Host: The trendy desire to build a Holdco of businesses is often received with skepticism, especially if you haven't yet bought a business. Buy your first, prove you can operate and get back to me in a couple years. So goes the sentiment, which is why today's guest John Mahoney felt a little reluctant to share his Holdco vision. But I leaned on John to talk about it because one the there's a mission behind it and two John has bought his first business, Bailey Heating and air, a small H Vac business in Greenville, Tennessee. Greenville is a town of 20,000 in the foothills of the Great Smoky Mountains in Appalachia. Meanwhile, John is from the suburbs of Boston, so this is a big change. And not to mention, John lives right next door to Bailey, renting the house from the previous owners of the business. So I say this earns John serious SMB cred. You'll also hear his patience come through. He's not breathlessly trying to buy as many businesses as possible as fast as possible. He's taking his time and thinking in terms of decades. So between his cred and his patience, I see someone capable of realizing his Holdco vision. See if you agree. Here's John Mahoney, owner of Bailey Heating and Air. 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. Listeners of Acquiring Minds know that for almost any business you acquire, its success comes down to the people and how you develop and manage them as their new leader. Thing is, in addition to management there is also a lot of process and bureaucratic work when it comes to your new employees. Payroll, compliance, HR technology, hiring to name but a few. These processes are crucial to get right, but at the same time distract from where you want to be putting your energy in leadership. So Aspen HR is an HR firm and PEO that takes this work off your plate and handles it with the care it demands. Aspen is owned and run by Mark Sinatra, himself a successful former searcher, so Aspen's own leadership understands the HR challenges that searchers have post acquisition. The firm is offering Acquiring Minds listeners a complimentary pre acquisition HR and PEO review for your target business. Check out aspenhr.com or contact Mark directly@markspenhr.com John Mahoney welcome to Acquiring Minds.

[3:01] Guest: Thanks for having me Will. Great to be here with you and thanks for the opportunity to speak with you. And like we spoke about the first time we met, you know, thank you for all you're doing for everybody's in the entrepreneurship through acquisition community. I mean, I certainly enjoy listening to your conversations and learn so much and reflect often on, you know, other people's experiences that I heard about through your, your show. So thank you so much.

Host: I appreciate that, John. Well, I'm excited to add your voice here to the mix. You bought an H VAC business in East Tennessee, Appalachia, and you are not from this region. You are a New England boy from the south shore of Boston. So we hear about searchers moving anywhere to buy a business, but it's actually not that common from what I've seen. But you are doing it, so we're going to hear about that and much, much more today. But please start us off, John, with some background on you.

Guest: Yeah, so as you mentioned, I grew up in New England on the south shore of Boston. Extremely proud of that area. You know, we've talked about all the culture that it brings to the table. Like, you know, people refer to parts of it as the Irish Riviera and, of course, hardcore New England sports fans. And I'm actually heading back there for Thanksgiving, which will be the first time I visited back home since making the move to Northeast Tennessee. And what originally brought me to the Southeast was the Marine Corps in North Carolina, where I was stationed at Camp Lejeune, and since then have taken a very winding path where I moved around a lot. And before moving to East Tennessee for the transition of ownership, Bailey Heating and Air was actually living by Nashville, which is middle Tennessee, and definitely has been fascinating to see the difference in culture between Middle Tennessee and Appalachia over here in Greenville and Greene County. So we're about an hour outside of Knoxville on the border of North Carolina, and it's been an amazing experience to move here. Certainly immersed myself in both the business and the culture of the local town. I literally live right next door to the office, so no excuse to be late. I have no commute. And it's been amazing both how the company and the community have brought me into the fold and made me feel so at home and so welcome. And it certainly was an amazing opportunity to partner with Robert and Carla Bailey, who founded Bailey heating and air 30 years ago. And, you know, I'm so grateful to them for really adopting me like a son. And, you know, I think of them almost like godparents at this point. And, you know, I'm so grateful that they've come into my life not just for the, you know, professional reasons, but have, you know, so enjoyed getting to know them. And so appreciate them making me feel like part of a family. And you know, Robert was just in here and everyone was laughing and joking and having a blast. And that's been one of the best parts about the last year is how we've been able to continue the legacy that him and Carla have built and, you know, keep them extremely happy with how things are progressing as we grow. And you know, it's been an amazing couple months. It's hard to believe that it's just been since February 2023 and it was a big milestone to get through the first summer in the heat and air business. And now the winter is fast approaching, so, you know, it'll be amazing to look back at one year of being an owner operator.

[6:35] Host: Well, John, the fact that you have such a good relationship with the sellers is going to be a part of this story. I mean that's. I think most searchers, the best they hope for is a functioning, healthy relationship. But godparents is probably a hook too far. So that we'll hear more about that for sure. But circle us back a little bit, John. What roads were you on that led to. To. To buying a business? What. Give us a little bit more of your history.

Guest: Been a pretty winding path. So, you know, joined the marine Corps in 2007 and spent five years as an infantry officer extraordinarily, you know, proud of working with the Marines that I did. And you know, we accomplished a lot as a unit for sure. And making the transition to the civilian world, like many other veterans, wasn't sure exactly what path to take. So I did work in some tech startups for a bit. And while I was there I realized that I wanted more of a business background from a fundamental standpoint, so decided to pursue an MBA using the GI Bill. And that was an amazing experience, you know, to had a great time, met a lot of amazing people, made great friends, as well as, you know, getting that foundational knowledge that I was looking for from Wharton. I ended up at McKinsey with a pit stop at one of the most motivating experiences I've ever had. Helping build an educational system in Africa, where I was based out of Mauritius. So there's this really interesting couple month period in between graduation and rejoining McKinsey. And that really sparked wanting to be part of a mission driven organization again. You know, after finding that in the Marine Corps, my time at McKinsey was extremely foundational for what I'm doing now in terms of being able to actually live and breathe what I learned in business school. Especially from a strategy point. And after spending time out of the Charlotte office, I actually, through a serendipitous introduction, ended up helping build a political organization that supported military veterans running for Congress. So through the 2018 election cycle, really was proud of what we built there and got some great veterans into office and especially ones that can work together across the aisle. So was looking for my next steps and really wanted to go the entrepreneurial path, but wasn't sure what that might look like. But with the pandemic kicking off, started trying to be helpful in any way to the Small Business Administration as they were rolling out the relief packages like the PPP and eidl. And while I was there, I started to kind of naturally speaking with military veteran business owners. And many of those business owners were Vietnam eravets. So of this retiring owner cohort that we hear so much about in the headlines with this generational transition, Vietnam era vets are heavily overrepresented. And just because I really enjoyed working with them, I actually started a sell side advisory firm which specifically focused on exit planning, which is kind of a niche in the industry where you're kind of quarterbacking all the professional service firms that work with the owner. So you're thinking through how to maximize their sale price, how to get their personal wealth in order to and how to get their minds right for post transition as they begin retirement. And along the way, most of these Vietnam vets said, you're talking about jobs, you're talking about community building, you're talking about growth, you're talking about the long term being a sell side advisor, your relationship naturally ends with the sale. So why aren't you thinking about actually buying a business and partnering with a retired owner yourself? And I really took that to heart, especially because that's exactly what I missed from the Marine Corps and from these purpose driven organizations. Building a team, growing something great with a common mission together. So after switching my mindset last summer, I very serendipitously was introduced to Robert and Carla Bailey through kind of a multiple step connection that was based out of military background. And we decided.

[11:06] Host: John, let me stop you there because I want to ask some follow up questions and then we'll pick up right there. So when you worked with the SBA, was, was that still under the auspices of McKinsey or were you independent?

Guest: No, that was just me as a person. Yeah.

Host: Were you an employee of the SBA or what?

Guest: No. So I was going through a one year program at the Harvard Kennedy School, again through the GI Bill. So thank you for your tax dollars with that. That was really important year for me to, you know, think about how I wanted to, you know, marry both my desire to do something mission driven and entrepreneurial. And along the way with the pandemic kicking off, you know, I basically reached out to the Kennedy School network and said, who at the SBA can I speak with because I want to be helpful? You know, the whole school had gone virtual at that point. I still hadn't figured out what I wanted to do next. So, you know, was, was trying to, you know, figure that out along the way. But I saw that this was definitely an issue that people were struggling, especially in Massachusetts, in New England where things were very shut down and small businesses of course were dealing with a lot of uncertainty. So you know, the SBA split up into regional division. So through their New England office was able to, you know, help them hire some of my peers, you know, and do some outreach on their behalf because of course there was a lot of uncertainty around what does it mean to take a loan from the government. You know, taking a loan in general is a pretty, you know, scary proposition for people who have never used lending or financial partners in the past, let alone it coming out very fast in conjunction with a, you know, national level, global level pandemic. So it's definitely a time of tremendous uncertainty. So it's trying to, you know, lend a hand at the time especially, you know, like you said, being from New England, wanted to help my own hometown and area.

