Host: Blue collar trades businesses get so much attention in our world of buying businesses. H Vac, plumbing, landscaping. You've heard many such stories on acquiring mines, but today's interview is with an entrepreneur who bought a white collar business. In six years he's taken a small four person $700,000 a year business to $12 million in annual revenue, growing it both organically and inorganically with three bolt ons. Jordan Evans bought a language services business from his parents. Another interesting angle of the story we spent time on. You may be intrigued as I was by the language industry. It's bigger than you think and everywhere but nowhere as Jordan describes it. So this is a great interview for anyone who hears the blue collar business buying stories but just can't imagine themselves in such a business. This is the story of a white collar roll up. It's also the story of someone who bought a very small business, had to pound the pavement in the early days to generate sales, delivering donuts himself to prospects, but figured that out and acquisition out and is today having a blast building his way toward $40 million a year in revenue. Here's Jordan Evans, own owner of Language Network. 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. A PEO run by a Searcher for Searchers if you're running a company with less than 100 employees in providing health insurance, you could secure better benefit plans at a 15 to 30% discount through a professional employer organization or PEO. Aspen HR, run by search fund veteran Mark Sinatra, understands the needs of search operators and could be a great solution for you to receive HR compliance and diligence support, a powerful HR tech platform and Fortune 500 caliber benefits, all for a fraction of the cost. Check out aspenhr.com or contact Mark directly@markspenhr.com Jordan Evans welcome to Acquiring Minds.

Guest: Good to be here Will Jordan, you're

Host: in the language business. You bought a small language business doing about $700,000 in revenue a few years ago. Today you are at $12 million in revenue. So we are going to hear that story and get a tour of the language business. Start us off please with some background on you. Jordan.

[3:04] Guest: Sure we could take that a lot of directions. The quick background that would be interesting for your listeners is knew I wanted to be an entrepreneur and do something for myself. Didn't know how to get there. I did those personality tests growing up and recommended being an executive, a CEO. You know, entrepreneur. But how do you go from a traditional path of school and then workforce to being a CEO? I stumbled into acquisition and I'm grateful for that. I did startups after leaving college. So software companies venture funded five or six of them. A few of them I started. Most of them we ran out of money, we had to shut down. One of them was a success. Booking.com bought us and did a stint for a large company. But what's interesting for for the group here is I went and earned my stripes on many failed projects first

Host: and

Guest: then also worked for somebody else. Had a W2 job, optimizing for sure, getting paid. But also I want to be learning skills that I can use one day. So stayed on the sales and marketing side of the business and picked up books and podcasts like yours along the way on everything else, operations, customer service, the financial component.

Host: Yeah. So I would like to ask a quick follow up, follow up question or two first. Booking.com acquired I guess your most successful startup. That's travel related. You're in the language business now. Is there any connection here just in terms of your personal taste or is that coincidence?

Guest: So my actually commonality with the company that I own and run now is it's actually a family business. So mom started Language Network as a Spanish interpreter in the 1980s. So I'm fortunate in the fact that I had an awareness of this industry all the while no intent to join the family business or run it. At one point I wanted to find my own path. But it was around 2016 thereabouts that made sense to bring what I've learned at software startups into a professional services firm like Language Network that was family run and turn it into a professionally run, you know, growth engine, not just a lifestyle mom and pop, if you would, business. So my connection is familial to this amazing industry that's language services. And ironically enough, it's the biggest little industry that nobody's ever heard of. It's everywhere but nowhere. Anytime two people need to communicate into two languages. So there, there was a short stint in college where I was did a spot training to be an interpreter. An interpreter, someone that does spoken word. So versus translation, which is written word. And I quickly realized I was not cut out for that. It's a very specific skill set. You have to have very high mastery of both languages. And you know, I respect the profession. We work with thousands of interpreters today. But I did a very short stint testing it out in college as a gig. So that's my background overlay with languages. Then I worked for booking.com which does have that international component. It's a Dutch company. They say the only thing that comes out of Europe is regulation but you know, booking bucks the trend. It was actually online startup right. For hospitality and it's a very fantastic company and they inspired me and how they did, how they operated at scale globally. They had offices in market across the globe and I've, I've taken quite a few cultural lessons and operational lessons from that stint booking that we've recreated or and are recreating at language network, which I can kind of layer in as we have our discussion today.

[7:25] Host: Yeah, yeah, I'll make sure that I want to hear that. That was great, Jordan. So you're in tech but there's been this mom and pop business in your life literally and figuratively because your father was in the business as well. So mom and pop.

Guest: Yep, mom and pop.

Host: Now there's a bit of in probably all business probably, you know, if you're in finance but certainly if you're in Silicon Valley or in tech and startups to look down your nose or think that, that anything other than kind of the, you know, the big leagues of startup is, is small ball. How did you decide that you were going to get into what probably felt a little sleepy and uninteresting compared to the sexy dynamic world of startups that you'd been in. I'm using that tone mockingly, intentionally.

Guest: Yeah, I mean it definitely was sexy at that time too. Just being irreverent. There's a bunch of money pouring into the promise of going to, you know, multimillion dollar, many multi million dollar valuation with the startup route versus this unsexy service business that are all around us. I tripped and fell into it. I wish I had a better transition story. The transition story is this. I, I was a mercenary at an early stage startup as skill jar name names, why not? It's fun. CEO. CEO and I didn't jive well first time CEO pre 1 million ARR. Like we're just figuring stuff out and I had nine months in. She didn't have enough faith in me and let's say I was a stretch VP at that time for her and, and for my career. There's lessons I learned now but she, she fired my ass. I don't know if I could say that on here, but that was, that was the kick I needed to say, okay, I'm ready. You know, somebody else doesn't think I'm ready to be VP of their thing, but I'm I'm ready to do my own thing. And I'm grateful for that. So grateful for that moment of somebody saying, you're failing or I think you're failing and kicking you out the door. I wasn't. I look back on it. I talked to a therapist. We're all good. But no, it's important to look back on those moments. And I'm so. That. That was the fork in the road, and I decided to. To walk it. So what do we do next? You started diving into books, and you stumbled upon buying. Buying a business. And I knew my parents were burnt out. The business had stalled. They were churning some big accounts in. Nobody take over the company. This was kind of serendipitous timing,

[10:18] Host: so

Guest: I'm fortunate for that, too. Two things went really well. Somebody said no to me, and. And then somebody said yes to me, and I had to figure it out.

Host: And were your parents expecting to want to exit then or be. Or did you get in there kind of as a consultant or was and then it evolved into you buying the business, or was it always kind of the goal, spoken or unspoken, that you would take it over?

Guest: Great. Yeah. No, not a Nepo baby. It was never unspoken that I would jump in, this thing would be given to you. In fact, I paid 3x too much for this company. Knowing what I know now. I sleep like a baby because it's family. And that's why I tell myself I'm just taking care of people I love. And, yeah, we structure in a way where nobody feels put out that we're able to do what we need to do. I got in the game. But, no, I had to figure it out. To answer your original question is I didn't know how I was going to do this. I knew I wanted to buy the company. I had no idea. So I started talking to attorneys, CPAs. There are very few books on it. I think I found the eight, The Harvard Business Review book that was. I'm so grateful for those guys. Royce Uticoff. And I'm forgetting the other guy's name.

Host: Rick. I don't know his last name. I just know him as Rick and Royce.

Guest: Yeah, Rick and Royce. Your audience has read it multiple times. I'm sure it's on everyone's bookshelf.

Host: Yeah.

Guest: But, yeah, it was a combo of putting it together and realizing I want to grow this thing. I think this is the right opportunity for me to bring the startup mindset, pair it with the unsexy services business, and use that discipline of growth, of pushing the Envelope. You know startup world 100 200% growth year over year versus service business. I had to learn very quick that that type of growth is not sustainable. You need to have ops so it's a leveling up. You don't want to denigrate quality and delivery side so you can only grow so fast in a services company. And that's what I had to learn. But I saw a path to grow something and benefit the parents and get in the game entrepreneurially.

[12:43] 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 and 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. Oberle is a specialty insurance brokerage for searchers by a former searcher. Check out oberly-risk.com O B E R L E D Hyphen risk.com link in the show notes. Well and from you start it working with the language business in 2016. It's not until 2018 that you buy it. What are the, what are those? What's happening in those two years? And let's hear about the deal that you structured with your parents.

