Host: Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs. And on this podcast I talk to the people who do it. My interview today is with Josh Paulson. Josh acquired a business that manufactures small pet cages. I know nothing about manufacturing, but you see manufacturing businesses for sale a lot. So I wanted to learn if someone like me with no experience could realistically buy a small manufacturing business. So we get into that. We also go deep on Josh's story. I'll just leave it at this. At some point in the interview, Josh says that acquiring this business saved his life. So it's been a long and hard road for Josh making the business what it is today and in so doing, making himself what he is today. Check out this story with Josh Paulson. Josh Paulson, thank you for joining me today on Acquiring Minds.

Guest: Hey, thanks for having me. I really appreciate the invite and good to get to know you here.

Host: Josh, you are the owner of a manufacturing company for small pets and animals. A very niche business and not one that I know nothing about manufacturing. So it's fun to talk to somebody who's not only in manufacturing, but in manufacturing a product that's kind of unusual. Although I guess every product is pretty, pretty niche at this point. You acquired this business from your grandfather and the way that all unfolded was unusual. You didn't really set about on a search. It kind of the opportunity presented itself. So we're going to cover all of that and bring from your acquisition right up to today. Start us off please with two minutes on your background. Like what was going on in your life before professionally that led you to this opportunity.

Guest: Yeah. So man, never had any business experience or didn't know. I wanted to be an entrepreneur but did a lot of weird things to try and make money. So apparently that's what it led to. I was a wrestler in high school and some little bit of college. So I learned a lot about being obsessed about things through that. And then outside of college I was in food and beverage production. So mostly in beer, wine, cheese. I did each of those for about two years and then was starting, you know, that was all fermentation sciences. So I was like, what's next? And that was, you know, the next thing was like mushroom cultivation. So I started like growing mushrooms in parents garage and what kind of mushrooms, selling them to restaurants. Locally culinary mostly like reishi, shiitake, lion's mane, all sorts of different stuff. It was an interesting project. It's not a good business, but it's a very tough business, but it was fun, actually. It was really fun.

[3:18] Host: So that was one of your entrepreneurial kind of projects. And you'd had others before, so you had kind of entrepreneurial leaning.

Guest: Yeah, it started out trying to. Trying to start a brewery. By the time I got to where I was ready to do it, everybody was already doing it. So it became much harder. And it's just super capital intensive. Growing mushrooms was something anybody can start at home. I mean, you can buy a DIY kit, build a little greenhouse tent with a humidifier and get, get going on it. So super fun. I got to apply my fermentation science knowledge to that. Didn't get anywhere with it, but yeah.

Host: Okay. So were you growing mushrooms when this opportunity came along? How did the Cage manufacturing business enter your life?

Guest: Yeah, so my grandfather was going through a lot of stuff. He's having a lot of medical problems. Family was starting to get his life managed under control. And I'd always known of quality Cage. I'd never even been to it or honestly knew anything about it at all. And I just had, you know, I wanted to start my own thing. Back then, I wasn't interested in acquiring anything. You know, I actually passed up a lot of chances for growing into businesses that I worked at that I just didn't honestly realized. Cause I was trying to start my own thing. Yeah, I kind of wish I had a different viewpoint. Going through those jobs and whatnot might have presented more opportunity, but.

Host: And so just drill down on that for a second. So your perspective back then was that you just always wanted to start your own thing. And so the opportunities you let. Let go by were opportunities to buy into other businesses or just get more involved in the leadership of some of the businesses where you worked or. What do you mean? And what did you do? Kind of. What do you regret not doing?

Guest: Yeah, nothing. I mean, there was nothing concrete, but there was. You know, the businesses I was working at, they didn't have dedicated staff. They were always dealing with staffing issues. You know, it could have been an awesome opportunity for me to step in as a leadership role and do some cool things and, you know, take on some more responsibility, help them grow and develop the business. But my heart was set on doing my own thing. So didn't ever.

Host: So you know about your grandfather's business, You've heard about it through the family or whatever. And so how does that then intersect with your life?

Guest: Yeah, to be honest, back it was 25, 26, I was having a real hard time in life. A Lot of depression, a lot of anxiety. I had a lot of suicidal stuff going on which it's not my nature. I'm a super positive, super happy person but I was making a lot of bad choices and playing victim in a lot of ways. I had been. When I was 25 I just got struck with all over body pain. Came out of nowhere through wrestling. I had a lot of injuries so I think it kind of came from that. But ended up getting every test is negative with the doctors and just going through all of that stuff. Ended up getting addicted to painkillers and antidepressants through that process and I was just you know, kind of lost. Started experimenting with other drugs, kind of being stupid.

