got me like a, A UFC belt there that I didn't know about, that she like gave to me.

[01:39:00 - 01:39:09]

Jared Lenner: A goes, which is awesome. She, she also got me a literal baton that says great potential on it for those of you. Oh, that's upside down for those of you on YouTube.

[01:39:09 - 01:39:09]

Will Smith: That's great.

[01:39:09 - 01:39:14]

Jared Lenner: There's an actual literal baton here with great potential. The logo and go Jared on the back.

[01:39:14 - 01:39:15]

Will Smith: Amazing.

[01:39:16 - 01:39:34]

Jared Lenner: So our, our quote unquote closing picture.

I, I was living in a sad Airbnb in Nevada City, California, learning from Dave. And you know, the closing picture is of me shaking hands with Dave. Passing the baton. Passing the baton, I was gonna say.

[01:39:34 - 01:39:35]

Will Smith: And Dave wearing his belt.

[01:39:35 - 01:39:42]

Dave Serwitz: Also, my wife got Jared's wife a baton too, because it's as much a kick in the nuts for her, you know, however, whatever that's supposed to mean.

[01:39:43 - 01:39:44]

Jared Lenner: Clearly, obviously metaphorical.

[01:39:46 - 01:39:47]

Dave Serwitz: But. Yeah.

[01:39:47 - 01:40:09]

Will Smith: Well, your wife, your wife is right.

To celebrate that, Dave, as a fall on your knees moment because, because you're right that so much of business is gradual. Small, medium sized wins. Yeah. But you're not going to have a more definitive, yeah, you know, victory moment in business than the signing of a, you know, closing on a business that you've built from nothing.

[01:40:09 - 01:40:23]

Dave Serwitz: So it was a little, you know, anticlimactic.

It was like 6am Pacific and we're all on a zoom and it was like. Yeah, you confirm? You confirm, you confirm. Cool, we're done. It was like 10 seconds.

I felt like, I'm like, that's that. Okay.

[01:40:25 - 01:40:34]

Jared Lenner: Dave felt like he got, you know, the short end of the stick, right. He's like, well, that, that's it. It was just like a five minute call. Like, is there supposed to be more pomp and circumstance?

[01:40:34 - 01:40:43]

Will Smith: Well, well, as I, as I understand it, the, the real moment is not the signatures, Dave.

It's the reloading your bank account number until the wire hits. Did you do that?

[01:40:43 - 01:40:57]

Dave Serwitz: Did you do that? Well, I mean, I, I suppose, you know, like metaphorically, you know, I'm saying. But okay, but yeah, and anyways, man, it's, I mean, it was great.

It was awesome and I'm super thankful and all that.

[01:40:57 - 01:40:58]

Will Smith: Good.

[01:40:58 - 01:41:01]

Dave Serwitz: But anyway, well, guys, let's, let's bring.

[01:41:01 - 01:41:17]

Will Smith: It Home here because we haven't even heard about Jared's leadership and, and there is some. I think there's a few minutes that we want to spend on that.

So thank you for all the color on, on what the actual closing is like from both your perspectives and your wives perspectives. Let's not forget we have a friend.

[01:41:17 - 01:41:37]

Dave Serwitz: That she would complain and she would, she would post. I mean, I, I'm not like a social media guy, but she would be like, like, and it to me also take a humble brag like, oh, like CEO wife life. Oh, you know what I mean?

And so like if they hear that, maybe they'll know I'm like making fun of them. But, but anyways, it's, it's, you know, it's real.

Woe is me.

[01:41:38 - 01:41:39]

Will Smith: When did you guys close?

[01:41:40 - 01:41:51]

Jared Lenner: August of 2024. So first email was December of 23. No, no, no, we were not a.

Wait, no, excuse me. December of 24, 23 is when we.

[01:41:51 - 01:41:52]

Dave Serwitz: Met in San Francisco.

[01:41:52 - 01:41:53]

Jared Lenner: Oh, you're right.

[01:41:53 - 01:41:53]

Dave Serwitz: Yeah.

[01:41:53 - 01:42:51]

Jared Lenner: So first email would have been August of 23. We met in San Francisco, December, signed the LOI in March, closed in August. Obviously substantially longer than a typical deal will. You know, we have tens of thousands of customers and millions of transactions due diligence. We have to do cohort analysis and you know, all sorts of different stuff.

So extended timeline. You know, Dave, I was literally sending Gantt charts of like, we are here, this many weeks to go. And I was actually pretty close to a guest to a guesstimated closing date. Although the bankers were like, how is it going to take you that long? I'm like, guys, I do not have a team of analysts.

