[00:00:00 - 00:05:55]

Will Smith: Today's story has an eye watering outcome and it shows the potential of buying a business. Jerod Pierce used the equity from a townhome that he'd house hacked with some buddies to buy an H Vac business doing three and a half million in revenue. Half a million of sde. He was able to buy the business himself without investors. Five years later he sold it for upper eight figures.

Jerod doesn't tell us the exact figure, but he does say that he turned down $95 million. So it had to be in range of that. Jerod is humble about this staggering success. He acknowledges that timing was crucial here. He bought and grew Mercurios just as H Vac was becoming a white hot.

Target for private equity. But really, there is so much Jerod should take credit for. He did 10x the revenue of the business over those five years from three and a half million to 35 million and 12x that half a million of SDE to over 6 million of EBITDA. So yes, there is luck here in that he could command a higher multiple. Than he might have gotten in cooler times.

But at $6 million of EBITDA he would have had a big eight figure exit. Whatever the multiples had been, Jerod's posture going into the exit process also helped. He didn't need or want to sell, which is of course the best negotiating position from which to sell. And so how did Jerod build the business over those five years? Listen for some of the key ingredients.

How he devoted himself to mastering digital marketing. How he devoted himself to learning sales, including going into the field to do it. How he was present in 110% involved. He was there seven to seven every day and on many Saturdays you'll hear him say that some Saturdays when he didn't have to go to the office, he'd go just to go just to find something to work on or improve that last piece. Presence is huge.

According to Jerod, he subsequently acquired another small home services business, this time through. His family office rather than as a scrappy self funded searcher with an SBA loan. But it has not gone well and Jerod believes that his lack of presence is a big reason why. There is much to take from this epic business buying journey with Jerod Pierce, owner of Olympic Holdings Investments. Enjoy.

As you know when buying a business, so much of your success comes down to the people. Attorneys Bill Barlow and James David Williams return for an office hours all about the legal questions related to this topic, specifically employee issues and non competes. Bill and James David will cover all the employment, non compete and non solicit issues that commonly come up on deals. That is this Thursday, September 18th, noon Eastern. The webinar is employee issues and non competes when buying a business.

Link to register for the webinar is right at the top of this episode's show Notes or on the Acquiring Minds homepage. Acquiring Minds 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 who.

Do it looking for an SBA loan to buy a business? Then meet Pioneer Capital Advisory, your team for getting an SBA 7A loan quickly and at great terms. The team at Pioneer has closed 81 SBA loans in just the last two and a half years with with an average close time well under the industry standard. Founder Matthias Smith and General Manager Valerie stash both have 10 years of SBA experience and know the process cold. There are three analysts at Pioneer who build you a lending presentation that speaks the language of the bank's underwriters and gets them to yes, two account managers to guide you from underwriting to close as fast and smoothly as possible, and two sales associates ready to walk you through the Pioneer Capital advisory process.

That's nine people at Pioneer, a real team to get you where you're trying to go. New owner of a business, go to PioneerCapitalAdvisory.com or click the link in the notes. Jerod Pierce welcome to Acquiring Minds. Thanks for having me, Will. I'm really looking forward to sharing your story, Jerod, which I first heard myself Ron Rick and Royce's podcast Think Big, Buy Small.

You were one of their early episodes. Your story begins with a challenging upbringing. You got yourself to Harvard Business School. You made a fortune in home services after buying the business as a self funded searcher. And now you're back in another home services business, this one going not quite as well.

Let's say we'll get there. We are going to hear about this entire journey right up to the present. So let's get right into it. Jerod, the challenging upbringing background that I referred to, please give us a picture of that and we'll go from there. Yep.

[00:05:57 - 00:09:02]

Jerod Pierce: So I like to consider myself Will, a product of the state. So I was born in Seattle, Washington and into a disadvantaged background. And what I mean by that is my mother, single mother, addicted to heroin, frequently in and out of jail. And so growing up I was in and out of foster homes and initially that was in Seattle, Washington and then we made our way from Seattle to Missoula, Montana and along the way I was in and out of a number of foster homes, I've slept on the street at a young age because we had stayed in a hotel, got kicked out, slept in a car, dumpster diving for food, behind grocery stores. So it was a very, very.

At the time, when you're living it, you don't. As a young kid, 6, 7, 8 years old, it's, it's not as difficult to think about as it is as an adult, but in and out of foster homes up until the age of about 10. And that's when I was in a permanent foster home in Missoula, Montana. The interesting thing about that is when I was in Missoula, I had been spending a lot of time with my best friend and he, his mother was a lesbian or is a lesbian. And so you have, I'm black, I'm in Montana, and my, I'm spending, I'm living with my biological mom here and there.

And eventually she gets in a decent amount of trouble and has to go back to prison and is going to go for an extended period of time. And so my best friend and his mother and girlfriend asked, hey, would you be interested in living with us? So I decided to move in with them in a trailer park in Missoula, which was, fortunately for me, the first time in my life where I had had some real stability from a household standpoint, albeit a non traditional household. Today people here hear this and it's, I think it's much more common. But this was 30 years ago, right?

So gay marriage wasn't even legal in the state of Montana. And I think if maybe not anywhere in the country. So it was just, it was, it was different and, and, but that point of my life, living with them was one of the first times where I started to really take off and excel because I had stability within the household. Well, Jerod, just to kind of set the stage about you as a person, so we're, we're going to hear about this trajectory, this rat really rags to riches. But one thing too that I want to ask you about, at the risk of making you uncomfortable, is you come across.

[00:09:02 - 00:09:52]

Will Smith: This is the third time we're talking. I've. Sorry, the second time we're talking. But I, but as I said, I heard your interview with Rick and Royce. And you come across as a very.

Like, balanced, level headed person. So aside from, you know, this, this just outsized success that you've had in kind of a conventional sense, what about the fact, how is it that you emerged from such a rocky childhood to basically it's at least seemingly, I don't, I don't really know you, seemingly. So with such a good head on. Your shoulders, I think for me and for most kids in, in foster care, it, you, you kind of learn how to survive in a non traditional environment. Right.

[00:09:52 - 00:11:38]

Jerod Pierce: And so what that, what that means for me, what that meant for me was being able to, if I, if I wasn't level headed and easy to be around, that, that would have, that could make it more difficult for me to have excelled in life growing up. And so I generally can be in a room and if there's 30 people, 25 of them are going to like me just because of how I tend to carry myself. And I think that that was just something that I developed as time went on in order to just fit in and try to be accepted in a lot of different environments. Because when you're in foster care, 1, 1 minute you're in a house that looks like X, the next minute you might be in a house that looks like Y. And so you've got to be able to relate and get along with a lot of different people.

And I think that's just a skill that I fortunately learned at a very early age was how to try to carry myself as best as possible and get along with people as best as possible. Yeah. And, and, and that certainly makes sense. On the other hand, Jerod, I would, I would think that a lot of kids who had that experience wouldn't learn to adapt and instead they would like, defy what they're experiencing and, and get into trouble, basically. So did you ever get into trouble?

I did. Okay. Okay. Yeah. Maybe not in the.

I got into trouble with the first time I was out of my house in, in high school with drinking. Really that's what it surrounded being, you know, drinking and partying with friends. So I've had my fair share of trouble, for sure. Great. Sharon.

[00:11:38 - 00:11:59]

Will Smith: Okay, so. So you. Do you go through high school with his family in, in Missoula? I do, Yep. Eventually my best friend's mom and, and her girlfriend split up and so I ended up moving in with her with her partner.

[00:11:59 - 00:16:15]

Jerod Pierce: So my best friend and I ended up going our separate ways, still friends, but going our separate ways because they were going to move to a different part of town that I didn't want to move to. But in short, I stayed generally in that same environment. Connect the dots then from, from that to hbs. Yep. So during my senior year of high school, my biological father reached back out and said, basically told me that he had terminal Cancer and was going to be passing away soon, prostate cancer.

So I had graduated from Big sky in Missoula, Montana and I was then, then at the University of Montana. I walked on and was playing football there and had decided that I wanted to get to know more of my biological father's side of the family because I really didn't know them at all. So then I moved back to Seattle and moved in with my biological grandmother and met that part of my family in a pretty meaningful way and attended Seattle University. While I was at Seattle University, I joined an investment club that had, that was managing at the time $50,000 from a firm called DA Davidson. And we were investing it.

And so as part of that relationship with DA Davidson, I got to know a number of folks at that investment firm. Coincidentally, DA Davidson is headquartered in Great Falls, Montana. So they in this, the office that I was working with was, is in Seattle, Washington. So they liked me quite a bit just given my background with Montana. So I ended up doing an internship with DA Davidson that ultimately pushed me into their investment banking group.

So I did, I was intern in investment banking and then after I graduated I joined the investment banking group within DA Davidson in Seattle, Washington. That's significant because the building that we were working in there was a gentleman that I would frequently see going up and down the elevators who was a African American and black guy as well. And he worked at a private equity firm called Gen X360 that was based out of New York. His name was Art Harper. Art and I became very close and eventually Art said hey, you should think about coming to work for Gen X and, and helping us in an operational manner within our, our private equity firm.

So I go to New York, I interview, they hire me and I'm at Gen X360IT that's an industrial B2B focused investment fund at the time, a $600 million fund. While I was there, there were a number of folks within the office that had gone to HBS and some of them had said hey, you should think about applying and going to Harvard free mba. So had something like that ever occurred to you, Jerod? Getting my MBA had occurred to me. But never going to Harvard or you know, or like a Stanford, like an Ivy League, a top business school.

That hadn't really occurred to me what I was thinking about doing more. So was going and maybe doing it on a part time basis and continuing to work within private equity or if I still would have been doing investment bank but just kind of doing a part time to check the box Because a number of folks had said, oh, you need to have an MBA if you want to be a partner, a managing director, et cetera. So I ended up, they helped me with my application. I ended up applying to Harvard. I get in and next thing I know I'm enrolling there in the, in the, you know, in the upcoming fall.

That did create a little bit of tension within the investment firm I was at because some of the partners thought that I was leaving a little too early, but I opted to do it anyways and so that's how I found myself at hbs. And, and so when you get into Harvard to hbs, is that how, how's that feel? I mean, I'm sure anybody who gets in is exciting. Is, it is exciting. Well, you know, but particularly from somebody like you, like, you know, from your background and you said that you had, it wasn't even really on your radar.

[00:16:15 - 00:16:54]

Will Smith: Kind of a part time MBA would have been, but. And then you find yourself actually granted admission to one of the world's famous business schools at. So I imagine it was even, even more exciting for you maybe than for others. Yeah, no, I remember getting the acceptance letter and posting a picture of it on my social media account and you know, I didn't really know what to expect when I, when I got to Harvard. Right, but you're in what's called sections, which are kind of like a mini fraternity and you're with a great group of folks, right, that have, a number of them are still really good friends of mine today.

[00:16:55 - 00:17:41]

Jerod Pierce: And you're with a variety of backgrounds, some folks that come from very wealthy families, wealthier than I had ever been associated with, and then other folks that are not the same background as me, but, but less fortunate upbringings, if you will. And so that was another instance of my life where I'm interacting with people from all different economic backgrounds and, and, and learning how to interact with, with different people. But it was, it was, it was different, but it was, it was a lot of fun. And while I was there is. When I took and first learned about entrepreneurship through acquisition after taking a couple of courses with Rick and Royce, did.

[00:17:41 - 00:18:06]

Will Smith: You feel like you, when you got to hbs, that, that you, that you belonged? You know, these, these really prestigious places, oftentimes there's imposter syndrome. You know, in, in some ways, no, but in some ways, yes. I mean you find, you find other like minded people naturally. I mean the, the class is pretty big.

