Host: You know how intimidating the deal process can be. As a first time business buyer with no finance background, you know how intimidating it can be. If you've only ever worked in an office, then buy a business and find yourself managing crews in the trades. And that describes sisters Julie and Jana Hottinger. But there was more. Julie and Jana not only didn't have finance backgrounds, but they didn't really have much general business experience, coming as they did from the worlds of public health and philanthropy. And finally, as women, there was that nagging doubt around how people in the trades might react to them as new and inexperienced owners. Well, let the Hottinger sisters be an inspiration if you are struggling with your own self doubt. Julie and Jana bought a business that builds custom cabinets for offices. It did about $2.1 million in revenue in 2022, the year before they bought it. This year they're on Track to hit $3 million, nearly 50% growth. This is the story of how they took the plunge and have had a strong first nine months as owners of Signature Woodworking. Please enjoy this journey into buying a business with Julie and Jana Hottinger. Announcements One of the themes that comes up again and again in Acquiring Minds interviews is the size of the business that the guests bought and how they thought about it. Well, next Thursday we're going to host a webinar on exactly that topic. Co Founder and Managing Director of Acquisition Lab Chelsea Wood will do a live presentation entitled how big a business should you buy? This is a topic that Chelsea herself sees discussed constantly in the Acquisition Lab community and she has thoughts on how to answer the question for yourself. How big a business should you buy? The webinar is next Thursday, September 12 noon Eastern. The link to register is right at the top of this episode's show notes or right on the Acquiring Minds homepage. Acquiringminds Co. If you can't make it, you can register anyway to ensure you'll be emailed a recording of the webinar after the fact. This webinar is also in Office hours, so come with your questions. We're going to leave a good chunk of time at the end for Q and A. How big a business should you buy in office hours by Acquisition Labs? Chelsea wood next Thursday, September 12 noon Eastern Register on the Acquiring Minds homepage. 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. 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 Oberly Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberly is a specialty insurance brokerage for searchers by a former searcher. Check out oberly-risk.com O B E R L E- risk.com link in the show Notes Julie Hottinger Jana Hottinger, Sisters, welcome to Acquiring Minds.

[3:52] Guest 2: We're glad to be here.

Host: Yes, Julie and Jana, I've already said one interesting angle to your story. You are sisters, but there's a lot more. The two of you bought a business in the construction space last year. Last year or was it earlier this year?

Guest 3: Earlier this year. October.

Guest 2: October 2023.

Guest 3: Yeah.

Host: The two of you bought a business in the construction space last year and despite some hiccups, it is going well. So we want to hear all about it. Julie, why don't you start us off with some background on yourself then Jana, we'll go to you.

Guest 3: I started off working in politics and then when I had my first and only kid, I transitioned into public health, went back to school, got my master's and PhD and worked in public health for about 10 years through Covid. And I've always been interested in sort of doing something, you know, running my own business. But I had always thought that you had to like come up with an idea or something. So I sort of had been thinking about incorporating what I was doing into somehow creating a business. But then I started getting like tired of public health. Covid really kind of put me through the ringer, I guess, and didn't really like, I don't love working in a bureaucracy. I found that out during my public health career and I my best friend's husband had purchased a about 10 years ago he bought a carpet cleaning business and made it, grew it really big and ended up selling it off. And I started talking to him about starting a business and getting out of public health and doing my own thing. Meanwhile, Janet and I are sort of talking about doing this and I'll let her tell you her story, but we started looking at starting our own business and looked into things that we could easily learn without having to go back to school. And then like six months through that, he was like, why don't you just buy a business? And so we bought the book buy, then build, started listening to your podcast, and a year and a half later, we bought a business.

[6:41] Host: Amazing. And just curious, your friend's husband, who was so successful in franchising, he didn't think that you should do a franchise?

Guest 3: You know, he wasn't necessarily against doing a franchise. We actually looked at a couple of franchises. But he said, you know, the. The. He thought the best thing about a franchise was if they had, like, some special sauce that no one else could recreate in terms of, like, you know, what you end up paying in terms of, like, franchise fees and everything. If it's something you can go out and create your own, eat that, you know, do that, or as. As we learned it, it seemed to be less risky. We. We were always about, like, lowering risk, and just from everything I read, it seemed to be less risky buying an established company that was, you know, over a million dollars in revenue and going from there. So he had a great experience, though, with franchises.

Host: Sounds like it. Great. Jana, tell us about your side of things.

Guest 2: How I got here. So I have worked in government and nonprofits for most of my career. I've essentially worked for the same leader for the last 20 years. He was the mayor of a major metropolitan city. Now he's the CEO of a foundation, and I'm the chief of staff. He is likely going to be retiring pretty soon. And so it got me thinking about what I want to do next, where I can apply everything that I've learned in all these various positions and was looking for some autonomy. And so when Julie and I, I think we were on vacation one.

Guest 3: One weekend up at a cabin.

Guest 2: Up at a cabin, and we just started talking about, you know, what. What we want to do. Julie was already kind of looking at this, starting or buying a business. And then we just continued the conversation, and I. I kind of was like, well, that. That sounds great, because I have all these skills that I've picked up over the last 20 years. You know, I have never worked directly in business, and I'm going to need to find something. I don't want to stay where I'm at. And so if we can find something that over the next few years, we can grow, and then I can step out of. Of my nine to five, if you will.

[9:24] Host: And so you had said that you and Julie, kind of as the plan forms, you and Julie partner, but you don't immediately go in. You go in, I guess, when this gentleman retires, Right.

Guest 2: Or when we reach, you know, a point that, that it makes sense financially.

Host: Well, obviously the trust issue between partners is one that you got to leapfrog because as sisters you have a lifetime of trust, trust built up. On the other hand, of course partnering with, with a sister or a family member or a friend, etc. Could only adds another layer of complexity to the, the partnership relationship. How did you all think about the, the, the potential downsides here, the risks here to the relationship?

