[00:00:00 - 00:03:35]

Will Smith: Today's guests set out to acquire cleaning companies. Their search was proprietary. Looking in the greater Seattle area, turns out most cleaning companies are very small sub million dollars of revenue. But Kyle Boyden and Jake Forfaro were open to such micro acquisitions and stacked the acquired revenue in their nascent platform up to 2.5 million. At that point, they decided to go bigger.

Their next two acquisitions got them to the $5 million where they are today. And only for the most recent acquisition, their seventh, did they finally use an SBA loan. The previous six acquisitions were structured with generous seller financing and low down payments, a key benefit to their approach. Kyle and Jake have only put a combined $100,000 of equity into the project. Even after servicing seller notes.

Their take home cash today stands at $650,000 and the duo owns 90%. Pretty impressive. Now this model is not for the faint of heart. Buying such small businesses flouts the conventional wisdom on target size. It was very difficult operationally.

They plowed what little money the fledgling rollup generated back in, so they had to make money elsewhere. They themselves say they wouldn't recommend it, but for them in their journeys, it enabled a couple of hungry, scrappy, action oriented entrepreneurs to move quickly and learn. They acquired the revenue very inexpensively. Risk was low, no personal guarantees. On those first six acquisitions, they built operating muscle, integration muscle, the confidence and competence to run and grow.

Their platform today is leagues beyond where it would have been if they just acquired a single $5 million business at the outset. See what you think of how Kyle Boyden and Jake Forfaro have built Rainier Cleaning Solutions. ENJ 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. Kyle Boyden, Jake Forfaro, welcome to Acquiring Minds. Pleasure to be here. Thanks for having us. Kyle, Jake.

You two are recovering real estate investors now building a roll up in commercial cleaning. I was introduced to you by my own recent guest, Kin Sio. Kin saw you on stage at an event for real estate investors, which he was at the time, and it was something of a debate. I believe you guys were up there advocating for buying businesses instead of real estate, that that's the better path. Whatever it was, Kin left that hotel conference room a convert.

He walks the path. Bought a business, came on Acquiring Minds to tell us his story. So first question for you guys is, what did you say up there that was so convincing to Kin? Yeah, Kin is now a year recovered as well. So congratulations Kin.

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Kyle Boyden: We, we really harped in on the, the upside of the investment in a real estate. If everything goes absolutely amazing, you might double your money on, on business. The risk Reward could be 20 fold, it could be a hundredfold. Right. And, and so the big part of the debate was greatest return on every dollar.

And I think what really resonated with Kin was a lot of the real estate strategies that he had learned. The seller financing, kind of any of the creative financing never really turned out to be all that true. And when it came to businesses, this is almost just standard how you, how you acquire a company and how did. Buying businesses get on the, on your radar. I think.

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Jake Furfaro: But I honestly, I think good old Cody Sanchez. But you know, we, that event there with Kin, it's all about controlling your future and having control of an asset. And when you have real estate, you have very little control.

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Will Smith: And Great. So let's get both of your backgrounds in brief. Kyle, go for first for me. Give us some context onto the path you're now on. Yep.

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Kyle Boyden: So I was born to two entrepreneur parents. It's kind of always in my blood. They begged me to go to school rather than start a business as a cocky 18 year old. So I went to school for, to college for entrepreneurship as well. Came out, had a couple internships with business owners, kind of dip my toes.

And I ended up landing in a what I would consider a safe sales job. Was making pretty easy good money, golfing a couple times a week, kind of cushy sales jobs. And eventually I just got kind of tired of looking at myself in the mirror. I just kind of wanted more. I wanted to follow my, my passion.

And real estate kind of initially tickled that fancy. I could make good money during the day, I could buy real estate, I could start building towards my future. After stacking a half a dozen or so single family houses, I realized that I was only about 300 more home purchases away from having my financial goals. And it, it felt entirely too slow all of a sudden. And I kind of longed for something more.

And I saw that Jake, not to take his story at all, but was out doing bigger things than I was in real estate, so connected with him, you know, the market changed a little bit and none of our underwriting kind of penciled out for our criteria for real estate anymore. And someone sent him an inbox saying, hey, do you want to buy my business? And Jake and I watched a YouTube video, read a book, watched a podcast, bought a business. I mean that was about as much thought as we put into this entire thing. But we're just, we were longing for more.

And we'll share the story of that. And it wasn't the greatest idea probably we've ever had, but at least it was that leap of action that got us in the game. And had we not done that, we probably wouldn't be here talking to you today. Yeah, for sure. And you guys are in the Seattle market or.

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Will Smith: No, Washington. Greater. Greater Seattle market. Correct. Greater Seattle.

Great. Jake, please. Yeah, so my background, my first career, I was a critical care nurse in the ICU here in Washington state. I was tired of being the best at what I did and being capped as far as pay goes, and I wanted to look for something else. So I started in real estate, started buying real estate, multifamily mobile home parks.

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Jake Furfaro: And when interest rates took a turn, it really made deals hard to pencil out. And that's kind of how we got set on our business buying venture. So the short of it and how. Much of a real estate portfolio had. You built up at that point?.155 doors over 13 properties.

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Will Smith: Oh wow, okay, so you guys were. So it was when interest rates went up that, that you stopped with your real estate investing. And so that was what now? 2022. Okay, great.

And so what was this? Who slid into your DMS there, Jake, about this buy. Buy my business, which is, by the way, an interesting approach to, to selling a business. It was this guy that was, you know, asking to have coffee for a while and I just, you know, I just didn't have time. And then he sent me a dm is like, hey, I'm in, I'm in a tough spot and I'm looking to just get rid of my business, property management business.

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Jake Furfaro: And we met and I think within a couple of weeks we had documents signed and we dove in a property management headfirst. So we're going to, I know this story. We're not going to spend too much time on it because it's, it's just one step toward where you now are, which is where we want to spend most, most of our time. But give us the, the quick three minute version of this first adventure because it's kind of crazy. The fast forward version of it is we went out to dinner.

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Kyle Boyden: The guy told us about his property management company and it was a small company, he had 115 total units and he was bringing in like 15 or 18k a month of total revenue of all of his management fees. And he had, I think two secretaries, a brand new truck A building office, two or three in house maintenance. His expenses exceeded his management fees by like 5 or 6k a month. So he was essentially just bleeding out day by day. And we asked him like, so what do you want for the business?