[6:44] Host: Yeah, this year 25 or 26 at this point. And what year is this?

Guest: Oh gosh, that's probably. I'm 32 now so seven years ago. So 2015. Yeah, around that timeline. Okay. Yeah. So the kind of leadings up to coming to quality Cage was honestly I had a very suicidal moment that

Host: it

Guest: really changed my life and my viewpoint and it really brought me back to who I was as a kid. As a 10 year old I wanted to do some really cool stuff. I had a lot of big dreams and kind of got this like third person view of what 10 year old me would look at in his future and he would see me at that moment and yeah, that, that honestly changed everything for me. That was a huge awakening of like 10 year old me would be absolutely terrified, you know this, that, that would be very disheartening and that would not that that's not a good. I'm not being the good leader for 10 year old me right now. This is, I need to make some changes. It was a lot more dramatic than that at the time to be honest. It sounds pretty dramatic now I look back, some of it's kind of funny. It's very simple things that I was doing wrong and different, different simple mindsets that I just kind of needed to rewire. But it was difficult at that time while you know, addicted to drugs and you know, hanging out with the wrong people, stuff like that. So the to that my family was you know, going back in and cleaning out my grandfather's assets and like cleaning up his life. He lived over in Portland, Oregon at the time. I'm in Boise, Idaho. Didn't really have a much of a relationship with my grandfather. Only fun stuff, good memories. I never really got to learn anything from him on the entrepreneurial side of things

Host: but he was so had he passed away at this point no, not yet.

Guest: I mean, he has now, but not at the time of me going into Quality Cage and acquiring it. So basically, man, at the time I was pitching to investors to try and really go at the mushroom thing. It was just a bad idea. I should have just been growing mushrooms and selling them versus trying to raise money. But I, yeah, I got out of an investor call at one point, and he was like, hey, go get six months running a business and I'll invest in your mushroom idea. And so I literally walked out of that meeting, called my grandpa and parents. I was like, hey, I want to move over and see if I can't restore this thing, because they were going to wind it down, shut it down. Nobody was interested in taking it over. And had anybody brought it to you

[9:42] Host: and said, hey, do you want to run this? I mean, was this kind of your total idea to raise your hand and be like, hey, don't shut it down. I want to run it?

Guest: Not really. It was my choice. My parents don't try to push anything on me ever. Very thankful for them for letting me live life and make my mistakes. But yeah, honestly, I walked out of that meeting with that investor and I was like, I want this business. I want to go do this. My first goal was to just go in and run it for six months and see what I could do. And then it ended up.

Host: It's still with the idea that you're just proving yourself to go back and raise investment for the mushroom venture.

Guest: Yeah, for a good 18 months, I was still stuck on the mushroom business. Like, I'm going back to that at some point now. Nah, not a chance. Maybe sometimes, I don't know.

Host: So you raise your hand, you say, I want to run this, and then what happens? Do you actually acquire the business from your grandfather or talk us through that? What happens?

Guest: Yeah, so I had zero money, nothing. Families, pretty, you know, very conservative, very frugal with everything. Not a whole lot of money to throw around. So I basically, I moved over to Portland, packed up my lease was done in my apartment. I packed up my four boxes of shit and moved over to Portland, honestly, in one weekend. And then I had, you know, I had no money. The business didn't have any money in it. It was cash flowing, but not profitably. And so I lived in the warehouse for quite a while, actually. And when I got there, I acted like I acquired it. Like I made a ton of changes. I was just trying to. Trying to get it flipped around and running smoothly. I was always, like, watching how it's Made and watching the profit on tv. So, you know, I'm an expert.

Host: You thought you knew. Yeah, exactly.

Guest: Yeah, I know everything that I need to do. I've watched all these shows.

Host: Josh, give me a sense of the size and scale of this business. So, like, give me a sense of what revenue was, how many products you were producing, units, how many employees there were. Like, set this. Give me a sense.

Guest: Yeah, so the books were crazy. And I had zero experience doing bookkeeping or accounting or knowing any of that whatsoever. So, you know, I remember the books were doing about a quarter million a year. There were seven employees. Everything was a. Yeah, yeah. Everything was a freaking mess. Processes are terrible. There's an ungodly amount of products that we manufacture. Later discovered that prices are way too low. You know, the business didn't even know it's cost of materials and it's cost of production. Nothing of that. And it took me a very long time to figure all that stuff out.

[12:36] Host: Seven employees with only a quarter million dollars in sales.