Guest 3: Yeah, we, we talked to a lot of people as we were sort of going through the process of like looking at businesses and deciding what we wanted to do. I have a, a really good friend who has a family business that's really successful and spent some time talking to her. We talked to other folks who had family businesses and then we, we kind of formulated that, you know, we need a really good legal partnership agreement that gives us either one of us a really easy out if we want to get out, you know, no questions asked. This is how we would divide it up. We spend a lot of time working on our relationship, I guess, and working, you know, my mentor or our mentor, Michael is his name, said, you know, like over communicate with each other. Just make sure you communicate everything. And I think that has been really important. You know, every day I call Jana and give her like an update of what's going on and just, just really making sure we're communicating everything. But you know, we're, we're early and so far so good. You know, we're just very aware of the fact that it could be very difficult. Yeah, partnership like this.

Guest 2: I think we went into it, you know, knowing about that, thinking about it, talking about it, making sure that that was definitely something that we needed to be very intentional about.

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Guest 3: I certainly didn't want to go back to school and, you know, learn something very like time consuming or, you know, so we wanted to look for something that was something we could learn how to do first. We wanted to like start a business from scratch. We focused on like home service businesses also because we, through my friend Michael, we had a lot of sort of connections in that world and that's what he did. And so, you know, we, that's sort of where we started. We looked at, you know, like I said, an epoxy flooring business, which was a franchise. So that was the first perimeter though, I guess was something we could do.

Host: And so you two were prepared to do epoxy coating yourselves. You were prepared to be the technicians in whatever it was?

Guest 2: I think we were, we were prepared to learn how to do it in case we needed to. Like, I don't think we were going into it thinking that was going to be our role, but I think we wanted to be able to step in if needed and to find something that, that, yes, we could physically do if needed.

[15:01] Guest 3: But yeah, like we, when we were looking, we went to an epoxy flooring company in New York because of the weather conditions are similar to Minnesota. And you know, we like check to make sure we could even like lift some of the equipment, which, you know, we had to jump on it and get it down. And so, yeah, I mean, we, we wanted to make sure we could fill in.

Host: So you really were not scared of getting your hands dirty. It wasn't the game plan, but you do it if you had to.

Guest 2: Yeah.

Guest 3: Like, yeah.

Host: Literally dirty.

Guest 3: Literally, yes. Literally, yes. Yes. And then I think the other parameter, you know, as, as we, as we went into our search, we added more things. Like once we decided we wanted to buy a business, we wanted a million in revenue to start with. And then what were some of the other things?

Guest 2: We, I think our minimum SDE was like 300,000.

Guest 3: Yeah.

Guest 2: To start with is what we were looking for.

Host: And let's talk about that number. So the idea there is, I assume you were going to use an SBA loan.

Guest 2: Yes.

Host: And do some sort of 10% or 20% down structure.

Guest 2: Yes, yes.

Guest 3: Yeah.

Host: Assuming that the the SBA loan payments are going to eat up half your SD. Right. Let's call it so that if you bought a business with 300 SD once you got in it, that would leave 150 after loan payments. And so that 150 was going to go to both of you, one of you, less than 1, you know, 1 of you and then, but not even full salary. And the rest goes to reinvestment in the business. It's a low sd. What I'm getting at clearly is that it's a low SD number, particularly with two partners.

Guest 3: Right.

Host: And mid, mid career folks who, you know, are, you know, can, can make good income elsewhere.

Guest 2: So I think that we are lucky in the fact that I can continue with my regular job and I don. Need to be paid. Julie, you know, currently her husband has a good job and I think we could be a little bit more lenient about how much we needed to make in the beginning of this venture, knowing that we were hoping to build and scale and make the company more profitable.

Guest 3: But I also, I did need to make a salary.

Guest 2: Yes.

Guest 3: So that was part of the. Because, you know, I would be working full time in the business and leaving my job. We had the benefit of my husband working, but I did need to earn something.

Host: Could you share with us, like what you needed was this like 50 or 75 sort of thing you needed to be able to take out?

[18:03] Guest 3: Well, I think by the, by the time we got done, I, I, because we, I had been unemployed for about a year and a half at that point. Closer to a hundred. Like I would say our final SDE requirements were more in the 450-500 range

Host: precisely for this reason because, because Julie needed to make a proper salary after having gone unpaid for a year and a half.

Guest 3: And again we learned that like, that's one of the amazing things about like a corporate acquiring a business is we learned that you don't have to like give up absolutely everything to do this or we, you know, we didn't, we grew up with parents who were not financial, financial people or, or you know, entrepreneurs. And so we had, I had never learned how you can use money to make money. I had always thought you needed, you know, to come up with an idea and grit your way through to make money. You know, like you had to have this amazing idea and you had to like eat ramen noodles for four years. And you know, you're not alone in thinking that, Julie. That's right.

Host: That's part of the reason why this podcast exists. It's Disabuse people of that notion. Go ahead.

Guest 3: Yeah. And I mean I wish I would have known this sooner because I mean I'm loving what I'm doing right now. It's totally up my alley. But didn't take like a massive change in lifestyle. It definitely has changed. You know, like my husband is now the main parent for a while and you know, it changed a lot. But financially it luckily because my husband works it, it didn't cause as much deprivation as I thought it might.

Host: Yeah. But that, that also is, is a lesson in buying a slightly larger business because you.

Guest 3: Right.

Host: Your criteria of SDE expanded or grew to be 450 or 500. That was going to give you extra room to pay yourself.

Guest 3: Yeah.

Host: So. So that's also a key takeaway I think here. I mean if you're, if you're going to buy a business with low SDE and it, which means it's going to be quite small and you're going to need to invest some of the earnings of the business back into the business. So there's going to be even less ste for you to pocket. You very likely either need to do a ramen living lifestyle.

Guest 3: Right.

Host: Or you need to have sources of income or big savings or whatever. So this is all kind of basic arithmetic but it's worth spelling out for people.

Guest 2: Yep. Great.

Guest 3: For sure.

[21:00] Host: And Jenna, going back to your expected future involvement in the business, you said it was going to be timed to your boss, who you're for whom your chief of staff retiring. But I suspect it's also going to be tied now to the business generating enough earnings to pay you something that would be acceptable. So there's actually two criteria to meet before you get into the business.