Guest: Sure. So 2016 was more of a figure it out year. I was consulting with them while exploring what I wanted to do and by consulting it's like they didn't know how to grow the thing. I was implementing CRM sales process not with the intent at that time to buy it. They just I'm, I'm free and I've got a skill set I can help you guys with. Once I started consulting with them in 2016 I started to see really like they need to be done. They were going to just run it until they're burnt out or tired and no path to selling it. No idea in their mind. So this was totally self generated and self discovered. That's why I say I fell into it. It was just walking, walking, walking. And finally this makes sense. Why don't I buy buy this company from you guys and when it's family there's usually generational like this is how we've done it versus this is how I think we can do it. You got fresh ideas and that's a tough one to navigate. So the Easiest thing to do is figure out, get them out, take care of them and plow forward and be able to make the change with no resistance. So 2016 was just consulting. I don't even know if I was charging them anything. Maybe a little something. I was like fun employment for a while. You're reading those books what I want to do next, entrepreneurial wise. The benefit of this was I got to know the industry really well, how they run things, what systems they use, what are the profit margins, who are the best customers are, what are some of the trends. To feel really comfortable to get to a place and say, I, I could make this thing better with my skill set. So that's an important lesson. Maybe not everyone has a family that has a business that they could buy, but the getting involved and going deeper somehow on a specific industry you're excited about to really validate. Is this a, a match for you? Because that. It truly was a match for me.

[16:00] Host: Yeah. And, and there are like you say that that might, that might take a number of different shapes. Maybe it's just somebody who's working at the business and they want to buy the business they're working in or they take a notion to acquire into an industry and somehow they, they intern or get work, get a job for six months or a year or 18 months in the business. But it's such an advantage to. Of course, the risk of doing something like that is you get into the industry and find that oh, this isn't for me. And then you feel like you've kind of wasted your time. But, but hopefully you like the industry. And then when it's time to do your deal, you've already got a year or two of experience in that industry. Very powerful.

Guest: Yes. Yes, 100%. So the, the gap in between 2016 and 2018, that's how long it took, even though there were two parties that knew each other and had trust to negotiate and structure this thing. And it was really going slow, measuring two times, three times, forecasting what their retirement looks like, forecasting what the cash flow of the company is going to be. And it was frustratingly slow. And then there's family dynamics too. Of. I'm one of five siblings and I have a sister who's involved. She'd been there for 10 years, so I needed to negotiate what her role looks like and wasn't going to buy the business unless she was included. And I actually have the five siblings. She's the only one I would do this with. So it still is true. Family, second gen. She's more back office and loves that and is great at it. Somebody I can totally trust. But I'm the front person. CEO. Grow the thing. Vision. Let's go. So it's a good match.

Host: So, Jordan, when you're negotiating with your parents, is it more of just everybody's got their cards on the table and let's figure this out, or is it. Is there actual negotiation where some. You're keeping some. Because some of your hand close to your chest, you know they're going to hear this. Maybe. So maybe you can't answer, but it's got to be so delicate because, I mean, I guess it gets. Comes down to the nature of the relationship one has with one's parents. But yeah, I mean, in negotiate, in a negotiation, we all expect that there's a little bit of, you know, what's the word? I don't want to say dishonesty. I don't want to say cunning. But we all understand that you get

[18:33] Guest: the best deal you can.

Host: Yeah, yeah, yeah. And ethical deception, let's say.

Guest: Yeah.

Host: And maybe that's. Or certainly that's complicated when it's with your family. Anyway, so you understand the spirit of my question. What did that feel like?

Guest: Yeah, negotiation. I look back and I don't see much negotiation. I see it more as trying to pencil out terms that worked for everybody and getting feedback. It was very open. And this is. You're not a prescriptive process. Everyone's got different family dynamics and they're probably more dysfunctional families than. Than not out there.

Host: Yeah.

Guest: I think every family has a version. So I won't say I have a perfect family, but just navigating all those is what took a while. And the benefit was I sought counsel of like, here's an outside third party attorney. Here's a CPA and using data and, and spreadsheets. Right. To get on the same page. Fortunately, though, this, they didn't see a path and I was the one that they trusted, so that was huge. And, and that's part of why I think I negotiated a bad deal. If we are using this term, negotiate. Like, gosh, how do you negotiate with your own, you know, family? So I cut him a sweet deal.

Host: I'm.

Guest: I'm happy to do it. And also it got me in the game, which was key. And maybe there's something here for your audience is I did a really small deal. I did a messy deal because his family. Gosh. And I overpaid all of that being said, it's been like magic. Is the quote you pulled, I got jumped into the game. I got, you know, chips on the board and I'm going deep in one industry. So that's my reflection on it.

Host: That's great. Jordan, can you, can you put some meat on those bones? In terms of what the deal actually looked like this, this sweet deal that you gave mom and dad, it was a $700,000 revenue business. Tell us what you can about how one buys a business like that.

Guest: Sure. So seven hundred thousand dollar business, way too small. I would go bigger next time. You know, I took massive pay cut and lifestyle and it was stressful to be able to make this happen. Was able to get creative and do seller carry with some equity and so no third party financing. So that makes it nice for two parties that trust each other. I, I did have a valuation put on it and then even, even people try to talk sense into me. I kind of had this magic number of they got to be over a million dollars. And that was me looking at the retirement, what, what it's going to cost. And so the beautiful thing of overpaying is that, and you got a seller note is a couple of things. Like you can always renegotiate terms. So pandemic happens. I can call them up and say we're going to put a pause, make sure we can navigate this or we're going to reduce it. So we had those discussions and I think that's the beauty of seller notes. You can do whatever you want on them, have whatever clauses. But yeah, it wouldn't have been bankable to pay the price.

[21:59] Host: So it was over a million bucks.

Guest: Yes.

Host: A seven hundred thousand dollar revenue business. How many employees were in the business? Was it the three of them? Mom, dad and sisters?

Guest: Four people and there were two of them. So how.

Host: Two of them?

Guest: Yeah, yeah.

Host: So SDE on that is what, 150,

Guest: 180 plus or minus.

Host: Yeah, yeah. And just on your point about seller notes, the great thing about seller notes is that you can. What did you mean you can do like once the seller notes are agreed. Here's the thing, you can't renegotiate them if your seller doesn't dance. So is it me? Does that mean this? It's good when it's your parents, because your parents. Everybody's kind of trying to make this work.

Guest: Well, we could talk about some more deals because we've done royalty agreements and other seller notes as a part of all of our deals. The SBA fantastic program in the United States has made us all lazy. And in fact, you know, it's it's bloated. The multiples and the price that people will pay everywhere else in the world. They don't have these government guaranteed loans. It's amazing. But also at the same time, there's cons to it. So forgetting the SBA 7A program exists, there's so many things that you don't have to color in the lines to go through underwriting through a bank scrutiny. You can do what makes sense for both parties and map it to their tax strategy. So we want to keep you under a certain income per year to keep you in a certain tax bracket. And that's fantastic because that means we spread it out over more years so it's less burdensome on me, the borrower, on the company. So we got nice coverage. You can put clauses in your seller note that have offset and protection if the business doesn't perform at a certain level. Whatever you want, that makes de risking the deal, you know, so I, and also it's a great mechanism to bridge a gap. If there is a price gap, I'd rather pay more to the seller than to a third party bank. And so interest right on this note is a good way, I think, as a mechanism of negotiation or goodwill. So yeah, seller notes, baby, it's, it's a great way to go.

[24:28] Host: Jordan, how many more businesses have you acquired to get to the 12 million you're at?

Guest: We've. I would have liked to have done more at this point, but we've bolted on three additional entities.

Host: Okay, okay. Just to set the stage and we'll, and we'll probably spend time on at least one of those. Well, I just want to highlight what you just said because it was something that came up in our conversation in the pre call and it was really striking to hear you say it because. And that is that the sba, which we celebrate as America, the SBA loan product, which we celebrate as Americans, in some ways has blinded us to the many infinite numbers of other ways that deals can get done. And that blindness means that maybe we're a little less creative or a little less scrappy in our deal making than we should be and indeed than most people around the world are forced to be. And so therefore, it might mean, despite the fact that we always assume it's the best thing going, we're not structuring the very best deal for ourselves possible because we just default to the sba. And you're a great person to speak to this because you are both American, but also have more of a global perspective because the language Business is international and you see lots of different deals happening outside the states and how those are done. So I think I just, I wanted to highlight that now because I assume it'll come up as a theme again. But if not, if you want to add anything to that, but really, really strong point I think from you.

Guest: Yeah. And I will add too that there are a lot more businesses out there that are not down the middle bankable deals that, you know, small, medium sized businesses, Main street businesses, folks that are running the mom and pops, they're running a bunch of stuff through there

Host: and

Guest: sometimes the profit shows zero and you got to do these add backs to get to whatever they say is there. And you know, banks, banks going to say no, we need three years to believe anything or you need to spend a lot of money, do a quality of earnings. But the deal's too small to really justify spending that money on it. So seller finance allows to do these deals and structure in a way or it's de risked and you can do a deal. And if you're doing a roll up and that in my industry, I'm picking one lane. There's a lot of shiny objects out there, but you go deep, you understand what levers you can pull on. I think that's really important too is you pair an industry and operating knowledge with creativity on how to get a deal done. And it comes down to people. Right. I'm, I'm going a little off the financing script because seller notes are so important is are you bankable with the seller? And so if you're a known operator in an industry, you got some brand and credibility there, some cachet for people to say, yeah, I will, I'll be the bank in this deal. So it goes hand in hand being a known entity, being trustworthy. The whole process to be able to make these deals happen is a people game. It's 50 people game, 50% numbers and spreadsheets and attorneys and all of that.