Guest: Yeah, it was bad, okay. Yeah, there was a lot of bad stuff going on in the business. I'm not going to speak too much of that as to what was going on, but it was a lot. And there's a lot of bloat and a lot of waste. I could definitely see that the business was not. The business was 40 years old when I got to it. 42, I think. And it collected 42 years of waste. That was just to me, like, I live out of four boxes and live in the office in this warehouse, and it's a fricking mess. I've always lived very simply and have very few things. And so it was honestly painful with how much was there. And it was a matter of just having to get rid of so much bloat. That was honestly the first two years it was just getting rid of things.

Host: And your grandfather was not the founder. Correct. He'd acquired the business and was kind of absentee in it. Walk us through that.

Guest: Yeah. So I don't know the original owner. He was passed before I came to the business. My grandfather was the second owner. I believe he owned it for four or five years. He was a serial entrepreneur, had a couple businesses, mostly in the packaging industry in Portland, which is funny. I ended up starting a packaging business later on and closed it down in the last couple of years. It was a weird circle of life, I guess.

Host: Yeah. So had he been active in the business for those four or five years? Roughly that he owned it.

Guest: I had heard he was for the first six months to 12 months. You know, he wasn't very right of mind when this all went, when this all happened. So I didn't get to pick his brain about everything. You know, he was proud of me for going at it. I remember getting those conversations and those were very meaningful, especially at those times when I was going through everything I was going through. But yeah, you know, very little history of the business. There was a lot of history to it. I'm getting told a lot of different stories by a lot of different people and a lot of different customers. And some people had positive experiences with the management that was there before me. Some people had absolutely disastrous experiences. So it was a lot of noise. It was very hard to concentrate on just fixing and rebuilding the business. And there I am just trying to get six months experience. So I didn't have. I wasn't fully invested yet either.

[15:15] Host: Yeah, you were going home and making mushrooms probably still. And so your grandfather didn't. He wasn't 100% at this point. So he really wasn't kind of a resource for you. Usually the seller is a resource for the buyer and explains things to them. There's oftentimes there can be two weeks or two years of training.

Guest: None of that.

Host: You just kind of came in and had to figure it all out pretty much on your own.

Guest: It was a mess. Yeah, it sucked. Basically. I got there day one, I had to fire a good 75%. Well, five of the people who were there. One stuck with me about six months and then he just, you know, started being super shady. So he got fired. And then there was one guy who was a 75 year old Vietnamese man named Tin who had been there for 25 years and he knew how to build everything, knew how the entire business worked, but he spoke like very little English. So it was actually really fun. Looking back, it was really fun. It was really frustrating at the time, but learning from him, learning how everything worked and luckily there was one of every product sitting on the shelf. There's no drawings or anything, but I could reverse engineer things a little bit. I had a bunch of woodworking experiences, going through middle school, high school and just kind of a tinkerer all around making things and. Yeah. So, you know, over time I ended up learning everything over the next year from this, from this 75 year old tin. Yeah, he's awesome.

Host: Wait, wait, Josh. So you get in there on, essentially on day one and you let five of the seven employees go.

Guest: Yeah, I'd never even managed a person before this.

Host: And you don't want to go into the details of what was, of what was going on. But reading between the lines, there was misbehavior by the employees.

Guest: Yeah.

Host: And you, and you knew this and you just, you just had to kind of rip the band aid off and let everybody go or let.

Guest: And we didn't have money. You know, they were, they were running off of debt essentially. So my grandfather was pulled into a bunch of debt and it was basically operating off of that money that he really didn't have. So.

Host: So he'd taken a loan, if there was a loan on the business, like a commercial loan, a bank loan of some kind or vendor loans or whatever.

Guest: Yeah, you know, there it was a line of credit basically that was being abused by the previous. So yeah, so.

Host: So then, so you're down to two people, 10 and the other person. And then that other person doesn't work out after about six months. So then it's you and 10. 10 is, you know, you're one like anchor. He knows what's going on. In fact, in fact, he's a great resource except for the small detail that his English is virtually non existent. So you bring in a translator

[18:05] Guest: a

Host: couple times, help download Tin's brain.

Guest: Yeah, we actually communicated better without the translator, so. Really? Yeah, just without words. We kind of just learned to learn from each other and you know, he could write English decently, so, you know, it was just a lot of back and forth. We had some humorous banter and.

Host: Is he with you today?

Guest: No, he's not. No, no. I wish, I wish he was. He was an awesome dude.

Host: Yeah, it sounds like he was.

Guest: I wish I was in a better place to, you know, financially to take care of him a little better than I was able to at the time. Yeah.

Host: And you. So there's 2,000 SKUs in this, in this manufacturing business and you have one of each. And so literally the shelves, I mean in the warehouse, there's just one example of 2,000 different products. Something like that.