Guest 2: Yep. I'm pretty flexible in my career. Like I can continue as long as, you know, I, I need to until the business is profitable enough for me, me to, to start working there. So I do have some flexibility which I think is, is good.

Host: Do you have hopes? Is it kind of like a sooner the better or are you like a year feels good or five years? Like, like I think, I assume, I assume it's not completely open ended.

Guest 2: No, it, I'm thinking, you know, three years, three to five years.

Host: Ah, okay.

Guest 2: So a lot more longer term.

Host: So Julie will have been in the business running it for three to five years when you step in. Hey, I'm, I'm warning you now that could, that could be tricky for the partnership. Yeah, he's going to feel like the boss or is going to be the boss.

Guest 3: Yeah, well, you know, I also like, we have larger aspirations, I guess, in terms of like where we want to take this. And you know, I could see a situation where I am the person who like, like eventually we'd like to get like a general manager to come in and run and then go buy more businesses either in this, you know, in woodworking or cabinets or something else. So I could see a scenario where Jana jumps. Like I go and like start, you know, like jump in when we buy a new one and set up our systems, set up, you know, get things rolling for a year and a half, two years, and then, you know, I move on to the next one. And, and like, there's a place for Janet like in the, in the overarching structure too.

Guest 2: And I also am working in the business. Like, I'm not like removed from it. You know, I have duties that, that I'm doing in the business and I'm here a lot.

Host: Okay, well, that's a good clarification because with a full time job, one might think that you are pretty, it's pretty removed. So, so the vision, recognizing that you're only. You said October, so only nine months into it, we're going to see how it goes. But the vision that could come to pass is kind of a holdco. You bought multiple businesses and you're kind of the, you're kind of the one who jumps in as the immediate manager, operator, Julie, and for a time gets things transitioned and then maybe rinse and repeat. And Janna, you might be kind of more at the hold co level and maybe I'm already like layering on more detail that, you know, maybe from your all's perspective it's like, well, we'll, we'll just cross that bridge when we get there. But it feels like that's kind of what you said.

[24:28] Guest 3: Yeah, I think that's, I mean that's my vision. We are a ways away from that, of course.

Host: Sure.

Guest 3: But yeah, that and Jenna, do you

Host: imagine yourself ever being an operator? Getting in.

Guest 2: I got, you know, I, I haven't like put too terribly much thought into that. I think, like.

Host: Right, that's a no. That's a no.

Guest 3: I know.

Host: Go ahead.

Guest 2: It's definitely something that I need to think about and we need to plan for of like what's going to happen next when this eventually happens.

Host: Tell us some of the listings that you looked at or the businesses that you, that you considered before arriving at what you did.

Guest 2: So the first one we looked at, which was, I think it was like $225,000 was. The asking price was like a fabric curtain upholstery. That was the first one. We, we looked at kind of like our. A practice, I guess, type, interview the owner, see how this all goes. So that was.

Host: So 225 was the. Was the purchase price. You weren't even seriously considering it. The SDE on that would have been.

Guest 3: Right.

Host: 50 grand.

Guest 2: Right.

Host: Okay.

Guest 2: Just kind of like dip our toes in and. And see how this whole buying a business process works, I guess.

Host: Okay, what else?

Guest 3: So then we looked at. I, you know, I think the epoxy flooring was next, which was the franchise. But we ran into this issue with the brokers who were selling the upholstery thing that we just had. We just had a bad experience with them. So we were like, okay, we need to pause. And we. I just, like, put in an email request to this franchise and started working directly with them. We were pretty serious about that one. We actually traveled to multiple sites. We were in Salt Lake City and New York to look at different franchise sites. And then at the end of the day, we just. We just couldn't pull the trigger on it. We looked at another epoxy flooring company that was trying to sort of do something similar to a franchise, but he was just kind of starting out.

[27:14] Host: Okay.

Guest 3: We looked at. Let's see. After that, we looked at an asphalt company. We looked at two asphalt companies. One was actually owned by a woman, and so we were pretty excited about that one. Then we went to an asphalt convention and we're. We're had some interesting.

Host: I love small business.

Guest 3: Yeah. Yes. Had some interesting interactions and came along.

Host: What do you mean? What do you mean?

Guest 3: Well, so we met with. It just turned out that my sister or my daughter's riding instructors. Husband's dad. Yeah. Was like this asphalt king and had just sold his gigantic asphalt business to private equity. And it turned out he was going to be at the convention. So we met with him one morning and he was like, I don't know why you guys want to. Want to be in this business. And he, I mean, I think he clearly, like, had had a rough night of celebrating. So, like, he was.

Guest 2: He was like, do not do it.

Guest 3: Yeah. He's like, do not do it. Everybody is like an asshole. And I think. I think it was.

Host: Tell us. It sounds funny and interesting, but also there are going to be people listening to this who are looking at asphalt companies. So.

Guest 3: Yes.

Host: Why did the king of asphalt say don't get. Especially since he had sold and, you know, probably Was speaking pretty candidly.

Guest 3: Yeah, I think because he said it's a really, I think like it's a really tough business. And he had started when he, he like went to a year of college, quit college was like I wanna, I wanna do my own thing. And he started at the very like he started with a pickup truck and a shovel and asphalt. So you know, he started at the very beginning and had been in it for you know, 30 plus years. I think he thought it was like physically demanding. I think he thought it was just really difficult to. And this is funny given what we now own, but difficult to deal with contractors, construction, you know, different construction projects. I think he thought it would be difficult for a woman to be in a business with that's pretty much male dominated.

[30:16] Host: But now did he say that or did you. Are you assuming he thinks that?

Guest 3: I am assuming. I'm actually pretty sure he said that.

Guest 2: Yep.

Guest 3: He wasn't the only asphalt person who told us that too. Which you know, I don't really put a lot of, you know, there. There was like a woman of asphalt booth that we hung out at and they were all like, yeah, do it. But so who knows about, you know, whether it's a woman. Like I'm sure there are tons of women who can go and rock it. I think he was also worried that we just didn't have the experience.