It is Jared and, and sfa and like Trevor Lou, you know, the VP at SFA is awesome and he's brilliant and was incredibly helpful through the process, but, you know, definitely a longer cycle than typical. We closed in August of 24. That one I know is true. So super obviously super exciting and it's been fun to leave.

[01:42:51 - 01:42:57]

Dave Serwitz: I wasn't rushing every year in the sense of like, we were like doing super well and blah, blah.

So I wasn't like rushing it, but. Sorry, what's up?

[01:42:58 - 01:43:15]

Will Smith: Well, well, what about Jared's kind of transparency and showing you where you are in the process? Was that something that helped you feel confident that it was going to close or was that never really a question? Because that, I mean, strikes me as a really helpful thing for you to, to reinforce the fact this is going to happen, this is going to happen.

[01:43:15 - 01:43:21]

Dave Serwitz: I mean, I didn't feel like Jared was dragging his feet. So I, I, I mean, he did show me that, but I didn't feel like he was dragging his feet and.

[01:43:21 - 01:43:21]

Will Smith: Okay.

[01:43:21 - 01:43:35]

Dave Serwitz: And I wasn't rushing it either. Yeah, I wasn't rushing it either.

So I wasn't like, like, I just wanted to get it right. Yeah. I mean, like. Yeah. Took what it took.

[01:43:36 - 01:43:41]

Will Smith: Great, Jared. So you can tell us now in front of Dave, is the business that you thought you bought, the business you bought.

[01:43:42 - 01:44:48]

Jared Lenner: No, it's better. No, seriously, though, it's an unbelievable business. The people that, you know, I inherited with the company are unbelievable.

You know, buy a great business from a great person who tells you the truth and has done a really good job of hiring really good people. If you do that, your job is a lot easier running a company, obviously, you know. Well, thanks, Jared. Like, that's, that's great advice. That's the hard part, obviously.

Right. But, you know, that's made my life super. Super. I don't want to say easy, because this is a very difficult job, as I'm sure you and anyone who's been on this, been on the pod, can speak to, but we've had the breathing room to hire a cfo, a coo, data engineer, head of technology. We have some tremendously smart and talented people.

We've done a little bit of relabeling titles, but broadly, the businesses, A, continue to perform beautifully, and B, you know, the people that I've inherited have been awesome.

[01:44:49 - 01:44:55]

Will Smith: Dave, one of the things that searchers intend to do when they buy a business is to change that business.

[01:44:55 - 01:44:56]

Jared Lenner: Of course.

[01:44:56 - 01:45:21]

Will Smith: Right. That's why they're buying it.

And that can be uncomfortable for the, for the sellers to see their, you know, baby changed or just, or, or.

Just to see decisions made that they.

Might not agree with. Jared's now 13 months in, you're on the board, you're, you're involved, as Jared has made clear. Has there been any, any discomfort on your part in watching Jared do whatever Jared has done for these last 13 months?

[01:45:22 - 01:45:54]

Dave Serwitz: I mean, there's been, like, uncomfortable things, but, like, you know, that's no different than when I was running it. So, yeah, I mean, so there hasn't been anything that Jared's done that I, like, disagree with or I'm uncomfortable with or wish he did differently. You know, as we talked about the other day, like, there are some things that Jared did that I don't have, like, the temperament and skill set to do. So I didn't like watching them happen. But, but I also Also understood, like, why it was important and the value of them.

But it wasn't like a party.

[01:45:56 - 01:45:56]

Will Smith: Like.

[01:45:56 - 01:45:56]

Dave Serwitz: Like.

[01:45:56 - 01:45:57]

Will Smith: What do you mean?

[01:45:57 - 01:48:21]

Dave Serwitz: Oh, like the, like, as Jared called it, like de risking.

Like, you know, I mean, like, the truth is, like, maybe you could say I got lucky that, like, I mean, we had plenty of, like, things that blew up in my face, but, like, nothing that was bad enough to, like, you know, be an existential threat or something like that. Right. But, you know, you know, there. There maybe were a few of those that Jared knew of. This wasn't like, he came in and it was like, oh, by the way, like, you know, I mean, so.

But it's like, you know, it's very like, okay, here's an area of risk that I haven't really dealt with. Like, here's an area of risk that I haven't really dealt with. You know, here's another area. And then they. Well, David, there's also.

Here's another area of risk that you haven't even considered. Like, that's true. You know, I mean, okay. And so, you know, for the first six months, Jared spent a lot of time, you know, like, defusing any potential bombs, you know, which is valuable. And, and, And I appreciate him doing it because I always knew that maybe some of them were there, but it's like, you know, you can only do, like, however many things you can do, and you got to decide what's worth it and blah, blah.