Guest: There's a lot. It was crazy. It was nuts. Everything was ran in QuickBooks, but there was no bill of materials built into QuickBooks. It was all guesstimation stuff really. It looks like the previous pricing had been done 10 years prior to that probably, which is pretty wild. Yeah. So it ended up. It was too much. And our main market right now is we serve chinchilla owners and then, you know, we do ferret, prairie dog, guinea pig. Each one of those customers is a completely different person. You know, a rabbit owner and a chinchilla owner are two Completely different people. It's essentially a new business as far as a marketing sense and e commerce sense. Like you've got a whole different target market that is very unsimilar. Uh, so it, it was, I tried to, I tried to market to all of them. Um, there was one that was working really well and one that was, you know, the majority of revenue in quality cage was rabbit, rabbit product lines selling the rabbit breeders and whatnot. Um, but there was like chinchilla sitting over here which was about 10, 10 to 15% of the revenue. And that was like growing without anything happening to it as far as the products there. And rabbit was kind of hard to make a profit because I mean look at the pet market. I'm not going to like a hamster is five bucks. I can't go sell a $300 cage to a hamster owner. A chinchilla is $300. So I can go and sell a $600 cage to a chinchilla owner. You know, same thing with rabbit. You can go to the pet, local pet store and buy a rabbit for 20, 25 bucks. So I looked at what's our highest value and it's got a decent market. And chinchilla people are more passionate than all of them combined. To be honest. They're awesome. So many memes related about super fun social network around them, very close knit community.

[21:05] Host: I didn't even, I had to Google exactly what a chinchilla was. I knew it was some cute rodent but I couldn't actually visualize it.

Guest: So y. I had no idea going into this business what most of these animals were. So especially chinchilla. Now I have two, but they're super cool easy pets.

Host: So Josh, you basically you come in and year one and two you're getting rid of the bloat, cleaning up the business. This 40 years of bloat that the business has accumulated, getting rid of the shadiness, working with tin to understand how things work. And then it sounds like one of your biggest, or maybe your first really big strategic decision was to simplify the product line. You went in there like Steve Jobs returning to Apple where Apple's got all these products and he's like, no, we're just doing these core seven products or whatever it was. And you kind of did a similar move in terms of we're going after the chinchilla market and only the chinchilla market and the rest of our SKUs. Maybe we'll return to them at a later date, but for now we don't offer this Anymore.

Guest: Yeah, yeah. I mean, as simple as that. And all at the same time trying to simplify the manufacturing that we do too. There's a lot of just, you know, extra processes that weren't necessary and all in all of that. And that's honestly probably the one that was actually probably the most important thing was simplifying those processes and systemizing them.

Host: Yeah. And you do the manufacturing in house. This is. Is that right?

Guest: Everything. Everything we can to an extent. I love vertical integration. I like to bring everything in house. We've added a lot of things that outsourced five, six years ago. We now have brought in house and we're doing it on our own, on demand. Powder coating, welding, CNC work, a lot of that stuff. We've brought everything in house. There's one more product that we outsource that I'm going to be bringing in house Q1 next year. And that's honestly going to be the most expensive, most difficult, but also the most upside to it. So. Pretty excited about that actually.

Host: Do you want to say what that is? Not that I'll understand.

Guest: Yeah. So we make our cages out of wire mesh.

Host: We.

Guest: It's 1 inch by 1 inch rolls, 100 foot rolls of wire mesh. We unroll them, flatten them, cut them to size, flatten them again, nip off the edges, sand them down. And so each cage takes up, you know, anywhere from 8 to 20 of these panels. We're to start making the panels in house out of, out of their wire, essentially.

Host: Cool.

Guest: Cool. Yeah.

Host: So when you get into the business,

Guest: flashy or fancy or anything, but it'll, it'll help us improve our operations a lot. Yeah.

Host: So not only are you learning the business, which many, many acquirers that I talk to, they have to get in there and they have to learn the business, which is enough of a challenge. So you have to do that as well as clean up the business, but as well as learn manufacturing. You don't really know anything about manufacturing because you were a food and beverage guy prior.

[24:14] Guest: Yeah. You know, cheese was volume one product, million pounds in a year. It's doing the same thing like a 14 process step or 14 step process over and over and over and over again for months. This is high mix, low volume. It's extremely difficult to manage. It's tough. It's very tough actually, you know, because we have one product that we do four or five hundred units a month of. We've got another product that is also necessary that we do 10amonth of. But it's something you Know, we are trying to cover everything that the Chinchilla could ever need. You know, that's what we want to be, is the one stop shop for chinchilla owners. And then so, yeah, we're perfecting it in Chinchilla and then we're going to start branching off and doing the same thing in those other markets.