And he said, and he said 50k. We both just kind of looked at each other and were like, we'll give you. You remember what the number was? I don't. 5K or 8k was not, not a large number.

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Jake Furfaro: Yeah, it was, it was pretty, it was, I felt bad saying it, but it was just of a Hail Mary. And we came to an agreement, we moved forward. We started to find some, some things that just were not adding up. Maybe some fraudulent stuff going on. And so we, you know, we, and I, I just, the, you know, with property management there's tenants, of course, but even more than that, more of a headache is the owners, to be completely honest.

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Will Smith: Sure. Well, they're the client. Right. Exactly right. And can be definitely unreasonable as well.

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Kyle Boyden: And so we were, we were annoyed and frustrated with the purchase and we're like, dude, what the heck? And he was like, you guys didn't even ask these questions or do any due diligence. So at this point we're, and I think on the transition over, we lost 30 doors or something. We were down to like 80 doors by the time this thing actually closed and we kind of needed to pull the, pull the plug and get out of here. And so we actually reached out to a really large local property management company and said, hey, we got 80 units.

Want to bring over with us. We'll help you with sales, but we want you to do all of the back end everything. So we got rid of all of the employees, the lease, we had zero expenses. And on that first month when he was, I think he was losing 8k a month or something on average. We brought in 6k.

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Jake Furfaro: Yeah. Of profit the very first month and rode the horse for about a year or so. And eventually, like this is just not where we want to be. And we sold that book of business to the property management company. And I wouldn't say we made out of like bandits, but we got out of a pretty sticky situation with our head still on our shoulders.

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Kyle Boyden: So that was good. So you buy this business for less than 10k. That said, it is a money losing business. So hard to, hard to know who got the, the better deal there, but, but still a nominal amount of money. You get in there and you find it's even, even worse than the numbers suggest, but you turn it around quickly and you're able to go from, you know, 8,000amonth in the red to six in the black, you said.

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Will Smith: And in just the first month or two. Thirty days, basically. Yeah, yeah, first few days. And just real quick, I assume that was letting people go is how you did that. Yeah, we just kind of at every cost, we wiped it clean.

So you wiped it clean and. And then proceeded to operate it for about a year, decided you didn't like the property management business and basically sold. Sold it as a book of business as opposed to a proper business, to a larger property management business. Property manager, locally in. Got out and actually at all given how loose this initial transaction was, kind of a win.

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Kyle Boyden: A bit of a miracle honestly, given, given the. The amount of research we had put into this. But the lessons we learned doing this is, is what led us up to, to the current strategy. We're and. And just a couple more questions before we leave this chapter.

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Will Smith: Why did you guys do so little diligence when you first bought this business? Because it was like, you know, even if the worst, I mean, all we have in this is ten grand sort of thing or less than ten grand. We, we were real estate investors and when I tell you we watched a podcast, that might be an exaggeration, we kind of just went and bought a business. It was, it was negligent. Looking back on it now, however, I wouldn't change it because of the lessons I learned.

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Jake Furfaro: And I feel like now the level of due diligence I'm able to do and I do do on a regular basis, it's from this. I call that just is tuition, you know. Yeah, yeah, yeah, exactly. And then why was it that you decided it wasn't for you? The, the business of property management?

[00:12:49 - 00:13:03]

Will Smith: Maybe? Yeah, for one, it was 24 7. I was either waking up every night with someone calling with something wrong or having a nightmare that someone was calling that something was wrong. So it was. And Jake said that the owners are a bigger pain in the butt than the tenants.

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Kyle Boyden: And the tenants are no peach to work with either. Margins are thin. There's problems 24 7. It's not higher margin work. So it was, you know, and we looked at our, what our biggest expense was every month.

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Jake Furfaro: And you know, of course it's subcontractors. And we're sending, you know, thousands and thousands and thousands of dollars to cleaning companies, whether it was interior cleaning for move outs, exterior to. For the. For the building. And that's kind of what sparked how we got to where we're at today.

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Will Smith: So you were paying these other vendors and you were like they, you were making the classic mistake of they've got a better business business than I do. Although. Exactly. Actually I think today you probably would, would still believe that you are you in a better place than you were property management. But just one thing about property management that is to love about it of course is that nice recurring revenue.

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Jake Furfaro: Sure. But I'm, I'm hearing you say that it's not so nice that it outweighs all the, all the unmentionable things. Correct. All the other stuff. Okay.

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Kyle Boyden: I think the recurring revenue was the one part we enjoyed about it. But in doing further due diligence we saw there was some other industries that had recurring revenue as well. That was really attractive. Great. Well Kyle, from our pre call I got the in depth story and that you, you guys did lots of twists and turns to get where you are now.

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Will Smith: And we're so, we're not going to take the audience through all of them but you did go into home cleaning. In fact, I think you still have kind of a side business in home cleaning. Maybe give us, let's, let's spend five minutes on just that industry. What kind of the story and super brief and then what can we learn from you about that and whether or not people should look at that as a business? Very few searchers end up with home cleaning businesses, but some do.

So let's, let's hear. Yeah, I think cleaning is a good industry. The home cleaning might be what Jake thinks about the property management company. It's kind of low margins but there's still some attractive. There's the recurring revenue when you get the repeat clients.

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Kyle Boyden: There's low customer concentration. It's pretty easy to remove yourself as an owner. Pretty darn scalable. Of course there's a lot of competition, but there's not a lot of great competition. I think we found that our average competitor was a phenomenal cleaner that got so busy that out of demand she was forced to hire help.

And then fast forward three or four years, she has five, six employees. But it's at no point was she ever a business owner. She was just a really good cleaner that now happens to run a business. So by us bringing a little bit of digital marketing and systems and processes and automations and just using a CRM software and a scheduling software, we've kind of differentiated ourselves from 90% of the market already. So what's not to like about home cleaning?

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Jake Furfaro: The level of detail when you go into somebody's house, when you're Talking about interior cleaning of, of, you know, kitchens, bathrooms, floors, et cetera. The, the complaints definitely pile up. The, the cleaners. The avatar of a cleaner is a challenging avatar to hire and retain. And clients only want their cleaner.