Host: Yeah, I think now would be the time to introduce that, that theme of your story as women looking at constructiony home services, tradesy blue collar y businesses and what you experienced there. This is a theme of the story. So it'll, we'll kind of interlace it throughout from here on out. But I don't think you were talking about the king of asphalt, but you looked at an asphalt company, a different asphalt company. This was the, the owner who freaked out on you, right?

Guest 3: Yes, yes.

Host: Can, can we hear that one? Because this one, this one is directly related to again this theme.

Guest 3: Yeah.

Host: What happened there?

Guest 3: So this was the second asphalt company we looked at and one of the reasons we were interested in asphalt and construction is because we have a background working in government and we were going to be certified as a woman owned business. And so we were going to try to take advantage of that getting like government contracts and you know, city, municipality contracts. So that's sort of why asphalt kind of fit into what we were looking at. But so we were met with the second asphalt company. He, you know, we like, we got the deal I guess. He, we met with him a couple times leading up to, you know, Signing. We had our financing in place. We had agreed to keep his son on, which was really important to him to work in the business. And we needed his son because his son, you know, really knew how to run the business and knew that. Knew the business. He was going to stay on for like a year and help us. We were going to pay him for. He was going to do it, I think for free the first month, and then we were going to pay him as a consultant. Well, like literally we were hammering out the agreement and the night before we were supposed to meet with our lawyers to finalize. He called me at about 8 o' clock at night and he was like, I can't do this. I can't sell this to you. You guys don't, you know, you're, you're not going to know what you're doing. This is a rough business. He was just like complete 180. Because he had been really supportive at first. And so this was completely out of the blue. Yes.

[33:51] Host: You're at the finish line and he calls you and starts ranting.

Guest 3: Yes. And he was, he was, he was ranting and.

Host: And was it about your lack of experience or the fact that you were women? Both. Was he explicit?

Guest 3: He wasn't explicit. And this has been sort of something that, like something we have not been able to figure out. But it's been a common theme in everything from meeting with banks to, you know, buying businesses. Is it our lack of experience or is it because we're women? Is it because we don't have business experience? Like we haven't been able to really parse out what it is, you know, which one of those. And it could be a combination of all of them, you know, that's given people pause when, when like presenting them with, with us.

Host: And do you feel like you. Do you feel like you've gotten a lot of no's or pauses compared to you listen to acquiring mind. So compared to the sense you get

Guest 3: from other guests, I think so. I mean, it definitely. And from other business owners that I talk to, it definitely seems that again, you can't parse out what it is if it's women lack of business experience or lack of like industry experience, what it is. But you know, I think it definitely seems that it's happened more to us than other people. Other people may have gotten no's for other things, but I have never heard somebody get a no for lack of experience. Experience in my limited network of people who buy small, you know, mid side businesses.

Host: Yeah. Jana, what do you think?

Guest 2: I Guess I agree with Julie. I feel like we were second in a lot of the, the businesses we went after, but I feel like we, we went after quite a few before we found one that was a good fit for us. And I think it's a combination. I also think it's a combination of factors. I think that being two women does play a role in it when you're looking at construction, depending on the owners. Right. Like the folks we bought this business from, they had no qualms at all about us being two women in the business. But I feel like, kind of like maybe generationally there are some still, still some things about women being in. In the construction industry or labor that, that pops up once in a while.

[36:57] Host: You know, it's one of this things not to excuse the behavior of some of these sellers, but it might not be that they are like, I don't think you can do it because you're women. But they think that their own crews might.

Guest 2: Yeah.

Host: So they're kind of, you know, they're kind of projecting on, you know, onto their crews how their crews might react to you.

Guest 2: Yep.

Host: And I. Oh, go ahead. No, no, basically that's it.

Guest 3: Go ahead. I think, I think that's a really important point because you know, the crews and then also like the contractors you're working with.

Host: Right. So. Yeah. So which is again, not to excuse it or to say that it's. It still fundamentally comes down to more friction as women.

Guest 3: So.

Host: But it could be them imagining kind of second order.

Guest 3: Right.

Host: Experiences that you'd have. Very interesting. Well, it's good for other women to hear. And it's this thing that happens so much in kind of, you know, social dynamics with, you know, gender and race and so on. Is you. If I went through those experiences that maybe I would have gotten the same amount of no's. The same, you know, but I wouldn't have had to have the nagging question mark in my mind. So even if I went through the same exact process, the same exact experiences and number of noses you did, I still am going through it a little more lightly because I don't have to. I wonder, is it because I'm a woman sort of thing? So anyway, something for everybody out there to be aware of, but particularly female listeners, although they probably could have guessed that this would be something they'd have to an additional level that they'd have to deal with.

Guest 3: Yeah.

Host: All right, well, let's. We're quite a few minutes in. We haven't heard about the business you bought. So let's let's get to that. Tell us about the, the business that you bought, what it is and why did you like it?

[39:08] Guest 3: All right, well, we bought a commercial cabinet company. We do, it's, it's custom work. We do tenant improvement jobs for like office spaces. We do medical offices, retail restaurants, bars, work through. We're a subcontractor, so we work through contractors for the most part

Host: and making cabinets. And so cabinets are specialized enough. I mean, I know that putting up, you know, IKEA cabinets in a kitchen is hard. I'm just thinking in a residential con context here that the general contractor that does the rest of the kitchen is also doing your cabinets. It's not a specialty thing. But in a bar or a dental office or any commercial environment, cabinets are a specialty thing. So the GC that's handing, handling all the other construction activity just doesn't knock it out themselves.

Guest 3: Yeah, and even in residential, they, they don't. They're like residential cabinet companies too that bid for. Yeah, but yeah, they. So like the architect will work with the contractor to come up with, you know, everything and then they'll bid out the cabinets and the millwork. So you know, we do like closets, we do cabinets, we do reception desks. Those are our main things. We're doing a lot of feature walls right now. So like wood paneling or flat walls. Any, any sort of millwork that is in an office space.

Host: Okay. And so that's why this millwork. That's why the, it's kind of. You call it woodworking. It's a woodworking business.