[13:12] Host: August Felker is a two time successful searcher. First with a traditional search fund. The second time around he did a self funded search. Today August runs Oberle Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberly is a specialty insurance brokerage for searchers. By a former searcher, check out oberly-risk.com O B E R L E risk.com link in the show notes and then when you kind of got the notion of exit planning. So I've heard it said that exit planner, being an exit planner is kind of a another word for sellside broker or some or there's kind of a lot of, a lot of overlap. There is that. Is that true? I mean are exit planners kind of first and foremost brokers but Then they also kind of have more value add on top. Or do you see them as two different things? Just help us with the vocabulary.

Guest: Yeah, there's, there's a lot of paths to being a exit planner and there's some certifying bodies in the field. So I myself want the certified exit planning advisor path, which people refer to as a sepa. And you know, people take those certification courses and do the professional education from a lot of backgrounds. You know, whether they be a wealth advisor, typical kind of strategy consultant, a broker, and you know, the kind of definitional exit planner is agnostic to kind of what seat you fill in the board of advisors that an owner is looking to, you know, utilize and partner with as they think about retirement. You know, I myself was coming at it from more of a operational consultant perspective and really did see myself as the quarterback of many people that they would partner with. So just like on the buy side where, you know, I think of an extended members of my team as a lender, the attorney, the accountant, a well prepared seller will also build that team. And you know, that's where we see some of these, you know, tragic stories about an owner who built an amazing business but had to exit suddenly because of a death disaster in the family disagreement. You know, these many reasons that might cause an immediate exit. You see all this enterprise that they value, that they built up, not actually transition to them or their family because they didn't take the time to think through what an exit would look like and have the right partners. I mean, you know, we've heard it so many times about people's opinions of brokers and all these other professional services in the lower middle market. So you know, one of the worst case scenarios is where a business owner partners with a broker who's just looking to move inventory and get that, you know, commission and you know, isn't really trying to maximize the sale price more so than, you know, just trying to get the sale done. So finding these partners and then having the time to actually plan how to stabilize the business so that going into a sale the potential buyers can look at this business and say this will definitely transition past the founder, the owner's retirement. This is a stable business that we can buy at a price we feel comfortable with and we think is fair. So, you know, the time to actually implement these exit planning strategies is absolutely essential. And you know, it's, it's definitely an interesting perspective to bring now as a buyer because I've seen the issues that these selling owners have where it's extremely Emotional, you know, and it requires thinking about the end of this chapter where, you know, I hope very much that many of these retiring owners that, you know, this generation of buyers will partner with will find a kind of second career of advising or volunteering or charity work. But a lot of people think about it as kind of the end of the road and now they're going to sit at home and not have anything to compel them every day and keep them motivated. So, yeah, the exit planning perspective has been really fundamental in me thinking about my partnership here with Robert and Carla, but also, you know, for potential tuck ins and additional acquisitions and your larger

[18:07] Host: vision too, which is at work in the background, which we're going to get to. That was great. Thank you for that. So. So yeah, I take from that that exit planners and brokers, there might be some overlap. Some brokers might be exit planners, but to use those terms interchangeably would be incorrect. An exit planner is supposed to be, as you said, agnostic, really about, about kind of the sale of the business or at least when it happens, they're just looking for the best plan to devise the best plan. Elaborate for us, John, on the purpose driven, mission driven. Maybe a little bit about your experience in, in the military or in Mauritius and what, like what you mean by that exactly. And how working in small business is mission driven versus working in some other outlet.

Guest: Yeah, absolutely. I mean, I think that these businesses, particular ones that retiring owners have built, are so instrumental to the success of these communities. So, you know, it's not only the employment of the team, but also providing people a great community to live in. So, you know, we're thinking about heating and air of yes, we want to be amazing technically at the heating and air business, but we're actually trying to make people's lives better. Not just our employees on our team who we want to have tremendous compensation and benefits, but we also want them to go to people's houses who have an amazing experience and are able to live and work in their dream home because they have the perfect heating and air situation for them. So, you know, I think that when we think about the mission here, it's how do we have people live to their full potential and grow personally and professionally and have the stability and type of career that allows them to have an amazing home life. So these ripple effects of creating an amazing employment opportunity and professional growth opportunity spills over into the community. I think that, you know, here we talk about how we're in Greenville right now and we're growing to Northeast Tennessee but we want to be the employer of choice because I think everybody wants to be a part of a culture where they feel like they're growing personally and professionally, they're having a great time, they care about their teammates, they're working towards this higher order mission of making people's lives better as opposed to just thinking about, you know, the very heads down, technical aspect of their job, which is fundamental, but not the, you know, end goal of what we're trying to build here. And you know, the Marine Corps of course, was the, the amazing example of that. And you know, with working with a platoon or a company of Marines who, you know, care so much about each other, you know, you often hear that, you know, it's not about accomplishing foreign policy at the time, it's about taking care of who's on the left and the right of you. And there is this, you know, intense camaraderie that will win the day and putting mission accomplishment first and trying to continually grow yourself as a person so that you can be better for your teammates. That type of values based organization where everybody on the team can name what the values of the organization are, what the mission is that they're trying to accomplish. That was an incredible time in my life and I feel like a lot of veterans feel the same way. Where you were part of this very intense experience that, you know, can be fundamentally awful, of course, you know, the. But that's when you felt the most purposeful in your life and you felt like you had the most meaning and therefore, you know, were feeling the most energized. So similarly, you know, I feel like we're finding that here where people want to feel like they're part of a team that's accomplishing something bigger than themselves. And you know, I think that if, you know, people can continue to replicate this model where they're partnering with a retired owner, whether that's in an immediate sale or a transition over time, continue these jobs in these communities and then help these communities grow, that's where we're really going to see success going forward because you know, you do going back to the time and team needed to execute a successful exit for a business owner. You know, this is where some of these communities, particularly in rural communities like Green County, Tennessee can, you know, really suffer when the businesses don't survive the retirement owner.

[22:47] Host: That's great because so, so sometimes if somebody hears mission driven or there's a, or, or the business has a mission, it might be some kind of super well defined goal. I don't know. I come, you know, I come from tech land. And so, you know, you hear about Bill Gates saying, we want to put a, you know, we want to put a PC on every desk or something. And often there is some large vision there that. That can be inspirational, but it doesn't need to have so much specificity. I guess it can be dedication to each other, to the. To the kind of just the team's health and success on an ongoing basis like that. That alone can kind of be the mission and then the great kind of spillover effects of that throughout the community.

Guest: Yeah. And to your point about, you know, shaping up a very targeted mission, I do think that there is a very driving factor towards that. And, you know, as with all things being a year into this acquisition piece, you know, we are trying to take a very deliberate approach to shaping up our values together as a group. And, you know, what that ultimate mission looks like, both at Bailey Heating and Air and at the larger effort to build a holding company at change of command. And, you know, that's been an amazing learning experience in itself because, you know, I think what could have been a pretty rough result or created a lot of turmoil in the team was for me to come in and say, hey, over my life, I've developed these personal values. These are the values of the company. And, you know, I think by having this kind of collaborative approach, hey, this is the end goal. By the end of the year, we're going to be able to publish, you know, what our company's mission is, what our company's values are. I think that that collaborative approach is almost just as important for the current team as it is to have that written role. So, you know, these conversations are shaping our culture itself, where a lot of people, you know, have never even been asked, hey, why do you come to work? You know, the kind of assumption is, yeah, you're just coming for a paycheck. But, you know, it's been fascinating just from having those conversations alone. You know, I've been trying to meet with everybody on the team one on one each week and having conversations about, well, you know, what's your. Why, what's your mission? And to learn the story behind it. You know, many times it. It's regarding taking care of their family is amazing to get to know people.

[25:23] Host: Thanks, John. Okay, let's return to your story. So you have decided to search, and you give us a little bit of a view into your search. You were mentioning that you met Robert and Carla, but. But were you also doing kind of a. Kind of a Formal full time search. What did that look like?

Guest: Yeah, you know, I'd always envisioned taking the change of command name and building a holding company, which is still the goal of a long term holding company. And step one, of course, was to acquire one business on the path there.