Right. So you're, you're kind of handcuffed by the client and the staff. So I think they want the client, the homeowner wants the same specific person from your agency coming every time or they'll clean. So if the cleaner calls out sick, it's just revenue's gone. Right.

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Will Smith: And, and that's because we as homeowners, of course we can all kind of relate to this. We're very particular about how, you know, you clean my vase and you know, the toilet downstairs, make sure you get, you know, behind it or whatever sort of thing. And so once, once we as homeowners feel like we've adequately taught the, the home cleaner, then we want only that person in there. In some ways the clients invest, they feel like they've invested in the home cleaner. Yeah, nailed it.

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Jake Furfaro: Yeah, yeah, yeah. And in addition to that, anybody with a mop in a bucket could offer to clean your house. So the pricing is, it's hard to maintain strong margins in a house cleaning business. And so give me, give me the two minute version of the story here. What did you guys buy?

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Will Smith: You bought a small home cleaning business and then a coup others you bolted on. Tell us, tell the audience please. Yeah, we bought a house clean company, had about seven or eight cleaners doing around 300,000 of revenue per year. Great, great staff, great previous owner. And then we decided to branch off and we bought a similar size window cleaning company in the sim in the same geographic area.

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Jake Furfaro: So that's kind of how we were, you know, really trying to maximize the value of that client. Right. Because now we can cross sell other services etc and it's still up and running today are how many cleaners do we have now? We have about 17 house cleaners. 17.

So we're maintaining and growing and the goal is not to grow the house cleaning business but when we can cross sell windows, gutters, roofs, pressure washing floors, that that client becomes a lot more valuable than just a house cleaning client. Right. Because if, if we naturally grow that company organically, then our other companies are also going to grow because of being able to cross sell. You have this house cleaning business and then you have the pressure washing, window cleaning, etc businesses as well that you actively sell into your home cleaning clients. Your house cleaning clients.

Correct. But it's all, this is all kind of a Side thing. This is not the main project today.

I, I feel like there's a, the commercial side of our business, which Kyle runs, and there's a residential side of our business that I, that I run. And so I think the home service business is, is probably equally as far as revenue goes. But you know, when you're talking about a commercial side where it's janitorial work, in the home service side, you have your cleaning and then we have the floor company and the window company, which both service the commercial and the residential cleaning company. Okay. Does that make sense?

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Will Smith: Sure, sure. Great. And so before we get into more about kind of what you've built today, give us a picture of where your income was coming during all of this. Are you living off of your real estate? Because when I hear a $300,000 revenue business for two partners, obviously there's not much profit to be supporting you guys.

So, so what, what did that look like? Is this, did you have day jobs? Paint a picture? Yeah, up until this year, I, I continued working on the weekends in the hospital as a critical care nurse. I was doing that, funding my life.

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Jake Furfaro: I have a wife, so dual income and just reinvesting everything into the business to continue to grow. Yeah, I think we both lived below our means for a long period of time. A little bit of real estate income. We held our jobs through, through part. I didn't hold mine quite as long as Jake held his, but we just lived a simple life knowing that the reward would, would pay off down, down the road and we hadn't taken any.

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Kyle Boyden: I mean, you're spot on. We didn't have enough money to take anything out of it. Everything needed to be reinvested into marketing and other acquisition opportunities. Well, this is good because, because it sounds, you guys are really relaxed and it sounds like you were just kind of loosely your risk on. So you are, you are pretty.

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Will Smith: You take risks and you move quickly, but kind of cavalier about this whole thing. But in fact, you were working your tails off. You were both retaining jobs and for income of which you didn't have much because it wasn't, you know. Well, I don't know about you, Kyle, maybe it was a full time job, but Jake, you were just working on the weekends. You were plowing everything that was coming out of these businesses back into them.

So this was really, this was really, you know, difficult venture. You. This, this was not buying a business that you then immediately could live off of, as is the case with so many of my guests. Correct. Great.

And just for the kind of People know where we're going. Where are you today in terms of revenue and are you living off of it and what year are you working, etc. Yeah, we are at pretty much just shy of 5 million revenue in just shy of 1 million EBITDA. Great. So.

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Jake Furfaro: And we started to pay ourselves and. Just started paying ourselves. And are you paying yourselves the bare minimum? Are you paying yourselves a breathable salary? The bare minimum?

Yeah, bare minimum. Well, I mean we, we certainly could pay ourselves more, but we're invested into this long term vision of continuing to grow and until I have another child, I don't really need to pay myself anymore. Kyle, you know, he doesn't have kids, so it's delayed gratification at its finest.

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Will Smith: Yeah, delayed gratification at its finest. I love it. Let's return to what you built. Where did things settle into a very clear strategy? Because you were dabbling, you were following your noses, you were figuring out what industries you didn't like what you did.

But eventually it settled out into a kind of crystallized strategy that you now have today. Take us there. How did that happen and what is the strategy? Of course. Yeah, I think, I think with the calmness there was also a certain level of confidence and we were, we were directional correctness is what we call it.

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Kyle Boyden: We were going forward in, in at least kind of the right direction in learning. And I would almost compare it to, to like dating. Like maybe there's a couple intangibles and I kind of like this and this attribute and feature and I don't really like this, but if they do this, as long as X, Y and Z are true, maybe it's okay. And that was kind of how we were looking at these business purchases. Like, man, there's not a lot of employees and it's kind of small, but it's 38 years worth of past customers.

There's 10,000 customers I can market to. They're all in the same geographic area I want. So as long as I can buy this at a, a 1x multiple and, and on seller financing like this could be a deal. And we were talking to at this point, hundreds of people that kind of fit our avatar of they're in a certain age group, they're thinking about retirement, maybe they thought their kids were going to buy it. It's a lot of the kind of blocking and tackling of buying businesses.

But we were finding the people that fit the avatar. Three of the owners actually work for us today. They, they sold and then joined, joined forces with us. So we Built incredible relationship with them. We just did.

We've acquired seven companies now and we just closed last week on our first SBA deal, the other six. And we're going to, and we're going to get into that one because there's, there's a lot you learn there. But Kyle, when you, you're, you're basically telling us about your search, what, first of all, what sorts of businesses were you searching for and how was it that you were talking to hundreds of owners in your local area? I was hiring guys on Fiverr to pull me lists of every single cleaning company in, in Washington state. So geographically we're just sticking to our side of the mountains.