Guest 3: When we bought it, it was, I think so 2.1 in revenue last year. In 20. Well in 2022. So. And we bought it October of 2033. Yeah, they had seven employees. SDE was 750. Let's see, the, the owner, it had been in business for 30 years. He was a cabinet maker himself and just grew the business. His wife did all the bookkeeping and accounting. She had like a full time job and did that on the side. We met with them and just connected with them right away. We really like the owners. We really think they, I mean the business was just very well run. The guys had been here for. So there were seven employees. Three of them had been here for two for 20 years and one for like since it's. It was started like 30 years and the rest of them had been there for a couple of years and they, he, the owner thought that they would all stay on, which was really important to us because we know, knew nothing about cabinet making.

[42:41] Host: And by the way, this is also a trade that you're not going to be able to get in and do.

Guest 3: Yeah, it's too. Right.

Guest 2: Yes.

Guest 3: That you know, we, we, we just, we learned also that you can't be too rigid in your. You're, you know, it checked off other boxes. So. And it was two years into it and we were like, we gotta pull the trigger at some point. And this feels right.

Host: Julie, you've been searching for two years like full time.

Guest 3: I. It wasn't full time. Cause I, I worked. But yeah, after Covid, I kind of left work. So. Yeah, I mean it was two years and doing a ton of research and you know, visiting, doing tons of networking

Host: and the, this business did the course. Construction. Construction related. That is always. You are. You're worried about the cyclicality of that Lander don't always love it. How'd you think about the project based? How you. How'd you think about that? I guess 30 years old. That's the answer to that question.

Guest 2: Right, Right.

Guest 3: That. That meant a lot to us that it was 30 years old and he could have grown, but he didn't want to. Like there's zero marketing budget. Zero. And he was turning people away and he just didn't want to manage more than seven people. But that really meant a lot to us that you know, like it's. Even though it's a construction business and cyclical, if you think about it like every 10 years people need new cabinets in like this, this space. It's kind of very niche, but they need to a lease and an office space is basically every five or 10 years. And when somebody moves out or moves in, they redo all the cabinets.

Host: Okay.

Guest 3: Yeah. For the most part. I mean sometimes it's not a big job. It's like we want to change the break room cabinets or we, you know. But they always try to spruce it up a little bit.

[45:06] Host: Yeah. Yep.

Guest 2: And with like Covid, all these businesses are downsizing, which means they need to do tenant improvements and change. Change their space. Which was something short term to look at.

Guest 3: But we didn't know that when we got into it. I don't think. I didn't know that. Like that was a, A blessing and Wait.

Host: That's a, A blessing. Wait.

Guest 3: Yeah.

Host: But I'm, I, I think of the post Covid commercial world as smaller footprints, less office space.

Guest 3: Yeah. We were worried about.

Host: So not a good thing.

Guest 3: We were worried about it and also worried about the economy because at the time we were buying, interest rates were rising. And you know, people were predicting a recession and but yes, so we, we had these theoretical ideas about COVID and if his growth had been like Covid effect. But yeah, like what Janice said, we found out that all these bigger spaces were condensing because of work from home. And so there was tons of ti work going on because they had to make these spaces enticing for people. Like we put in kegerators and we're still putting in like kegerators and like you know, just really thinking like what do they call them, Thought rooms or. Yeah, I don't, I don't know, like, you know, just like all this updated stuff. Stuff to get people to want to come back to the office.

Host: Okay, so, so the fact that on the one hand it doesn't look good because the footprint of office is, is going to just get smaller in the aggregate. But on the other hand there's all this churn happening which you do benefit from because they're re envisioning the office. The office and therefore doing construction to put in. So lots of work for you all. Okay, very interesting. What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursum. They all went through the Acquisition Lab, the accelerator in community for people serious about buying a business. But they represent just a sliver of the Lab success stories. The number of deals across the Lab's cohorts now stands at over 120 with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions and an active community of serious searchers. Check out acquisitionlab.com link in the notes or email the lab's co founder, Chelsea Wood. Chelsea. Buythenbuild.com I just want to say this.

[48:27] Guest 3: I was talking to somebody a couple days ago and he funds private equity funds who are solely interested in commercial real estate. And he was telling me that it's horrible for commercial real estate right now.

Host: Yeah.

Guest 3: And to me, you know, a year ago I would have been like, oh that's, that's must mean it's terrible for the cabinet business. And I think just a really interesting lesson in all of this is like to really get down to the local level and see what's actually happening because all these big numbers can, can be very helpful in guiding You. But you know, we're so busy, we can't. And, and I don't, I still don't know if there's like a delayed effect and it'll, it'll hit us. But it's just so interesting to me that, you know, he's saying it's only starting to pick up now. So I don't know, it's just really interesting to, you know, you just really gotta talk to people.

Host: It's a great point, Julie, that, you know, we, we probably. A lot of the associations we make about how what market a business is tied to are pretty loose and they, they need to be interrogated more closely by us as business buyers to really understand the dynamics there. So it's a, a great point. But speaking of then a business owner, the seller who is turning business away, didn't want to grow and what you're seeing, you're going gangbusters. So what, what is revenue projected to be? You said it was 2.1 at the end of 20 for calendar year 22. You bought it late 23. What do you think revenue is on track to do for this year? We're on, speaking on July 1st. So we're halfway through the year.

Guest 3: Yeah. So we're at 1.5 now, almost 1.6. We have to close things out but for the end of the quarter, you know, and summer is the slow season, theoretically. And we are booked through September, so. Yeah, so.

Host: So you could see getting to three to three, like doubling.

Guest 3: Yeah, yeah. I've sort of quietly made it. Our goal is to get to three.

Host: Okay.

[51:00] Guest 3: I also like the, the guys. I don't want to scare people into like we're going to throw all this work at you because we're new and we have all these goals and so that's what I mean by quietly.

Host: But they already have experienced of 50% increase in volume for the first six months of this year. Have you hired or are they just working harder or, or what? I mean they're already the businesses working at a much higher level. There's more, much more throughput. 50 more throughput.