[00:18:06 - 00:19:40]

Jerod Pierce: There's, there's 900 kids in a class and within a section there's 90. And so you will find people that you belong with and then there's other groups of people that you don't really interact with much because you don't you. I, I didn't feel like we could have a great relationship. And I also, what's different with me is I tend to have my best friends have been my best friends since we've been friends. So when I, even though I went to I was at hbs, my best friends from undergraduate or high school, I still spend a lot of time with them.

There are some kids that come into like a business school environment and I've never quite understood this, that it's like all of a sudden there's these big groups of friends and they're like, we're best friends. And I'm like, you guys have only known each other for a couple of months. I don't understand how you can have this great relationship relative to like, where were all your friends before? And so for me, that I have a couple of really good friends from business school, but I don't have this broad friendship group and have a bunch of new best friends from business school. So I was there to do what I had to do.

Played intramural sports, did some fun stuff and established a couple of good relationships and you know, was back in Seattle. You know, Jerod, they say my wife in grad school though, so. Oh, well, yeah, at Harvard Law School. So I do want to put that out there. Yeah, yeah, it was good.

[00:19:40 - 00:20:09]

Will Smith: Good roi. You know, they joke about business school that the value of it is the network. And so, you know, all that networking you're doing and those connections that you're making are, is more invaluable, is more valuable than the curriculum itself. So pretty interesting to hear your take on long term friends versus, you know, making a lot of maybe thinner friends or quicker, quicker connections, but more of them. Yeah.

[00:20:09 - 00:20:40]

Jerod Pierce: I think the best value that I got from going to, to Harvard is, is when you meet other folks. You know, when I was searching, which I'm sure we'll get into, you tell somebody you go to Harvard, they just think you're smart. Whether, whether you are or you aren't, you get this like instant level of a certain level of credibility. Yeah. With folks that I think that's the value that's really hard to put a price tag on is that you know.

[00:20:40 - 00:22:11]

Will Smith: That one of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or Even pen and paper. But tech is complicated with tons of solutions out there. So choosing the right cloud platform, CRM, telephony, compliance and cybersecurity, not to mention implementing all that, is a job in itself. Acquiring Minds Guest Nick Akers knows this firsthand. As a former searcher who now owns Inso Technologies, Nick has seen the tech challenges searchers face when acquiring businesses.

His team at Inzo regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients, drawing from his own experience in the search phase. Enzo dates back to 1989. So this is a company that has managed the tech for hundreds of small businesses over decades. And one last thing, no long term contracts with Enzo, a big differentiator.

Check out enzotechnologies.com I N Z O or email Nick directly@nickzotechnologies.com and don't forget to tell them you're a searcher. And so you find yourself in the ETA course. Rick and Royce's course. What year is it now? So I did it.

[00:22:11 - 00:26:09]

Jerod Pierce: I took a course both years. So I did. They have, they had two courses, ETA one and ETA two. So this is the first course I would have taken in 2013, 2014, kind of that, that crossover year. And then 2014 and 2015 would have been the second.

The second course. So the first, the first course was very introductory and then the second course was more just a more intense version. Guest speak, you know, is just a little bit of a deeper level. Great. And so was this, you know, the kind of cliche, love at first sight things that sometimes people in ETA talk about or is this is the path I definitely know I want to do this or no, not necessarily.

It still wasn't love it at first sight. I found it really, really interesting. And the idea of being your own boss and having greater economic and income upside than doing other career paths, including going back into investment banking or private equity, is what I found interesting. I'm a very competitive person. I've grown sports, growing, played sports, growing up.

And so the idea of taking a business, thinking about it as a team and trying to win as much as possible, I found that part interesting. But it wasn't something that I 100% knew for sure, especially after the first course in my first year, that I would be really interested in doing it was more so by the end of my second year that I was leaning towards it more and more for a couple of reasons. One, the job search. I thought going to Harvard I was going to be able to work at any private equity firm in the world that I wanted, and they would come to me and I would just kind of pick whichever one I wanted to be at. That's not how it works.

Worked for me. Um, and so I ended up joining a smaller private equity firm in Boston after I graduated. And that, that time there is what really had me revisiting the courses I had taken at, at HBS and saying, yeah, maybe, maybe buying my own company is, is a better route for me than staying in private equity. And what was it about your exposure to private equity there at that Boston boutique that made you want to go search? So I was their first.

It was two partners and me. And everything was flowing downhill to me. So in the worst way possible. So my hours were terrible. I wasn't making very, very good money.

I wasn't doing a very good job. I was in over my head. Like, I kind of oversold myself on what I could do. And so there was a lot being asked of me, which I hadn't really done in my prior life. And so I, I only spent about a year there.

And at like month 10, I had a conversation with one of the partners. I was like, hey, this typically if, if you're not happy, somebody else isn't happy either. Right. In any relationship, personal or professional, I feel like if one side's really not happy, the other side is probably feeling a little bit of it too. And I figured that was the case with them.

And so I said, hey, you know, this is what I want to do. I want to move back to Seattle. I'm going to do a self funded search. And so we agreed on just like a couple of month transition. They would find somebody else.

And so it was a very amicable separation. But it was the time. It was just too many things not going my way that had me feeling like a career change was the best move. Okay, Jerod, so you decide to search and you decide to do it back in Seattle, we assume, because that's where your family is. Correct.

[00:26:10 - 00:27:05]

Will Smith: Give us the criteria, how you thought about tackling your search. Yep. So while at hbs, they had talked about the two ways that you could search. A self funded search are going with, you know, what some folks might call the search fund mafia, which is where a group of investors, formal or informal. But there's, it's, it's really a formal now industry will give you a salary and help fund your search and the diligence costs and transaction costs and whatnot, and then put up the Equity when you buy a company and then you as the searcher and I'm simplifying this, but generally are in some sort of promote scale of depending on how well the business goes that you buy, you might get 10% of the equity, 20%, 30%.

[00:27:06 - 00:30:14]

Jerod Pierce: It can vary depending on whatever you work out. But that's kind of the norm is anywhere from 10 to 30%. If you do really well, you're at 30, you don't do well, you might be at 10. And that's the traditional search fund model. That's a traditional search fund model.

The self funded search is try to do it all on your own. And so and at hbs, that's what I had really taken away as, as the push was doing it on your own. So when I moved back to Seattle, I moved in with my sister and my grandmother was living, my maternal grandmother was living with my sister and I drove my grandmother's car. She, she had dementia at this time, so she was just, you know, living at the house with us and I was living rent free and I was doing a local search because I wanted to be in Seattle. It's where I wanted to live.

And I felt like I could have success finding a company there if I was very active and aggressive about it because I had met other folks that were doing searches and they were flying all over the country, Nebraska, Florida. And I just felt like it was a little bit of a waste of time and a lack of focus.

And so for me it was, I want to find something within two hours of Seattle, within a drive. I felt like it's crazy, that is to say I could drive up to two hours one way. And I was willing to just do that because again, as I mentioned earlier, you know, I grew up with not much. And so generally speaking, I'm willing to work a little bit harder than most folks and willing to travel a little bit further than most folks might be open to traveling. Why do you say that's crazy now that two hour radius because even for you that was too far.

Well, because it's a long, it's a long ways to drive one way. Yeah, every day. It is, it is. And the business that I ended up buying was 45 minutes away and that's an hour and a half every day. Yep.

And I did that every day and we'll get to that. But. And so to think that I might be driving four hours a day is, is a lot. But I think that I would tell somebody that that, that is something that you can do though, right? Because I, I believe you need to be present.

So if you're going to buy a business, you should, and you want it to be successful, you should be present. And if you buy a business four hours away one way, I don't know how you're going to really do that every day. So for me it, I started off with the search similar to my private equity backgrounds, B2B. So I was looking at manufacturing, machine shops and I felt like, man, well there's just so many of them in the Pacific Northwest in the Seattle area anyways with Boeing and some other larger manufacturers there that I would have success doing that. Great.

[00:30:14 - 00:30:45]

Will Smith: And what about the kind of size and what you were going to do for, if anything for equity? How are you going to scare up the money to, to, for whatever you bought? Yep. So my, my search evolved quite a bit and I don't know if that's normal for other searchers, but for mine it evolved a lot. And so like I started off, like I said, local, looking at manufacturing and machine shops and looking at companies a little bit larger.

[00:30:46 - 00:35:54]

Jerod Pierce: So I had folks that I had previously worked with and known in the industry that had expressed interest in being investors because I, I really didn't have much money. When I decided I was moving back to Seattle to search, I had bought. This is a funny story. Well, I had bought a townhome in 2010. I paid $290,000, $293,000 for this townhome.

My two best friends moved in with me. It was a three bedroom, three bath townhome just north of Seattle. And there was a Obama had this tax credit for first time home buyers. He got this like $10,000 tax credit. Yeah, I remember it cost.

My down payment was like, I did an FHA which was three and a half percent. My down payment was like 15,000 bucks and I got 10 of it basically back. So I put, you know, and call it five grand down. Two best friends moving with me. We're all paying 700 bucks a month in rent.

My mortgage and everything is covered. Well, you Fast forward to 20. I started the search at the end of 2016 and I ended up closing on the business at the end of 2017. So it was, it was just under a year. But in the meantime I knew that I needed cash.

So I sold the townhome and I sold it for 595,000 bucks. So I, I, yeah, I walked away with just, you know, call it $300,000. Turning five grand into 300 grand. Yeah, yeah, maybe that's the Episode that we should talk about. Yeah, it was quite a return.

Yeah, no, it was a great return. Great return. Right. And so, so I was using that, I knew I had that to put in as my own equity into whatever opportunity buying in terms of it evolving. I had first started out with larger companies with people saying they were interested, but as time went on, I was thinking, I was like, man, first of all, there's a lot fewer larger companies out there.

Like looking for a company with 3 million of EBITDA, 4 million of EBITDA versus 500 to a million. It's, it's, you know, it's, it's, it's a fast, fast difference. Your pool of opportunities, if you look smaller, are much higher. But I had, I remember looking at a pallet company and giving them a, an LOI for $26 million. I didn't have 26.

I, I didn't have anywhere. I didn't even know where I would get it. I just was just faking it till I make it. I was just, you know, just if, if we got a deal worked out, I was just going to try to find the money. Um, and it probably wouldn't have worked out and I probably would have been one of those bad stories that people hear about like I shouldn't worked with the search fund or they didn't have the money, yada yada.

But then time went, as time went on and, and quickly. One thing I learned pretty quick, like I'm willing to adapt pretty quick. So, you know, started the search in October of 16, found a, closed a business in November of 2017. And along the way I am honing in and shifting where I'm no longer looking at just manufacturing businesses. I've now looked looking into home services and B2C businesses.

I stayed away from things like healthcare and technology because I just felt like was too far out of my scope. But anything blue collar was not fair game. I'm driving down the road, I see a car with whatever sort of signage on it or a truck with signage on it that looks like it could be interesting. I'm writing it down, looking them up when I get home, calling them, trying to get lunch. And so the advantage I think to searching locally.

I met so many people, so many business owners in the Pacific Northwest. It's probably changed now, but five years ago, I don't think anybody knew more small business owners than me. I knew so many owners by first name because I would cold call them or I would email them and just say, hey, look, whether you want to Sell or not. I think this could be a valuable meeting for both of us because at worst, we. It's two more people that know each other.

And I can also tell you what people may be interested in, in your business if you do decide to sell down the road. A vast majority of business owners know they have to have an exit at some point. And so I would meet with some of them and I would say, look, you're. You're really small right now, or you're too involved in the business, or you've got too much, you know, customer concentration or whatever it is and kept in touch with a number of them. And I think that's an advantage to searching locally because business owners also know other business owners.