And we were calling vent cleaning, carpets, janitorial, house flooring, anything that cleaned, we were just calling them and having conversations, posting on Facebook groups, telling brokers. We pretty much drew a line in the sand and Jake was going to run the portfolio and Kyle full time was going to find business opportunities. And we, I think it's kind of the power of, we say one plus one equals three. The two of us together. Together is kind of, kind of what our cheat code is.

So by being able to go full time on that, I don't know if that's, it's almost more small scale maybe than a lot of searcher strategy might be, but the amount of just reps that we got on that led to some really good opportunities. And for a while we were just buying things that made sense. And it was again, the directional correctors. We were moving forward and eventually it kind of struck us about last year. It's like the same as the real estate.

We have to buy 300 of these companies to, to get to where we want to go. And that's when the parameters got a little bit tighter. We're gonna go larger. Great, great. Let me stop you there.

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Will Smith: So, so Kyle, when you, so you were reaching out to just any sort of cleaning company, so you were cleaning agnostic, any sort of cleaning residential, commercial floor, carpet, exterior, interior, this, that and fit and, and all in the spirit of like that we're going to kind of figure out which ones we like the best or, or we're just going to, you know, have this conglomeration of all these different businesses and they're basically all kind of sort of similar in the way that they operate. So we can, they, it can be a grab bag of these little businesses and, and we'll just operate them and it'll be fine. They don't need to have kind of a logical coherence to Them what, what were you thinking there? What was the strategy? Or was there one?

Was it just. Were you dating? If this is the dating stage, I. Would say logical coherence enough of we weren't going to try to start selling security systems or yeah sprinkler heads or whatever. But like if, if it fit under cleaning and it cash flowed, can we buy it at a really, really good multiple?

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Kyle Boyden: We're still investors at the end of the day. Does this make sense? Can we sell these same services to our existing clients? Is there a large database? Like what kind of additional juice or meat does this deal have on top of it?

But yes, we were calling the. The net was pretty darn wide and, and for the first 18 months or so that was just the strategy. Touch as many people as we can. I think the Northern Star was always commercial janitorial business. Right.

[00:27:19 - 00:27:39]

Jake Furfaro: And with that being the Northern Star, a flooring company is a great bolt onto that. A window cleaning, pressure washing cutters, etc is a good bolt onto that. If I'm controlling all janitorial spend for that client, I'm going to choose who I'm going to subdot to. Why would I not sub it out to myself? Right?

[00:27:40 - 00:28:18]

Will Smith: Yeah. A nice, a nice trick you learned from property management, right? Be the, be the point of contact that is the one who then selects subs.

So you did have your eye on commercial cleaning by pretty early in this process you, you knew that that was. Okay pretty early on. As you might imagine, most cleaning companies that we talked to were a little one man, two man operations. It was pretty hard to have a good conversation with a large cleaning company that had enough meat that was super exciting. So it definitely took the, the hundreds and hundreds of conversations to, to find these companies that were even north of a million of revenue.

[00:28:18 - 00:29:32]

Kyle Boyden: There's just kind of few and far between. And so say, say Kyle Moore about what you just said, where you started having the feeling that you'd had in real estate where it was going to take you 300 acquisitions to get anywhere. These companies were, were tiny that you were striking good deals, but they were just like really small amounts of revenue. Give it, give us, give us more. 300 to 500k of revenue.

Missing some pretty simple scheduling softwares and kind of easy steps. So I think each one of these little acquisitions might have taken one to two years off our life expectancy and after doing a, a handful of you get some sort of deal fatigue. And it was like, look, at this point we have the confidence, we've done it, we're actually really good at transitioning. We're really good at negotiating deals. Like it's time to just like pull the pants up and go, go a little bit bigger here we, we have the fundamentals down.

We've got good team in place. We've made all the mistakes we need to make in, in hiring and, and changing prices, customer communications, how to handle employees, so on and so forth. Like it was time to be more picky with the next deals. And if I could give it a little bit of context, you know, it took us five acquisitions to get to two, two and a half million of revenue and it took us seven acquisitions to get to five million of revenue. So.

[00:29:32 - 00:29:56]

Will Smith: Right. The last two were much larger still below I think the average searcher. What they look for as far as you know, I know it's around a million dollars EBITDA give or take. And but what we've learned to get to this point, I don't think we would have been ready to jump into that million dollar EBITDA purchase, really. Correct.

[00:29:56 - 00:31:07]

Jake Furfaro: Yeah. Because you guys seem very resourceful, you see, and you seem like you have high pain tolerance. You were, you were doing really, really hard work, learning as you went, making mistakes. All things that you are characteristics that mean that you could probably take on a bigger business and you know, figure it out. No, probably could have figured it out, but I don't know if I would really would have wanted to.

I don't know if you know that, that, that fetal position moment would have hit a little bit harder. But you know, the biggest thing with transitions for me is is that the people aspect of it. Right. The employees been through, I think we 40, 50 employees now. So it's, it's, you know, getting to know everybody, showing them that you care like that, that there's an art there that I didn't necessarily have a really good grasp on and I, I think I needed some of these smaller ones to get to the point where now I can confidently go in and say, hey, this is the vision.

This is, this is the direction we're going to. We need you to row the boat with us. So that's great stuff. Jake. Say, say more about, say more about that.

[00:31:08 - 00:31:57]

Will Smith: What do you think you learned? Help somebody who hasn't had all this hard one experience. You can accelerate them to, to know just by listening to you what you have learned the hard way. Yeah, I think a common denom, a common factor in the businesses that we purchased are a lot of them lack elite leadership and vision where the company was going and I think stepping in there and being able to be a presence first one in, last one out and, and lay out the vision for people and get people to buy in and obviously treat people with kindness and respect and love and hold true to your, your values and morals as a person and not just run the business by a spreadsheet. I think there's, especially in small, small business, it's such an important that, that people found your people are everything, right?