[27:57] Host: And, and so to jump ahead again. So you make a point of being out there in your industry, being, being visible panels, conferences, what have you. And also not just being, you know, Jordan, the guy who's doing it, but, but also your brand and where your focus is in this industry. Because this industry has its own sub niches. And so what your sub niche is so people know Jordan Evans is the guy who's doing this and buying this type of business and he's the operator of this type of language business. And all of that has M and a subsequent M and A value because you Seem like a really strong buyer and somebody that a seller might be that much more comfortable doing a seller

Guest: note type deal with 100% and that's. I love roll up. Specifically I hate the Holdco. I feel like it's a big, you know, adhd, you know, mini Berkshire strategy. I know it's in vogue but at least you get an edge in this strategy and it compounds and it's exactly what we're talking about. You can have a brand, you can be a known entity and you can

Host: be,

Guest: you know, a big fish in a smaller pond. I'm, I'm anti pe. I'm not. You know the suit that's going to spreadsheet everything out and buy your company and gut it for maximum return or require you to be an operator and get an earn out. I, I'm not, you know, I, I could stand out. Like this guy knows is one of us. He gets in and, and works with, with, with us on the same level. I mean he's operating a different scale. So I enjoy that about it. And it's a very sincere process when you do in industry roll up. Going deep.

Host: Yeah.

Guest: Going to all the industry events, speaking about what you're doing. Yeah. Because it's hard. We just talked about it going from zero to one. He spends so much energy. So once you got momentum, just keep following it on.

[30:08] Host: Totally. Yeah. No it makes a lot of sense. Although on the point about private equity usually roll up in private equity or you know, two, two words in the same sentence. So, so if there, if, if you self define as somebody doing a rollup, I imagine private equity is going or somewhere maybe as an acquirer, maybe not. Maybe you're going to sell to a strategic who's already in the business. Let's put a pin in that. We can return to it later.

Guest: Sure.

Host: Let's get, let's get back to the, the chronology here. You're so you bought the business, tell us what it was, tell us a little bit about what it's like become what it was like becoming owner and kind of take us up to then your decision to do your first acquisition as new owner. So I guess your second acquisition.

Guest: Okay for context this was a micro acquisition where you got to roll up your sleeve. So my experience is around there's no management, there's very little systems to scale. I mean you have grandiose plans to grow the thing but like you got to do staples runs to literally buy more staples. Right. It's like small business ownership. We had an office, we had people coming into office. We had a server on site,

Host: so. And were mom and dad leaving the business immediately?

Guest: Yes, I, I mapped a plan, I backfilled them, so hired a outsourced accounting firm to do all of our books and actually get them tight and clean and be able to retire. You know, dad, who handled all of that. Then I hired overseas for project management to help mom move out the area that she was in. And then I took over, you know, the strategic vision, all the sales and marketing, all the problems, the, the contracts, evaluating our system so it truly blocking and tackling. Nothing sexy about it. Picking a payroll solution, going from paper on premise to cloud solutions and migrating data and just gives me a headache thinking about all the stuff, the work that was required. But it was fun and exciting at that time because this is my thing. Like I'm, I'm doing this. People are benefiting from it. I'm going to benefit from it.

Host: I think it seems great because you, you're just, you just, it must feel like, sure, it's not fun to shop around for payroll providing solutions maybe, but, but you're just, it's the sense of value that you're adding to this enterprise must just be strong. It's like I'm making this very inefficient business much more efficient and that's gotta feel good.

Guest: So anyway, yeah, I wouldn't do it at this stage. Like it's not that I'm super old, but it just, I've been there, done that. So I'd rather like bring somebody younger along to go handle that.

[33:04] Host: Okay, gotcha.

Guest: Gotcha. But I worked a lot. I worked a lot. Yeah, I didn't track hours, but I was all in. There was no other option.

Host: And, and Jordan, to be clear, let's get a sense of how many people are, were in the business with your parents and then are now in the business as you take over, who are actually delivering the service of what the business delivers. Which you should probably tell us what that is given that there are niches within the language world. What, what, what do, what did you guys do? Provider at that time, sure.

Guest: So we were four people, 700,000 in revenue, several hundred linguists, so interpreters, translators that are contractors, so extended part of the team, but not on direct payroll, not under direct management. And now we are 42 people and I want to say 3,000 something linguists. And we're globally distributed. The services we provide are in 200 plus languages and it covers the gamut from spoken word. So picture an ER hospital that requires somebody to Speak Vietnamese. We can do that by putting somebody on site in the operating room or whatever the intake. We can do it telephonically or video like this like Riverside telehealth style. So that's a big segment. About a third of our business is healthcare. Fantastic segment. It's growing language access in our country is a civil right and it's a part of the Affordable Care Act. So it's not just a nice to have, it's a mandated service to provide. Another third is government.

Host: Jordan, let me just understand. So I'm a non English speaking Vietnamese person person. I arrive in the emergency room there's a effectively a FaceTime call that can occur via that you guys manage and, and it's basically the per. The person behind the desk, the and then the person on the phone who's the, the interpreter and then the patient and they're all kind of speaking. There was somebody's holding the phone sort of thing.

Guest: Yeah. Picture us if it was telehealth we just have a third person in this room. Another you have zoom call style and that's the interpreter. And we just talk like we are and they're interpreting and it's consecutive and it works like magic. And then over the phone would just be speakerphone and it can be done. It's anywhere there's Internet connectivity really it's you know browser agnostic and it's not proprietary actually software has become utility maybe 10 years ago. Yeah I was all in on the software startups that you could have a competitive edge but we're in a no code, low code era and then the world's been sassified. So every industry has their own like workflow ERP style tool. So just find something that works and is good enough and lease it rather than build it. Focus on your customers especially in a service. You know we're tech enabled service company. The other parts of our business, government. So that's a third so state, local, federal. So think election material. Yeah. In California I think there's 19 threshold languages. So based on the census how many people speak this language in this county. And then that requires certain documents to be in that language available any, any state run like during COVID emergency notifications, real time Twitter translation website. And then the other segment is international business. So it's almost a third or third a third marketing and training material. So you're, you're going to market and you've got training manuals, online content or you've got your customer support materials and you need to do it in 19 markets 19 languages. And we're your, your language operation department, really. So we embed our people and we manage, you know, anytime you're shipping content, we're part of that planning and consulting. What platforms do you need? So you could take this business any direction on any specific one of those services or verticals through acquisition. It's allowed us to have that nice diversification. A third. A third, A third. And the segments we offer, interpretation, translation, localization. Those are my oversimplification. And it's a global industry as, as you said earlier, there's thousands of language companies like us that it's a few people, low barrier to entry and they can cover a language, cover a geographic area and similar to other service businesses. Like a guy in a truck that's a plumber. Right. Just starting out, low barrier to entry.

[38:17] Host: Yeah, well. And I want to spend some more time on what the industry looks like. Jordan, that was a great taste. The. But let me understand how your business operates. So you said it was the four of the four of your parents, two other people and hundreds of contractors. Now you're 42 and thousands of contractors. So are all of the people who actually do the interpreting or translating or localization always contractors? And so the people that you employ W2 style are administrative in back office and other functions. Is that how it is? Pretty much.

Guest: That's correct. So the administrative, project management, operations, technical integration, account management, you, HR, billing, all that is under the 42. But the actual specialist, the linguists, which is a, it's a white collar industry. White collar services. You've got the most brilliant people. Let me give you an example. Somebody who is a surgeon or a doctor in Iran and immigrated to the US can't be a doctor here. You know, they're not credentialed. They don't, they don't have the right, it just doesn't translate. So yeah, what they're able to do is take their deep skill in language and subject matter and become an interpreter and be a fantastic healthcare interpreter for Farsi and, and have a job and be gainfully employed. So it's, it's truly an amazing industry. The most interesting people. And it moves with immigration and it moves with globalization

[40:03] Host: and do you service any businesses, any clients that are not in the U.S. yes. So you do. Okay, so you're, you'll be, you'll be doing the translation or interpretation or localization work between two entities or two languages that are not even touching the U.S. going through the U.S. so the customer,

Guest: I mean our nexus, our headquarters is A US Company and we have customers outside the US that we might have a direct relationship with. So we it ends up making it back domestic. But our team is global and we've got customers globally as well. North America and Europe are the two biggest markets you think of modern economies, a lot of immigration, a lot of manufacturers and we export, you know, technology all over the world. So that's it. Yeah, we could stay focused in the US but actually we're Europe is also where we exist and are eager to do our version of a roll up in Europe. So hopefully we'll do it an interview down the road and we've got more lessons learned from doing bolt on outside

Host: of the U.S. well, speaking of which, then returning to the story. So you do all the things there in your first chapter as new owner, the CRM and the buying paper clips and the payroll shopping. Payroll service shopping. You get that stabilized. When do you, when and why do you decide, okay, I'm going to buy another one. Another business in this space. When does the rollup vision crystallize?