Host: I'm glad you realized that that's often the advice of aspiring Holdco owners. Buy that first business first there, buddy.

Guest: That's right, that's right. I mean, you know, there's definitely a huge benefit to planning with the end in mind. But you know, as I've been reminded many times over the past year or two, there is a paralysis to trying to perfectly tweak the tax structure of what the business might look like 20 years from now, as opposed to getting your first deal done. The approach that I took was basically the self funded search model where I didn't take investors ahead of time and was doing outreach directly to owners and through brokers. The, you know, the path through brokers was an interesting one, especially coming from the exit planning model beforehand. And I certainly appreciate both the proprietary outreach and the brokered outreach because at least the brokered outreach, you know, that the sellers have made a concrete step forward to making that sale as opposed to, you know, kind of proposing the idea formally to many of these retiring owners. You know, although I'm sure it's something that these owners think about all the time. You know, having an actual conversation that starts to shape up around numbers when there's no other advisor in the room is a much different conversation than an owner who has allowed a broker to, you know, shape up the sim, the confidential information memorandum, and, and actually publicly, you know, even if anonymously list the business. So that was definitely interesting to see that dynamic of people who are ready to sell, you know, or at least had taken steps towards that and then people who, you know, were having a conversation with you. But there's a lot of education and a lot of trepidation about kind of going forward without that kind of more common path with the broker.

[28:01] Host: So you were doing that kind of outreach and you're doing this from North Carolina?

Guest: Actually, I was by Nashville, so I was.

Host: You're in Nashville now? Okay.

Guest: Yep. And so I was in Nashville and had reached out to a broker who is based here in East Tennessee and we spoke about a different H Vac company and I told him my story and my goal and he, you know, had kind of the traditional interaction with the broker where you, you know, speak about a specific deal, go down the road a bit and then, you know, you let him know that this isn't the right fit for whatever reason. And about a month later, he reached back out to me and said, look, I remember your story. A few years ago, I looked at working with this husband and wife who operate an H VAC company. They have military in the family. They took their business off the market because they never found a buyer that they felt reflected their values and would treat the team that they wanted going forward. I think from our conversations before, you might be a good fit if you're interested in making the ride out to East Tennessee. Would you be interested in meeting with them? And I said, yeah, absolutely, of course. You know, and Tennessee is a very long state. So, you know, it's, for me, you

Host: know, it's like Florida but on its, on its side.

Guest: Yeah, that's exactly it. That's exactly it. And, you know, for me being all in on this, you know, what's a, what's a four hour drive? Of course, you know, I'll make that drive all day, every day. And after, you know, having an initial conversation with them and, you know, convincing them about, you know, who I was as a person, as a transplant to Tennessee, like many others who moved to the state and someone with no industry experience, very heavily leaning on the, you know, Marine Corps leadership and the trust that that brings from being part of the service, was able to continue the conversation. And we had a pretty standard path through the acquisition process using the SBA7 program. And closed and February of this year of 2023, after, you know, making the conscious decision not to close right at Christmas time and to kind of let the holidays shake out and do it when it might be a more stable time for the whole team, which I am very thankful for that they suggested that. And, you know, like many things, I am certainly willing to invest the time or take the our time and consider, you know, the long term effects as opposed to rushing into things since, you know, I feel like I found exactly what I want to be doing for the rest of my life. So, you know, trying to hurry and acquire a company the week before Christmas and letting the team try and celebrate the holiday, but actually be nervous the whole time that they're trying to spend with the family, waiting that, you know, couple weeks was absolutely worth it.

[31:07] Host: Yeah. Well, we're going to return also to your kind of long term orientation here, John. But you mentioned the four hour drive. I teased at the top the fact that, you know, you're from, you're from New England and this is, this is Appalachia. Were you prepared to just go anywhere? I mean, get.

Guest: For.

Host: Give people kind of a look into to the. The decision to basically move somebody pretty. Somewhere pretty rural. So were you always open to that? Did you have any misgivings about it, or did you just dive in headfirst and it was cool or what? Talk to us about that?

Guest: Yeah, absolutely. I've been given some contrary advice to what I did where people say, you know, only buy a company where you want to live. And, you know, without knowing about Greene county or Bailey Heating and Air, I had essentially committed to myself that wherever the right professional opportunity, agnostic of location, I was going to pursue. So, you know, a lot easier for me to sign off on that decision since I'm a bachelor. You know, my. My family, my extended family are very supportive of me being anywhere in the country. You know, especially after the Marine Corps experience. You know, it's like, well, at least he's not in Afghanistan, you know, so the, The. The beautiful part is that it just so happened that Bailey Heating and Air was run by an amazing founder in an amazing community and in a beautiful part of the world and a beautiful business. So, you know, I'm certainly still technically in the honeymoon period, but I don't think it will ever rub off where, you know, driving around and seeing, you know, the ridge lines where the Appalachian trail runs, it's an incredibly beautiful place. And, you know, it's definitely history. Has historically has been very rural, but is suburbanizing quickly. And I certainly see the appeal for people moving to the area, which definitely makes for an interesting professional decision since, you know, we now have much different kind of bifurcated demographics than, you know, before where, you know, Greene county was pretty homogenous. Now with many transplants coming in and building, you know, their dream home, it's definitely an interesting customer base to deal with. But, you know, that's exactly what happened. To your point about moving was, you know, I was based in Nashville, having a blast there, and to move from, you know, southeastern city to a rural spot was definitely a, you know, a departure. But unlike many people who kind of are going the entrepreneurship through acquisition route for lifestyle purposes, you know, I'm going, I. I was going this route to go all in on the professional side. So, you know, a lot of my last year has been kind of like deployment mode, military style. I've been heads down and honestly, I've been loving it. You know, there hasn't been a second that's gone by where, you know, I've wanted to take a vacation or you know, wish I had, you know, a 9 to 5 job or something like that. Like, everything about this year has been going towards this theme of, you know, trying to build myself as a person and grow into a leader that can eventually, you know, build this massive mission with a long term holding company. But this year has been, you know, a ton of learning on my own and thinking about it as, all right, well, you know, this year I'm a student and a builder and you know, it happens to be in a beautiful place with amazing people. So, you know, whether that was in the middle of a city or, or out here, you know, I'm just excited that all those parts fell together.

[34:47] Host: And so with your long term, do you anticipate being there forever and ever or maybe, maybe not, or who knows what the future holds sort of thing?

Guest: I think, I think it's more in the last category there. But the, you know, the nice thing is, for my own personal situation is that I think that obviously buying one business is, you know, a huge milestone for anyone. The transition between buying one and then two is a really pivotal point. You know, maybe buying the 15th and 16th business, you know, not that big of a deal. But going from one to two locations is a massive endeavor. And, you know, we've certainly been fielding those opportunities, which has been an interesting transition since, you know, a year ago. At this point, I was a search searcher who had to explain what I was doing to people to now nobody.

Host: I want to be.

Guest: I want to be. I want to be. Yeah, absolutely. And now, you know, it's like, you're like, oh, this, you know, it's a fellow business owner who's in a fellow industry. We should have a conversation as peers. So, you know, that's led to a lot of opportunities. So, you know, essentially we're looking to grow Bailey here from exclusively heating and air to heating and air electric, which we're actually rolling out right now and in the future, plumbing. So, you know, continue to grow this business in this area, but are certainly looking for other opportunities. And to go back to your question about would I move, you know, I am certainly, you know, looking at some of these opportunities as, okay, well, there's a GM in place or there's, you know, an operations manager in place and I could run that remotely or do I want to go the same route and I could join that business as the day to day leader and kind of do this leapfrog model because, you know, Bailey Heating air, that's been the case. But I feel like market wide, that's where the greatest opportunity to build value comes from is, you know, for these owners who need a one for one replacement to come from outside and maybe not have the internal talent to elevate within a management structure.

[37:05] Host: Yeah, well, that's a great segue there, John. So let, let's hear about, let's hear about Bailey. Bailey's or Bailey.

Guest: Bailey singular.

Host: Yep, Bailey singular. Bailey. And is that their last name? Is that Robert and Carlos last name?

Guest: It is, yeah.

Host: Yeah. So let's hear about, let's hear about Bailey. Well, I guess first question and then broadly about Bailey, the vision that you just laid out for us or the possible vision of you, of you going into a second acquisition or third acquisition, the way you've gone into Bailey here or not, if there's an operations manager GM already in place, but that all these potential paths that your career might take over the next five, five years or however long, that was something that you were, that you explained to Robert and Carla.