[00:31:58 - 00:32:23]

Jake Furfaro: People are replaceable. Sure. But at the same time, if you want, if, if we're going to go where we want to go, we need a strong team behind us that believes in us. And it takes time to build that, but it also takes time to learn how to lead. And I think the last few years, you know, if you look at the first acquisition to the latest, that the buy in is, is undeniable.

[00:32:23 - 00:32:41]

Will Smith: And so Jake, when you get into an acquisition today, what do you, what do you say? Not word for word, but what, what is the kind of, what's the kind of vibe? What's the gist? Yeah, I, I think the most important thing is to come in with, with humility. If I am not an expert in that industry.

[00:32:42 - 00:33:32]

Jake Furfaro: For example, this, the latest acquisition of the carpet and floor cleaning. I've never ran a truck mount machine before and, but the thing is that's not what I'm coming in to do. But I, I tell them straight, straight up, you know, you know more than me regarding the technical aspects of this, of this industry and that's okay. Nobody's going to learn it as fast as you see me learn it. However, I'm going to give you the tools and the resources you need to do your job effectively.

And, and this is where we're going. We, we, we have a meeting and we say, hey, here's a vision. We need everybody to buy in. If you're not going to buy in, then unfortunately, sometimes you have to cut ties. Right?

And the, the buy in that we have received and the amount of support we have from our team is, is incredible.

[00:33:35 - 00:34:20]

Kyle Boyden: And it definitely all comes from how bought in Jake is. He, he's not exaggerating. It's first in, last out. Every single day. There's a Restoration call at 10pm Jake's on the track.

Jake's a hundred percent bought into it. When on the first acquisitions we, we said we were and I think deep down in our heartware, but it wasn't really visible. So the, the, the buy in that we got initially isn't the same as it is today. I'VE heard it seems like brokers most, I've heard so many people say, oh, just buy a good business and don't screw it up. Like that's your strategy for buying business?

Yeah, never really, it's like, okay, cool, as long as it doesn't get screwed up. That's a good strategy. But what happens if something goes bad in, in with our hands on approach, if things go really, really bad, like we could actually save this thing. Yeah. Buy a business and put an operator in place.

[00:34:20 - 00:35:02]

Jake Furfaro: Yeah. Okay, let's see how, let's see how long and great your business goes. Let's see the culture of your company when you're putting everything into that person's hands. And, and the, the vision for me it's, it's not to sit on a beach and drink a martini. I, I, I don't know if I ever will retire.

I feel like God put men on earth to, to work and that's what we're called to do. And you know, I want my fingertips in it. Of course I will let things go and delegate and I already, you know, have a good team, but I think it's important you lead from the front and, and that's what it's about. It's great guys and, and thank you for, for that on the leadership. We're going to probably return to it.

[00:35:02 - 00:35:39]

Will Smith: Let's get into a little bit of deal dynamics now. So these really small acquisitions that you were doing, you said, what did you say? 3 to 500 in revenue, you said, you said it took five acquisitions to get to two and a half million. So call it half a million. Average was revenue each.

What did the deal structure look like there, Kyle? Because as I recall, you were, you were able to get a pretty, pretty good deal. Terms as a rule, they were all seller financing. Very small, cash out of pocket. Owner carrying the note from anywhere from three years to all the way up to 10 years.

[00:35:39 - 00:36:01]

Kyle Boyden: Ten years on some of them. We have a number of them at 0% interest. Give me one deal in particular and let's double click on it. Oh, two really fast ones. One is the first one we pitched, no interest and she responded and said, I'm going to go ask my accountant.

And we're like, oh, this is not going to be good. And she came back and she's like, my accountant said everything looks good. And we just could not believe that the accountant signed off on a 0% interest loan.

[00:36:03 - 00:36:17]

Will Smith: For how long and how much of the deal was it? That was four or five years. Five, Five years. So Our monthly payments, I think when we bought it, the company was cash flowing 7 or 8amonth. And our monthly debt service on it was 2200 at no interest.

[00:36:18 - 00:37:04]

Kyle Boyden: So as an investor, it made sense. And you did you have to put cash into the deal? How much of the. Or was it 100? It wasn't 100 seller finance that one.

We dropped 30,000 into the deal. 30,000. Okay. Okay. I think so we total of our own money at $5 million of revenue now, which is 4 million of that is acquisition.

About just shy of a million is natural growth. We're a hundred thousand dollars of our own cash. Oh, so that would be a good number to get. I. That would be an attractive part of, of stacking and building.

And if we're looking in decades instead of years or days, we saved a heck of a lot of money doing it this way and gave some invaluable experiences. Yeah. Yeah, absolutely. You know, I just wonder. Yes.

[00:37:05 - 00:38:19]

Will Smith: As you said, Jake, the, the conventional wisdom on this podcast and in this world is, you know, bigger is better. Although I've entertained the debate a lot here about buying smaller. And plenty, plenty of guests have bought small and we always talk about it. I mean, it's a really important conversation. And I don't think there is a super right answer.

You guys, your approach is, you know, buy small plus. Plus. I mean, you got, you guys really leaned into that. You bought small and then did it again and then did it again and then did it again. But it's interesting because this is an approach and it was painful and you weren't really making money, but as you said, it was kind of tuition, and now you feel really confident it is.

Is my, Is my impression fair? Fair. Very fair. Well, let me, let me flip, let me flip this. What would.

Would you have done it differently? Even though you've. It was. It's been painful, but you seem pretty psyched about where you're. You're at now.

So would you have done it differently? Reflecting back, do you allow us to. Have the, the experience in our head, though, the wisdom that we've learned from it? No, no, no. Then I wouldn't do it differently.

[00:38:19 - 00:39:48]

Kyle Boyden: I, I agree. I think, I think hard is okay, and the fact that there was two of us in it together. Entrepreneurship's extremely lonely, and there was a lot of dark nights and a lot of what in the world have we done? And just the promise to each other was, I'm not going to quit today. And, and we do that enough days in a row and stack up Enough, enough of these which seem very small wins at times but eventually you get the momentum just for, for the same exact reasons we're buying, buying businesses rather than starting at zero.

It's, it's just stacking momentum. And, and what were some of those dark moments, Kyle? Just like 10pm crises or something or anything. And then looking at the bank account and there's like $4 in there and transferring from one account to another and then just figuring out how to get by. And, and we're, we're, we're so smart.