Guest: Okay. Yeah. You keep pulling me back to the, the memories I'm trying to forget of all the those hours like picking out paper clips. Yeah. Doing mailers. You know, old school is new school. Delivering donuts or tamales or whatever to our best clients and getting in the car and, and just being a road warrior and doubling the business organically. That's. It was along that journey that I said I'm open to acquisition. This was a great way to get in the game. So it was only a few months into negotiating Language Network, I started looking. I hadn't even closed yet. Knowing that it would probably take time and knowing this is just all bonus round. I'll get to learn, see other people's P and L, what are they doing, what type of customers they have. It's all under NDA and I wouldn't be able to compete against them. But it was a free education even though it required my time. You know, that was a spread thin but I started looking pretty quickly. I want to say even in 2017 of and closed in 2019 on another acquisition. So a year and a month or so after closing Language Network, we acquired another entity.

[43:10] Host: So and that was because you were just kind of shopping around. Worst case scenario, you learn by looking under the hood at somebody else's business and then you see one that you're like, wow, this is I. You can, I can do this. I can buy this. This makes sense to actually pursue.

Guest: Yeah. The, the best word for it is serendipity. And being open and just seeing what's out there. And it's, it's a worthy, you know, I'm long on this industry, so let's talk to all the brokers. Anytime something pops up, let's request information, let's run some models or scenarios. How could this work? And it was along that, that time while I was driving, you know, donuts to clients, I forgot to mention the largest customer that was 20 something percent of that 700,000, you know, out of the blue after 10, 15 years, says, hey, we're going to another vendor and you guys are going to go to zero. And I didn't know that going in to the deal that there was that level of concentration. It was hidden. They, it was an insurance company and we had a bunch of law firms. And so we were billing ultimately insurance company, but through the law firm. And so once the insurance company said we're leaving. So when all the other law firms. So I was pounding the pavement hard to replace that revenue in the first 12 months. So it was realizing, yeah, we can, we can hit the ground running. I only have so many hours in the day. Let's, let's definitely grow organically, but acquisition's gonna push us faster, further. And coming from software world, I just wasn't ready to accept that I'm gonna be driving donuts around and then hire somebody else that's gonna do that. And that's how we're gonna grow and scale this thing. It's not what I signed up for.

[45:07] Host: But let's linger though on the donuts for a second. You, you clawed back the revenue that you lost from the insurance company and then did I hear that you doubled organically?

Guest: Correct, Correct.

Host: So you went from 700 down to 550. Call it when you lost the insurance company and back up to 41.4.

Guest: Yes.

Host: In a year.

Guest: That's right.

Host: Delivering donuts.

Guest: Yeah, I mean it was metaphorically. Metaphorically. Yeah, it was as.

Host: That's really, that's really just, just pounding the bay. And so therefore a lot of the clients were local. A lot of your. That's where you were scaring up business.

Guest: Yeah, that's another good angle. So this is a geographic, you know, where, where do you have traction? What's the low hanging fruit? It's sell more to the customers you got and sell more to customers that look exactly like your existing customers. And so that's where we picked up that revenue prices had not been adjusted in years. So that was a nice little lever to pull. It doesn't get us double overnight, but it moves the needle, you know, a couple percentage points and just got to work geographically. It's. You got a traction point. If you're a service business too. Like let's say home services is really popular. Right. I've got this area I can service. I've got people and resources here. So let's really focus on who can buy from us. So that's what I did. And from the buy side, it gives you a nice story too. The, the prospective clients you can tell a nice story. I work with so and so, you know, two towns over.

Host: You know, it's interesting that point Jordan, because I feel like, I think you've touched on it. I'm not sure you've said it explicitly, but this is a bigger business industry than we all, than our intuition would tell us. Bigger than the music industry, I think you're fond of saying.

Guest: That's correct.

Host: Bigger. Bigger than the music industry. And given that you basically found another $800,000, let's call it of revenue locally going take it from 7, it dropped to 550, back up to 15.1.4. So sorry. Another $700,000 of revenue locally, you know, so, so it, you could have a. Basically you can have a language business. That's a million dollar language business just serving. You're in Santa Barbara, just serving the kind of the Santa Barbara market call it roughly. Right, right. Am I, am I, I'm kind of trying to do one of these tr. Triangulating the size of the business. Like you can have a million doll language business that just serves a. And of course, you know. Yeah.

Guest: So it's, I think that's what's shocking about these small businesses is you don't realize the, the, the size or scale that they're capable of doing just locally. And we're talking greater LA here, like Orange County. I don't know if you're familiar. Southern California.

[48:07] Host: Okay.

Guest: A little bit in the Bay Area. But yeah, you could be a very, very large company. I would even argue a hundred million and just be in California.

Host: Really.

Guest: One of the largest guys is out of Monterey. Language line and I think they do 800 million. But it's global. It's not just here in California.

Host: Yeah. Yeah. Wow.

Guest: So I mean it's population, that's the demand and the resources. So you look at any major metro in the US There's a nice size market for language services. But Greater LA has got, I think they say the population, the LA county is bigger than 40 states. So it's kind of unfair. It's like its own little country.

Host: Yeah. Yeah. And it's really diverse. So the need for that kind of on the ground translation stuff is, is high. We've gotten through the organic growth locally. Even though you were like, you know, kind of software guy, you need to see, you know, exponential everything, it's actually really impressive. You must have at some point been, been pretty psyched that you were able to double your parents business, that it had been around for decades in a year or so of hard work, even if that work was unglamorous, pounding the pavement to, you know, donuts and tamales.

Guest: Yeah, it's pretty awesome. Sure. Yeah. I mean, looking back. Yes. Okay. With anything in life, you don't stop to celebrate the wins enough. Yeah, I was having fun, don't get me wrong. But it was, it was work. It was pushing the ball down the field. I wouldn't be doing if I wasn't having fun. But at this point I was kind of committed and so there was that pushing me too. So maybe I was trying to outrun, you know, failure just as much as I was being pulled towards success. So I had to push and pull in my story. And yeah, that's, that's when we were able to double again with this acquisition I mentioned overnight. And that was like, I think you said, crystallizing. When did this roll up, start to crystallize? Once we did that one, it was a light bulb of wow, that was a lot of work. But it sure beats trying to grow it organically because you get the fulfillment side and it's accretive cash flow wise. And we, and that one, we used 7A. And so that opened my eyes to that facility and we expanded into another state, Washington state, so west coast, so I could pop up there, which I was, you know, twice a month on premise, integrate, manage the team, get people bought in. And that's really when it crystallized. Okay, we're going to commit to this. We're not just going to be two shops. We're going to keep adding in companies as our growth strategy.

[51:14] Host: Great, let's, let's just debrief that. So you said you doubled the business again, so I assume now we're talking about doubling from a place of a million and a half bucks. So this, this business was roughly a million and a half bucks in revenue.

Guest: That's right. That's right.

Host: So say it takes you to around 3 million in revenue and you use the SBA loan this time around. Can you share what the structure of that looked like was it your traditional for us in this world? Traditional kind of 10, 1080 or something? 15, 1570 or something like that.

Guest: Sure. So the 7A program was actually a fallback. I was negotiating this deal from a full seller finance. You know, we bring some equity and seller carries paper and we were at a place where they were ready to go sign off. I think three years was the max I could push them and I, I looked at the, the coverage ratio on that and thought gosh, could I do it? Yes, worst case scenario, I got to pull into, you know, our core business. If, if any we lose a customer, I mismanage it so there's some cushion. But this 10 year amortization schedule from the bank sounds a lot better. You know, there's a lot more margin for error even though I'm going to pay more for that, that money. And so I went the insurance route and I'm glad I did because it opened me up to 7A program. What did we do? I think we did 10%, we did 90% bank, 10% our own equity and then we did something a little non traditional. We did working capital seller note. So they, they left X amount of dollars in. Don't get me started on working capital and getting owners to realize that it's the, the air in the tires, the, the oil and, and the, the blood in the body. The.

Host: Yeah, we've got all our favorite metaphors.

Guest: Yes, it's a battery, it's the fuel and the car needs to run off the lot. Right. So that was, that was what we could negotiate and you paid back over a period of years and that had offset clauses in it too. So I felt really good about, I could take this risk of buying a company another state and I've got protection, I've got your time and cushion with this loan. I've got the seller note with offsets which on all these deals there's always been something that pops up and it's common taxes, retirement plans, misrepresentations on you know, some sort of contract or client margins or suppliers. So it's nice to be able to have recourse and a method to just solve any issues that pop up.