Host: At what point did you stop, let go of the mushroom dream?

Guest: About two years in? Well, I mean, I won't say that it was still sticking with me, but I had let go of it. Once I acquired the business, which was about eight months after I started working at the business, I really didn't want to acquire it. And so then a couple of things happened that I just decided, you know what, it's going to. Let's do this. I actually chickened out of it last minute and was like, nope, stop the acquisition. And then two weeks later was like, no, let's do it.

Host: What were the things that. What were the things that happened?

Guest: It was weird. That was the first year at Quality Cage in Portland and that was the year that the national rabbit convention happened to be in Portland. Very convenient. The rabbit competition. National rabbit competition is basically like AKC dog shows you see on TV in rabbit world. It moves around every, every location every year. But it just happened to be in Portland, which was crazy. So a lot of the local rabbit breeders, people, organizations were in charge of coordinating the show. They got us a spot for cheap little tiny 10 by 10 booth. Everybody else, every other cage vendor had the big old, big old booth. So it was kind of crazy. But yeah, long story short, there was this kid that was putzing around. He was looking at our stuff in our booth and he was, he just looked super happy. Where everybody else is like in this manic state of everything's going crazy, they're stressed out and this kid is super happy. So I asked him what was going on and you know, he, we got to talking and he told me his, his story basically comes from a super poor family. His grandma gave him some money to do something. He decided to start breeding rabbits over two years. He is now at this competition and he got like multiple first places, a couple of third places, and he ended up selling a bunch of his rabbits for like 15 grand. I thought that was like just insanely cool. This kid's like 16, 17, like what? That's cool. I wish I had that knack when I was that age. That's super awesome because I was just all over the place and yeah, that kind of like changed my outlook on Everything. I was like, dang, if that kid did that, then I would like to figure out some way to help other people do that in the animal world. Yeah, that kind of changed. That was the kicker that made me want to purchase the business. I saw a lot of potential in it, too. And it's super fun. It's very challenging, and I love challenging things. I honestly am way more into the challenge than I am, like, profitability and the finance side of the business, stuff like that. If we get a quote on $100,000 machine, let's figure out how to make it for 20 on our own. And, you know, we're never gonna hit 20. It's probably gonna be 40 or 50, or maybe it doesn't even work. But, you know, we learn through the process. It's fun. That's what I like doing.

[28:27] Host: But this moment with the kid really kind of shifted your view on things to being like, this. Could this. I want to do something that. Like, to be part of this community, help this community, encourage other people like this kid, Help other people like this kid. It just. You kind of just vibed with the culture of this ecosystem and wanted to be a part of it.

Guest: Yeah.

Host: Yeah.

Guest: In a way, I wanted to help that kid. I would invest in that kid, essentially, and whatever he does in the future, I would definitely want to help him in some way or work with him in some way. I wish I would have got his contact info. I never did. So unfortunately,

Host: and just circling back to the hardship that you were personally experiencing at the top of the story, you know, it feels like the moving into this business was, like, really kind of you needed. I mean, you really sounded like you were having a really hard time, and this was something to just like, grab hold of. I mean, almost like. And sink your energy into and kind of like a Hail Mary. Like, um, yeah. Am I. Am I connecting dots that aren't there or.

Guest: Absolutely. I was. I was running away from that previous me. I was running away from that circumstance. Um, it wasn't. It wasn't like a hail. Like, in my mind, it was. I was sprinting away from that previous me as fast as I possibly could. Move to a new city, live in a fricking warehouse, shower at the gym. I know nobody in Portland. It's a whole new life. You know, it was a whole starting fresh. And, like, also in a dire straits situation. I bought this business. I had $0 the very first month. I had to sell $30,000 in sales or I couldn't pay my bills. You know, it was it's kind of like the movie Maze Runner. You know, you're plot, you like dropped in a situation and the only way to get out of that situation is to go explore and move forward. You know, that's, that's kind of how I like to symbolize it best. But yeah, it was this business definitely saved my life 100% now, now, I mean like now I'm a completely different person. I don't even read self help books anymore or any of that crap. It was a great tool for the time. Yeah, it really changed me for sure.

[31:02] Host: Cool. And so after the moment with the kid and some other things, you really decide you're going to buy the business, you're going to commit yourself to this business. Can we get into the numbers of that at all, what that acquisition looked like from your grandfather or the terms like the structure of it? Was it just like a fully seller finance situation or.