Why aren't we making money and we're working so many hours. Like why did I walk away from a six figure job where I was golfing three times a week for this And a lot of self doubt and in the winds when you're kind of in, in the moment, don't really feel that great. Like of course that should happen. Like obviously that would happen with this much effort. I, I can't believe I'm not this much further ahead.

And so really remembering we just had our very first celebration dinner three days ago. So we had to hit $5 million revenue to actually celebrate anything. And we still felt like we haven't scraped, scratched the surface. Just getting started. Just getting started.

[00:39:48 - 00:40:14]

Will Smith: Yeah. That's so cool guys. That really, that really is inspirational. But I have to say then, so when you were up there on that stage bending kins ear, you were not in the clear just yet. Well, I would say when we're talking to other people, I think what the hindsight here is, I don't, I wouldn't encourage anybody to do what we did, but that's a different question than what I do.

[00:40:14 - 00:40:50]

Jake Furfaro: What we did. Right. Totally. I think people should go bigger. I think you should, you know, try to shoot for above 500,000 EBA to, to, to leave a job, especially a well paying job.

And I, I feel we can speak on that because we went the opposite direction. We know what the opposite direction was like. And so then Jake, is there a personality profile, somebody who might be listening to this for whom you would prescribe what you guys did? This, this really scrappy tiny acquisitions, stacking the acquisitions. Pain, pain, pain, pain.

[00:40:50 - 00:41:14]

Will Smith: But learning, learning, learning, learning. Yeah. I think you would have to be someone with a threshold for, for pain. But I, I also think you need to be very, very humble and, and not have any sort of ego because you're not going to have great conversations with seller if you're not humble. You're not going to have good transition periods with employees if you're not humble.

[00:41:14 - 00:41:43]

Jake Furfaro: It all comes down to humility. And I think if you don't have a lot of money, capital or you don't have access to capital, sometimes it's the place people have to start. And I think that just throwing off the wayside because it's the harder way doesn't necessarily mean it's impossible. But if you have capital or access to capital, save yourself some gray hairs and go bigger. Yeah.

[00:41:43 - 00:42:30]

Kyle Boyden: Yeah. I think anyone that hates their day job and isn't making a life changing amount of money, this should be an interesting proposition too. If you're not liking your day job, you're, you're kind of already stuck on the wrong path. If you already know you're on the wrong path, is that not the greatest risk of all just continuing down, down the wrong path? Why not take a calculated risk?

Do, do your due diligence, do the opposite of what we did initially and, and take a bet on yourself. And, and if you take these small calculated bets like we did initially, if that proper, if that company didn't work out, we could have cash flowed it and got the heck out of there and, and been back on track. I think I've said this before, but the, the worst case scenario is we go back to our W2 job and we retire at 65, which is most people's A plan. And that was our B plan. Totally.

[00:42:30 - 00:43:00]

Will Smith: Yeah. Oh, I love that. Very well put. But, but to the point about these small acquisitions, which we haven't yet addressed it, but it's kind of the, the glaring appeal of them is that the risk is, is very small. Your capital outlay is not a, is not a lot.

You don't have a loan. Well, you have seller financing, so you have that loan. But this is probably not personally guaranteed debt and it's not a lot of debt because these are so small acquisitions, right? Correct. Correct.

[00:43:00 - 00:43:13]

Kyle Boyden: And when you're buying it at 2x multiple, you got a lot of room for something, for things to go really bad and you can still service that debt. I mean, this is 2x multiple. You, we didn't ask it, we didn't hear the multiples. What were the, how are you getting. These valuations lower than that in many cases?

[00:43:13 - 00:44:22]

Jake Furfaro: Also a lot of times you'd have to teach the seller about what, what the company's worth. You know, there's, there's times where we'll have a reality check where they'll come and ask four or five times what the profit is and the market doesn't agree and you got to show them proof that the market doesn't agree. And, and I think, you know, just a side note really quick here, one of the great parts about going small for us is it's, it's a lot of the previous owners are, are helping us so much and they're pushing us forward as far as introduction, selling, helping with the team, etc, so there, there are some, some pros there as well. And you think that they're more friendly toward you because the business was so small or you think that's just a happy accident of the deals you bought? I think a lot of them see, see themselves in us back when they first started, started their business and a lot of these businesses were booming until Covid or, or something happened at some point and they just kind of let it fall apart or they lost energy, they lost momentum, they took enough bullet wounds where they just didn't quite have the energy to grow it again.

[00:44:23 - 00:44:53]

Kyle Boyden: So when we come in super excited about the business and wanting to grow it and I'm going to give you a path where you're going to make money for the next 10 years, like they're kind of bought into the success of this business. Anyone that's owned a business for 30 years, you're, you're purchasing a, almost one of their limbs, like a piece of their identity at this point. So they are very, very invested in the future success of that. And so. Okay, so, so the businesses that you're buying there, unlike the property management business, which, which was just a mess, these are very small.

[00:44:53 - 00:45:29]

Will Smith: But, but they're, these cleaning businesses that you were buying were small but old with staying power with, with long term clients in some cases. I'm sure that was a blend, but. Yeah, 30 years plus at least four of them. And the owners were willing to sell because they were at retirement age. You said that was one of your criteria.

And because there aren't other buyers for tiny businesses like this. Correct. That's a huge advantage of this. Most, most people aren't going to buy this. You listen to anybody on YouTube or a broker or anything there to say you don't, you don't buy businesses like this.

[00:45:29 - 00:46:19]

Kyle Boyden: But if we already have the platform in place, we can just transition basically just clients over even at that point. And we structure that deal in a way that we're not taking a whole lot of risk, but if we just pay you a percentage of sales for a short period of time, we kind of found a no risk situation there. Yeah. And these are, these owners, do you suspect would have just eventually Shut the businesses down. Is that what they thought they would kind of what they expected in their future if they would just close it down one day.

A lot of them didn't know you could sell businesses. So we're. We're not taking advantage of people that don't know by any means at all. It's never once felt that way. It's.

It's giving them an out that they didn't even know was there. Yeah. It's found money from their perspective. Yeah. At two and a half million after five acquisitions what is the business or platform that you've built look like at that point?