Guest 3: Yeah. So we, we've hired, we hired two, two new people and then like a summer intern or a summer, like a kid out of college who wants to see if he wants to be in the trade. But we're, and we're still trying to hire. It's been really tough to, to hire. I mean that is what's going to slow us down.

Host: Yep. Not an uncommon thing to hear. But with this whatever intern, apprentice guy testing Things out. And then the two others that supports 50% growth in revenue from 2.1 to 3 million.

Guest 2: I also think that we've done some efficiencies in the shop. Julie has and in kind of the project management of. Of the whole operation. I think that has helped keep the guys. And actually we have a. A woman now. Cabinet maker.

Guest 3: Yes. So I shouldn't just say the guys anymore have.

Guest 2: Have like kind of the. The old owners did everything on like paper and pencil. Like, they had no technology, no systems in place for, you know, project management or anything like that. So I think just kind of implementing some of those efficiencies has helped as well to produce more.

Host: So have you. Have you digitized the business?

Guest 2: We are working on is. It's a work in progress. You know, we have some, but we're still kind of figuring out what exactly we need for others, like job costing, figuring out what tools there are that

Guest 3: can help with that.

Guest 2: So kind of narrowing down.

Host: Give me one example of an efficiency that you thought was, you know, a big win.

Guest 2: I would say even like just a minor thing is like paying bills online and, you know, just like. Just like minor things. Yeah. Direct deposit for our employees. We have a time clock system that we have implemented. I mean, it's some very simple things, but I think it just, you know, building on that is going to be beneficial.

[54:17] Host: I feel like things are going really well. Have there been fetal moments? Have there been. Has there been any difficulty or. I mean, this is. You're certainly making it sound too easy.

Guest 3: Oh, yeah, no, they're every day. I mean, so I'm trying to remember when the first fetal moment happened.

Host: Oh, there have been multiple.

Guest 3: Okay, there have been multiple. Yes. We've had, you know, like our laminator a couple weeks ago, that Guillain Barre syndrome and had to go to the hospital, you know, and his paralyzed. Was paralyzed and now is having to work through getting, you know, getting back to work. But because we have such a small team, you know, we lost the laminator, which is like an important job. Luckily, one of the new hires knew how to do that. So we've had like some just employee, like, tragedies like that happen. The cash flow situation is. Is real.

Guest 2: It's real.

Guest 3: It is. We. We could not understand it when the previous owner kept saying, we can't explain to you cash flow because it is so dependent on when the. They don't pay you until the entire job is done and then the contractor gets paid. So we have jobs that we haven't yet been Paid for and they've been done. And you know, we've paid for all the materials for like four to six months.

Host: Yeah.

Guest 3: So cash flow was rough.

Guest 2: Yeah, that I think is definitely something.

Guest 3: Yeah.

Guest 2: That we knew it was going to be a problem, but we didn't realize how big of an issue. Not issue, but how big of a. How much we were going to have to like, manage it every single day to make sure that we had enough

Guest 3: cash and that it was longer. We had like, we had figured out like three to four months is what we needed for cash flow. And it's. I mean, like I said, some jobs it can be up to six months to get paid.

Host: And how have you managed other than being super on top of it? Have you had to use a line of credit or infused the business with more of your own cash or anything like that? Or just hyper discipline has got you through.

Guest 2: I think that. So we had a working line of credit as part of our financial package. So we have used that and we're using that that has been able to sustain us for now. And hopefully, you know, it seems like we're getting a handle on it as, as we get more of these, like, lagging receivables in. But.

[57:23] Guest 3: And I think relationships also mattered a lot because we had a great relationship with the bank. So they increased our line of credit like three months in when they could see that we were, you know, selling. Gonna have some trouble. Yeah. And they could see all the, the, the sales on the books. And then, you know, we like, if something like one month. I talked to our landlord and I said, can you wait a week to cash our rent check? You know, and we have a great relationship with him. He actually owns, I mean, he owns the building, but he owns the company that's on the, like, other side of our building. You know, sometimes we can call our vendors and like we've just through talking to people and like, we have our quartz guy. He's like, I totally understand. I own my own business. I went through it like, yes, you can pay me next week. Totally fine. Like, we were just honest and you know, and so far people have been great. Like, I'm sure they won't. Wouldn't want that to go on, but, you know, we don't want it to go on forever. And it's like Janice said, it's. It's evening out now where it's not as big of a problem.

Host: You're basically having to wait twice. The general contractor's got to get paid and then you got to get Paid from the general contractor. So your business model is the gcs. You're a sub to general contractors. So let's talk a little bit about that because that's one of the cons.

Guest 2: Oh, I would say one of the benefits of the model. Well, I don't know if this is a benefit, but one of the things with this model is that we don't work directly with customers, which I think is nice. We work with this. The contractors who have a better understanding of the business and like how it works and you know, you're not talking to somebody who just had their kitchen cabinets put in and are super mad about it or.

Host: Yeah.

Guest 2: Didn't like the work you did. We're working with contractors rather than customers. I guess the contractors are customers.

Guest 3: Yeah, but. And also the commercial side of it is.

Guest 2: Right.

Guest 3: Rather than doing residential. I think is. Is great in terms of. Yeah. Customer feedback and

Host: the. Is there customer concentration when you're working for gcs? Is it like, you know, some big GC in town? You guys are in Minneapolis.

[1:00:05] Guest 3: Yep.

Host: Some big GC in town provides you all your work sort of thing. I'm exaggerating, but something like that. What's the customer concentration? Like that.

Guest 3: That was another huge red flag in the business. We have basically two contractors and we work in like with smaller contractors. I would say they're mid sized contractors. Eventually we want to reach out to the larger contractors, but right now we're just bidding job to kind of medium sized contractors. Maybe 50 to 60% of our jobs are with these two contractors.

Host: Wow.

Guest 3: Yeah. Which is huge red flag. I am. One of the things I'm doing is working on trying to diversify that pool because there's plenty out there. It's just again a matter of like we don't want to. They really count on us. So we don't want to stop delivering to them. We just want to add on. And again that's, that's a growth. A growth strategy and still working on hiring people.