Guest: Yes, yes. And you know, that of course is an interesting one because there's what's important to me personally and my long term vision and then, you know, there's what's important to a person who's sitting across me for the first time hearing who I am. And you know, that certainly in itself was a, a learning experience over time as a searcher was how to better tell your story, especially without industry experience. You know, the, the idea that in the future I would like, you know, Change of Command to be a great example of, you know, American entrepreneurialism and employ an amazing amount of people who feel like they're living fulfilling lives. Of course, you know, that is important to me personally sharing that with Robert, Carla off the bat where they're just like, how are you not going to collapse this company in the next six months?

Host: What are you talking about right now? You lost us sort of thing.

Guest: Right, right. So there's definitely a, you know, a phase where, you know, I was trying to explain the long term vision, but very much put up front and emphasize, which is very true, that I want Bailey to live beyond me. I want Bailey to be a pillar of this community for the rest of my life and beyond.

[39:21] Host: And so John, tell us more about Bailey. Tell us kind of the bullet points of size of business, age of business kind of sim level stuff.

Guest: Yeah, so the, the business was founded about 30 years ago in 1992, and for many years, you know, it was a small, smaller team. And Robert Bailey, our founder, is basically a force of nature, you know, still is a Force of nature, that's for sure. His retirement has consisted of building a house for his son. So, you know, he's not really taking a full step back yet. But, you know, over the years certainly established a amazing reputation from just doing sheet metal and installation work to doing service where it's very hard to build a brand and be excellent in. So, you know, incredible credit to Robert for not only, you know, having the customer mindset, but also being amazing technically. And over the past few years, you know, I was reaching kind of the mid-3002 level in earnings. And, you know, the real growth happened in the last two years. So 2021 and 2022. So in 2022 they got to about two and a half million. And, you know, when it came to discussing terms, you know, we wanted to. It was extremely important to me to make sure that, you know, Robert and Carla felt like, you know, they had a great win and that this was how they wanted to transition to retirement. So we decided on a million dollar purchase price which was, you know, funded partially through a seller note and through an SBA loan. And we also included the building in that sale and it was an asset purchase. And, you know, we maintained the entire team through the transition, which was, you know, all credit to Robert and Carla speaking so highly on my behalf. So, you know, I walked into the team and gave my introductory spiel, which I actually said this and believe it to be true, where whether I'm the best leader in the world or the worst leader in the world, the first three minutes of my speech to the team are probably going to sound exactly the same. But asking for the team's patience and trust to prove that I was, you know, am who I said I would be, and, you know, with Robert and Carla's, you know, close relationship and sharing that, you know, they had the opportunity many times over to exit the business, but specifically felt comfortable and trust with me. I think that really did buy me the time to actually show and demonstrate that they were correct in their assessment of me.

[42:16] Host: And is there anything more to say about what they liked about you, John? I mean, we already talked about. You shared with them your vision, you shared with them your history, they met you, they liked you, so maybe that's it. But was there anything more like when or maybe contrasting yourself with some of the previous opportunities they had to sell?

Guest: I think the previous opportunities were more traditional investment firms who asked a checklist of questions right off the bat who were, you know, very curious immediately on, you know, the financial accounting and which is all of Course, like, you know, extremely important. But I think that, you know, the messaging was very important there as well as the, you know, ability to say, truthfully, I'm gonna be here every day, I'm gonna move here and build this company. So I think that I'm gonna move next door.

Host: As a matter of fact,

Guest: the funniest part of that is actually rent from them. So, you know, they.

Host: I'm moving in.

Guest: That's right. So yeah, there's a lot of jokes about, you know, my landlords where, you know, it, it, they have built, you know, like many business owners have built a portfolio of rentals. And when I asked them, you know, hey, could you take a look at some of these apartments or homes I'm looking at, you know, they said, hey, actually we, we just bought the house next door and are fixing it up and we could fix it up quicker if you want to move in. So, yeah, I, I moved in a little bit before the transition of ownership and we hadn't told the team yet. So I was like this hermit over there that people knew was occupying that house but hadn't met yet. So it was pretty funny to like reveal as I walked across the street after Robert and Carla delivered the news to the team that that was me who had been the neighbor over the past month.

Host: Two mysteries solved at once. Who's the guy living in the house and who's buying this business?

Guest: Right, right.

Host: Okay, that's great. And, and, and so just going back to the terms a little bit. So you said it was kind of had kind of historically been 300ish in earnings, but then grew in 2122 and you bought it for a million. So you, so according to kind of historic earnings, you earnings you were at 3x, but it also had real estate. So. And then there was growth in the most recent two years. So it sounds like it was a pretty, it was a pretty strong purchase price and, and probably not what these investment firms were, were going to going to offer. They probably sold to you and sold to you, having had these other opportunities and sold to you for less than other opportunities. So doubly a double vote of confidence in you, I guess.

[45:17] Guest: Yeah, it's definitely accurate. And you know, it was a little counter to the traditional process where, you know, there are many times we paused the conversation for me to say, look like I want this to be a win for everybody. I want you to make sure that years from now you're going to look back at this and feel like I did right by with the economics of this. And they really were extremely committed to the company's continued growth and continued service to the customers. Because, you know, the one thing I forgot to mention, you know, was treating the customers well was a huge concern for them, that, you know, these are not just, you know, numbers on a spreadsheet, but these are their neighbors, these are their family. You know, a lot of people on the team, including Robert, Carla, come from very large families. So, you know, the last thing you want is for a cousin or, you know, an aunt or uncle to have an issue with the team that isn't continuing this tradition of service. And, you know, we. We certainly, like, think about, you know, the community as a, you know, part of this transition, where they've been amazing at introducing me to, you know, so many people, civic organizations in the. In the community that, you know, we hope to benefit for the long term. And, you know, one I mentioned that we're building out our electrical department, but, you know, during the conversations with Robert and Carla about transitioning ownership, you know, they stood out to me so well, where, you know, you have to have this ice cream in the freezer during the summer, the team has to be able to come back at the end of the day and have some ice cream and push pops. And I just said, all right, you know, absolutely no questions asked. You know, we. We will keep the tradition of ice cream going. And, you know, we eat a lot of desserts, for sure. And, you know, when it comes to building out our electrical department, that's actually how we basically recruited them. Where word had gotten out in the community about, you know, what we're trying to build here, how we're integrating technology, how we're hiring people, how we're thinking about the long term. And we were actually using a new construction job to train the team on some new. New technology, new H VAC systems. And I was running out to join the meeting and brought popsicles in cold waters because it was cold out. And these two electricians who had already been primed to speak with me because they had heard about the growth we were having, saw me bring popsicles. And that triggered them to say, like, all right, we got to go talk to this guy. This is. This is definitely the company we want to join. So that might be, like, the highest return on investment of buying popsicles. You know, I could ever experience, man, the power.

[48:15] Host: The power of popsicles. Yeah, that's. Yeah. I mean, you always hear John or my guests so often will say that searchers come in very, very kind of money spreadsheet oriented and so like incentivizing people is all about, you know, their direct compensation and then quickly learn that it's often all of this other intangibles think, you know, things as, it's kind of hard to foresee and hard to guess as, as you know, the regular desserts, you know, on offer in the freezer or whatever. It's super. Illustrates the point perfectly. John, you said word had gotten out and I don't want to beat this to death, the small town thing, but it's, but I, but I think it's part of the story. So indulge me the how big is the town and what's the name of the town again?

Guest: So the name of the town is Greenville, Greenville, Tennessee. The county is Green county. And we kind of think about Greene county right now as our service area and that's kind of bumping up into 80,000 people. And you know, we are nestled in between Knoxville and then what people call the Tri Cities area, which is, you know, the closest one of those three cities is Johnson City to us, which you know, has been made famous by Darius Rucker covering Wagon Wheel.

Host: Johnson City. Yeah, that's right. I know, I know the line. I almost started singing it. But I'll spare you in the audience

Guest: the, the, you know, and, and all these places are experiencing growth right now, like I was saying about the suburbanizing area. So you know, it is an interesting spot to be and from a strategic perspective, you know, there are a few H Vac and trades company here, but you know, you don't find the kind of nationally RPE backed companies that you would find in a big city. So it's been interesting to think about the opportunity here as we continue to grow and, and roll out, you know, similar best practices, but do it from the mindset and the approach that we're taking and do it, you know, here in the community that doesn't have those larger companies. But the downside of course of that is the, the skilled trade labor pool that, you know, you might be able to find a lot more of even though there's a national shortage in the larger cities. So, you know, we need to really think about our strategy of growth with how do we recruit and retain the best skilled trades men and women that we can find, particularly because, you know, in these areas they are in short supply. So that type of reputation is extremely important to us.