[00:46:21 - 00:47:55]

Jake Furfaro: Yeah. So we have at that point in time it was a home service business where we offered house cleaning and window and gutter cleaning as well as pressure washing. A team of about 20 in the field and some help with some virtual assistants that are a big part of our admin team. Keep costs down and they're. They're a great part of our team.

Fantastic. And more recently we've dove into where our Northern Star has been all along is the commercial side. And that is kind of the. The four, four or five million or I'm sorry, two and a half million. On to five million is.

Is more commercial. So at two and a half million you say to yourselves I think we're ready for bigger businesses now. And what did those then next to acquisition six and seven that together represent two and a half million more of revenue. What did those two businesses look like? Funny enough.

The. The janitorial company was the. The seller of. It was a previous seller of the house cleaning business. She.

She separated her business and sold the house cleaning side. She knew how we operated. We had a great relationship with her. They were moving out of state and we made them an offer for the commercial side of the business and they accepted it. And that's Kyle's baby now at the.

[00:47:55 - 00:49:28]

Kyle Boyden: Two and a half will. We were getting random from our. Our efforts out there. Just random requests for can you do flooring? Seem like we're getting one of those a week or something.

Didn't it? And we just kept saying no or passing it off to a referral partner. And we were starting to get some commercial. I think we had almost 20 commercial accounts just by being alive basically. And so it really felt like we can make a concerted effort towards this.

We can capture all of the revenue and with a concerted effort we can grow this as well because we're already naturally getting some of that business. So on. On this particular search we were only going significantly Bigger we had, we had a much tighter buy box around this next surge. Bigger and more committed to commercial janitorial business. Yeah, yeah, yeah.

Janitorial being 100% and then the flooring company having a big percentage of their business as well. And we wanted, since we were new to this space, we didn't, we didn't really want to buy a bunch of small companies and, and kind of build from the ground up again. Like, we wanted to buy real solid, good companies that had management in place. And so we knew we needed to be above a million dollars revenue. And there's again, just a bunch of cold calls until we found two very good targets.

And I mean, they both might have been a year or so. The carpet floor company, we're working on that for a year and a half. Seller backed up three times and the fourth time was a charm. And the janitorial company, the one I referenced before, it was a previous seller of the house clean business we bought. Okay.

[00:49:29 - 00:50:17]

Will Smith: And so those were roughly evenly split terms of revenue. Pretty, pretty close, yeah. Okay, so a little bit over a million each in revenue. But you, you've got all these services again, you've got commercial and residential, you've got cleaning, you've got exteriors, you've got floors. But in your vision, cleaning is the main thing in all these, all these services kind of that orbit around cleaning.

So you're cleaning. I'm trying to define the company in a sentence. I would say it's a full service commercial and residential cleaning company. And you're at 5 million. Now, your last acquisition, Kyle, was your first SBA acquisition, correct?

Let's hear, let's hear the story of that, please.

[00:50:19 - 00:52:28]

Kyle Boyden: So I'm trying to think of even where to start. We came to terms that we'll do an SBA loan. They didn't want to do seller financing, they just wanted the cash. We used US bank and they were doing 7% loans at the time, which was about 3 or 4 points below the market. And we had looked at an original financials, an original P L and it showed a little north of 300k of profit.

We came to a million dollar purchase price. And then right as we're about to turn it into the SBA, we saw P Ls that showed like $570,000 of profit on. So like 50, 50 net margins. Yeah, yeah, yeah. So we're.

Which was a bit alarming, as we know. Amazing. But too good to be true. Yeah, a little bit too good to be true. And we just, we'd always been Told the SBA is the, the greatest underwriters in the world.

They'll do such a great job. So we trusted them to, to kind of knock the dust off this thing and look through it and fast forward a little bit. They never even asked for bank statements in any appointment at any point. So they had P. Ls and tax returns that matched. And we went pretty far through this process.

And eventually Jake just kept saying, dude, something about those numbers doesn't seem right. Something about those numbers doesn't seem right. And finally I was like, yeah, I, I agree. So I requested the bank statements and I looked and the, the total sales of the company was about 300k short of what they had claimed. And so that right there just said, something's off with the bookkeeping.

We ended up hiring a, she called herself a forensic bookkeeper that went through, through the books to try to, to create what we believe the real pianos to be. And she thought the bookkeeper had stolen upwards of $300,000 of profit from, from this company. Wow. We are learning all of this on the side and not wanting the SBA to know anything because we want to keep this deal intact and we want to figure out what, what, what the real purchase price is going to be and then just let the SBA know that we've reached different terms. So this is all happening in the background as we're getting closer and closer to closing.

[00:52:29 - 00:52:51]

Jake Furfaro: So you remember and your thought was. That if, if the SBA heard about potential embezzlement, they would just, or your lender, that they would just disqualify the deal out of hand at that point. Correct. So we're trying to keep this, keep this as far from them as possible. And then back from my thing of how are we going to tell the SBA that we're going to offer significantly less with no real explanation whatsoever, but we still want the deal regardless.

[00:52:52 - 00:53:09]

Kyle Boyden: A phenomenal company. Great management, great systems in place, like the processes they've created and their onboarding process and their training program and everything was that of a Fortune 500 company. It's a really well ran company. We just want to pay the appropriate price for it is all. Yeah, yep.

[00:53:09 - 00:53:32]

Jake Furfaro: And the owner of this company, the seller, she was learning this in real time as we were. She had no idea about any of this. And how could she have not felt in her own, you know, pocketbook that it's $300,000 less than it should be. Had we not already had a really strong relationship with her? I just flat out wouldn't have believed her.

[00:53:32 - 00:55:09]

Kyle Boyden: And, yeah, that's my reaction. We asked her that question. It's kind of a hard question to ask, but she, she said, you know, I'm not used to making this kind of money. This, this company just blew up. So this was a, A, A whole new world financially for me.

And she was embarrassed. She's like, I, I, I don't know. I have no estimation, but that was my thought too, is how, how could you possibly miss 300k? And ultimately, the bookkeeper wasn't stealing. The bookkeeper was like double tapping invoices.

She wasn't canceling them out. She would transfer money from one bank to another bank account that is income. It was as if it was. It was a mess. It was as if it was her first time ever doing books.