[54:13] Host: Well say, say more there Jordan. I, I, I, we might not be tracking perfectly. So why is the seller note is the mechanism to pot to, to skin

Guest: in the game Cover, cover, cover you

Host: for all these unforeseen but it's unpredictable what the thing will be but it's predictable that there will be a thing 100%. So say, say give us More give us really in the weeds of what that would look like.

Guest: Please 100% more specificity would be we bought an entity versus an asset purchase. So stock purchase.

Host: Why?

Guest: For customer friction and continuity. We work with government health care. A lot of these contracts are non assignable. That would create unnecessary scrutiny from really big clients. And we don't want to have to go through that exercise at there's more risk than reward going that route. And then it makes it easy too to set up shop in a new state. It's already registered and so there's. You're assuming an entity and there could be lawsuits or stuff that pops out from the before you owned it. With the right attorney you can mitigate all these risks of what's going to pop out when you own it. It's very nice delineating date, you know, close date. Certain things are your liability. You go forward. These are my liability seller note. So that's all good and great. Seller note actually gives you a method to enact. If there's something that has a material fee, you don't have to sue them to write them a check, you can offset it. So that's always a fantastic. Not that we want to offset anything but it gives you that insurance. It's essentially an insurance policy. And it's important they have skin in the game in a service business too. This is not like a software subscription. Your revenue that's contracted, it's reoccurring, not recurring. So it gives you that, that cushion. Yeah. And I think I named the hot spots that usually pop up the.

Host: Yeah.

Guest: Small business not doing the retirement 401k contributions correctly. Employee issues, you know, tax issues, stuff like that.

Host: Great. And you know just one thing. If in case it's not already abundantly clear for people, if there's this, if there's this percentage of the deal that is. That is like an insurance policy. Like you said, it's meant to not go to the seller if. If it needs to. If there's some unforeseen cost that pops up later. Always better for that to be in your hands, not theirs. So you don't want to pay somebody and then have to claw it back. You know, you always want to be in possession. So a seller note's great because that money is in your hands and, and you're dribbling it out assuming nothing, nothing's going wrong as opposed to having to clot, you know, giving it all to them and then clawing it back if there's something of the problem. Just that's Just kind of negotiation 101.

[57:25] Guest: But it's, it's important and it's a good part to say out loud explicitly.

Host: Yeah, yeah. Another thing I want to double click on there, Jordan is bear with me a little circuitous. But Adam Markley, who, whose episode will be coming up here, he came from the world of, he came from the kind of the UK buying businesses and so there's no SBA and, and there's kind of a lot of you know, try to get no money down, 100% seller finance, that kind of thing which you know we. Is very hard to pull off and so on. But, but he made the point that even if you can get such a deal like 100% seller finance or a lot of seller financing and so you know you, the buyer don't have to bring much to the table that he made the point like that that's kind of celebrated as little money as you can put into the deal is good. And he's like, but actually those sell if even if you can do that, which ostensibly seems like a win. In fact those seller notes are pretty tight. Like you just said, maybe three years, maybe five years.

Guest: Yeah.

Host: So the debt payments are super onerous. So don't. It's, it's an oversimplification in naive to think that it's all about how little you can bring to the deal. The amortization time is a huge component here. There's a big difference between a loan again, forgive me if I'm saving the audience. Saving, saving the obvious audience. There's a big difference between a three year amortization schedule and a ten year amortization schedule in the, in the burden that puts on the business. And sellers aren't generally going to want to wait 10 years for their money. So while a lot of seller note feels good, actually it can be pretty burdensome and expensive on the business which is actually a great benefit of the sba which you've already said and I'm now just saying explicitly is that long 10 year amortization schedule is, is great and, and rarer for the party across the table from you to get to give you 100.

Guest: Right.

Host: And great.

Guest: That helps everyone sleep better at night. We like shock absorbers on that car to go over any bumps because they're going to happen.

Host: Okay so at this point you do, you do acquisition number two and then it crystallizes and you're like this is, this is what we're going to do. Do you. You said something about integration. So the Washington based business did what what does integration look like in a white collar business or at least in your businesses? Is there a big effort to integrate or can they stay pretty independent or what?

[1:00:12] Guest: Well, integration can mean many different things. So we'll define it for our, our purposes. The vision is Language Network. It truly is a language network where we've added good fit companies and teams and clients into the family and commercially we, we keep the brand but it's a sub brand to language Network. So it's, it's not a revolution, it's an evolution. In all of our marketing and contracts we evaluate where is it best renewed at, you know, which, which entity with the team. We don't underwrite axing people, we don't do turnarounds. We've got had not gotten to that place. It needs to be accretive. There's no reason to take on a burning building dumpster fire. And that's key when you're self funding a roll up and not having PE is cash flow makes the merry wheel go round.

Host: What is the logistics of integration? Do you guys. Do you get them everybody on the same CRM? Do you or, or not?

Guest: Sure. So let's just split it. There's back office integration and front office integration. Back office customers don't touch it. It's accounting, HR internal systems and those are I think easier and better to prioritize. And the internal stuff depending on like team and trust. Like the first 90 days definitely on the accounting systems. Like prioritizing, getting to one system,

Host: all

Guest: the bank accounts consolidating onto one payroll, getting under one benefits plan, you don't have to do that but it's, it makes things easier to consolidate. So those are easy. The front end stuff like websites, workflow management systems, portals, stuff that customers touched, stuff that vendors touch. You know, the third parties that, that stuff takes a lot more time and you really don't touch. At least in our experience, maybe till nine months. At that point, you know, the team, they know you. You've built some level of mutual understanding and vision for the future. It's always amazing, Will. Like I wish people were light switches, but they're knobs. They can turn up, you know, heat, they can turn down cold. And let's just say that's the transferometer.

Host: Did you come up with that?

Guest: I don't know. I didn't come up with anything. I. Probably somebody smarter than me.

Host: I've never heard of that. I love it.

Guest: People are. Yeah. You can't just turn them on and productive. Right. And we're not machines here. I wish you the on and off switch and then it just works magically. If your computer's giving you issues, just turn it off and on.

[1:03:09] Host: Yeah. Reset.

Guest: Yeah. Geez. But yeah, it takes time. So that's why the integration is usually slower. And if it's accretive. Right. Like we don't have to move fast. Like if anything moving fast means we're going to mess something up. There's something. This whole thing's working right now as is. So do the people build the trust, know where things are and then have a thoughtful plan of what systems and when you're going to map and God, I hate it. It's up there with death, divorce. Yeah. And software migration there. It's in the same painful bucket of life you're retooling, getting people on board, training, the cost.

Host: So it seems like this is not something that I've heard of or asked about, but it seems like if you're doing enough acquisition activity that. And it really is kind of becomes a core function of the business that you could have a devoted person to just be constantly tasked with the perpetual project management of all this stuff that you just listed.

Guest: Yeah, yeah, exactly.

Host: Maybe that's who you are for the moment.

Guest: Yeah. Especially on these first deals. Looking back in history, that's me. I'm the guy. And fortunately like I come across like pretty easygoing and in a white collar space like fast talking, shoe from the hip type, you know, acquisition, acquisition guy who bought the company like sent in some red flags for people. So the, the FaceTime, the breaking bread with the team, asking them questions. Actually this is a fun story. You think this stuff is a. Is implied. So this is why I'm saying explicitly, just like you're talking about the 7A and the, the 10 year AM versus 3 year IS. We skip over, we look at the spreadsheets and our ideas of what we can do the company and we forget that we're just, we're buying a bucket of people and problems and like another good one. Yeah. Know what you're buying and do yourself a favor. You know, don't, don't poke a bear that you got in your bucket that's going to give you problems. So that's important as you, you spend that time with the people and fortunately. Gosh, I don't know. There's a lot of stories I've. Okay, okay. But I will say there's some people just the operation that we are. I'm really proud of the team. And not only has the cash flow been accretive and adding new great customers and expanding our pool of language resources. But the people in a service business, you're only as good as the people. And they have that tribal knowledge and intimate knowledge that you don't want people leaving. That's people equal revenue equals cash flow. So customers want to know they can still call and get John or Julie or whoever on the phone. So, so important not to skip over the, that people keeping them there and yeah. Knowing where the, the strengths. Weaknesses are.

[1:06:26] Host: Well, Jordan, I want to kind of accelerate through the kind of the end of the story or take us up to the present and then ask you just more about the industry and some kind of higher level questions. Before we do either of those two things, please define accretive. This is a word that comes up in our world and it's a finance word. So it's, it's not one that everybody's going to know. What is accretive revenue?