Yeah, I had some business owners introduce me to other business owners and, and whatnot. And so. Go ahead, Jerod, Let me pause you. I mean, this is just fascinating because you are, you are also therefore doing a proprietary search, a real scrappy proprietary search, taking phone numbers from the sides of Vance. And so you would cold call as opposed to email.

[00:35:54 - 00:36:15]

Will Smith: And how often or would you follow up with email? Because I imagine getting to an owner, first of all, the extent to which people even pick up their phones now, about 10 years later, is. Is dropped. I mean, we, most of us don't even pick up the phone because the only people who call are our, you know, our partners or spam. Yeah.

[00:36:15 - 00:37:13]

Jerod Pierce: Yeah. So at the time, maybe more it was easier to get through, but, but still, point remains, I imagine it was hard to get through. Did you also email? What did your script, both call and email sound like? Exactly.

Yep. So always tried to lead with an email first. Always, always. And my wife was helping me and we had an intern, unpaid intern that I had hired as well. And so we would, once we found, say we were.

We saw a truck and they did H Vac. We would then be like, okay, let's look for all the H Vac companies we can find. That looks like an interesting industry. Let's look for all the H Vac companies we can find. When I graduated and first started searching, I don't even know if I really knew what an H Vac company was.

It wasn't like it is today. Like, people weren't talking about it like that. You know what I mean? Like, it really. It wasn't like an industry that I think people were aggressively going after, but we did that.

[00:37:13 - 00:37:41]

Will Smith: Well, that was going to be my question for you, Jerod. So let me, if you, if you'll indulge me, let me just ask you point Blank. Yeah. You were ahead of the curve. You.

You bought an H VAC business before H Vac was hot. Did. Was that just because you just, you know, you went through a bunch of industries and looked at the fundamentals of the industry and seemed good and you went after it, or did you have. I mean, you were just. The timing here is.

Is striking. What. What did you see in H Vac that nobody yet did that. But that. But that everybody eventually did.

[00:37:42 - 00:40:41]

Jerod Pierce: I only saw a business that an owner was willing to sell me at a price that I could afford to buy. Okay, that. That's. So by the. I'll jump forward a little bit and then still go back.

But like, by the end of my search In October of 2017, I had two H VAC companies that I had the ability to buy and a waste. A trash compactor business as well. So. And they were all within. The one ended up buying was the one furthest away, actually.

And they were all I close with, with all three owners. Met with them multiple times like a deal was going to happen. I knew for sure, certain with one of those, it was just a matter of. For me, at that point, it was like, all right, Jerod, which one do I want? And I picked the H Vac one.

The, The. The specific business that I picked, I picked it because the owner I felt like was least involved at that particular business.

When you're. When you're meeting with owners and searching, there's certain cues, I feel like that can kind of tell you increase your probability of success of buying that. And one of them is how involved are they? Right. And I feel like when you buy a business, you also need to be prepared to step directly into that owner's shoes and in every.

In every facet, so. Including how much money they're making. The trash compactor business, I really liked that business. I think initially I liked that one more than the other two. But the owner wasn't making very much money himself, and he never went on vacation, and he lived in kind of a small house.

And not that that necessarily means everything, but I just was like, man, this seems like a great business. I mean, they had contracts with the airport and the, the sports stadiums, like, zero customer concentration. They go around, they service these compactors, they sell. It just seemed like. Seemed like a great business, but I was.

But just something just wasn't. Wasn't working. Whereas the one that I, I did go for, he was there, you know, typically out by. By noon, did not work in the field. Had 10 acres in a little town called Gig harbor, just outside of Seattle.

Nice, you know, nice house, a farm with farm animals. And, And I was like, he's doing, you know, and I'm looking on there, I'm seeing he's taking decent, decent distributions because I asked for the bank statements. I did all the diligence myself on the one end of buying. And like, man, I can see he's making. He really is making money and he.

He has a pretty good life, and that's why I opted for. For that particular business. Well, Jerod, just to underline this, I. I've. You're not the first person to mention it, but it's not. It's not a technique that we hear about often.

[00:40:41 - 00:41:25]

Will Smith: So it's worth mentioning just really this point about looking for evidence, looking for signals from the owner's own life and lifestyle that, you know, this is because. In some ways you're going to buy the business. So you'll. It's likely a good proxy of the life you'll have in the business, or at least it's a good baseline. One hopes that you'll grow the business and have a better life than they have, but at least it's a good baseline.

And if that baseline feels like a life you wouldn't want to have, that may be, you know, something you really want to pay attention to. So, great call out. Thank you. Yeah, I. I've met with other searchers, and it's just amazing to me when I hear about some of the businesses they're looking at buying, and I'm like, well, what's the owner doing? They're like, well, he works in the field.

[00:41:25 - 00:43:34]

Jerod Pierce: And I'm just like, oh, my gosh. Like. And you think. And you don't know anything about this industry. And they're like, oh, well, you know, he seems like a really good guy.

And they're going to work. I'm like, dude, you can't assume any of that. You've got to make sure they have the people in place there. And so, yeah, for, for me, I don't know how to fix a furnace. And, you know, I didn't know how to do any of these.

Any of these industries, any of these businesses. And so I had to be very selective and I oftentimes would pass on opportunities because I just felt like I could not fill that owner's shoes. And to your point, on. On the baseline, oftentimes people feel like I can run this business better than the old owner. And maybe that's true, but you better be prepared for you to be able to just Run it just as good as that owner and be exactly where they are.

And so going back a little bit, when I would search and I'd see a vehicle and we'd dig in, we had a very consistent process for emailing. One, we had this app or widget at the time called not contact, maybe Contact Monkey or mailchimp. Monkey or something like that wasn't mailchimp. It was something that when we sent an email, we, we could see if you had opened it, if you had clicked on an attachment, if you forwarded, if it, you know, if you didn't do anything. So we had down to the.

The subject line was very specific. And we had the first email that basically went out and the first paragraph was very unique. The second paragraph was like for the industry. The third paragraph was like, hey, just a quick background about who we are. And everything for Olympic holdings was at that time and was oversold.

You see Olympic holdings in this email. You're like, this might be a. These guys seem pretty credible and there might be some there. Some something there. There wasn't anything there.

The names on there that said they worked. There were people that were my friends. Okay. Yeah. So because I.

[00:43:34 - 00:44:57]

Will Smith: You were leaning on that Harvard credential pretty hard. I was leaning on the Harvard credential hard. 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 6 do it for you. Owned and led by a former Searcher, Chris Williams, System 6 is a leading outsourced finance team for. 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 6 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 system6.com link in the show notes or email helloystem6.com and then the second email. Most of the time I knew we weren't going to get zero response. On the first email.

[00:44:57 - 00:46:41]

Jerod Pierce: It was like very, very little. But the second one was. But much more casual and it was like changed it to follow up and just like, hey, just want to follow up on the email below if you're not interested, that's fine. We could, you know, Grab, grab coffee or breakfast, you know, I can come to you. Keep it, keep it really short.

We had very, I won't say very much higher hit rate and response rate with that. If we didn't get anywhere with email, then I called them and I would just call and I'd be like, hey, this is Jerod as will around, you know, and sometimes, sometimes they're like, whoa, hold on. You know, I'm like, well, I'm decide. We've, you know, I've sent a couple of emails just following up on an email, wanted to touch base with them and that had about, I want to say it felt like 50 hit rate, but it was probably like a 25 hit rate. I got through here and there.

But it, it's, it's harder, you know, and you, when that owner gets on, you've got seconds to make this work. And it's like, hopefully they've seen your email and, and I'm just trying to get them to grab coffee or lunch. And so when you do a local search, you can do that. When you're doing a national search, you're not going to go, I can't imagine you're going to hop on a plane to go meet somebody for coffee. You're going to try to Zoom or FaceTime and things.

And so it's just, it's not as, as deep of a relationship that can be built with folks in a short period of time. And I think that was a big advantage to me. Searching locally was, you know, it was, it was just over a year. It was 13 months for me to buy. And, and we got to move on beyond the mechanics of this.

[00:46:41 - 00:47:19]

Will Smith: But this is really good stuff, Jerod. But last question on it. The, you get them on the phone and so you don't say, hey, I'm a searcher, I'm interested in buying a business. I'll continue your legacy. It's like, hey, I would you get, can I, can I come to you and we'll grab coffee?

Would love to learn about you. Would you say? Yeah, it was more so because they do want to know what's the purpose of, of, you know, grabbing coffee or lunch. So it'd be like, I am interested in, in buying or potentially partnering with you on your business. I think that I could be helpful and if it's something you wouldn't want to be a part of, I, I could maybe be a good steward for you to transition it to and I'm very flexible.

[00:47:19 - 00:48:33]

Jerod Pierce: Like whatever, whatever type of transition would be most appealing to you is a transition that I'm willing to help you try to achieve. And so everybody that I've. Anytime I meet with the seller, I'm. I'm letting them know what you're going to get with me is flexibility.

And, and, and if you're not interested at all, I can still. I'd love to learn more about your business and industry, and maybe I can be helpful. So if that time does come, then I can, you know, help position you in the best light possible to sell your company. And I've had owners, I've. I've had two with three owners follow up with me since my search, wanting to sell and have connected them with brokers to help them sell and help them on the process and just talk to them.

And one of them, I was actually up in Seattle a week or so ago, and we're. We. We missed each other, but are planning to reconnect. And it's an interesting business. And that's.

That's all this is a relationship from. You know, this is eight years. Eight years now. Wow. Wow.

Yeah. Wow. That. That's a really remarkable proprietary outreach there, Jerod. Really good success on it.

[00:48:34 - 00:49:06]

Will Smith: Cool. Yeah. Carry on then. Okay, so you find the. The three businesses.

Two H Vac, one trash compactor. You go for the H Vac, even though it seems like the trash compactor business is. The fundamentals of that business seem more appealing, but the lifestyle of the owner seems less appealing. So you go for Mercurios? Yep, and I go for Mercurios relative to the other H Vac business, because Mercurio's was essentially all B2C, so it was.

[00:49:06 - 00:56:47]

Jerod Pierce: It was just a little bit more simple. Whereas the other H Vac business was about 50, 50 commercial and B2B and then B2C, the other, you know, residential for the other 50%. And on the commercial side, you know, I'm in his office, there's these plans, and they're, you know, it's just like drawings, and it just looked like a lot. And I'm like, man, I'm like, so who kind of like, who, who. Who checks to make sure this is all right?

He's like, oh, well, you know, I'll look over everything. And I'm just like, yeah, I can't do that. Like, I'm not going to look at these. At these drawns and make sure that the airflow is going right and there's enough CFM and blah, blah, blah, blah, like. And so then I opted for the.

The. The more simple of the two ATC business, interestingly, Enough. I almost bought that business a couple of years later, but it was. I just felt like it was still a little too early for my first add on. So the business that I buy is Mercurio's and when I purchase it, it has 15 employees, 16 if you count the old owner.

But it's fairly. There was really no single point of failure within that company from an employee standpoint, which I like. They had two sales guys, so I had to have both walk out the door. They had two install crews, so I had to have. With a foreman on the top.

So I had to have both walk out the door for that to go sideways as well. They had five service techs and so it was just a little bit. I felt like there was. The owner wasn't working in the field. And so I felt like, okay, this is a business that I have to really go in and screw this up or get multiple people to run out the door within the same department for us to not have some.

For us to have an apartment go away, if you will. It had been around since 93, so it had been around for about whatever that is, 25 years when I bought it. And the owner was a little bit older. He was, you know, call it 60ish. Just under.