[51:11] Host: And then the town of Greenville, I know you said you kind of think about yourself in the Greenville or serve the whole county, but what's the town where you are?

Guest: Yeah. The town itself is. Population is about 20,000.

Host: 20,000. And so. So where I'm going with this is just the kind of how many eyes are on you. So when you buy a business for any of my guests, you know that all eyes on them from the employees of the business, of course. And that. That's a lot of attention and can be pretty intense. You got that. Plus, depending on. I don't want to overstate this, but depending on maybe the size of the town and how well Bailey is known in the town, that you might have kind of people outside the business even kind of watching. I mean, you got the extended family of Robert and Carla, the electrician guys, had apparently already heard about, you know, this new guy and what he was doing over at Bailey. So do you feel that, or am I. Am I overstating it?

Guest: No, I think that's perfectly stated. It's been a. Definitely a wild experience to, you know, meet a lot of people for the first time and have them say, oh, I've heard about you. You know, this is an amazing opportunity for you. But just make sure you don't break what. You know, don't. Don't try and fix what's not broken. And, you know, there's.

Host: Screw it up. Welcome. But don't screw it up.

Guest: Absolutely. Absolutely. And, you know, it's. It definitely is a visible physical location. We're at kind of this t intersection that is in between schools and the downtown, so we get a lot of traffic going by, which was an interesting consideration. You know, when it came to the purchase price, you know, don't. Haven't spent a lot of marketing because, you know, 14,000 people drive by a day. You know, the. The. But the funny thing is, one of the reasons why I mentioned the property and one of the reasons why, you know, partnership with Robert's been so great is, you know, after he transitioned ownership, he said, all right, well, I'll finally have some time to fix our sign. So one of the first things he did, you know, after transitioning ownership was, like, spend a day on a ladder, you know, cleaning the sign, putting fresh bulbs in there, resetting the timer. So it's things like that where, you know, I'll meet someone for the first time, and they'll say, like, oh, yeah, I remember when I saw the sign light up again, and I was all excited, you know, Cause I had heard about you. So I was glad to see that the sign was lit at night. And, you know, more recently, we've kind of gotten a lot of encouraging Words about, hey, I saw the new vehicles outside. They look great. You know, that's exciting. So, yeah, it's interesting because on a personal level, you know, as a leader in a company, I know that everybody's watching and everything I do will be scrutinized for sure. So there's no, you know, skating past. You know, what happens if I show up one day with my hair, you know, not combed? I'll get ribbed about it. You know, so there's no detail that gets missed. You know, as a leader and then as a company, you know, to your point, we are very visible. So it's, you know, important that we keep appearances so that, you know, when you think no one's watching, they're actually looking at you closely. So upholding that standard is very important. And, you know, that's, that's definitely been an interesting conversation with a lot of searchers who don't come from a military background. Because, you know, in my military experience, you know, everybody's looking at the leader and everyone's going to, you know, crack jokes and, and review about, like, the smallest of things. But honestly, I see that as a huge positive. You know, I was nervous until people started chirping me here. You know, it's like, that's how, you know, people like you is if they, you know, give you crack a joke at you. And, you know, I remember, like, the day that it happened because, you know, it had been a few days and, you know, we're still a little tense with the new guy and everything else. And then, you know, someone gave me a hard time about not having a great shave, and I was like, all right, I'm good. We're good. Yeah.

[55:16] Host: Oh, man, that's such a good kind of lesson in leadership because maybe if you haven't had a military experience like you, you don't realize that that's a sign of a tentative sign of affection or acceptance as opposed to hostility. That's great. Okay. I want to. Well, I do want to get a little bit more detail on what you've done. You've mentioned that it's 16 people from nine expanding to electric and stuff. But so. Well, that's my next question. But then I also just want to spend some time on H Vac kind of broadly and stepping into an H Vac business where you don't have the technical background because H Vac is such a kind of high profile category for searchers. So we'll, we'll do that next. So you mentioned the. That Robert fixed the sign, got New vehicles, new hires, expanding into electric. Just tell us a little bit about, about. But also that you were pretty tentative and didn't want to break anything. So that you, and you were doing kind of, you know, your listening campaign and just, and kind of waiting, you weren't getting in there and you know, trying to change everything. But it sounds like changes have happened now, what, nine, ten months later. So anyway, talk to, talk to us about what? What you, how the business looks different today.

Guest: Yeah. So, you know, one of the amazing things to me is, is seeing how Robert built this business just as a incredible force of nature. So when it came to processes, especially written processes, you know, the business didn't have those in place or kind of like a formal meeting cadence to kind of communicate, you know, each day and on a regular schedule to work towards, you know, a goal that everyone was aware of. So at a fundamental level, that's what we're working on most after this transition and stabilization period where it was most important to me to just absorb and learn what was going on. So, you know, change management has certainly been a theme of this year where, you know, we could bring the most rigorous processes in the world to bear here. But if the adoption level is 0%, then we, what's the difference? So, you know, we're trying to bite off projects that we know we can succeed at and move forward. And you know, probably the largest example of that was integrating software for the first time. So the entire business was run off of pen and paper. And towards the end of the summer, after, you know, a lot of input from the team and a lot of discussions, we actually formally made the leap into Service Titan. So we're now running the entire business off of Service Titan, which has been incredible, especially from a long term perspective where we actually have clean data for the first time and can make strategic decisions based off of the numbers that we're seeing. Obviously we still have a long way to go till we're operating with a proficiency and comfortable that we'd all like. But that was definitely an exercise in change management for sure. Where, you know, the most visible difference in our company every day is instead of having a cork board with, you know, call tickets for each person we're going to visit and you know, each home we're going to go to change out a unit. And now we have flat screen TVs mounted on the walls and iPads for everyone and laptops. So, you know, that physical transformation and, you know, the process transformation has meant a lot to the team and generated a lot of excitement, but of course, also a lot of trepidation, as with anything new. So, you know, that's probably our biggest piece was the fundamental layer of process with the. The software transformation. And, you know, the best part about, you know, not to jump ahead to the H Vac industry, but, you know, the H Vac industry, there is a playbook, you know, and best practice groups exist and coaches exist, and, you know, the idea that just like the Marine Corps, you know, there's a way to run a platoon, there's a way to run a squad, there's a way to run a fire team, there's a way to operate as an individual Marine. Those exist out there. So now that we're starting to implement that, I think that we're really positioning ourselves for massive growth in the future. So we already have grown as we're laying that foundation, but it's very important to me, going back to the time horizon, that we really build that foundation. So with February being the year anniversary, I think about if I had been part of a traditional fund or fund structure and, you know, I'm already 20% of my way through, you know, my time before trying to exit. So, you know, that might not be the right pace if that was the case. But I really do feel like, you know, the greatest accomplishment that we can come out of with 2024, going into 2024 is having the foundation laid and having this stability through a very turbulent period, you know, for anybody to go through. New boss, you know, new. New person, writing your checks and, you know, shaping your professional trajectory at a company. So I think that, you know, the idea that we have the tools in place, but more importantly, the strategic goals in place and the mindset that, you know, we're going to continue to set goals and drive towards them will be the. The greatest accomplishments for this year at Bailey.

[1:01:09] Host: And. And it also sounds like you're going to kind of codify a mission here in the next six months and, and make that explicit.

Guest: Absolutely, absolutely. Which I think will, you know, not only serve to, you know, grow our internal company and people, but also continue to serve as a. As a beacon for, you know, people who do want that type of professional environment. So I'm really excited about that as a recruitment tool as well.

Host: And John. But the meeting cadences, that didn't exist and the SOPs, that didn't exist. So are you still kind of holding back on those so as not to do too much too soon, or are those also in process or done?

Guest: We're. We're layering them in. So, you know, the, the kind of culture that intentionally excluded meetings before was very strong. So we're trying to, you know, ease into that. You know, I am very.

Host: Just gotta offer free popsicles. Everybody can have a popsicle if you come to the meeting.