Guest: Good question. And I've learned to love this word. At first I heard it too. I think it was a VP of sales when I was in software world and we're talking about adding sales reps. That was how you scale the revenue is more, more heads equal more revenue. And so every sales rep, you know, adds more revenue. So every deal needs to add more than it takes. And so accretive in my, in my sense is net. Net. It's positive. We're, we're adding momentum, we're adding cash flow to the bottom line that we're not taking a hit, that we don't have any period of negative cash flow where we got to go backwards to go forwards. That truly the first month after acquiring, our cash flows increased. So that's accretive. It keeps us in the game. And so that's why I've learned to love it. At first I thought I'm never going to use that word, but it's a good one. Add it to your vocabulary. I will.

Host: Audience will hear me dropping it in there. All right, the. Okay, so you did second acquisition quickly. Just take us through acquisitions three and four and whatever other key plot points there are between where we are in the story and today.

Guest: Okay, sure. So doing deal one, deal two, crystallize this roll up. Still focus. So let's, let's look at this from a. How do we manage this? So we stayed focused on the west coast, the US for me flying back and forth for people and everything. So kept focusing on where we are as far as like our footprint and ease of assimilation, integration, ongoing management. So we were crystallizing things at this point. So I stayed focused. I talked to the brokers we did previous deals on, I targeted and talked at industry events in our language industry about what we did, you know, just being a known figure. And I'd like to do one to two acquisitions per year. If it doesn't come, it doesn't come. And I think that also helps is I don't have a mandate. I'm not desperate to do something that's not a good fit. So the focus really helped us stay in like geographic time zone, focused, found the next deal through a broker. And thank God for brokers. There's a lot of bad ones, but when they're good, they're good. They, they run interference, they help get a deal done and they take a lot of the emotional burden, which is a roller coaster for somebody selling their company. What else did I learn? You got to kiss a lot of frogs. So, you know, in that time probably talked to 40 plus other companies and evaluated, you know, a packet of information from them and had meetings with them.

[1:09:51] Host: Wait, Jordan, So there were 40 other language businesses just in the West Coast, Western US that were coming up for sale in what, a two year time frame? I mean, once again, I'm, I'm making a point about how surprising the size of the industry is.

Guest: Yeah, okay, so good, good point of clarification. It expanded in the US not just in the west coast.

Host: Okay.

Guest: But it was still part of the education. I was like, I'm open to it, but I'm not seriously considering. It's got to be. Something slapped me in the face. We should stretch and figure out how to make this happen. So not just west coast, but definitely all us at various sizes and stages. Some of them self sourced, others through a broker. And then every industry usually has like a consultant or a few like known many celebs or entities. And even if they're not a broker, referral fees and they're usually tapped in of people that are talking about retirement. So that's a good way to source. So it's through those three channels that we had good deal flow while managing what we already bought and keeping that going.

Host: Now I have a hunch, so correct me, that this industry is ripe for what you're doing. Well, and we might say this about a lot of industries where basically the core pattern that we all hear first as our first thing into this world, the older generation retiring, the new generation having an opportunity to buy these businesses. And that in fact for a lot of these businesses, there are no good Buyers. And you know, we might have said that about H Vac and, and plumbing a few years ago, but now that industry at least is, is really hot and it's kind of the stand in for like this whole concept of buying a blue collar business. Anyway. I still would imagine that it holds here that there's probably a lot of people like your, like your, a lot of businesses like of the same size as your parents business that is not big enough to be interesting to a big buyer. To the extent that there even are big buyers or even to an acquisition entrepreneur. You, you reflecting back, wouldn't buy that business today or you wouldn't advocate somebody buy a business of that size. But once you got the platform which you've now become, you can bolt those on all day long and because there aren't other buyers, drive a pretty hard bargain. That's my hunch. Respond to all that, please.

[1:12:33] Guest: Sure. So I mean the fundamental platform that you said, I feel like we're still making that platform at our size, you know, 42 people, 12 million. There's still things that you haven't killed us like integration wise that you just run in parallel. So sure, a little extra complexity, but doesn't affect our work, doesn't affect our margin. It just, you know, internally it's a little bit of inconvenience for reporting. I gotta pull from two systems. So I think we're still, we're finally at a size and scale where we're like awkward puberty phase, you know, got braces and like acne and one arm's bigger than the other, just being stretched. Right. Like you're not big enough to have full executive team. But now we do have heads of certain services that through acquisition we've been able to create budget and, and hire the right folks so I can keep moving up my role and be a true CEO. There's still stuff I do that I probably shouldn't do. And so in this journey I've had to keep changing my role every, you know, few quarters, every you know, year. I need to be doing something different. One thing that's been constant is I'm, I'm the deal guy. I'm always in the M and A. I sure feel like that's a skill that adds the most value to the company that I need to be involved in that and bringing the right people on board have been really important to our success. People that are excitable, that are committed, that right culturally. So you asked a big question and I, I jumped on the platform bit. But yeah, the the language industry and the private equity and the. Right. That's your opportunity.

Host: Yeah definitely. So talk to us about private equity, other acquisition activity but also your own the opportunity here that there's probably a lot of mom and in pops and not a lot of buyers because searchers at least haven't come into this space that I can tell that are that I've heard of. Although you are my second interview actually somebody who's, who's rolling up language businesses. The other being Cedric Sigua from early days 2021 I think I interviewed him but obviously this is not an industry that it's like you know everybody is talking about on search funder.

Guest: Yeah actually there's a few folks and I get emails now more and more from searchers that you know it's on people's radar and gosh there were some guys that you did this at a bigger scale. They buyer they bought Morningside. I think it was around 40 million revenue 2 searchers Number years ago. I forget their names I'm not aware of. Yeah they're two co CEOs and they, they bought the company did bolt ons and then sold the private equity and then private equity is very active in our space but they do big deals. It's highly fragmented, super fragmented industry. So that's the right material for a roll up the top 20 companies. Right. There's a billion dollar a year revenue company TransPerfect the top 20 makes up like 15 of the total market.

[1:15:56] Host: Wow.

Guest: And so and then the next hundred Maybe it's like 20% and so it's super fragmented.

Host: Yeah.

Guest: And then the other component is we have AI and tech and there's like fear, uncertainty and doubt of what's this market going to look like in five to 10 years. How much is exactly how much is existing services. So it's, it's at an inflection point and there's a lot of folks that are retiring as you mentioned like been doing it 20, 30 years but it's going to need to be reinvented and a lot of the companies shouldn't be bought. They should just you know go by the wayside And a company that's going to.

Host: Why is that? Because without. Because they you, you. Why can't those businesses be repurposed in the way you repurposed your parents business?

Guest: I mean the juice has got to be worth the squeeze. Most of the companies yeah too small for somebody to spend their life force, you know changing it. And most of the people that work there are not their employees. They don't want to take that risk. And they're not capable of buying the company. And the sellers, this mom pops are not creative enough to figure out a exit strategy. So yeah, the lion's tale this industry, these companies are under 2 million of revenue. Like even more under 1 million. And those are for our purposes a why bother from an acquisition standpoint, it's really hard. Who says this? There's deals that are small and hairy that you should just avoid. Then there's just small deals. You won't make money on them. There's big deals that are well optimized and like sounds look good and sexy but you're going to pay a premium and chances are you're going to mess it up and unrealize the value. And then there's the big hairy deals. These sizes are relative. Right. But the big hairy deals are the ones where there's opportunity. As Brad Jacobs got like guy a lot smarter than both of us.

[1:18:06] Host: Yeah.

Guest: He said this and I agree my experience has been I see more and more now as we grow that fit that smaller hairy. It's just not worth the squeeze.

Host: But Jordan, why is in this business, you know, some businesses there's the, you know, particularly white collar businesses like the client list kind of is the business.

Guest: Yes.

Host: And it's. But and it's also worth something. So a chuck and a truck plumber. If I'm a plumbing business with a platform buying the chuck in the truck and he's going to retire really doesn't make sense. Maybe he's got a phone number or a website or a Google reviews. You know, he got a bunch of Google reviews that are positive and that might be worth something. But. But he doesn't have ongoing relationships in your business. Even if it's not recurring, it's reoccurring enough that this client list got to be worth something. So why couldn't you. Why wouldn't that be viable? Something that you'd want to buy, you know, half a million bucks of revenue but you're getting. But you can just tack that on because now the clients come to you. You hope. Yeah.

Guest: It becomes how good at integrating and acquiring do you want to get you. You really need a mini team to do that lift because you still there's

Host: going to be a lot of integration there. I guess what I was trying to see is is there a way to just buy client lists without all of the integration work? And. And it sounds like the answer is not really.

Guest: That's right. A lot of the contracts are non assignable. So it's not so easy to just port over. You're an unknown entity. So it's small and hairy. So better for them just to diminish and then call those customers and set up your relationship directly.

Host: Yeah.