Host: Right, right. Again, that being the bottleneck. I mean if you could hire people, you could probably pretty easily find more GCs to work with. Who themselves are probably. Probably desperate for no work, no workers.

Guest 3: Yeah.

Host: Cabinet makers talk about to us about the experience of buying into a business where you don't know anything. It's. And it's a. As you. As you said, Julie, this is a pretty. This is a skilled trade. This is a, this is something people go to school for. And here you guys are sauntering off the street to buy the business. What can you tell people who are. Haven't yet gone down this path about how to prepare for it?

Guest 3: I would say the owner was key in how like in training me in and I still have breakfast with him every couple weeks. He really, I mean he believed in us. He knew that I, he, he's like, you're not going to learn how to build cabinets, but you're going to learn how to bid them and understand how they're made and understand like the process, you know, actually building them is something that you don't even really need to know. But. So he really spent a lot of time teaching me. He also spent a lot of time. When they announced the sale, there were three guys who were pretty upset about it. The three who had been here for a long time and the owner spent a couple weeks taking them out to lunch, you know, really talking to them to get them on board. And without those three guys staying and they have taught me so much, it would have been really tough. I don't, I don't think I could have done it without the owner being heavily involved and the three main guys being, I mean they, they change their attitudes. They are so helpful. They are. Like a couple days ago one of them brought me a cabinet making book and you know, I don't know if that's a hint, but also like he, he's always, you know, they're just always great.

[1:03:47] Guest 2: Really?

Guest 3: Yeah. Which we couldn't have done it without them.

Host: And how do you think they were, they were won over. Was it the seller, the seller taking them to lunch and, and convincing them or it's something that you've done now as their new bosses and owners?

Guest 2: I think that it's a combination, but I think that Julie has built really strong relationships with them and has listened, like spent a lot of time talking to them and listening to them and you know, low hanging fruit, like direct deposit, you know, just doing some of those things right away that they had been wanting is, is helpful in, in building the team and getting everybody on board. But Julie spent a lot of time with.

Guest 3: Yeah, and we really focused and this is something we believe too. Like, like we, you know, the first couple weeks I'm just like, I want to listen. I want to, you know, you guys know, we know nothing about, we are honest. We don't know anything about cabinets. I want to listen, I want you guys to tell me what's working, what's not working. I also want us to grow together and we want to share that. Like we want to share our success with, with all of you. And you know, when we get to that point, we will figure out a way for you all to like share this because there is no way we could have done this without every single one of them buying into us and you know, working with us and doing their jobs and like they're rocking it.

Host: Well, good for you, Julie.

Guest 2: For.

Host: I mean there's really. I mean you seem to.

Guest 3: I mean it wasn't it not without, you know, issues along the way. But I think the one thing I really worked on with them is like just to be open and honest, like, tell me what I'm doing wrong. It's fine. I'm not gonna be.

[1:06:00] Host: How often do they come to you and tell you you're doing something wrong and what. What.

Guest 3: For example, Quite often.

Guest 2: Quite.

Host: What have they told you?

Guest 3: Just like the other day I was bidding a project and I. It was a bigger project with a lot of like wood details and feature walls and fancy reception desks. And I emailed like our main. My main estimator and project manager. And I'm like, can I. Because he was also bidding on the job for another contractor. And I was like, can you just check my bid to make sure it's okay? And he was like, no offense, this job is too big for you. Sorry. But. But yes, I will bid it and we can go over it on Monday and I can show you like, you know, so they. They tell me, you know, but I. That's how we learn, right? And I tell them like every mistake you make, they were a little bit hesitant to. They kind of like covered up mistakes and. And I'm like, every mistake you make is an opportunity to make things better. So let's talk about it. And so we're starting to get out of that. That shell of like hiding things. But anyways, yes, they're very honest, which is good. I have a strong self esteem, so I can. And I know I know nothing about cabinets, so.

Host: Well, I want to start wrapping this up, but I. There was an in the weeds question that I failed to get to that I think is important just the structure of the deal. So. So I don't think we heard about that reminder to people. It was the business when you were bidding to buy it was $2.1 million in revenue in 750 in SDE, which by the way, great margins. Those are 33% margins in a subcontracting construction business.

Guest 3: Yeah, that.

Host: So I. Should I be surprised? Because I am. Those seem like really good margins.

Guest 3: I was crazy surprised. I mean it. It's I think it's just. It's a really complicated business, so maybe. I don't know. Yeah, it's.

Host: But does it. Now that you've been in it for. For nine months, do you feel like those margins are true to your experience?

Guest 3: We. So the previous owner like pinched every single penny to get to that. We are doing some improvements. So we're spending more.

Host: Right.

Guest 3: I can see down the road us getting back to that. But you know, like we just spent some money on doing a shop clean out because he like kept everything. So you know, we got a dumpster. We actually had three dumpsters that we, you know, so we're spending some more. More than he spent. But I think it will even out once we, you know, get things implemented. And. Yeah, right.

[1:09:18] Host: These are, these are one time expenses. And so you think you could return to a 33 margin status quo.

Guest 3: Yeah, we'll see. I mean we also, also, if he

Host: wasn't investing in marketing, you'll. You'll want to do that on an ongoing basis.

Guest 3: Yeah.

Host: And he wasn't investing in growth and hiring, etc. Etc. So these are all, if you're growth oriented, are going to be ongoing new expenses.

Guest 3: Yep.

Host: Yeah. Okay. Well, that might just be one of those where we would. That we often hear about. If STE seems really high and. Or margins seem really high, it could be because the business is just being underinvested in very common for a retiring owner to just be under investing and. Or that the. The team is underinvested in like he's doing too much that he should have a, you know, he's doing the work of two employees. There should be another employee there. Something like that.

Guest 3: Well, and just two points on that. The what? The one thing we found out that we should have probably looked into a, you know, note to sell for the next time. The employees hadn't had a raise in forever like pre Covid. So we had to get their salaries straightened out or their wages. And then the other thing was he really, like our mentor Michael said go through the P and L and like you can eliminate, you know, probably there's so much junk in there that you can get rid of. And there was not a thing like it was, it was bare.