And so, so Jared did all those things, but after a while, I'm like, dude, we're not doing anything cool, you know, I mean, like, yeah, like, I'm teasing him. Like, you know, I mean, but like, so I'm glad he did that. So that. So, yeah. And then there were, you know, some.

Some team member stuff, you know, that wasn't, like, amazingly glorious, but unfortunately, I dealt with, like, less than glorious team member things myself too. Right? So it's like, yeah, there's nothing. I mean, I think Jared's doing a great job. And I mean that not just from a financial standpoint, but from a people standpoint.

And I think Jared, you know, I mean, look, I probably was like a one of, you know, probably my harshest critic. Maybe Jared is too. And like, it did feel good when people that I respected and admired told me, like, wow, Dave, like, you're doing a great job, you know, blah, blah, like, okay, thanks. Because it feels like I'm hanging on for dear life sometimes, you know, and so, you know, Jared is doing a great job. Maybe he feels like he's hanging out for dear life or not, I don't know.

But no, there's. I haven't disagreed with anything. I mean, sometimes it's just not my style or preference. But like, that's also why Jared's here. And you know, hopefully one plus one is more than two and hopefully like, you know, like it's probably good that Jared and I have like not perfectly overlapping skill sets because like then I wouldn't be very beneficial.

Right. And so I'd like to think I can add some value still. And you know, Jared adds value in ways that I wasn't able to. And so that's. So that's great.

[01:48:22 - 01:50:50]

Jared Lenner: Yeah. Look, I think obviously you guys can all tell Dave is, is my biggest cheerleader beyond the fact that he is the largest individual equity holder in the comp. In. In the company. Right.

Like, you know, he truly cares about me and the success of the company and, and our people, which is incredible. Buy your company from someone like Dave. If I haven't said it enough, you know, like the stuff he's talking about, like employee handbook, buying brand new computers for the whole company, like hiring a world class cybersecurity firm to get us, you know, fully, fully up to where we want and need and deserve to be. You know, these sort of things. Hiring a cfo, I'll never forget one of the hard days.

Dave had a bookkeeper who's awesome, super nice person, like incredibly kind, you know. And so through the diligence process was like great. Like, you know, it's a part time bookkeeper, you know, she has her own little firm and does. And so yeah, Stove. So great.

Like we're, we have investors like GAAP and accrual accounting is not optional. Like we have this methodology. Do you understand it? Are you comfortable? Yes, absolutely.

Great. And so on day, you know, 33, we go to close the books and I'm like, okay, great. Like we're going to sit down and go through the revenue deferral schedule together. Are you ready? And literally she goes, I quit that day.

So, you know, wow. There's unexpected stuff along the way. And obviously, you know, my first call was to, to sfa. I was like, guys, like, you know, this just happened. Like clearly I'm not gonna.

And the second call was to the lender and I was like, I'm so sorry. Like clearly we didn't see this coming, you know. And we have, obviously you have some time to get your feet under you for reporting and all that, but super transparent. We were able to and had Power bi dashboards. And I could tell the business was performing beautifully.

So I wasn't worried about, you know, are you making money? But I, I didn't know how much for probably the first 60 or 90 days. So, you know, look, I think have a hundred day plan and, and know that there's 0% chance you're going to do it in the order you think you will. But the absence of a plan is in, is, is a plan. And so, you know, definitely have a plan for what you're going to do, but know that things are going to happen.

Like your, like your bookkeeper who swears up, down, left, right and center that, you know, they're, they're comfortable and excited to do accrual and gap quitting the literal morning that they were supposed to start on that.

[01:50:52 - 01:50:53]

Will Smith: Wow, Jared, that would have been a.

[01:50:53 - 01:51:02]

Dave Serwitz: Scary one for a long time. And she called me up, I was on vacation. She's like, so Jared probably will be calling you. Yeah.

I'm like, okay.

[01:51:02 - 01:51:13]

Jared Lenner: And to be clear, no hard feelings. Like, she's so nice. She's a wonderful woman. I just wish that, like, I had known that, you know, 30, 45 days prior.

Sure could have planned around a little.

[01:51:13 - 01:51:25]

Will Smith: Better the SFA model of working with searchers. Jared, are they going to continue to be involved operationally? Are they, how, how much support do you get at this part of the journey?

[01:51:25 - 01:52:55]

Jared Lenner: Yeah, look, the support's tremendous.

I would say have a great board. It really helps a lot. So obviously Dave is on the board. We have an outside board member named Brian Kibbe. He's amazing.

Like 15 out of 10. You know, I consider Dave and Brian friends. I mean, I consider Tim, Matt and Sean friends too. But, you know, look, I look at them as board plus. Right?

Like, they don't meddle. They're not interested to, you know, micromanage at all. I have a weekly call because I choose to. And you know, they've said, hey, like, we can take that down. Like, you're doing really well.