Guest: And that's the exercise at this point doing a rollup is how much would it cost me to buy and get these organically? The cost to acquire a customer in this contract and how much time versus me buying it and buying the team that can service it. That's always the, the calculation that you run. And in our industry there's. They're not big buyers are already being serviced by somebody else. So organic you have to displace somebody. You know the, the er example in downtown la they already working with somebody. They've had these needs for a long time. So the best you can do organically is get on their short list and start picking up some of the scraps. Hopefully build the relationship and expand. So while the market is growing as a whole, the big accounts that are being serviced by others and these small operators, mom and pops have a lot of customer concentration. It's very common that they get a couple of big contracts and that's 80% of revenue and so that's really what you're buying. So if they go under or they choose to shut it, you, you go in that direct. So it's. My industry is. Sounds sexy and fun but it, it is work. And I will also say there's a lot of professional, technical, scientific, white collar services industries that are untapped, undiscovered that I think are fantastic for a rollup. If you think of.

[1:21:35] Host: Can you name names?

Guest: Gosh. What comes to mind like healthcare industry, there's a bunch of niches like scribing, believe it or not. Like people think AI is going to take that all over but medical scribing, you're kind of like a specialty staffer. It helps the doctors move faster and bill more to insurance and they get all their chart notes HIPAA compliant into the system for lies Hospitals, you need somebody on site in their system, not remote. So I've seen some really interesting businesses that are doing healthcare niche staffing that you could buy in a new geography and maybe centralize some of the admin. What else environmental like testing or consulting that is repeating your stuff for compliance.

Host: Yes.

Guest: Especially in these highly regulated states where the demand never goes away and but you're like so obscure that you're not competing against everyone else to buy an H VAC plumbing company.

Host: I had a guest who bought a an environmental compliance I mean, just like you said, consulting business in California. Of course. Well, I want to, and I wanted to actually dwell on this point about white collar because it is, it does feel like acquisition entrepreneurship is just, your search has just taken over with blue collar. I mean it's almost synonymous with blue collar. It's like the, the, the, the trend is buying blue collar businesses and, and certainly that would be the trend that would jump out at somebody looking at the archive of acquiring minds. But it doesn't have to. There's probably just more blue collar businesses out there, but it's also probably just a bit of a, just a bit of a momentum effect, a trend effect. It's what people's attention is being called to because other people are doing it. It just kind of perpetuates itself. Yeah, but, but yeah, I think the, the white collar businesses, you know, present a really interesting opportunity, especially because any regular listener will have heard me ask countless times that cultural gap, but for going white collar to blue collar and how much friction there can be there and, and the, the learning curve and the everybody getting used to each other sort of thing.

[1:24:04] Guest: Yeah.

Host: You don't experience that in, by and doing a white collar roll up fair. Right?

Guest: Yeah. It's different types of, of problems and I prefer my people problems than a blue collar one. You're just thinking of aggression or like background checks, not showing up for work, like.

Host: Right.

Guest: Addiction to substances, you know, that type of stuff. Yeah, but there's still money in that and, but as an operator I prefer the white collar and then it lends itself really well to remote work. Yes. So if this is part of our playbook and I should have added this earlier in is as we bought more businesses we got, you know, codified our operating playbook and that is to add net new seats or backfill seats with hiring globally. And that's just an amazing cheat code or there's not a cheat code. It's just a way to upskill and up level your staff while cutting your labor expense drastically. And so about half of our team is global outside of the United States. Nothing wrong with hiring domestically, but for the value on the spend, I'm long global talent, especially in any service business. So we got, we actually spun off a company called Hire Globo that was our internal recruiting department. And we just had enough people asking can you help us hire like you did in Argentina or Mexico or Brazil? And so we launched a separate entity, Higher Globo. And they, that's what they do. They find us the best people and it's been fantastic for cash flow.

Host: The point about the virtual nature of white collar businesses or that they lend themselves to, to virtual work. Remote. Remote work, I should say. The other, you know, benefit of that is that in some ways this may not apply perfectly to your business, but your potential customers are global too. So you can sell across the world. So all of a sudden your market is way bigger than the plumbing H vac guys whose market is just the size of their local geography. Sounds good. On the other hand, of course, the, the, your competition is now also the entire world. So it's like, yeah, so eco, you know, you stand up an ecom business and it's like, oh, awesome. I can sell my widget around the entire world. The entire world's my market. Well, you're also now competing with every, you know, Chinese factory as well. So, so cuts both ways. I think we've given people a picture of the industry, but let me just make sure we've rounded it out. So. And I guess this would be another time to contrast with blue collar. So blue collar, we say, you know, 20% margins. I think net margins are kind of normal, maybe, maybe, maybe a little bit above average. But high teens, and if you're doing into the 20s, those are pretty good margins. And if you're doing low teens, 10, that's a pretty uncomfortable business. Although of course there are plenty of businesses that operate at 10 margins and they're giant businesses. Can you, bro, can you generalize or maybe just share what the margins are of your business?

[1:27:31] Guest: Yeah, the blue collar one strikes me as high of 20%. But I guess if you're the only guy to do like pest control or like emergency remediation and a flood and a residential home, you can charge whatever you want. So there's pockets of unusually high profit depending on the situation, the competition, how you operate. In our industry, I've seen stuff from 5% up to 30% net margin. What we target is around 15% in growth mode with the actual push target like 20%.

Host: Why?

Guest: Well, there's little pockets where people put it in cruise control. Like I've got these couple contracts and I'm just gonna set up our systems and not invest in anything. And it's gonna milk, you know, cash flow. And that's what's deceptive about buying them is you really have to normalize the situation. This person just found a nice little pocket in the market and good on them for milking the, you know, 25% net they've been getting over these years. But most People would not be able to operate that. You can't scale that. So I think 15% is a nice aggressive target as we try and grow 20, 25% organically year over year. So we're spending money on our own sales and marketing, you know, lumpy, making investments in it, making forward strategic hires. I've got managers now, so we've got more opex. So yeah, there's actually a book. Greg Crabtree, have you heard of the sim? Simple Numbers, Big profits? No, Highly recommend. That was an early pickup. As I was trying to figure out being a business owner. There were a couple of books. Traction EOS was one, the one page marketing plan. And then I'm a fan of taking a wheel that already works and slapping it on and then Simple Numbers by Greg Crabtree and just talking about operating margins and all the key Y metrics to track. So he, he has a theory like 15 is gravy. You know, 10% is break even. In today's world, most businesses well run should be around 15%. Is his, his point that interesting with, with true competition, if you're truly investing in the business and you're operating it right. And, and he since came out with 2.0 of this book and I think he's added more specificity on industry. How to interpret that based on industry? Are you just. How are you operating it to grow and exit or to just milk profits?

[1:30:23] Host: Yeah.

Guest: Highly recommend the book though. And that's been really a North Star for us on the, the financials.

Host: Well, good to hear another perspective on margins. I, I may be off where he says it's 15% and I think it's 20%. I may, I may need to revisit that. I just, and I, you know, I'm, I'm, I'm getting that 20% number just because I feel like it's what comes up time and again with my, with my guests. Back to your industry. Back to the language services industry. So I think we've got a picture of revenue here. A highly reoccurring. So high quality revenue, not the highest quality because it's often not contractual, but just a, a sustained perpetual need. So as long as you're delivering good service, you can count on a lot of repeat business and indeed kind of indefinitely. There's going to just be a regular and ongoing, indefinite, never ending need sort of thing.

Guest: Yes, that's right. Yeah. The demand is not shrinking, but it may be shifting as I alluded to earlier with AI on some of these service lines that how much in our workflow needs to be changed. How much do we need to disrupt ourselves? How much is going to be language as a feature? And maybe I'm going too far into my industry.

Host: Yeah, no, that was going to be my final question. And so let me just get it out of my system and then carry on with your answer.

Guest: Sure.

Host: So when people look at businesses to buy or in industries to buy into and are seeking enduring profitability, you know, some of the kind of three big disruptors that we always hear about, is it China proof, is it Amazon proof and is it AI proof? And of course the AI proof one is, is more poignant than ever, especially it would seem in an industry like this, which is all about the generation of content and understanding language. I mean, this is where we've seen the explosion of AI is all around language generation and understanding. So there's, there's the obvious AI question. This, this industry seems very vulnerable to that. But of course, crisis is opportunity. So what do you, what do you say?

Guest: I say the, the landscape looks different, you know, at 40,000ft versus on the ground. And so depending on what industry you're in or you're wanting to be in, like being able to be at 40,000 and kind of get a lay of the China AI or Amazon, whatever and then dive deep and really, you know, test those assumptions. So in our space on the ground, it looks different. It looks like certain industries, certain use cases that before needed professional support or human mind may be just okay with a first pass at machine or AI or the next iteration on that pyramid. You know, moving up the pyramid is there's some variation where it's machine plus human to get to the quality, the level acceptability. And then at the top we got this great thing called regulation. And the space that like creates these pockets of, I don't know, we have the fax machine for crying out loud. Right. Like, healthcare is one that is a slow adopter. So looking at what services are most likely early on to be disrupted, do you, do you service that? How can you move up your pyramid? Fortunately for us, we operate in a place where it's life or death, death or liability, like lawsuit risk. And we've even seen amendments to contracts certifying that no AI has been used. So my, my take is five, 10 years is going to be a wild ride. I, I hope that it is. What was it? CEO of Alphabet said he thinks this could be as profound or more profound a man than, than fire. So we'll see.