His engage was like 59. And so I was like, okay, he's. It's not like this is one other thing. I. I tend to look for wills. I don't like to really buy businesses from people that are too young because I.

It's kind of like, well, why are you selling it? Sure. You know, like, why? If you're able to run this business for 30 years, I feel like, well, it can't be that bad. There is a person that has done this for 30 years.

And so, you know, and so those aspects of Mercurios were great, but it was small. It was three and a half million in sales and about 500,000 of. Of EBITDA. And I paid 1.75 for that business. So my focus going in there, because I knew nothing about.

I knew nothing about H Vac was I had to learn. I felt like for me, the strategy was learn as much as I can about this industry as quickly as I can. And to do that, I need to make sure I make this as compelling of a place as possible for the old owner not to leave because he has a lot that he could teach me. Then two, I need to grow this business as fast as I possibly can to get more people under me. So I had even fewer points of failure that could happen.

So if we have two install crews, how do I get to four as quickly as possible? It wasn't so much about making more money that came with it, but it was really about survival. Like, I need more people, I need more expertise, I need more gray haired guys around me. I need more people doing every single aspect of this business. So if somebody walks in and says I don't want to be here anymore, I'm like, okay, you don't have to be here anymore because that will happen.

Right. That's so interesting, Jerod, that approach that you are about growing not for money's sake, as you said that that would come, but more just kind of for this strategic kind of to make the organization more robust 100%. And so, and it's one of those things, looking back, people always say, well, don't worry about the money, don't worry about the money. Or how do you not worry about the money? But looking back on it, it's like if you.

It wasn't, I wanted money, but it was really like the driving force was protecting the business, making sure the mothership could stay afloat, you know, in any sort of storm. And so with that, what that meant for me was I like invested a lot into marketing because I wanted to get the word of mouth out there and I controlled all of the marketing. So I worked with Google and Microsoft and Facebook and they all have teams in house that will help you run your campaigns and we'll tell you, do you want to try this? Do you want to try that? And so what that did for me was two things.

One, we had essentially zero agency costs. Like I didn't build our new website, but it was built on Squarespace and I would make changes to the website, but all of our ad spend, 100% of it went to the ads. So if we spent 5,000 bucks a month in Facebook social media ads, all of it went there. That, that I feel like will save a company 10 to 20% of their marketing spend. Because I think agencies typically take around 10 to 20% of your spend is, is my understanding of how they will work.

So one more of our dollars went, more of our marketing dollars went to marketing. And then coming from outside the industry, everything that we put out I obviously had, I approved it all. And so for me it was like, well, I felt like if it makes sense to me who didn't really know much about this industry, then it might make sense to somebody like you will, that doesn't know a lot about H Vac as well. And so that was a big component of it. And then I, I early on learned sales as well.

We had a sales guy that wasn't performing well. I go to the owner, the old owner, and I said, hey, he's not doing well. Would you teach me how to do H Vac sales? And by now, by that time, him and I had had a pretty good relationship because I really was. 7am I'm there.

I was 7 to 7. 7am to 7pm I was generally one of the first people there and generally one of the last. Unless a crew was working late on a job and they, you know, they got back at like eight or something. But for the most part, I was there all the time. And it.

So that bought me a lot of respect from not just the team members, but the old owner. So a lot of people at that company were willing to invest and help teach me. If folks needed something on a job site, I'd run them out on the job site. So when I asked the owner about teaching me how to do sales, he said, sure. So for like the next 30, 60 days, half the sales calls that came in, him and I would go on and we'd go together and he would teach me about the ductwork and airflow and he'd like, you know, look at these.

Count these registers, open these up. Here's how you size up windows. Here's how you do a load calc on the house. And so reading the nomenclature on a, on a furnace, air conditioner, heat pump, I can look at it. I could come to your house right now, Will, and I could sell you a system.

Like, did they. I could size up your house, be like, here's exactly how much airflow you need. So that's how much I leaned in. So you take that, you couple it with the marketing and just things started to come together for us. Where.

[00:56:48 - 00:57:27]

Will Smith: And Jerod, why. Why, you know, these decisions to invest yourself in learning X or Y, in your case, marketing, then sales, our investments there. I don't. Maybe not capital allocation decisions, but attention allocation decisions. Why did you decide that those were the right things to learn as opposed to maybe some of the technical stuff?

It sounds like on the sales calls you were learning technical stuff, but why do you think that those areas were. Because every owner and CEO's decision point around what should I do versus what should I delegate? Why were you deciding to not delegate those out? I. Yeah. Yep.

[00:57:27 - 01:00:23]

Jerod Pierce: So kind of two parts. The marketing and office aspect of it. I, I knew I could get, I knew I, I understood that and I could do that. Right. Just given my, my background in banking and private, like I just kind of get the, the office stuff.

I get and I tend to be like very critical and a perfectionist when I'm looking at things. And so I'd see something come around from an office side of marketing and I'd be like, that, that's, that's terrible. Like, we've got to change this, do the, do that, get, get uniforms and, and whatnot. So I knew I could do that aspect of it. And on the other side, the, the field side, sales was the lowest barrier to entry for, for somebody outside of the industry.

If you want to be an installer or a service technician, that takes, it is a skill trade. And so that would take a lot longer to get up to speed on that.

I can look at an install because I'm just familiar with the codes and I can tell you if it's, if your system's installed correctly, but doing it was just going to be, take a lot more time to get to. It's not uncommon for home services companies to hire folks from outside the industry and teach them sales especially, you know, if they're a great salesperson, they're like, we'll take a great salesperson. We'll teach them this, you know, how to sell within this space. And so for me, I felt like, okay, if I can at least do the sales part, then if any of the sales guys leave, yeah, I, I'll, I'll just do sale. Now all I need is an installer and a service guy, right?

Yeah, yeah. And so it was the barrier to entry, like I'm using that academic term, but it was this, this, the, the least steep learning curve was sales. Jer, just before we move more into the story, the terms of the acquisition, it was an SBA deal. Yep, SBA 10, 10, 80 sort of thing. What did it look like?

The seller carried a 10% seller note. Yeah, it was probably about 10, 10, 80, 10% seller note, 10% equity. I did a little bit more than 10%. I think I put 260 grand in. So it was essentially all the cash I had.

And then the rest was an SBA loan. And I was comfortable with that because fortunately my wife was working at a local like fairly large law firm. So we were comfortable putting up as much cash because we knew that she was doing pretty well, making a decent amount of money. That what gave me a little bit of peace of mind with this business too was I knew I could not make any money if we had to just live off of her salary, we would be able to do that. But in terms of the structure of the deal, it was probably more like 10, 15, 75.

[01:00:24 - 01:00:55]

Will Smith: Okay. Okay. 15% being your equity into it. Yeah. And Jerod, as will become so apparent to the listeners later, that decision to not take investors was maybe the best financial decision you've ever made in your life in terms of dollar amount.

But was it actually a deliberate decision or was it simply like, I have the cash from this, the sale of my townhouse, so I'll just do it myself. As opposed to, as opposed to trying to raise equity from my network.

[01:00:58 - 01:02:33]

Jerod Pierce: It was more so I was looking at the amount of money I was going to put down and being like 50 grand, 30 grand, 100 grand from somebody else coming in and now they own a third of my company and it's only 100 grand. Right. And I know that's a lot of money when you're first searching and you don't have very much. Like I get it because I had saved a little bit, so I had a little bit more than what I sold from the townhouse, but I didn't have like, I maybe had to my name half a million bucks, which is, is, is a lot. But I got lucky on the townhouse.

Right. That was, that was an element of luck there. And so for me, I was just like, man, I'd rather just roll the dice. I've, I've, the worst that's going to happen is I'm going to be bankrupt. Right.

And I've, I've grown up without anything anyways. So I just was looking at it and I had some people that wanted to invest and I just was like, I'm just going to go it, go it alone. But, but actually, Jerod, to your credit, I, I, I didn't give you credit a minute ago when I teed up that question because to your credit you did recognize that selling equity in a self funded search deal can be quite expensive. That, you know, bringing in 100 grand for whatever you said, as, you know, 30% of the company that that was, was likely to, if this played out, even if it didn't play out in, in an astronomical way as it has, but if it played out, that was probably going to be a very expensive check, equity check to take. So you, that was the, you were actually strategically thinking about it, even though you kind of just yourself said, well.

[01:02:33 - 01:03:00]

Will Smith: I'll just take a risk on myself. But really you, you appreciated how expensive that equity was. Yeah. And I, and I would tell somebody, like, if you're Going to raise equity, make it meaningful, make it something that you cannot do on your own, then I would do it. Like if you, if you can't do it on your own, if you literally can't do it on your own, then of course I would take outside equity to get the deal done.

[01:03:00 - 01:05:11]

Jerod Pierce: And you, it is what it is, otherwise nothing. You don't move forward, right. You don't get to the next stage. So unfortunately in my case I didn't have to do that. I did and I still give my current business partner a hard time about this.

Shortly after buying the company, I offered a couple of people a total of 8% of the company I offered who would ultimately become my general manager and the other sales guy who was really strong, I offered him both 4% and in return I said hey, I want you guys to sign a non compete and they're from the industry. They see this, they see this agreement. I think they're looking at 4% of a company, it's a small company at this time, you know, we're yeah bought it at three and a half. Maybe we're doing 4 million at this time, you know and they're like 4% and I can't go, I can't do what is my livelihood anywhere else within. I'm just gonna, I don't even 25 miles or something, right?

It was. And they both passed on it and I said well you know, maybe I'll put together some sort of bonus plan for you guys or something. Well, the sales guy ended up not putting anything in place for him at all. Like him a lot. But I just knew sales then right like now it was like, like yes, good sell.

I wouldn't want to lose him. But if he leaves, I'll just do it myself. So his value went down to me quite a bit. The other guy, I did put a bonus plan in place for him and some other members of the, of the management team. But I had offered him 8% and that would have been a lot of money had they had they and I in my, my business.

Who the guy, the general manager who passed on it, who's my business partner. Different endeavor. Now he still says well you know, you could still, you could still give it to me if it bu you still bad g you can still give it to me. Well, the funny thing about it is is both parties there, you and them just thought it was going to be worth a lot less than it was. You were only offering it.

[01:05:11 - 01:05:25]

Will Smith: You would of course you wouldn't have offered it if you knew what that was going to eventually be worth, and they were not interested because they couldn't see how much it could possibly be. Be worth. So, yeah, really interesting. And we. The audience still doesn't know the number yet, but we'll get there.

[01:05:25 - 01:05:40]

Jerod Pierce: Yeah. So returning to the story, Jerry, you said things started coming together. You had learned to do the digital marketing yourself. You had learned to do sales yourself. One thing to underline about digital marketing or one thing to call out about digital marketing.

[01:05:41 - 01:06:10]

Will Smith: As I understand it, right around in this time frame, 20, 17, 18 time frame was when home, particularly H vac, but home services broadly, started getting more sophisticated as an industry about digital marketing. But there was this window of time where you could, I guess, probably generate a lot of leads for yourself way more inexpensively than what you'd see today. So this was that timeframe. So you were probably doing really well with your digital marketing. I expect on a cost per lead.

[01:06:10 - 01:07:27]

Jerod Pierce: Basis, 100% and the ability to. If something wasn't doing well, I could change it. Right now, it's in same day. Right. Like, I'm looking at it in real time.

I'm doing my own searches in incognito mode and making changes depending on how we're ranking or searching elsewhere in the country to see how companies in our industry are, like, why. Why do these guys rank high organically going on the website, taking some language from theirs, tweaking it a little bit, making applicable to ours. So, yeah, it was. It was their early. The early days of digital marketing.