Guest: I mean, food, food is definitely a part of our culture. You know, we, we. A lot of people have had birthdays recently, so, you know, the holidays are already detrimental, anyone's diet plan. But, uh, you know, having cake all the time too. But, you know, and that's part of it, right, is like, you know, and why we're easing into it because if we say, hey, we want to have a meeting every Friday as a team and then the first one they have is, is boring and terrible, then that sets a awful precedent and people aren't going to be excited. So that's one of the reasons for us to move slow is because, you know, we need to make sure that we're actually making these meetings useful, purposeful and motivating towards growth. And you know, as with all things this year, you know, you hear the phrase it's, you know, simple but not easy. You know, there's about a list of a thousand simple things that, you know, you could do. So how are you going to rank order those and pick the highest order? 1 is one of the, you know, the biggest challenges that I've been facing, you know, is that of the many tasks you could pick, how do you select which one's going to have the highest impact and you know, you can get right as opposed to, you know, having to rework or go through all this change management process and then scrap after that big buildup. So, you know, it's, it's been amazing to like, you know, work with other owners as well. So co owner of the business is a fellow military veteran who runs a plumbing business in New Jersey and a H VAC company in New Hampshire. So, you know, it's been amazing to have, you know, a larger team as well to build this because, you know, a huge part of the progress this year is having people like Rich Jordan, who's the Marine vet I just mentioned, you know, to hold me accountable. You know, it's the idea that I have coaches and I have mentors and, you know, I would never want to let Robert or Carla down and have these external pressures to continue to push the pace has been amazing because I think that, that when people talk about, you know, the lonely path as a searcher, the lonely path as a business owner, I have been extraordinarily fortunate to not feel lonely in this path because I have a lot of people supporting me, especially on the, you know, emotional side of these, these changes which are difficult to navigate.

[1:04:40] Host: That is great. But you should also take some credit for that because I think there's something about you that, and your kind of openness to this in your, you know, community orientation that, that wants to make wants, gets people to want to help you. So, so that's great. And Rich Jordan, of course. So when you say co owner, Rich is an investor in this, in this with you, kind of interesting to hear you characterize him as co owner. Is that, is there anything more to say? There is investor just as good a term?

Guest: Yeah, I mean, I think that investor is accurate. You know, the, the other co owner who's an investor who's been a guest on your show is John Hubbard.

Host: John Hubbard twice. He came on his update episode and he's the one who connected us.

Guest: Absolutely.

Host: The man, the legend, John Hubbard.

Guest: That is the man, the legends is the best way to describe him. And you know, the, the path of a self funded searcher is interesting because technically I could have gone alone in the acquisition from a financial perspective, but you know, with the larger mission in mind and knowing that, knowing the value that I see in coaching and camaraderie, I, you know, wanted Rich and John to come on in a big way and you know, that's paid or. It's been so amazing to have people who have blazed this path before, you know, especially from a mentorship perspective, from a friendship perspective and you know, when it comes to investor versus owner, you know, neither of them are involved in the day to day basis. But you know, the best way I could describe it in the, in the military there's a term called qrf, Quick Reaction Force. So essentially, you know, as an infantry platoon commander, if my unit gets pinned down or we need additional help, you know, the qrf, the Quick Reaction Force is basically a dedicated unit that's, you know, at a base that you can call on to come and help you out. And you know, this is kind of like from the movies, right? Like you know, Lord of the Rings, you see like Gandalf crest the hill with the cavalry and you know, come to save you against, you know, insurmountable odds or what you didn't expect to see and backup or like cops would call backup. That is a much, much more articulate way of saying exactly what I'm saying. Yeah. And you know, the, at a lot of trainings in the Marine Corps, they'll have kind of like an honor graduate, but then they'll also have a QRF award. So, you know, that's a really honorary title for someone because basically people are saying, hey, if I'm in trouble and if I. In a time of my greatest need, who do I want to see crest that hill? Who do I want to call and have on the other line to come help me? So, you know, things aren't obviously as extreme as that, you know, but. And I have a blast with Rich and John, but I see them as like my qrf. Those are two guys who personally and professionally I would pick as QRF award winners, you know, because they're just amazing people. So, you know, to feel like, you know, they have my back and are a part of this is incredible opportunity and certainly, you know, driven a lot of our success.

[1:08:01] Host: That's awesome, John. Wow. I'm. I love that. The qrf, what a great, what a great concept. Okay, so we're bumping up on time here, but we, we still need to spend a little bit of time on, on a few things actually here. H Vac among them. But, but even before we get to that is went from nine to 16 employees. Does that. Has there been new revenue this year to pay for all those employees, or is this the world's scariest J curve?

Guest: No, no, we have, we have increased revenue. So, you know, we'll probably be on track for about 3 million as opposed to kind of two and a half last year. And, you know, with the time horizon, a deep J curve is okay, relatively deep, but you know, with the kind of excitement and, you know, particularly looking at our pricing, you know, we've grown the business both from a revenue and an earnings standpoint to support this growth. And, you know, from a personal perspective, I'm all about reinvestment in the business. So, you know, we're definitely are thinking about this as, all right, how does this propel us forward in the future? And you know, the. The H Vac industry certainly can be cyclical. You know, I made the mistake a few months ago saying that H Vac is weather dependent. And I was quickly corrected by another owner to say it's weather enhanced. So we're in a weather enhanced industry, but there are cycles to it for sure. So, you know, part of this strategy of bringing on additional trades that are more, you know, steady, regardless of what the weather is, like plumbing and like electrical is part of that so that we can support the company as a whole as we continue to, you know, make bets on great people. Having an outsized impact on the company and growing us going forward.

[1:10:01] Host: Yeah. And to be clear, H Vac is cyclical because a lot of revenue comes when people replace their whole systems. So there are these big spends, whereas plumbing and electrical, you don't have that as much. So consumer spending on that is more kind of, it's less lumpy, it's more just kind of consistent year to year to year to year. And it kind of smooths out that those ups and downs of H Vac tell us about the cyclicality of H Vac.

Guest: Yeah, and, you know, this has been a fascinating part of my last year is to learn more about this industry that I'm new to, especially because of the nuances of this cyclicality, both within a calendar year and over the long term. So, you know, recently I was sitting down with a gentleman who's 83 years old, has been in the H vac industry for 50 years. And you know, one of the first things he told me is like, I've lived through six recessions. So, you know, this isn't a, a new, a new occurrence, which is, you know, comforting that, you know, over the course of your career you'll see the highs and lows and with a long term perspective, you know, that's okay because you're not trying to time the market. But you know, within, within an H Vac company, people will talk about service quite a bit. And that is a lot of times because it's operationally very intensive. So you have the customers calling. You need to get out there right away. But the reason you get out there right away is to drive the opportunity to change out their system. So in actuality, you know, a best practice for residential H vac would be about 30% of revenue is service. We're actually going out and you're fixing things. And 70% is from changing out these systems. So, you know, people change out their systems when they break. You know, very, very, very few people proactively say, hey, it's been a few years, I should get a new system. So you have these high points of the summer when people are, you know, having the air conditioners on. And then the winter, particularly after you crest or you know, go below a certain degree. So, you know, the first day it was 95 out was the busiest day, you know, we've had. And this year is a great year to, you know, kind of cut my teeth where, you know, there's about people say in the mid south here, you know, that there was about 20% less cooling days this summer. So, you know, essentially we had a very mild start to the summer, then August was very hot. So, you know, from a company that's still working towards our marketing campaigns or membership agreements, things that would smooth out these curves, our revenue, you know, you can see exactly type of weather where May, June, July are pretty shallow, then August is a huge spike and it'll be the same thing in the winter. So that's kind of the cyclicality within a calendar year. The cyclicality within a century, it seems like, is about a 15 year cycle. So definitely differences in technology and everything else. But if a homeowner is thinking about replacing their System, maybe it's eight years in one place, 20 years in another. So salt, snow, whatever the differences might be. But generally 15 year cycles and where we're heading is an interesting time to really start refining our company and grow because 15 years ago for us was the recession. So if you look at the equipment that was bought over the last few decades, you're going to see this massive dip. You know, that is the bottom of the natural cycle in 2008, because people weren't spending money on pretty major home improvements like air conditioning. So 2008, fast forward 15 years later to 2023. There's very few of these systems that are naturally going to age out. Now layer on top of that, the fact that 2021 and 2022 H vac companies had a ton of success because homeowners were at home very cognizant of whether their heating and air conditioner was performing well or not. So they actually replaced early. So basically for 2023, 2024, 2025, they moved forward what we naturally would have expected to change out in these years, and that got stacked onto the revenue of 2021 and 2022. So, you know, long story short, 2036, 2037, 2038 is going to look pretty amazing. So I'm like very excited to be in the H Vac business for the long haul when people who bought a ton of systems in 2021 and 2022 need to get their systems changed out, you know, 10 to 20 years from now.

[1:14:54] Host: So first of all, is this being talked about a lot in H Vac land among H Vac owners, that there's this kind of severe softening of a demand for H Vac services coming or already here? Because it's news to me.