[1:34:36] Host: Heard that.

Guest: Yeah, it's, it's quite interesting. A Lot of AI is US based and there's a lot more online content that's fed it in English. So, you know, the training models, these large language models need data and there's just more of a library in English. So that will be an interesting one. We've had machine translation for many, many decades. We just didn't call it AI and we've used it for efficiency. But it's been an adoption thing. I don't trust that. I want a human to tell me this is good. So I'm excited to reinvent it. I think we got the right team and the right attitude. We're not afraid of it. But there's a lot of folks in an industry you might find an opportunity once you get on the ground that the gray hairs, I shouldn't say that offensively meaning the mom and pops are the people that are ready to do something else with their life. They don't want to reinvent themselves in this new era. And so there's. This is a really interesting time. If, if you see an opportunity in a services business to adopt AI for the new services or improve the workflow, it could be quite interesting.

Host: Yeah, well, so it seems like what you're saying is that this industry is likely to be disrupted, but not in the sense that it's going. Not in the sense that it's going away. Travel agents disappeared when, when online booking came around. But it's likely to be reinvented or added to or change. And so anybody considering this industry should not think that they're getting into a sleepy, insulated industry where they can just keep kind of printing, printing money out

[1:36:27] Guest: of the business as usual.

Host: They're gonna. Right. It's not going to be, they're going to need to be in an adaptive frame of mind, which is not an, is not a bad thing. I mean, that can be really exciting to somebody. It kind of maybe blends acquisition entrepreneurship with kind of tech forward. Much more tech forward than just putting in a CRM. But truly tech forward kind of being at the cusp of change in an industry could be really exciting for a certain person like you. The other thing I'd say is I, I heard a good analogy for about just, I mean, they AI. So many people pontificating about AI, but this one was good. I thought it implies in this situation where when spreadsheets came around, it was like, okay, accountants, I guess we won't have any need for accountants anymore. Of course what happened was that accountants were just the ones to adopt spreadsheets. And maybe there Are maybe there were less accountants on the other side of that, I don't know. But certainly accountants haven't gone away. They just became the most able users of the spreadsheet. So it accelerated what they offered. People still go to their account. It's not like, it's not like people are going to do their own translation work. They're still going to want translation services to do it for them. So it just may be that a lot of the work is you guys do is being done by AI. And maybe the industry contracts in a way, but it's not like the tr. The language services industry goes away.

Guest: That's right.

Host: Because no one's going to, you know, the people at the hospital are not going to want to be gen, you know, print, you know, printing out 19 different versions of their, whatever, signage in different languages. They're still going to outsource that in one way or another.

Guest: That's right. And, and depending on what market you're choosing, ours is growing too. So the pie is getting bigger. So it's not like it's a fixed entity that now AI is taking up more of it. The whole pie is growing too. And so for me, that's an acceptable risk. Yeah, because the market's growing, more content's being created. Yeah, we're experimenting with it. So I think it'll be what you discussed, that we'll probably be power users of it and figure out ways to be more efficient and yeah, it's, it's a, it's an area that. It's not a core competency of what somebody else is doing their day to day. Just like bookkeeping or cpa, you go to the expert.

Host: Jordan, if somebody were interested in buying a business in the language services world, and you said that the business that you bought from your parents at 700,000 was too small, what is a good size to start with? If I can press you on that, like what's too small for somebody to consider? Maybe put it in terms of sd. Yeah, it is. Of course it's going to depend on a lot of things. Well, how about this? How about I anchor to this. What we often hear in our world is that buying below 750 or even a million dollars of SD, ideally you buy something at 750, maybe even $1 million of SD. Do you feel like that is a good rule of thumb here or, or too big or what?

[1:39:38] Guest: Let's, let's make some assumptions. Yeah, you can buy smaller if you're going to go bolt on or you have a path to growth that it's not going to stay small. And if maybe you're acquiring and it's small and it's highly reoccurring and low maintenance and just you're picking up a little hobby cash flow thing, then that would be acceptable, too. I'm thinking of like, you know, niche widgets for certain websites or, you know, you know, a calendar app, you know, does one thing and there's. But if you're going, like, service business, like I've done that we're talking about, and you're not willing to take a pay cut and put in some sweat equity to really scale it up, I'd say probably 200, 250 on the lowest, depending on what your stomach is for risk and your lifestyle.

Host: Okay.

Guest: And how important it is for you to get in the game. Okay. It's worked out for me because I knew how to grow it and I committed to. And we had enough margins and repeating customers that I could do that at that one 180 number that we talked about.

Host: And you were so de risked because you knew the industry and you knew the business so well.

Guest: Yeah.

Host: You had a couple years peering inside it.

Guest: Yeah.

Host: I said your sellers.

Guest: That's right. That's right. So those are all the key relative caveats. There is. So 250 plus. But do your own due diligence on it and feel good about the risk. It's. It's a lot easier to get in the game at that level. There's more of them out there. Sure. And less competition. So if you can find a way to be scrappy and make it work and it's a good way to get started. And then the sba like you're. You go bigger, you're going to overpay. Maybe that's okay for your first deal. And you amortize over 10 years. And where's your life going to be in 10 years? So maybe that's acceptable. But prices are higher because of the money that's guaranteed. They're willing to lend it to you. So I think you can do smaller deals if you structure them right, too. There's enough. You got to have more seller note. You got to have offset clauses and protection. Um, so I think that those are the other caveats we didn't cover. If you're going smaller.

[1:42:06] Host: Yeah.

Guest: They need to be structured. Right. De risked. Right.

Host: Jordan, last question. So you're 12 million today. What do you have a goal of revenue or of exit or of growing forever or paint a picture of what you. You're working Toward if, if you even know, are you just. Just optionality. Bigger the better, gives you options.

Guest: Yeah. So the, the serendipity I apply to like acquisition. Let's not try and force anything. But how we operate is quite contrary. We've gone full fledged. The EOS model which has been great for integration and scale, have a common, you know, way we work. So what is it? We got a 10 year target of, of 40 million in gross revenue, you know, global team in order to get there. I think we set that this last year. So it's nine years out. So we're going to continue on the acquisition train in order to get there. We can't just get there through organic and let's see. I'm having fun. So if at any point that vision needs to be recast and I'm not the right guy to operate it or I'm burning burnt out, then I want to honor that and let the business go where it needs to go or with who it needs to go. But right now having too much fun and I just, I don't. You need an operator in a service business. You gotta have somebody that's wearing the jersey and going out on the field. You can't just run it from a spreadsheet. So yeah, that's where we're going. Global company. Hopefully soon we'll have a couple done in Europe and those are our core commercial bases and we'll continue to hire in Latin America and Spain. Two amazing talent pools for the dollar or for the euro, if you will.

Host: Unless it just in case it's not totally clear, this has been a good thing. This has been a good journey.

Guest: It's. I'm so grateful. I'm having a lot of fun. I fell into my little corner of the pool and I'm you know, building my sandcastle or mixing analogies here. It feels like play. It's, it's really fun. I feel challenged by it and I get to go on this journey with other people.

Host: What do mom and dad say about what you built?

Guest: I mean it's at a scale and size they never would have dreamed of. I think they're really proud. So that's really fun. We did a company off site in Mexico this last year. We flew everyone out to Cancun, you know, rented out a little boutique property, worked together for a week. And that's been like also magic for our team and morale because we all work remote and they just, they, they were just amazed. They just. From four people to a global team of 42 spending time in Mexico, working together. Just another level.

[1:45:06] Host: Yeah.

Guest: That's so great. Wow. Yeah. Now the team's saying, when, When's the next one? And it's like, well, we got to hit these numbers before we can even talk about that.

Host: Yeah, yeah, yeah. Be careful of

Guest: expectations.

Host: Yeah.

Guest: Manage them.

Host: Well, maybe you should have worked up to Cancun that first, that first meeting maybe in somewhere less clamorous. That's great. Really cool, Jordan. Well, if people want to reach out, do you have a preferred platform or mode of communication?

Guest: You know, LinkedIn is getting a lot of flack, but that I, my, my inbox is open. I'm not getting spammed so much that I ignore it completely and it's professional enough. Or you can find me on X and just my name. Jordan. Jordan Evans. Jordan P. Evans. Happy to chat. It's been a transformational journey. Going back to your question of buying businesses, you changed the trajectory financially and opportunity wise for my family and I hope for all the people we employ too.

Host: But it's a great path, great point to end on. Jordan Evans, thanks for coming on.

Guest: Hey, thanks, Will. It's been a pleasure.

Host: Sam.