Fortunately for me, I got to grow with that. Like, I got to experience that firsthand. It's kind of. I'm watching this documentary on the Cowboys, America's Team, and, you know, Jerry Jones buys the Cowboys, and his family comes in and they don't know anything about football, and they grow it to be this phenomenal franchise. And now, of course, they all know.

They all know football as well as anybody. Right. But to step into that today would be much harder than to grow with it and similar to them. But I'll be in a different industry. I. I've got to grow with that.

And so that. Yeah, that was, you know, that's an element of luck there. Yeah. Yeah. Great.

[01:07:27 - 01:07:45]

Will Smith: Okay. And so when you say things started coming together and I guess the business started growing nicely, what did you mean? And we might have to accelerate kind of through your whole ownership here, but any kind of big inflection points, big learnings from that, from your. Your ownership period. Yeah.

[01:07:45 - 01:09:00]

Jerod Pierce: So I think our numbers went like three and a half to five and a half, 12 months later, to seven and a half, 10, 13, 20. Like it just went boom, boom, boom, boom, boom. Wow. And so my approach to it was, well, as we get more dollars in, it was a will. As we get more dollars in, let's spend more money on marketing and then let's get more customers and spend more money on marketing and get more customers and spend more money on marketing.

And next thing you know we're doing postcards and val pack and TV commercials. PPC social like our budget when I bought the company. To give you a sense of how much more money we were spending on marketing, when I bought the company the year prior, I think his name was Chris. Chris had spent $38,000 in marketing for the whole year, less than 40,000. By the time I sold it.

Our total marketing budget was 1.4 million. So we were over a hundred thousand dollars a month in marketing. You know, we basically what he would spend in a year, we were spending. Not quite, but call it in a week, two weeks. Yeah, yeah, yeah.

[01:09:01 - 01:09:27]

Will Smith: You must be a pretty expert digital marketer at this point in the story. Yeah, I mean I, I, I feel like, I, I feel like I get it as well as anybody, especially I mean Google, Google in particular, they want you to be successful. So when they're, when their reps call you, they're saying, hey, do you want to try this ad? I was like, sure, I'll try it. It was this dynamic search style ad.

[01:09:27 - 01:13:40]

Jerod Pierce: There's a best performing ad. I was like, yeah, that's great, let's spend more on that. You know, and I'm not as sophisticated as these other folks, but. And they're like, yeah, no, it's working well. I was like, yeah, I'll try it.

So whenever they ask me to try something, I always try it with them just to see because they want it to be successful, you know, and, and I, I find that, that, that, that, that worked for us. So in terms of other inflection points. So obviously Covid hits and that has a meaningful impact on our business. Fortunate where we had to start stocking inventory. A lot of dealers in the space, contractors had to start stocking inventory within H vac because you couldn't get anything from the distributor and manufacturers.

Fortunately for me, I knew since I had been doing sales, I knew all the products. So I, we, we, we at one point had a million bucks of inventory. Mind you, we, when I bought it, you couldn't find, we never had a furnace in our warehouse because our distributor, we'd Buy from our distributor. We, as long as you place the order the night before, we always got it the next day. So we never stocked equipment.

We had supplies, we had capacitors, whatever, but we never had furnaces, air conditioners, Ducklet, none of that. But by the when Covid hits, we have to ramp all that stuff up. And so I'm stocking it all. I know what to stock, blah, blah, blah. But that was a big inflection point for us in the sense that the work from home and the tailwinds that that would provide for a home services company were meaningful for us.

Just the pull forward of everybody wanting conditioned space in areas that may not have been conditioned before was a big benefit. And then we had grown to a size 2 where we were probably at like 75 employees at this time. Within. I then make a small acquisition of an electrical company. I then acquire another H vac company about 30 miles south.

That was 7ish million, 6 million in sales. Acquired a $3 million H vac company about 30 miles north. So we were kind of in this triangle. And next thing I know, we're doing 35 million in sales and almost 7 million of EBITDA, just short of 7 million of EBITDA. So the COVID was beneficial to us.

And then picking up these other acquisitions, which will to my benefit. Having a background in private equity investment banking made me comfortable and with doing that. And then when I met with owners, they. I knew that I was almost one of them. You know, I was never going to fully be one of them because I didn't start the company.

But we could talk. You want to talk brand, you want to talk systems? Oh, yeah, that, that's. We're having a lot of issues with that. Hmh.

And they're like, so are we. And I'm like, yeah, I know it's a problem. I mean, blah, blah, blah. And so I could get meetings. I mean, once you.

Once you're in the industry and you want to talk to an owner and where we had grown, they took my call. All of them. Sure, sure. And one other big point for us on marketing was we. Our TV commercial.

We partnered with the utility companies. So in. In Tacoma, in the Seattle area, there's Puget Sound Energy, and then there's Tacoma Public Utilities, Tacoma Power down in our core Pierce county area. We got them to go on TV with us and say we work with Mercurios in the amount of credibility that that gave us, that we do rebates. Like, we leaned in really heavy on rebates.

Was enormous. So people then looked at Mercurios, looked at our company and said, I see them on TV with Tacoma Power. And Tacoma Power is saying this is a great contractor and they can help you with your utility rebates or your utility loans, et cetera. We leaned and got, got basically in bed with these guys and that created a lot of credibility for us as well. You know, Jerod, it sounds like you've got a, you've got a penchant for marketing.

[01:13:41 - 01:14:12]

Will Smith: The digital marketing that we'd already talked about taking that over, doing that, well, experimenting. When Google calls you and says, hey, we have a new product and then this concept which is marketing but a completely different variety of marketing. It's, it's branding. And the idea of kind of, you know, doing a co marketing with the local utility company is that you think that's right, that you have a certain, a certain thing for marketing. I mean, I don't know about that, but I just, I think, I think when you look back you can see you can maybe paint, paint that picture.

[01:14:13 - 01:15:17]

Jerod Pierce: Sure. But, but for me it was like, what can I do to get us more credibility? Because I'm going up against other competitors and you know, everybody's pitching their value proposition. But what better person to pitch for you than somebody that's respected by your customers, generally speaking, you know, respected or trusted anyways. And so I think you can paint that picture.

But again, it's just kind of, it just, it was just an idea that we had. We weren't sure if the utility companies were going to do it and they said yes. And it's to this day the new buyer will. They supposedly shot a whole new commercial. They got done with it and they decided they didn't want to get rid of our old commercial yet.

So they spent all this money like producing a new commercial and then they've never aired it once. Like they came in, I think they were like, we need new this, we need new that. And then they got to thinking about it and they're like that the com. It just, it, it was a, it just crushed it.

[01:15:20 - 01:15:43]

Will Smith: Jerod, anything to say about your leadership over these years? You first time doing anything like this, you buy a smallish business as a self funded searcher and then you, you grow it to $35 million in revenue over how many years? Late? 2017 through. Yeah, I sold it in, I bought it in November of 2017 and sold it in October of 2022.

[01:15:43 - 01:19:16]

Jerod Pierce: So just under five years. Just under five years. A lot of growth, a lot of employee headcount growth. What can you say about your trajectory as a leader during these five years?

So growing up, I played a lot of sports, so I view myself more as kind of like a team player. Right. So I've played within, you know, various, you know, sports, if you want to call it organizations. Right. And so I think what helps me as a leader is that folks just saw that I was willing to roll up my sleeves.

Like if there was. We're doing an install and there was. We had one of our foreman, he was a little bit older, his name's Mike. Great guy. And the crawl space was tight.

In, in Washington state, you have a lot of crawl spaces. It was tight. So I select, I ran the line set. It was this. It's called a line set.

It's. Anyways, I ran this, this line set underneath the crawl space for him. And you know, I'll never forget the next day he just went off on the install team. That. The fact that I had to go out there and run this line set because they, they hadn't done what they did.

But not only, you know, when they, they see it and then other folks that didn't see it here, just my ability to like, roll up my sleeves and be in the trenches with you, I think helps you as, as a leader. And when people within an industry see you taking interest in their, in their trade, in their profession and learning more and more. Because I mean, keep in mind, every year, Will, I was learning, I can have, I understand the sequence of operations like I get it within a furnace and you know, I get how things should generally flow. And nobody expected me to know as much as them, but I think they saw, they appreciated that. So then they were willing to work harder for me, you know, as well.

And that's, you know, that's an advantage of just being there, being present. And so the team, getting them to work for you, if they see you putting in the effort, I think they're more likely to do that too. Yeah, yeah. And so for your tenure, it was at 45 minutes up and back in the morning, seven to seven every day for five years. Yeah.

And then the last year when we had made some of the other acquisitions, some days, you know, one was, it was, it was even further south. So it would take me an hour and 15 minutes to get to the, the one furthest away. So sometimes I would be visiting all three locations in a day. So I would spend a lot of time on the road. But, but the management team also did it as well.

So my key members of the management team, certain days, they knew they had to be in Olympia or they had to be in Bremerton, but it was, I think, easier for them to do because they also saw that I was doing it. I didn't ever ask anybody there to do something that I wasn't willing to do either. And so it just became part of our culture. Like, everybody just knew. We just work hard, and if you have to go there, you got to go there.

I became an electrical administrator, which meant that I could. I could run from an administrative standpoint. I could lead any H VAC company in, in the state of Washington. They could. They could be working on high rises, and I could go in and be their.

Their head electrical administrator. And so what, as a team sees you take an interest in, in lean in like that, I think that, that, that, that, that helps them go to bat for you. Yeah. You know, Jerod, it's. It's interesting to hear.

[01:19:16 - 01:20:27]

Will Smith: I'm just asking myself, like, to what degree other of my guests, other searchers really try to, to learn the industry that they buy into. We all recognize that there's something inherently crazy here about buying, you know, a skilled trade business and not knowing the trade at all. And then we all expect of ourselves that we'll learn some, to some degree, you know, what we need to. But I just get the sense from you that you leaned into that maybe more than other searchers to really just. Just learn as much as you could.

And while that all seems great, I mean, it does seem just like a. Like a. Just a positive. Was there not some kind of voice in the back of your head from maybe your private equity time that's like, you know, at some point, I'm probably gonna exit this, or I should be, you know, I should be above this. In some way or, or.

Or not at all? Not really for me. I mean, my first year, I made a million bucks. It was 880,000 bucks was what I took home my first year. And I was like, this is more money than those guys are making, right?

[01:20:27 - 01:22:23]

Jerod Pierce: Like, especially at, like, lower middle market firms. Nobody's making a million bucks there. My path to making a million bucks at a private equity firm was years away. Years away. And then you keep fast forwarding time, and it's like, next thing I know, 2 million bucks, 3 million bucks, 4 million bucks.

And Rick and Royce, during ETA, back in my time there, they had this chart, and I've talked to them about it, and that did resonate with me that it's just like the equity value that you start to create. And the, the income that you can generate in real time, it just, it just surpasses if, if it's going well than what you then what you generally can make within private equity. Right. Obviously, there's, there's folks. Steve Schwarzman Billionaire Like, I'm, you know, obviously, I'm not saying I'm at that level, but just saying, you know, you.

As time went on, I was like, this is great. And this is providing me a lot of opportunity and flexibility. Right. That for me, when it came to selling, I. I actually started leaning away from any interest in selling because I was like, man, the amount of money you would have to offer me is just going to have. Is going to be insane.

Because when I sold, I was 38. And when I met with the buyers, I was very honest with them. I said, I'm only here because of the amount of money you guys are offering me. This business is not a problem for me. This is not.

I get it. I know the team. I'm. Everybody at that company knows me for the most part. We had 125 employees.