Guest: It was an asset acquisition. Basically. I started a new business. We acquired the assets of the old business at fair market value and I purchased debt from that business to like, I purchased the debt in lieu of offering money. Like I carried the debt, I took on the debt essentially. Yeah. So I had. It may not have been the best way. I honestly didn't know what I was doing. I went and got a bunch of one hour consultations from attorneys on like how do I do this? And I had no clue. I have no business experience or savviness whatsoever. So I was just like trying to pick and pull and find the cheapest way to do it. Ended up landing on owner carry, take on the debt essentially.

Host: And do you think in retrospect that that was not the right way to do it? Did you learn something that the audience might benefit from?

Guest: I think I could have done it much cleaner. Go get a loan, do it that way. Don't take on the debt, just buy the assets. I was in a way doing my grandfather a favor too at the same time in the way I went about it. Yeah. I honestly would have changed the name of the business too. Didn't do that.

Host: So.

Guest: Yeah, I wish. Hindsight.

Host: Well, of course, of course. Bringing us up now to now you're in Austin, so you moved the business down to Austin. Correct. Okay. And was that a business decision or just a life decision?

[33:05] Guest: It was both. So I moved it from Portland to Boise like a year after I purchased it. Portland sucked for manufacturing business. I had a home in Boise. I had family, I had friends, good ecosystem. All my mentors, all my advisors were over there. Yeah, Boise Also not great place for Idaho is a wonderful place. Boise is an amazing place. There's no labor market there. It is absolutely terrible for labor. Then I always wanted to move to Austin. Had I had the financial ability, I would have gone straight from Portland to Austin. Just didn't have the finances at that point. And then, yeah, so I kind of got bored of being in Idaho. I've spent my whole life there. I started actually, like, building the Excel sheet of like, what does this look like, moving to Austin? And it's. Honestly, it was like a 20, 25% profit increase, and it would cost $15,000 to move. Like, okay, let's go.

Host: Because of the lack of taxes or all expenses are less, or labor expenses

Guest: or less or all the above taxes. Yes. We ship mostly to the east Coast. So, you know, from Idaho to New York, you're going 90% across America. From Texas, you know, you're cutting that in half. So shipping costs, you know, we spend almost $100,000 a year in shipping. We instantly save 30, $35,000 in a year, in the first year, which paid for the move in, like, three months. So. And then, you know, insurance was low. I think the only expense that didn't go down was my auto insurance. Electricity was cheaper. Water was cheaper. Internet's cheap. Everything's been cheaper here. Rent actually was even cheaper, believe it or not. I don't think. It probably wouldn't be now, but two years ago, when I made that move, yeah, it was awesome. And I always wanted to be here. And, you know, I did meet a girl who I'm with now that. Her name's Ben, that I met here on my sixth trip down here. And we were dating long distance for about nine months before I finally moved down here, too. So that definitely accelerated the process.

Host: Yeah. Yeah, for sure.

Guest: Yeah.

Host: Cool. So what's the business look like today?

Guest: Yeah, so we're still sub 1 million. We're getting there. We're anywhere from between 35, 50% growth per year last year. 2020 was insane growth. Awesome. But I had moved just in March. I had zero employees, zero network down here. I moved a week before COVID happened. It was a mess. Sales exploded because everybody's work from home, so they're buying pets and then refunded a lot of money just because of the time it took to fulfill things, unfortunately. So I didn't get to capitalize as well as I would have liked to on that pandemic situation, unfortunately.

[36:11] Host: So you didn't have any employees when you moved from Boise down to Austin?

Guest: No, we had built up some inventory. I knew I was moving so we built up some inventory. Ran the last month on my own, had some people help me move and that was it. Total restart once again coming down here.

Host: Yeah. So a business that was doing $250,000 in sales when you started working with it and had seven employees in fact, you were running it by yourself?

Guest: Yeah, for a while actually until we got to about a half a million. I was working 16 hours a day making things all day. In the very first two years I built out a really good marketing system that kind of propelled us in Chinchilla for the, for, for the first few years to where we didn't have to do any marketing. It was a self fulfilling kind of system. And so I was running off of that and just making stuff all day, manufacturing all day.

Host: And so you're the one with your, you're the one doing the manufacturing or you were the one doing the manufacturing yourself?

Guest: For a while I listened up like 8 hour, 8, 9 hours of audiobooks a day and powder coating, welding, shipping, manufacturing. I did have a, you know, I did have a few employees back in Idaho off and on. But yeah, you know, I really liked the doing it myself in the beginning. You know, I paid off all the debt. Now that there's not as much debt, definitely. I definitely enjoy having employees.

Host: So how many employees are you up to now?