[1:15:08] Guest: Yeah. And I mean, of course, you know, there's a strong chance I could be incorrect on all this, but you know, the I. I've definitely had conversation with other owners in this region about, you know, the coming years, about kind of the, you know, the rapid pace of 21 and 22, where, you know, everyone was busy every day of the year because, you know, this high revenue time. I think that, you know, when it comes to kind of like people are in the industry, it's definitely on people's minds for sure. And it definitely did not trickle down to me as a searcher looking at H Vac, evaluating this company going forward, but it definitely is. No one wants to be in a recession, but I think that as we articulate our mission, articulate our values, build a great culture, build these processes, this next few years, which may be tough for the industry, will be, you know, a great test of our ability to recruit and retain people and grow through this, you know, especially with a loyal customer base and then accelerate once, you know, things start going on an upward trajectory again. So, you know, if I was trying to sell the company, next year or two years from now would not be great news. But I think that, you know, this is kind of one of those challenges that face a business owner that, you know, I, I am actually very excited to face and think that, you know, we'll, we'll come out the other side a stronger organization because of it.

Host: Yeah, it could not only kind of fortify your team, but, you know, thinking about it kind of as an investor, you know, if, if you've got a really long term horizon, then moments of softness within a category can be great buying opportunities. If you're acquisitive and you can kind of weather the storm, you know, kind of the, the blood in the streets to use the Warren Buffett kind of violent imagery of, of buying when people are scared. Why do you think H Vac or. Yeah, why did it become so hot now or. And maybe it's not now, maybe it's been this way for the last seven years. But among both searchers and private equity, I mean, is that a trend or is it just kind of always. It's big. It's like always popular with people buying businesses, be it institutional folks or searcher types.

Guest: From some industry veterans, I've heard that private equity interest in H Vac has come in waves. People will talk about, you know, they've seen this consolidation happen with, you know, very large roll ups. And then, you know, some of them had success, some of them didn't. But, you know, it does seem like this kind of interest in H Vac companies from, you know, institutional firm level comes in waves. I think to your point, From a search perspective, there's kind of two things that go on. One is a mirroring and kind of, you know, tailgating. You know, I see, you know, I'm a searcher. I see these very successful private equity firms going hard on H vac companies. So that's going to pique my interest and say, well, okay, if they're interested in that, you know, that's a leading indicator that I should go there too. I don't have, you know, the research budget or the, you know, years of industry experience. And these guys have zoned in on H Vac, so it's got to be good. So I think there's some of that going on. Yeah. And, you know, the other thing I think is that it does check a lot of boxes that, you know, search funders will joke about, you know, their, their websites, you know, we'll have the like, you know, business categoristics page on, on their website. And, you know, it's recession resistant, which I think is an important, you know, disclaimer. It's not recession proof. And, you know, I think that the recession resistant nature of it, the high margins of it are very good, I think, because it is an understandable business with a playbook that makes it attractive. But I do think that, you know, H Vac is also an interesting business for people to get involved with because it involves so much trust. So, you know, to be the owner of an H Vac business, there's a very, you know, solemn responsibility where our employees are going into people's homes every day. So, you know, whether that's, you know, wearing shoe covers to make sure that their floors stay clean, to, you know, literally having the person like, trust you with the security of their family and, you know, welcoming you into the home, which is, you know, their most sacred space. That's, that's a really, you know, attractive challenge for people to take on and interesting, you know, factor in this business where it is highly personal to customers and, you know, the ability potentially, once you are in the house and have the homeowner, the customer to be able to offer additional services is a big advantage. Which is, you know, one of the reasons why we're moving to electrical and plumbing as well. Other traits and one other kind of characteristic, you know, when people talk about customer concentration, you know, there, there definitely are people who look at H Vac that involves heavy new construction where they might be concerned about that being a big chunk of revenue. But generally, you know, speaking whether you have maintenance contracts or you're just going out to you know, one home at a time. The customer concentration isn't as large of an issue for people going through underwriting for loans to buy an H VAC business, which is also a reason since it is a familiar company asset light model for banks to kind of understand and be, you know, comfortable moving forward with.

[1:21:08] Host: Thank you for that, John. And then what about the, the obvious? You don't, you're not an H vac technician nor are you an electrician or plumber. So how do you, how are you approaching this in your own life in terms of your knowledge deficit there and how much if any, you're going to try to kind of hit the books?

Guest: Yeah, I mean, you know, going back to like thinking of myself as a student over the past year, that's definitely been a factor layered on to just kind of the foundational business owner. Business fundamentals is, you know, this is actually work that I'm not familiar with or proficient in. So you know, I've looked at that as actually a, a culture building opportunity as well where, you know, I think that our team gets a big kick out of when you know, I try and make regular ride alongs with everybody and you know, learn from them. And literally my role during those ride alongs is to hand people their tools or run back to the van to grab them some wire, you know, so I, I certainly am not bringing any technical expertise, but it's something that I've been fascinated by and have definitely been picking up a lot just from you know, speaking with our team and being on the job sites and you know, the, the conversation of the kind of the economics, the acquisition with the long term perspective. You know, there's always a conversation among people who are going to search fund route of, well, don't buy too small, don't buy too small. Since I have the long term perspective, I actually intentionally went, you know, into the fire, so to speak, where, you know, I knew I was going to be in the business. You know, people talk about on the business versus in the business. I'm in the business, you know, I'm. Over the course of the last couple months, I've made every mistake you read about in business books about, you know, doing the $5 work, $10 work for sure. But I feel like that's very important in this formative experience to over the long term grow as a business owner. Because now going forward I know what it's like to go up into an attic in 100 plus degrees in A, you know, August afternoon in Tennessee. And I know what it's like, you know, to have to carry equipment around somebody's house and up over a hedge, you know, to set their air conditioning unit. And, you know, I think that, one, it's great team building with the team where they see me sweating and getting dirty as well. And two, you know, with future owners to partner with, there's a lot of credibility there where, you know, I have been living and breathing this business as opposed to just a more financial buyer. So, you know, with the expansion to other trades, there's no way I'm ever gonna become an expert in all these trades. But it is important that I feel I can communicate competently to our team and to our customers, you know, the value that we're bringing. So, you know, my role I see as a ecosystem builder so that these technical experts can thrive and also a problem solver for them so that they can actually focus on the technical piece of the business. So, you know, thinking about myself as a problem solver has certainly made this past year a lot easier. Because that kind of mindset of my job isn't to go out and replace a blower motor. My job is to think about everyone can surface their problems up through the organization, and I'm the one who wants to collaboratively work on the toughest problem. So from my own curiosity perspective, there's a lot I want to learn about H Vac from a technical perspective. Uh, but I know that, you know, as soon as I reach a level of, like, conversational competency, to use like a, you know, language analogy, I need to, you know, be spending the bulk of my time on these kind of, like, strategic problems.

[1:25:01] Host: And has your team also understood that? Because. Because you're filling the shoes of somebody who himself was a. Was a technician. And if you say a force, keep calling him a force of nature. I assume he was probably the best technician on the team. So. So as your team understood that, hey, I'm here to, you know, my technical ability is making this business the best it can be. Not knowing H Vac are people, does that resonate with people?

Guest: I think it has resonated. I mean, I think that, you know, the communication of that has been integral to reinforce that over and over and over again. Um, you know, this is a hard work, you know, so it's easy to potentially get frustrated. But if, you know that deep respect for these technical experts is consistently and clearly communicated and then actually showing, hey, you know, last week we sat down, we all, you know, ate together, and we surfaced these five problems. These are the five problems that I'M focused on right now. This is how I'm addressing them. We've solved, you know, these other problems like showing concrete movement forward I think has been, you know, really where we made strides in that relationship. But, you know, everyone's excited about the growth aspect. Everyone's, you know, better compensation, better life, you know, style and painting that picture of, hey, if I'm the best, if I become the best technical expert, that's not going to happen. So this like division of labor, you know, where we come together as a team and then the technical experts focus on being a technical experts and I go talk to a benefits company about what, you know, healthcare package we're going to select. Like that is the best use of time. And that's definitely been a change. And you know, the theme of, to the point of rolling out meetings for the first time. We talked about, you know, what the theme of our fourth quarter would be and the one we settled on, which I'm positive is a, you know, ripoff of some business book, but it's over. Communicate and then say it again. So, you know, this is the way that we're trying to operate right now where, you know, even if I want people to be sick of how much I tell them that I, you know, am appreciative of their knowledge and their eagerness to learn, especially in the industry where there's a lot of technology rolling out right now, that's going to fundamentally change the game. So we need to be not only proficient now, but we need to be eager to learn going forward. So, you know, in terms of over communicating and say it again, my goal is to have people be like, all right, I get it, like, you know, you're, you're, you're very appreciative of us.