I probably knew 115 of their names. Like, I, you know, and so it's like, I've got this, this loyal, like, army of folks going to bat for me every day that there's nothing for me to run from here. So. Yeah, yeah. And you're making five.

[01:22:23 - 01:22:28]

Will Smith: The business is throwing off $5 million a year. Yeah. At that point. Right. Yeah.

[01:22:28 - 01:23:47]

Jerod Pierce: So that. When I, When I, When I sold, we. I want to say we were on Track for like six and a half million of EBITDA, 6.4 million of EBITDA, which I don't get all of that, obviously. Right. But just, you know, taxes, various stuff.

But we were tracking. We felt like we were going to hit like, 6.8. And so when I sold, there was a short window there of, of an earnout to see if we would get to this 6.8 million of EBITDA, which we ended up hitting between. We had between October and December 31st to hit this number, and we did. So, yeah, for me, it was just like.

It was. It was actually a lot of fun. It was. I look back on that time as a period of just an enormous amount of fun and just like, winning and just kind of having that mentality within the organization. I was like, guys, you know, we're like Alabama here.

And when we're, when somebody's coming to meet with us about working here with my general manager, if he really likes somebody, he'd like, get Your Alabama hat on. I'm like, I'm willing to talk you like this guy's like, yeah, I'm willing to meet with him too and let's show them around the warehouse. You know, let's talk to him about all this stuff and let's make this a winning organization. And that's what we did. It was a lot of fun.

[01:23:47 - 01:24:37]

Will Smith: Well, well, Jerod and I asked you about your leadership. That, that also just gave us a little, a little window into your leadership of just like the personality and the kind of spirit that you brought to the organization. Maybe, maybe you were underselling that before because I just, I really got a strong taste of it right then. But yes, also being willing to run the line or whatever the thing was, get on your hands and knees and do the dirty work certainly helps as well. Just to, just to be clear to move back from the culture to the money, the call it $6 million of EBITDA.

A lot of that EBITDA was actually free cash flow because this is not a lot of capex in a home services H Vac business. You've done some acquisitions. We didn't get into the terms of those, but I suspect there was a lot of seller note in those deals. So a lot of that EBITDA was actually free cash flow. Yep.

[01:24:37 - 01:26:59]

Jerod Pierce: One of the businesses that I had bought, I paid 3.3 million for one of the follow ons which, so that was. Call it double what I paid for Mercurios and Mercurios was substantially larger than that one. And I, I actually did an SBA loan on that one still. The other two that I did were smaller and I just paid cash on those. Um, just to, we were just doing well, I was like, I'll just pay cash, you know.

Yeah, so and so. But all in all I had about, I had about. I had also bought the building at, at, at one point I bought the building that we were in and so I had a, about 5 million bucks of total debt. Like about like I still hadn't paid like everything off. It was just, you know, so I had about 5 of debt and sold close to, you know, I'm not, I won't say specifically.

My Highest offer was 95 million and I was pretty close to that at what I sold at. And so I walked away with, with a ton of money. I had to roll 20% into, into the, the purchasing entity. And then I gave a couple of key team members. A couple of them got a million bucks or just over a million bucks.

One got a Million one got just over a million and then a few percent. Guys, one of them was, one of. Them, the one was, you know, he went from getting, he would have gotten, you know, I don't know, the $3 million or something to getting just over a million instead. Right. So.

And then. Yeah, but you didn't have to give them that million, Jerod. Wow. No, yeah. And then there are some other folks, install manager, front office manager, just, just people that I felt like had been really supportive that had gotten a few hundred grand as part of the transaction just as.

And I just told him, I was like, thank you guys, like there's no obligation, but this is like, you know, I wouldn't have been here without, without all of their hard work. So let me just really quickly, for the audience's benefit, repeat really quickly. You had a 95 million dollar offer for this business that you did. That was your highest offer. You didn't take it.

[01:27:00 - 01:28:06]

Will Smith: But obviously whatever offer you did take was going to need to be somewhere in that ballpark, otherwise you wouldn't have taken it. So we can infer from that kind of what the number was. 80% you got in cash. The other 20% you rolled. And so the private equity firm that bought you, you still have 20% with them.

An enormous, really an enormous amount of money. I wanted to just make sure. And you were at six, six and a half million dollars of EBITDA and you. Six and a half. And they had the earn out to get you to have you reach 6.8 shortly after acquisition, which you did.

And so this year you said was late 2022. So that is also probably the peak of H vac, would you say? I mean, the timing was just unbelievable. Yeah, the timing, it couldn't have been better for me, which I did not know that that was not a driving force. When I first went, when I first started being interested, like open to selling, I had met with the guy and he had said, hey, you know, I really want to buy your business.

[01:28:06 - 01:29:42]

Jerod Pierce: And I was like, I don't really know. And he brings me and my wife out on his yacht and this is in early 2022. And he's like, what's it going to take, Jerod? And I said, I go $50 million. He's like, okay.

So I give him time to try to get this figured out and he's just not able to get it done. He's, he's got all these other companies, he's trying to do this quality of earnings and he's just not getting there. So then I talked to an investment banking buddy of mine, and I said, you know, if you think I can be in this kind of like 12 times, 11 times, multiple, like, I'm. I'm open to selling. He's like, I think you could probably get that.

So then, like, an offer comes in at like, 70 million, and we didn't even meet, like, that group because by then we were. We were inching up. And so it was like, 70 million wasn't going to really get you at the table with us. And the guy that had offered 50 was a guy that came back. I'm literally about to sign the LOI with the group I'm going to go with.

And he knows what the number is. And he's like, I will give you $95 million. And I just said to him, I was just like, you know, I like you a lot, but the certainty of close isn't there. Yep. Whereas with this other group, I knew they were going to close and get the deal done.

And it was a number that was obviously still very meaningful for. For me, all of that, you know, that's a lot that happened there. And I think some people could look back and say, man, this. You must have just felt like you. You knew you were reaching the top.

I didn't. I felt like we were still. I felt like there was a lot of room left in the group. Well, your psychology had been, this business is just going great. I mean, you're thriving, you know, all cylinders.

[01:29:43 - 01:30:09]

Will Smith: It's just. It's just couldn't be going better. You're making millions of dollars a year. You can keep running this and growing this thing. And so.

So you said to us, you know, you'll only entertain conversation. It's got to be such a big number because you're really not looking to exit at all. So. So you. So what.

I mean, that, of course, is the negotiating position you always want to be in where you. Where you really don't need or want to sell. And you mean it. Yeah. No.

[01:30:09 - 01:32:35]

Jerod Pierce: Yeah. And one thing that I. One advantage that I have is having been in private equity and investment banking, I also know what people want to hear. Like, I know what buyers want to hear. I've been there.

I've been on their shoes, meeting with management teams. And so my management team, we talked, and I was like, you don't want to say things like this. You want to say more things like that. Right. Can you give us an example like.

That their involvement relative to my involvement that, like, you guys need to be viewed as running this Business from, you know, the controller to the general manager and not so much as, hey, well, we're going to constantly look to Jerod. Not that they did. It was, it was, it was, you know, it was self sufficient but just, you know, really lean in on what they do and speak up more. So at the management meetings with the investment groups, I didn't really talk that much. I let them do all the talking.

And because as a buyer, what more do you want to hear than the people that will be running it from them day to day? If I'm doing all the talking, they have some hesitation on am I going to stay around and what's going happen to, you know, what kind of commitment are they going to get? Exactly. But when you're talking to these people that look like H Vac people, they felt, all the buyers felt really, really good about the business. I think they felt like, man, yeah, because I've heard there was one of the other business I'd referred to that wanted to sell the.

Some buyers were hesitant because the sellers were too, they felt like the sellers were too involved and that how's this business going to operate without them? With me, I think also just people seeing, oh, this guy went to Harvard, like what, what, what could he really be doing here relative to the rest of them? So we, we, you know, we were a united front going in and they also knew I had told them. I was like, listen, if, if and when I sell this, my goal is for at least two of them. I said, I want both of you guys to at least get a million dollars.

That is my goal on this. So they were like, they were, they were ready. Well, well, I love that too, Jerod, because it just goes to show that, that buying a business at the level of private, private equity for many tens of millions of dollars and bro. And, and we buyers, searchers, buying businesses, a lot of the, the philosophical approach and the risk management is the same. You, you don't want buyers too involved.

[01:32:35 - 01:33:58]

Will Smith: You know, they're asking the same questions that you were asking when you were just a self funded searcher with an SBA loan. You know, it's kind of interesting. Good stuff. Well, congratulations, Jerod. I mean that must have just, I mean, I mean it's just, it's just an incredible outcome, an incredible amount of money.

And you did it. You, you were what, when you finally sold, you were how old? 38. 38. 38 years old.

I, we still have a little bit of ways to go here because I basically have two big topics I still want to get yon Jerod, which. And one of those is what you're doing now. But before that, I just want to understand and for the audience's benefit here, when you become wealthy, truly wealthy, what that's like you're. You still got a good head on your shoulders. It seems maybe you've been coached and seeming down to earth, but you seem down to earth to me.

But that, you know, we'll, you know, in, in our world, we'll, we'll hear from people who make $10 million, $20 million, $30 million, but every additional, you know, notch up it. It's. You're in more rarefied air. And, you know, this, you sold this thing for north of 60, 70, maybe more. There's not really that many people with that amount of money.

So what's it like up there?

[01:34:02 - 01:37:49]

Jerod Pierce: I don't feel like I have as much money as I have. You know. And I think my wife and I, we talk about it because we see folks just spend more and maybe it's just how we grew up, but spend more freely than we do. Like, we have some nice stuff and we have a couple of home. Like we have, we have, like, if you were to really look, you'd be like, but for, for us, I, I just don't feel like I'm as wealthy as I am as, as paper would show.

And I don't know why that is. And maybe it's because it's still only been a couple of years, but, you know, our, our total assets are now over nine, like over 100, like, which is everything we have. Like, it's, you know. Yeah. I was gonna say if you make that amount of money, you are, you are destined to have over a hundred.

Yeah. And not that. And not in. Not too distant future. So it sounds like you've already crossed that.

Yeah. And. But it just doesn't.

Just doesn't feel like we can still just go do whatever we want. And there's a component of it too, that we don't ever want to run out. Right. And so we are very strategic about what we do from an investing standpoint going forward. But I don't know, when we talk to folks like our financial advisor and just other people, they all seem to be.

Tell us, man, you guys have it all. But we don't quite feel like that yet. And not, not because we're like greedy. Just. It just doesn't.

I don't know. It's. It's. We have a lot of. It's tied up in equities.

It's tied up in real estate, it's tied up in some operating companies and we have, you know, we have cash on us and stuff, but it's just like, I don't know, we still hem and ha over some purchases that we shouldn't, some would say we shouldn't be too concerned about. You know, it's not as glamorous, but as you'd want to hear. But no, that's where we are. No, I think, I think the audience is just going to be shocked that you're, that you're so balanced about it and you have daughters or you have kids. Two daughters.

Yep. And. And how are you thinking about that? So we, my hope is we've. We've started a family office now to, to kind of lead our, our investments that we're doing.

And my hope, again, they're young, they're three and six. But my hope is that eventually they want to come work for our family office in some sort of capacity. But, you know, who, who knows? Only time will tell. What I can say, unfortunately, is every business that I've bought.

3. Well, I've bought a few more now, but within the H Vac. The conversation within H Vac. But even most recently, this window and door business we bought, they've all had kids working in the business and the kids have not wanted to take over the business. And so there's, there's, in the back of my mind, there's this component that the, that the girls may have no interest in this.