I'm like, no, like I, I really enjoy bouncing ideas off you guys and saying, hey, like, what do you think? What else has worked? SFA has slack channels with every single CEO. So if I have a problem I'm facing, I can slack and ask a CEO who's been operating, right, Ask a group if I don't know who has faced that problem before. So the level of support post close is as good or better than pre close.

Right. And I don't want to say it is the level of involvement you choose because Obviously, this is a single capital source investment. It's a concentrated bet. And the flip side of that is, of course they're going to provide more support and be closer with you as a CEO, I look at that as a giant benefit. Once a year we all go back to New Orleans or Denver.

This past year we had a crawfish boil and in the new office, it was a heck of a lot of fun. And I will take any excuse I can to go to New Orleans.

[01:52:57 - 01:53:03]

Will Smith: Amazing, guys. Any last thoughts? Anything that we didn't hit that you wanted to or shall I close this out?

[01:53:03 - 01:53:09]

Jared Lenner: Look, as I joked previously, previously with you, right? Like, long time listener, first time caller.

[01:53:09 - 01:53:11]

Dave Serwitz: You know, been a big, been a.

[01:53:11 - 01:53:19]

Jared Lenner: Big fan for a long time. It feels a little bit like I'm meeting a celebrity here today, Will, but, you know, it's been a blast.

[01:53:20 - 01:53:34]

Dave Serwitz: Yeah. The only thing I might add is, and I, I would assume that this is kind of like broached, but like, like, it ain't easy, right, Jared?

[01:53:34 - 01:53:34]

Jared Lenner: You know what I mean?

[01:53:34 - 01:55:02]

Dave Serwitz: And, and so, like, I mean, I feel like that's kind of what you're implying when you say, like, oh, the closing of the business is just a starting line. I feel like that's kind of what you're implying, but like, yeah, you know, I don't, I mean, I've been involved in different business groups and blah, blah, which have been awesome and like, I don't know a single business owner or somebody running it, that it isn't like a very significant struggle most of the time. Yeah, I mean, that's my, that's my personal experience. Maybe I have a biased sample set, you know, I mean, but yeah, that's just my experience.

It's like, hey, like, you, like, just, just, just. So I, I had a wrestling coach in college and he was a, he was a world champ, silver medalist in the Olympics. And he's like, yeah, his little kid, he's like, yeah, he's, he's starting to get into wrestling. He's thinking about wanting to wrestle. And he's like, he's like, it is a lot.

He's like, he basically was saying, like, I don't know if I want to encourage him because it is a long journey. He, like, looked at me and said, it is a long journey. You know, and like, I feel like I think about that a lot too, because I feel like that's probably this. And like, you know, if people like fully understood what they are getting themselves into, like, would as many people do it? I don't Know, like, we'll see what Jared thinks, you know, I mean, in a few years and.

But, you know, I think that's. You just got to be like, however, however. However tough you think it is, it's probably going to be tougher. I mean, like, I'm sure there are exceptions, but. What do you think, Jerry?

[01:55:03 - 01:56:10]

Jared Lenner: No, look, I think that's true. You know, look, I think that's true through the search process where it's like, hey, you know, celebrate the little wins along the way. Because it's a binary process where if you do it right, you buy one company, right? So like two years of no, no, no, you're dumb. You could never buy me.

I make a hundred thousand dollars for one. Yes. Like, if you're not celebrating this, the, the Iois and the Lois and, you know, all of the steps along the way, it's really arduous. And look, running a company is, is really difficult. It's, it's.

There are nights that I toss and turn and don't sleep, but it. Is it worth it? Yeah, it's awesome, right? I mean, I'm biased, obviously. Like, we're doing really well.

We're growing. You know, we're a company that helps kids be excited to go to school again, Right. Like, it's pretty easy to be pumped about that mission, right? But it's really hard to run a company. It's worth it, it's awesome.

It is everything I dreamed it would be and more. And the, and more is both the good and the bad. Right? But on the balance, it's the best decision I ever made to search. Great.

[01:56:10 - 01:56:26]

Will Smith: Let's send it there. Guys. Jared Leonard and Dave Surowitz, thank you very much for coming on. Thanks for sharing, Dave, especially you. It's really hard for us to, to get sellers in our community on stage, so we appreciate you doing it today at Darden Etc.

Really great to get your perspective.

[01:56:27 - 01:56:34]

Dave Serwitz: That's my new goal. I just want to, like, try to have, have more fun, like enjoy my days, you know, I mean, so I'm happy to be here. I'm enjoying it. Thank you.

[01:56:34 - 01:57:21]

Will Smith: Yeah, good, good stuff. Thank you, gentlemen.

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