[1:27:43] Host: I've, I've heard that, John, that like, you know, the CEO or the leader's standard for when, for when they know they're communicating the right amount of, is when people are sick of it or they're being made fun of. Like that's your, that's how high it has to be. I, I've always found that so interesting. Well, John, this, this is great. We're, we're wrapping up here. I want to ask you about the long term vision that you've, you've now mentioned many times and we, we kind of glanced off of change of command and how that was the kind of the original title for your exit planning project, but that evolved into a buying this business. So, so, so make it explicit. What is, what's your Long term vision here because it's not just, as is clear, it's not just long term in Bailey, it's long term something grand or what is it.

Guest: So the goal for Change of Command is to build a long term enduring holding company that has a specific focus on home service businesses and the trade. So you know, the goal here is that Bailey is kind of the flagship of future portfolio companies, that Change of Command can function as the M and A arm, the governance arm and the infrastructure arm going forward. So the hope here is that Change of Command, with the goal of building these companies and growing these companies, but also focusing on building thriving communities, will become the acquirer of choice, particularly in these county seat rural areas in the home service industries. And you know, this year has been really exciting because, you know, now we are getting the operational experience and the transition experience and are already thinking about how to do that again with other retiring owners. And we've actually brought on two teammates to Change of Command. One as a COO who's a general manager of a heating and air and plumbing company that grew from about Bailey size now to, you know, over 10 million in revenue. And we've also brought in a CFO who, you know, retired from Pricewater House Coopers as their managing partner, Tennessee bank back in 2003 and has been working with business owners from an accounting perspective, but also from an exit planning perspective. So between our cfo, who's a Vietnam era veteran, our gm, you know, who's done this for decades, and now me, you know, being new to the industry, we hope that, you know, Change of Command can be the one who partners with other retirement owners. And Bailey would be an amazing example of a company that we had a incredibly successful transition from a cultural and a personal perspective with a retiring owner and the founder, and then grew massively in the kind of shape of the culture that we think will lead to people leading amazing, purposeful, meaningful lives in a great profession.

[1:30:53] Host: And you who said how your kind of your, your focus on the targets will be kind of county seat rural areas. So those will be the, that's kind of that side of the equation. But the operators and the buyers that you ride along with or that are become part of the organization are vets. I mean, it's going to be, it's going to be a military focus, hence the name. So. So talk a little bit more about that and. Yeah. Why, why that? Is it just because that's your background and you see a need there or you see competence there? All of the above.

Guest: Why that it definitely, you know, from it being my background, I feel like I have perspective that it is a competitive advantage to hire veterans into your organization. You know, they have worked with people from all walks of life. You know, they've been in intense and chaotic situations. They've basically been through the best leadership training that exists in our country for years where there's an extreme focus on, you know, how do you not only hold yourself accountable, but then rise throughout this, you know, structured organization to take charge and responsibility for other people that you may or may not have worked with before, but you know, that you share a common vision and mission with. So, you know, the idea of hiring veterans is from that leadership capability standpoint. So, you know, they may not have the technical perspective and they may not even have the business background perspective, which is an interesting challenge. You know, one of the leadership principles of the Marine Corps is know yourself and seek self improvement. So, you know, for a veteran to come out of the military, they, they do have incredible leadership and they do have incredible technical skills that are in that sphere. But now it's time to think about, okay, well, how do you read a profit and loss statement? How do you think about the financial aspect of it and how do you think about not only leading and motivating your team from a values based perspective, but also now from a compensation perspective, which was not part of the equation before the military. And you know, that mindset was a little daunting at first. You know, coming out of the Marine Corps is, you know, this is going to be like learning a new language when it comes to finance. This is going to be, you know, a challenge I haven't faced before with the compensation, but I actually think it's incredibly exciting one, because in the Marine Corps, you wanted to compensate your top performers better. You wanted to provide a better quality of life for your team, and now you can actually do it. And so, you know, it's just another tool that you have. So the fundamentals of the leadership piece and that veterans bring remains the same as their time in the military, but now there's more tools available to them as they learn them. And so, you know, I am hugely looking forward to, you know, recruiting veterans to our efforts to harness those talents and provide the mentorship structure for them to, you know, adjust to these new advantages of the private sector and grow, especially grow our culture, which, you know, veterans are very, very familiar with since, you know, the, the spirit and the camaraderie in the Marine Corps is often what wins the day for the unit. So building that team and teamwork is something that, you know, is definitely not unique to the military but is reinforced every single day and is a core competency that is directly tied to your success in the military. So very excited to hire more veterans and you know, give them the opportunity to grow these businesses and grow personally and professionally as well.

[1:34:47] Host: Don, you know, having a Holdco holding company of all these trades businesses, H vac businesses, plumbing, electrical, retiring owners in rural areas multiple over decades and the operators of those businesses are all kind of come from military backgrounds. Maybe not necessarily, but kind of in a large part long term. Hold cos are really sexy and enticing and fun to think about for people. But this one has kind of an additional layer. First of all, the vision is more dialed in and then it's also kind of got this mission layer on top of it. So really, really a cool vision. And also, you know what, your success with Bailey, it'll just be such a compelling founding story. John founder did this himself with Bailey and, and then he kind of made that a template and, and, and branched it out from there. You'll be telling that story many times over the next 20 and 30 years. So pretty cool. What didn't I ask you, John? Anything we failed to talk about.

Guest: It's a great question. Well, and thank you for saying that. I mean I really appreciate that. That means a lot. And yeah, I look forward to us growing together, you know, over the years and reflecting back on this first tele taped conversation. You know, I think that a question that often gets asked is, you know, what would you do as a new. Someone new to entrepreneurship through acquisition or you know, I think that it's incredible the amount of materials that are out there now, whether it comes to, you know, broad based books about the general concept or you know, extremely specialized, you know, website. So I think that there's an amazing opportunity for people to learn about the entrepreneurship through acquisition path. I do think that it can be very challenging in practice to translate the kind of academics and the concepts to action. So I would encourage, you know, people to find someone like me. I'm of course very open to this, especially with veterans, but to like find someone that you can almost like apprentice for. And you know, there's going to be amazing mentors who are very far down the path and are, you know, kind of retirement age and built amazing careers. Their advice may not be as useful to you as someone who just went that path, you know, in the current economic and environment that we're in. So I would very much encourage People to, you know, find people who have successfully done this recently and, you know, look to them for some advice because similar to our conversation about Rich and John, you know, there's, there's so much that I know as of today that a year ago I never would have thought to even ask about. So, you know, having these types of communities is so important. Having groups of peers that you can talk to, whether it's about, you know, hard finance questions or just say, hey, I had a really rough day. And it's bizarre because, you know, I'm just looking at sims today. So, like, how do I tell my wife who, you know, just worked a, you know, 12 hour nursing shift that I had a hard day when, you know, I'm just looking for a business to buy. So that was a very long winded way of saying, you know, if you're going this path of entrepreneurship through acquisition, especially as a veteran, I think it's an incredible path for a lot of people. I would definitely recommend that you seek out, you know, a mentor who's walked the path ahead of you because there's certainly a lot that you can read about and learn about, but it won't be the same as talking to someone who's been through the paces. So that would be my recommendation strongly.

[1:38:37] Host: Great, great message.

Guest: Sorry, I was just going to say it. I'm very fortunate to have been the recipient of that mentorship. So, you know, I'd love to pay that forward.

Host: Great, great message to end on, John, and perfect segue for me to ask you how people, how you prefer people reach out. What, what media? What's your medium of choice?

Guest: Well, I, I've, I've really gained a lot from SMB. Twitter for sure. But probably the most effective way to reach out to me is through LinkedIn. So, yeah, LinkedIn is pretty easy to find me. John Mahoney. M A H O N Y And yeah, I would love to be helpful because this is a amazing way, you know, that I found to, to move my own life forward and would be glad to help people think through if this is a, the way that they want to spend their time or, or sometimes it's just as useful to learn that it's not. So, you know, the. Yeah, I would definitely love to be helpful to anybody looking at this amazing opportunity.

[1:39:44] Host: Appreciate that, John, and I appreciate you coming on, giving me so much time, sharing so, so transparently about the business you bought and also telling us about your long term vision. Thank you very much, John Mahoney.

Guest: Thanks for having me, Sam.