And if that's the case, it is what it is. But my hope is that they, that they are interested in, in pursuing this. So my goal is to try to set up Olympic holdings with enough infrastructure and operational capacity there so the girls can be a place that they can work when they get older. You know, because Jerod, I mean, they're three and six, so it's not going to be for 20 years before they even contemplate coming in to steward. Yeah.

[01:37:49 - 01:38:42]

Will Smith: This. At these, these assets. And so who knows what it's going to be, what the number is going to be. Then why is it so why do you want them to do that? Why not?

Why, why do you not want them to just go off and do whatever. Well, I think that it's. This where I'm at now offers a ton of flexibility and, you know, we move at our own pace. We want to do. I was.

We. The family office. Yeah, my wife and I. My wife and I, we have a controller, we have a director of real estate, and that, that's basically what Olympic holdings is today from a team standpoint, but we move at our own pace. We travel however we want to travel for however long.

[01:38:42 - 01:42:43]

Jerod Pierce: We want to travel a lot of times for the summers. We're gone for the summers and then come back for the school year for the kids. So I think from like a work life balance standpoint, there's, I hope that they would find that appealing. And we have enough of just passive income coming in that we can just sit, not do anything and you know, you can make a good living. And so I, you know, my advice to them would be, you guys would be crazy not to, to take this because it's, it's relatively easy.

Like, you know, it's, if you don't want to do anything, you don't want to make another investment, don't make another investment. You can just manage the investments that we currently have. If you want to do more, then we can talk about how you can do more. And we have some guardrails in place right now on. So we are, you know, trying to make sure we don't get overextended on certain things.

But like, I would, I would hope that they would, that taking this on would afford them to do a lot of other things that they want to do. I'm doing things now. Like I mentioned to you, I was in Grenada looking at citizenship by investment there. I'm training for Ironman 70.3 events. Like my wife is doing the same.

And so it's, it's, it's a lot of fun. And what about the fact that they'll grow up in wealth and you grew up and just the, the opposite and kind of reconciling their very different upbringing with yours. Yeah. So I, I, you know, and they're still young, but you know, my, my daughter, my oldest one has said like before, like, oh, you know, are, are we, are we rich? You know, and I'm in some networking groups that have for like high net worth individuals where we talk about things like this and like how do you have conversations with your kids and at various ages?

And so, you know, right now our response is like, well, you know, rich could mean a lot of things. What we, we have what we need. Right. And that's what we're rich in that capacity that we can have what we need. And so as, as time goes on, it's, it's hopefully trying to create a grounded environment for them.

But I don't know exactly what that will mean until I see it. I can tell you like growing up, how I grew up and When I see the girls act a particular way, like, I. I will make like, you guys want to do anything here. You're going. You're going to clean up this living room. This is not for the.

The housekeepers to come in and just be constantly picking up after you guys. So I don't have a problem having that conversation with them if they want anything, if they want a snack or they want a dessert. Dessert or they want to watch a movie time. This room better be clean. And so my hope is just teaching them little things like that on, like, working.

And my daughter has. They both do now have a. Have a. Like a kind of like a piggy bank. But it's like a third of it is spend, a third of it is share, and a third of it is save.

And I tell them, I'm like, if you put money in the save one, then it will grow and you'll get more money. And the only way it grows right now is I go and I put another dollar or two in it every so often when I think about it. And then we get to go buy something. And so my daughter at one point was like, well, how do I get more in there? I'm like, well, you've got to sell.

Like, if you sell, sell. Like, if you make art, I will buy your art. So my daughter, sometimes she's like, makes me a picture, and I buy it from her for a couple of dollars, and she puts it in her piggy bank. And, you know, next thing you know, she's looking in there, and I'm like, well, how many dollars do you have in there now? And she has eight.

And then a week later she might have 10. And she's like, it grew. And I'm like, that's what happens when you save. You save. And it grows.

It's a very simple approach to it. And then we go to the store and I let her take out the money and she hands it to them. And I'm like, now make sure, because you can spend all your money on this. You're not going to have any more left, or you can spend some. And so, you know, we doing these in a very elementary way, we have some of these conversations that I'm just trying to get her to understand the concept of money and savings.

[01:42:43 - 01:42:49]

Will Smith: Sure. Because I've. I've been a. A big saver. So we'll see how she.

[01:42:49 - 01:42:52]

Jerod Pierce: How they. How they deal with it. Who knows? Yeah. Yeah.

[01:42:52 - 01:43:26]

Will Smith: Fascinating. Fascinating, Jerod. Well, we're already beyond an hour and a half here, Jerod, but I can't let you go, we have to hear about what you're doing now because this is, this is. You've made it seem so easy this whole time, and yet what you're in now has been anything but that. So we're going to have to bang through the, bang through your current business, but let's do exactly that.

So you've bought another business. Tell us the very quick history of how that came to pass. Okay. Yeah, so I've, I've bought. I've bought two businesses.

[01:43:26 - 01:53:34]

Jerod Pierce: One is, is was a senior living community that's going well. Good cash flow, good team in place, going well. How big a business was that? Just before we get off it, 5 million bucks. Okay.

Yeah. Okay, great. So I. We tend to buy, we tend to still want to buy smaller companies from a. A risk standpoint.

Like we don't really want more than like a couple million bucks of equity tied up in any one deal because right now any one of our investments could, we could lose and we would not be happy about it. But it wouldn't, it wouldn't change our day to day life. So we do have kind of a hard cap. Like we're not putting more than 3 million of equity into anything just from, just so we don't have to. I don't want anything keeping me up at night.

I go and I put 20 million bucks into something, it's going to be too meaningful to me and I just don't want that kind of stress. So my general manager at Mercurios and I, who we've worked together with for. I've worked with him longer than anybody else I've ever worked with now. And he was at Mercurials when I bought it.

The buyers decided they wanted to move in a. Mercurials buyers decided they wanted to move in a different direction from him. And so we, him and I were having a conversation that's like, well, we can't buy anything in H Vac because he's not compete and I can't. He, he, he more likely could. I can't. H Vac Plumbing off limits.

Not happening. But we were like, well, let's look at some other industries. And so we got to thinking around about some other home services industries. Roofing, windows and doors, Lancy landscaping, yard, you know, whatever. And so we, we had come across a business in the window and door space 10 minutes from where Mercurios is.

Been around for, since 85, so been around for 40 years. And we're like, oh, this thing, this seems like a, a Slam dunk. A third of the, it's called South Tacoma Glass. We've rebranded it ST Glass and window specialist. A third of that business is automotive glass.

So think safe, light. And then two thirds of the business is window replacement in the residential space, some multifamily as well. So like a renewal by Anderson or Champion Windows, if anybody's familiar with those, then we're like, well that's, that's B2C residential. Like we're going to, we're going to understand that completely. And the business was doing over 6 million in sales when we bought.

Has been nothing but a nightmare from the, the day that we bought it, the day that the sellers announced to their team two of their better installers quit that day. We hadn't even said anything, mind you, when I had bought Mercurios, nobody left for the first six months. Nobody just. And actually of all the businesses I bought, nobody's ever quit on day one like that. Nobody's ever really quit shortly thereafter because of a transition.

In this case, I mean, it's looking back on it, it would only have happened at this business. So we're on a run rate now of probably like 4 million in sales. So we're down pretty heavy. I'm not making any money on that business. The gm, my, my partner from Mercurios who partnered with me on it, we're 50, 50 on it and he's running it day to day.

He's making a little bit, but not much. Fortunately, we're both being paid by our old company, by Mercurios to, we've got some licenses and stuff that they need and so we're still getting some, some compensation there. But in his case he's, he's making substantially less money than he would have made before. And an industry that we thought would be very easy to walk into has been different. And, and if we weren't in the position that we're in, we probably would have failed.

Like, I, I, I think that most other buyers, if they would have bought this and didn't have the financial means, one month, I just for, I'm, I'm everything in this business too. Well, like I'm, I'm the debt, I'm half the equity, right? So if I don't want to, early on with this, I was like, you know what? We're just not even going to make this loan payment. It's, it's just going to me anyways.

But like we're not going to make it because it's just losing it was Just losing money. We walked into a business and we should have seen was losing money when we bought it in. But losing money or declining revenue or both. More kind of declining revenue and losing money unless the old owner sold a big job. And that is the single piece that we really missed was how critical he was to the business.

You heard me talk about this whole conversation, how critical that is. Right. And he that business. And I've told this to him. His name's got guy.

This business didn't make money unless you sold a job. And what we've been up against here is you haven't sold any jobs for us. And the jobs that he would sell were these big multifamily jobs. They might be a million dollar job. And when he owned the company, and this is why, lesson be learned, when he owned the company, he had to go sell those jobs.

And so guess what? He sold those jobs. Right. Because that was the only way the business was really making money. Now that we've had, now that we're in there, we've peeled everything back.

You can see everything. Everything else is break even to losing money in that unless he sells a big, a big job. And we had not had for the first six months, no big jobs came in. We had a strategy of transitioning more heavily to residential, but we weren't able to do it as quickly as, as we, as we thought we could. We changed the software, we rebranded the company.

We made a lot of changes that typically I wouldn't even make when I first buy a company. I tell folks like take it slow. But the business was losing so much money that we had to make drastic changes. We've had to lay off a number of staff members either because they were overpaid, they weren't operating at the capacity that we'd like for them to operate at. And so we've revamped, we have reorged that entire company.

We are just now making money. And it's almost, it's almost a year. I'm looking at the date right now. In, in 45 days we will have owned this company for a year. And we are just now breaking even to making money.

There are some months we lost $40,000. Wow. And we went to the sellers just before we closed and said, hey, we need to, we need to talk about the valuation. We need to talk about some comp. And they left a few, a few hundred grand in the business for us.

We left, we put in a few hundred grand. And so that's kind of helped us weather this storm. But we've had to make some drastic changes. And I think, like, you know, not to be egotistic about it. We.

And we know what we're doing in this space, right? Like Hank, my gm, he knows how to, you know, operate and run a company. But there was just so much heavy lifting to do that we didn't realize that it's. It almost took us a year. So, like, what we are doing now, Will, is what we thought we would be doing when we bought the company.

We just now are producing a TV commercial. Just now, we thought we were going to be producing a TV commercial in November of last year. Instead, we're sitting here having to, like, lay this person off, replace them with that person. We thought, here's a specific example of not doing proper diligence.

I asked them, oh, what, what operating software do you guys use? They said, we use this, this program called Main Street. Like, okay. And they're like, what do you guys do there? Oh, this is, this is the system we use to process customer invoices and whatnot.

Okay, what's your account in software? QuickBooks. Okay, great. I assumed that all these systems talked. Just assumed.

No, what we walked. What we walked into is. So this system, Main street, they weren't even using it in its full capacity. So it didn't do any scheduling. They're doing the scheduling on, on.

On, like, paper. I just assumed it was happening in their CRM. When they go to process a payment, I just assume the CRM process because that's what I was familiar with. No, when they're, when they, when they want to take a payment, they have to use this other system called Clover to process the payment. Like, okay, well, I'm like, well, how's it, how's this get into QuickBooks?

Oh, we have to manually enter everything. So then they're taking. And, you know, they're manually entering things and supposed to be 59, instead it's 95 gets entered in. And so they have to. Man, they were manually entering in from Clover to Main street, from Main street to QuickBooks.

I mean, in the amount of time that was taking was like their accountants, you know, it was taking that person multiple hours a day. So we've swapped that out with the system we used before. I had to beg the company to come into this new industry because Service Titan hadn't done much in Windows and Doors and now they all talk. But the first few months was, you know, onboarding a new CRM because we were like, well, where's the scheduling? And we couldn't see it and it's on some guy's desk in the back.