Guest: We're four full time and two part time and probably bringing on one or two more here over the next couple months. We'll see how end of year goes.

Host: Cool.

Guest: Yeah, I don't do much in manufacturing anymore.

Host: And you had mentioned, I think that you're so for the last few years or a couple of years you've been in chinchilla only and now you're re expanding back out into some of the adjacent pet markets.

Guest: Yeah, it's kind of terrifying, but yes. Yeah, pretty excited actually. We've got rabbit product line like partially going. We're just introducing little tiny products here and there. My plan is basically throwing a couple products into rabbit. Start doing lead acquisition, getting an email list going, getting some social media going on the rabbit side. And then you know, it's building a new business. You know, it's building a new business from the ground up with each animal and trying to keep it separate, line it out in the, in the bookkeeping and everything. Keeping it, trying to keep it as a separate product line essentially. Yeah, yeah, yeah, yeah. So it's, it'll be a slow process but yeah, pretty excited. Trying to make it so that our. We're doing 100% bespoke custom. It's gonna be very difficult on the manufacturing side and the communication with the customer side. But I think we've got some cool tools developing that'll really in development that'll really help with that. Pretty excited about it, actually.

[39:25] Host: So your customers will be able to design a cage themselves. A completely custom case.

Guest: Yeah. So a lot like you can design a car on car manufacturer's websites. You'll be able to come onto qualitycage.com okay, what animal do I have? Chinchilla, rabbit, ferret, guinea pig, whatever. Select that one and it'll bring you up to this cage builder, essentially. Well, you'll have the option to see accessory products and then, hey, I can build my own cage.

Host: Cool.

Guest: And so it'll actually be a 3D graphical automated rendering system where you move some sliders, click some buttons, and you get to design your own package essentially for your. For your pet, for your chinchilla or your rabbit.

Host: That's awesome. That I imagine that's going to be really cool. So it sounds like you're basically a DDC brand. Is that right? Direct to consumer on Shopify or do you actually sell to pets Pet stores as well?

Guest: I tried the whole pet store thing, man. Pain in the butt. I wanted it to work. I really did. But for the amount of work they created and the amount of margin they want to take it just. I'd rather work with my customer. I'd rather work with a chinchilla owner and make their day, you know, have the full margin, but then also include some cool stuff that they didn't actually expect in those orders and really take care of them. You know, I'd rather have somebody who's going to like, talk good about us where, you know, a pet store, if they. Somebody comes in at a lower price with a similar solution, they're just going to jump. Yeah, yeah. I think it's an outdated model, to be honest, but it has its place.

Host: Josh, before I let you go, just a couple questions about manufacturing. Because you see on the business listing sites, you'll see niche manufacturing companies for sale. And as somebody who has no knowledge, no experience in manufacturing, I immediately just pass those because it just seems like too much to learn. It's intimidating, but here. Yeah, but you learned it. Although you said you were always like you had an aptitude for it going back to high school. I mean, you've been a tinkerer, but you learned a lot of it, you know, on the job as it Were or in the seat. So what do you. What would you say to somebody who wants to buy a business but doesn't have experience in manufacturing or niche manufacturing? Would you encourage them or would you say, yeah, maybe don't look at, you know, maybe. Maybe you aren't the right fit.

Guest: Like, talk.

Host: Talk to us just generally about the prospect of buying a niche manufacturing business.

[42:01] Guest: I would say it's a. What's that term? Hell yes or no? I would say you need the hell yes. Otherwise it's a no because it's really fricking hard.

Host: What's difficult about it? Just moving pieces.