Guest 2: Both.

Guest 3: It was bare bones. Like. Yeah. Not, you know, nothing. So he really didn't spend much.

Host: Okay, okay, okay. So you were 750sd. What did you buy it for? What did the structure of the deal look like, please?

Guest 3: So we bought it for 2.1. Right. Or 2.

Guest 2: 2.

Guest 3: 2.

Guest 2: And then we put 10% down. We had a seller's note for 10%, and then SBA financing for the rest.

Host: Okay, Very classic, pretty straightforward. And that 10% you put down, you guys split the two of you.

Guest 2: Yep.

Host: Okay, Easy enough.

Guest 2: And then as part of that deal, we had the line of credit in there as well.

Guest 3: Yeah, that was part of. Was.

Host: And how much. How much was the 300?

Guest 3: Was it 350 to start with?

Guest 2: No, I think it was 250 to start with.

Host: Okay, what about the fact that this is both of your first business experience, like your business people for the first time? How's that going?

[1:12:01] Guest 2: Yeah, I think it's a bit of an adjustment for me because, you know, I've. I'm. I've always been working for, I don't know what taxpayers or. Or community, and. And this is, like, I have to think about this as my business that I need to, like, continue to be super motivated to meet goals. It's not just gonna, you know, not just gonna build itself. So I think that's been a bit of an adjustment for me.

Host: And is this a. Do you like this or do you not like this?

Guest 2: I do like this. I do like this.

Host: I mean, Jenna, often one of the things you'll hear guests say is that they wanted to build something for themselves, as opposed to building.

Guest 2: Right.

Host: Serving somebody else's.

Guest 2: Right.

Host: Building for somebody else, essentially.

Guest 3: Right?

Guest 2: Yep.

Guest 3: Yeah.

Host: Julie, so you. You're taking to being a business person. It feels pretty natural. So going from public health to being in business.

Guest 3: Yeah, I think it's a little bit like my campaign background, because it's. It's very similar to running a political campaign in terms of, like, having to budget and having to, you know, get things done and figuring out how to do things and networking and. But I also love the fact that I'm doing this for myself because I also have never worked for myself. That is where, you know, public health is for the public good and campaigns are for, you know, getting somebody elected. And I just, like, I love that, you know, that I'm like, this is about, like, what I'm building and growing, and I love the challenge of it, and I love that you have to be really scrappy to figure things out, or at least I do, maybe, because I. You didn't go to, you know, business school. Like, I just. You just gotta solve problems, and I love that.

Host: And just to wrap up on the. The theme of women, because I hear from women, and they want to have more. See more women where you all are sitting here as guests on the POD hear more stories from women. We've already talked about it quite a bit, but is there anything more that you want to speak to them to say? I will say that this seems like a very encouraging story, but what would you say?

Guest 2: So I would say that one thing, like, advice, if I could give advice for other women, is to just network with a lot of other female business owners and a lot of women who are working, like, maybe not in the industry, because we kind of had a hard time finding that for some of these, but just like, a lot of networking, a lot of meeting with women who may be in the same situation.

[1:15:02] Host: Okay.

Guest 3: Yeah. And I mean, I would also just say, you know, I mean, be fearless. Like, don't let perceptions or get in your way. It's been a great experience for us, and it's. It's sort of fun being in a business where we're, you know, kind of the minority because everything looks like an opportunity for us.

Host: What do you mean?

Guest 3: Well, like, so we. We just hired a young woman cabinet maker, and I have this big giant box truck that we use to deliver our cabinet, like, for big jobs. And the laminator had the license to drive the box truck, and he's out. And so I needed to get another employee to go get the license requirement and drive the truck to these big jobs. My two young guy guys said they didn't want to drive it, and I. Because for whatever reasons, and I was like, I will ask Darcy because she will jump at the chance to do something new and, you know, powerful and. And I knew it. She was like, yes, I will do it. Of course I will, like, sign me up, you know, because there's just so many new opportunities for women that it's. It's really exciting.

Host: So a lot of the stuff that happens in the business is not traditionally done by women, so women could really enjoy. Kind of probably haven't had the experiences themselves. So there's a lot of opportunity for new experiences.

Guest 3: Yeah. Yeah.

Host: Okay.

Guest 3: Better way to say it.

Host: And all of. All of that, what we were talking about earlier, where sellers either themselves thought, as two women, it wouldn't work or thought that their employees wouldn't give you the respect that you'd need to be successful bosses, all of that stuff. Now that you're on the other side of your transaction in a business, you're, you know, you're. You're just a Data point of 1. The one business that you bought. But do you have any more insight into that now? Do you think that sounds like Things are going well with your own business, but do you understand it better? Do you. Have you learned anything about all these sellers, perspectives on the fact that you were women and what on the inside, what it's actually like to be in one of these businesses? Were they. They were just wrong?

Guest 3: Yeah, they were just, you know, I don't know. I think. I think maybe not having a business background is probably the biggest red flag to people.

Host: Yeah.

Guest 2: I think the contractors that we've worked with, they have had no issues.

Guest 3: No, no. I mean, it's been surprising, actually, that the contractors are like, we just want our cabinets. We don't care. You know, we want to make sure that you know what you're doing, but we don't care what gender you are. You know, they just want to do business. So that's been refreshing and great.

[1:18:18] Host: Okay, well, let's end it there. Julie and Jana Hottinger. How can people reach out to you?

Guest 3: Email is the best.

Host: We'll put that. I'll get those from you. Put those in the. In the show notes.

Guest 3: Okay.

Host: And what is the name of the business?

Guest 3: Signature Woodworking.

Host: Okay.

Guest 2: And we don't have a website.

Guest 3: We have.

Host: Wow, that guy.

Guest 3: We're working on that.

Host: That guy really wasn't spending money on marketing.

Guest 2: Nope.

Guest 3: Matter.

Host: Okay. Okay. Julie and Jana, thank you very much for sharing. Really fascinating story. Can. Congratulations on the early success.

Guest 3: Thank you. Thank you.