And we're like, we don't even know if we made any money today. We don't even know what job. We don't even know where the guys are at.

[01:53:36 - 01:54:03]

Will Smith: Jerod, some of this is like while painful, this is a lot of value that you've added and enterprise value you've created. So is that the silver lining that the business just having done all of this stuff is now much more valuable than when you bought it. Or maybe it's not because revenue is continue to decline, but you've got this much firmer foundation from which you can now grow a maybe nicer business than you even thought. 100%. 100%.

[01:54:04 - 01:56:01]

Jerod Pierce: And there was just waste unnecessary second location that wasn't needed that we had to close that down. It was just a store just to storage warehouse save saving us four grand a month. Right there we had one of the owner's son, his son was making $165,000 tinting windows. We've replaced him with somebody making 25 bucks an hour. Like just, you know, big, big, big savings here.

We just now are in the process of hiring our first virtual assistant. So somebody not on site that will be helping us with calls and stuff like that. So. And then the CRM that's in place, the marketing, the branding that's in place. So yes.

Well, everything you're saying, like I. The business undoubtedly is better today, not even close than what it was a year ago. It's just. It's just had taken a step back to get there. And I told the old owner, I said look, if we can get the old you back this.

I don't. I said guy, if we were here when you owned this business, this would have been the greatest business ever because you were wasting so much money everywhere. Like we now have to be. We had to basically strip the business down to where it's profitable if he's not selling any big jobs and that's where we are. And now he just sold.

He did just sell a big job. We're booked out through October, probably November. Now with the other stuff we're doing, we've hired multiple salespeople. We've got TV coming on board. So I've though I've.

I think it'll be really until next spring and then hopefully we're really like off and running. Our TV commercial is going to be pretty.

I think it's going to be effective. We'll see. So. And Jerod, we've heard you say now A couple times that this all happened, you got into a nightmare business, maybe because your diligence wasn't as tight as it could have been. Is that.

[01:56:01 - 01:56:18]

Will Smith: Is that the difference between this experience and your Mercurios experience? That Mercurios was a higher quality business because you were more selective? That's a component. And were you more selective because you, you know, is your, you know, is your. Is your balance sheet making you soft?

[01:56:18 - 01:59:14]

Jerod Pierce: I. I think it is making me a little soft. The other big piece is I'm not. I'm not involved nearly as much as I was before. So at Mercurios, I was there every day. And I'm not exaggerating, Will.

Every day. Like on the weekends, I was going down there.

Two to three Saturdays a month, I would go down there. No plan in mind, just. I'm just gonna be here and just see what I see and just work on whatever I want to work on around the warehouse. And now I'm in Texas, and this business I have is in Washington state in Tacoma. So I'm not there nearly as much.

If I were there, more. More change would have happened more quickly for the better and not knocking my business partner on it, but he's, you know, he's on an island there by himself. And I tend to when I'm there and I hear a CSR on a. On a phone call, as soon as she gets off, I'll go out there and talk to her about it and be like, hey, you know that I like what you said, but like, next time, let's definitely try to see if we can squeeze them in quicker. Right.

Like the. The culture, there was a real lack of urgency, whereas I tend to be like, now, now, now, now, now. And so me not being present, I think has all the same issues would be there, but we haven't been able to address them as quickly because I'm. I'm not there as much. Right.

I thought I was going to be there this past summer a lot more, but one of our daughters had a health issue going on, so we decided just to stay in Houston because we still have a place in Seattle and it's just sitting there. So we thought we'd be up there for the summer and I would be there every day and tackle a lot of things that's now going to be pushed to next summer. So I was gonna say, to your point of, like, being soft, I don't have to. Right. Like, before, I had to.

Before Mercurials had to be successful. If this isn't Successful. It sucks and I'm not happy about it, but I'm willing to wait till next summer. Like, it's not urgent enough, it's not meaningful enough for me to grab the girls and say, let's, let's go, let's go spend. I mean, probably really like 90 days, six months of like true undivided attention would probably just really get a lot of the processes in place.

But instead I told the mindset, I'll just do it next summer. The business will survive because at worst I just won't make a pay. It's debt payments to me. And it's, it'll be fine. It'll go.

So we'll be fine. But it's. Right, it's, it's harder. It's hard. And, and, and so what do you think can a searcher listening can take away from having your two experiences?

[01:59:14 - 01:59:40]

Will Smith: One, that's been a disaster, although it sure seems like you'll write the ship here. But it's basically been a disaster so far this first year versus Mercurios, where things went pretty gangbusters right out of the gate. What's the, what do you think we can learn from this, by the way, this time around? You've also got five years of owner operator experience. So you're, you're a much more experienced operator now and yet still having a harder time, so.

[01:59:41 - 02:02:44]

Jerod Pierce: Well, yeah, and we're, we're more experienced and we know this. Yeah, we know the systems, we know the processes that work well and the ones that don't work well. Right. But for a searcher, there's two things. One, there's always going to be a component of like luck in whatever you're doing in that part you can't control.

Right. Whether it's the right timing that you've bought in a particular industry or that you sell or whatever sort of dynamics might be going. There's things going to be outside of your control and that. And that is what it is. But the biggest thing that I cannot stress enough is if you are going to buy a company, you have to be present.

Like, you have to be there and fully invested and committed to its success more than anybody else. And with Mercurios, I was, that I, I, I was all in. And it, that was an investment. That was an investment of my time and my energy. And there was other things that I didn't get to do.

I didn't get to, I wasn't going to the lake every Saturday. You know, I wasn't doing all the fun stuff that the folks are doing for me in the evenings, we'd be watching a movie, I'd have my laptop on my lap. I'm looking at our website, I'm looking, I'm Google searching competitors, I'm doing whatever. You just become obsessed with it, right? Like I became obsessed with Mercurials and was all in and it, and it benefited and I mean, it's, the business is not doing well right now.

If I were there and like the team were there, it would, we would be fine. Like, we wouldn't be growing on a rocket ship, but we would, we would be, we would all be happy because we were all committed. And with, with this business, not only am I not there, my business partner is not there as much as he was at Mercurials either. And yet he owns more of this. But again, he did well when I sold too.

I, I, you know, I took care, it took care of them in a meaningful way. So, and I've been talking about that. I've been saying, hey, you know, you need to be more present. Like, you've got to be more present here. We've got to be here to work, to help.

Just, there's always something. There's never a day what I would tell somebody, if you have a business, there's never a day that it can't benefit from you being there. Just go in there and just go into the CRM, go into the accounting software, going to the warehouse, see something and just look to make it better, one thing at a time. And next thing you know, you're going to look, you know, you're going to look back and a year is going to have passed and it's going to be substantially better. And that's the difference.

And that's why we're, we're struggling with this and it's taking longer and it's been harder because we haven't been as invested. Wow. That's a powerful and very clear answer. Anything to say about the industry, and we talked about how H Vac. You timed it beautifully, if unintentionally.

[02:02:45 - 02:03:01]

Will Smith: Anything to comment about there on window and door versus H Vac or home services broadly, or how to assess an industry. Do, do you, do you think about that? Where, where you know what inning an industry is in or not? Not so much. No, no, I do.

[02:03:01 - 02:07:52]

Jerod Pierce: I mean, I, I, what trumps being opportunistic trumps everything for me. So if you get a great buy in a, in an industry that's in the ninth inning or the first inning, but you have a Great. You know, there's great transaction dynamics of it. Then I would say pursue it. I, I have a lot of people that I speak with that say they want to get into H Vac.

I think it's, I think the game. I think you're late. I think you're very, very late to it. Not, not trying to just like not meaning somebody won't be successful. Of course you can still be successful in the industry, but you're late, you're late to like the seller's expectations.

Before, you know, I was buying businesses for five times or less and now, you know, a good business, they're going to want high single digits for sure. Right. So you're just not going to buy as attractively as you could before. The marketing's a lot more competitive. The, you know, when I bought Mercurials, they weren't even wearing uniforms.

Okay. Everybody's got uniform. Just the, the, the, the basics of that industry have matured and are much more professional than they've, than they've been. So I would tell somebody, if you're looking to do something and you want to have a high return like a real, a real home run, you're probably not going to get it in something like H Vac or plumbing. It's, it's just going to be a lot harder.

And so for us, you know, one, I couldn't go back into H Vac, but I feel like there's other industries that are still untapped that, that aren't that could be potentially the next H vac Windows and doors that I mentioned that, that we're in now. I think there's not a lot of, there's not a lot of roll ups happening in, in this space. And does that mean necessarily though, Jerod, that, that it will happen? Or maybe there was something to H Vac and plumbing, some, some, something about the unit economics or the TAM or whatever it is that was the perfect basket of opportunity that private equity would like. Whereas it, it maybe it never happens in window and door or in roofing or in whatever.

Yep. And so I, having been in both industries now, H Vac and plumbing has I imagine a higher TAM has to, I don't see how it couldn't and has better dynamics in terms of maintaining the systems. As a very simple point, you probably have somebody come out to your house every year, every other year to, to work on your furnace or your air conditioner. Just make, just do a. Maintenance windows and doors.

You're not really doing that. You're not. When's the last time you had somebody come do a maintenance on you when you maybe had somebody come wash your windows. But have you ever had anybody come to a maintenance on your windows? No.

Right. So it's you, you. There's dynamics of some of these other industries that I hear people kind of, I do hear people starting to talk about windows and door now. I heard somebody talking about fencing, residential fencing. I was like, man, yeah, that's a stretch.

Like, wow. Roofing. I know roofing is very popular right now. Roofing. There are a number of roll ups happening within roofing.

I think roofing has a little bit more of a maintenance component to it than, than windows and doors. So it may, it may never happen in windows indoors, or maybe it will. I think that most firms are looking for the next, the next best thing, right. The next best industry to go in and try to roll up that hasn't been rolled up. And so for, for, for me and for us, it's like with windows and doors, if we just focus on making this the best company, we can make it as big as we can get it to be, people will find that interesting.

Down the road, we will start to acquire other companies and we will get size. So right now we're in south Seattle area. Hopefully, I think we're still a little too early. Hopefully in six months, by the end of next year, for sure. We're then looking at buying a company on the other side north of Seattle.

Right. And so if you just focus on doing things like that and prove to folks that this could be an interesting industry that can have size, that then I think people will come, but there's no guarantee. And we are not, we don't have a specific exit similar to like Mercurus, but our goal, I just tell my partner, Hank, I'm like, let's just make this thing the biggest, best company we can make it. And at worst, we'll just make a lot of money ourselves. Yeah, well, it goes back to where you were with Mercurios where you could have held onto it forever.

[02:07:52 - 02:09:48]

Will Smith: You were just, you were happy and content with it continuing to grow. Now also with this giant win behind you, you, you really, you really don't need to have an exit. And, and in general, family office capital is considered very patient capital. It's, it's, it's not looking to maximize IRR so much as it is take dividends. I think that's a fair generalization.

Is that how you think about it? Yeah, 100%. We're all about cash flow. Yeah, yeah. Yeah, Jerod, there's been so much here I gotta let you go.

It's been two hours. Anything that you want to share with the audience that I didn't ask you for? No, no, I think we touched a lot. So thanks for having me on. Well, thank you for, for coming on.

Thank you for giving me, giving me and the audience so much time, so much transparency, not only about the numbers and the journey, but also about your family and about, you know, the relationship with some of your managers. Just really, really, you, you shared a lot with us today and we so appreciate it. And just a, like, such a strong congratulations on what you, what you've accomplished in life, broadly. Really, really quite a journey. It'll, it'll really inspire people as it has me.

So, Jerod Pierce, thank you very much. Yep, thank you. Have a good one. Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter.

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