Guest: If you have the funds to like, acquire it, Put in an operator and find. And find an operator who's done it before. Yeah. You know, you've got an option there. Incentivize them. Right. Because this shit is hard. I. It's very, very hard. If you want to learn it yourself, it's a long route. You know, any. Not to put down marketing, but anybody can learn marketing in a year. Manufacturing is something, you know, I've been in this business for seven years and there's still something new that comes up all the time. Some kind of supply chain issue that comes up that, you know, that's the only supplier available. So what do we do? We have to either redesign the product, completely ground up, or we have to make that component ourself. Both of those are incredibly difficult to do and expensive. You've got a lot of costs into it. There's a lot of different trades. There's powder coating, there's welding, there's cnc. I mean, every manufacturer is different. Completely different. In fact, there is no cookie cutter thing for manufacturing. It's a lot of businesses all rolled into one, essentially, is kind of how I like to put it. And we even do our own fulfillment in house. We make our own boxes for products. That's how far I've had to go to get this to be profitable at this small scale so that we can begin to start to grow the business. Outsourcing. All the things that were being outsourced, it didn't work. We outsourced powder coating for quite a while and I had nothing but issues. Nothing but supply chain issues. Nothing but surprise costs. Because I send 100 units to this powder coater and 87 of them come back all effed up. You know, that's. We had no control over that. Some. Some people make outsourcing work great in their manufacturing plants. I have not been able to whatsoever. So, like, that's the hardest part is you Got to be willing to bite the bullet and do things yourself. I mean, that's kind of what America was built on. To be honest, though, like, you gotta be willing to do the hard shit, otherwise you're gonna fail. To put it simply. And, you know, I still work in the business, so I don't know about the whole sit back and be investor side of things. I like being an operator, so I don't have the investor perspective of it. I like the operator perspective of it. But being the operator of a manufacturing business like this is very difficult. A lot of long hours, hard to find good people. Yeah, yeah. I'm glad I was single when I was going through all of it, because I was working 16 hours a day and was able to and doing nothing else. And that's what it took for me with, you know, $0 to my name, from beginning to getting it to where, you know, it's at now. And, you know, it's profitable, it's growing, and it's been a long road. There's a lot of things, you know, I could probably do it again in a year. What I did in seven years, I do it again.

[45:46] Host: I was just going to ask you that, Josh, because I think that I found you on. It was a tweet of yours that said exactly that. It was like. It was exactly that. If I. It's taken me seven years to get where I am, but, you know, if I knew now what I knew, then I could have done all of this in a year. Are there one or two things that you can point to that others might benefit from?

Guest: Know your pricing. That's number one. Know your pricing. Know what kind of margin you want at the end and set your pricing to that. And then from there, you know, systemize your business. You know, go from, you know, set your pricing to your current operation right now, set your pricing to whatever 30% profit, and then go to your business operations and start to fine tune those, get it to 30%, get it to 40% profit without raising prices again. And then, you know, you can go a couple routes. You can start decreasing your prices,

Host: retain

Guest: your prices, and, you know, take the money out, whatever you want to do. That's number one. That was absolutely.

Host: So that was just as simple. Like, you could have just simply raised your prices and then the stroke of a pen, you could have kind of changed your destiny a little bit earlier.

Guest: I could have probably erased two years of torment of myself by just raising my prices day one.

Host: And how did you finally, you know, this is classic, you know, everybody's scared to raise their prices. Every entrepreneur makes this mistake. Everyone undervalues what they're selling. How did you finally get the confidence to do it? Were you just like, this business isn't going to work if I don't raise these prices, so let me try? Or did a coach tell you, like, dude, just raise your price? As simple as that?

Guest: No, to be honest, it was like. It was something in my mind for six, seven, eight, nine months. I was like, no, let's just get better at manufacturing and then not raise our prices. Let's get better at manufacturing or raise our profitability that way. I fought that for, like, six months. And then finally, I think. I think I was drunk one weekend. It was like, screw it. I'm just gonna raise all the prices 20%. And yeah, you know, there was a little backlash, a little negativity toward it, but those are the type of people who are gonna ask for discounts all day long anyways. Not my customer. You know, in the beginning, everybody was my customer. I needed the money, you know? Yeah. I was wanting to grow revenue. Revenue is kind of a vanity metric, to be honest. The profits, all that matters. Well, customer satisfaction is more important, but, yeah.

[48:34] Host: Cool. Well, Josh, if people want to get ahold of you to ask you questions about niche manufacturing or buying your business, buying a business from your grandfather, how can they do that?

Guest: Unfortunately, grandfather passed a couple years ago, but Twitter's kind of my favorite avenue. I've always been on it, but never utilize it. Lately, it's been really fun. My tag or username or whatever is Amagi A M A G I Josh on there.

Host: Maggie Josh.

Guest: Okay. I kind of. I limit myself to it, but it's a pretty fun place.

Host: Yeah. Yeah. For small bit. The small business community on there is just so awesome.

Guest: Yeah. DMs are open. Absolutely willing to offer advice in manufacturing or anybody who's acquiring a business and feels over their head. It's very stressful. So, yeah, I'm absolutely, totally open to people messaging.

Host: Cool. Josh. And the URL of The business is qualitycage.com that'll be in the show notes, but I just wanted to plug that. Sir, thank you for. For being so transparent about your story. The.

Guest: Absolutely.

Host: Especially the down bits, but the up. The up ones as well. It's really. It's really an inspiring story and quite a. Quite a trajectory from where you started to work at now. I appreciate that.

Guest: Thanks for having me.

Host: Thanks, Josh.

Guest: It's been fun.

Host: All right.