So it was such a mess that the, the, the lady that was hired for forensic account bookkeeping still doesn't have an answer to this day. So we, we went through. And basically the, the beauty of this whole thing is that sets it. Since it's such a recurring nature of the business. It's janitorial.

It's the exact same dollar charged every single month. Even if you skip a claim, you charge them the exact same every month. So all we needed to do is recreate a couple of the most recent months and we would have the run rate for the year, and then we could come up to a multiple in which we could, could cash flow and still be protected. So we ended up becoming the forensic bookkeepers. Came to the price.

It was undisputable. There was no arguing between us and the seller. It was definitely a significantly less of a purchase price, so they had to be able to stomach that. And we ended the whole thing amicably. She's still helping us every day.

She's phenomenal. And we told the SBA that.

[00:55:12 - 00:55:28]

Jake Furfaro: Didn't we just. Yeah, we told them that, yeah, we negotiated down a little bit and that we thought the. It was way more. The owner was completely removed is what we thought, and we've since learned it's not. And that I'm gonna have to work this full time, and I'm gonna need to justify a very large salary to have this be my main thing.

[00:55:28 - 00:57:01]

Kyle Boyden: And the SBA asked very, very few questions and approved it. When you guys keep saying the sba, you mean your lender? This is. Yeah, this is US Bank. They were.

It felt like it was everybody's first time doing an SBA loan through, through the entire process. It was a pretty choppy thing, but maybe because of that it ended up benefiting us. But I'm surprised that you guys feel that they would have run away scared if they found out that the revenue was less than initially reported, because that's not. I mean, that's not totally uncommon down here in this. This world.

It was significantly less with incorrect tax returns, with monies owed. I mean, it was pretty darn sloppy. And there was still no clear. The company makes this much other than my word, that, hey, here's my Excel spreadsheet that I built. So that.

That was our fear. Okay, well, your. What you'd heard that the SBA underwriting for an SBA loan is this airtight process. I feel like I. My understanding of how rigorous that is on the back end has also been, like, corrected that it's not that these, you know, these underwriters for, for SBA loans that are supposedly really diligencing your deal or at least, you know, looking closely at things.

[00:57:02 - 00:58:03]

Will Smith: It's much more formulaic and less analytical than you'd think. Of course, it varies from underwriter to underwriter, bank to bank. I don't want to make some sweeping negative generalization, but I do think it's important for people to hear because I think I myself have said from time to time that your SBA lender can be something of a backstop. If you, if you know, if you've done your own diligence or whatever, you, hopefully you've hired a due diligence provider, but you also have this one more filter in the SBA lender underwriting that to go through, which is, you know, a good thing. They'll catch something that maybe you haven't.

And my confidence in that is less than it used to be. And I think especially based on your experience now, people's, People's listening, their confidence should, should also not be so high. In other words, you know, don't. Don't lean on anybody else for, for your diligence. Great catch, Jake, or great listening to your instincts, Jake.

[00:58:03 - 00:58:51]

Jake Furfaro: And I think that the. To come full circle here from where we started as far as the level of due diligence that we did on our very first deal to this one. It just shows you that, you know, we've learned along the way and refine those skills, whether it's analytical spreadsheet, financial evaluation, or if it's, you know, talking to meeting employees. Well, whatever the due diligence is, I feel like there's not many people that can do it the way we're doing it outside of, like, a third party. Of course, Well, I have to ask, despite the fact that you have all this hard won experience and what you just said, that you've gotten pretty good, you think at diligence, I, I still would argue that it's a best practice to pay a, an expert, a third party diligence provider who do this by profession.

[00:58:52 - 00:59:16]

Will Smith: Especially as your deals got bigger, did it occur to you this decision to go bigger, did it occur to you to use some third party services to build a deal team around yourselves rather than just leaning on each other? I agree with you. I think it is best practice and I would encourage everybody to do that. I think I brought it up a couple times in the process. Kyle's looking guilty.

[00:59:16 - 00:59:34]

Kyle Boyden: I was gonna say fundamentally you are 100% correct for cleaning businesses. We've done enough of these acquisitions. I might be cocky or whatnot, but I would trust my own underwriting ability for a cleaning company at this point is much as anybody that would pay $10,000 for. Honestly.

[00:59:36 - 00:59:52]

Will Smith: All right. If it was any other industry, sure, I would definitely and I would highly encourage everybody else to do it as well. Had we not had these prior experiences, we would have paid way too much for this company. We would have probably bankrupt ourselves. So yes, everybody should make absolute certain of the numbers on all of their deals that they do.

[00:59:52 - 01:00:16]

Jake Furfaro: Yeah. Higher than the third party. It's great guys. I want to in just like close with the big vision in the big number and kind of how you, how you see getting there. But first, just one more time, the kind of the service offering that you have and what the strategy is there.

[01:00:17 - 01:00:59]

Will Smith: So full solution cleaning, both residential and commercial. And so it's, it's not just janitorial, it's kind of as you said, carpet, floor, exterior, all of that. So. And that's, and that's slightly differentiated in the market. Usually it's just janitorial and then, and then bringing in third parties or subs to do carpet.

Say more about the your go to market strategy, if you will. So two different brands, right? So when a client's reaching out, they're not reaching out to somebody that is specializes in both. Because I feel like that you need to be a specialist. And if we were to keep it together, it's just not a good vision.

[01:01:00 - 01:01:41]

Jake Furfaro: So yeah. So commercial cleaning, janitorial, control everything. We truly want to be a janitorial partner. Control everything when it comes to the building. And then on the residential side, house cleaning at the core and then leveraging out the subs on both the commercial and the residential.

But we are subbing to ourself and those are different brands as well. We have a long term vision of building the same brand on the residential side but right now we're trying to keep, keep things separate. It's all, it's all separate client facing but the back end, it's the same team. We're cross utilizing our admin in our office. Great, great.

[01:01:41 - 01:03:50]

Will Smith: Thank you for that. And one thing that I want to circle back to. We, we joked earlier that you learned that from property management that you know to be the, the gatekeeper to, to other services that the client needs is a useful place to sit. But the reality actually is when I, when I've talked to other people who had kind of a vision of building a, having a property management business and then building a vertically integrated, you know, having H Vac and all the other services that the client, the landlord, so the, the, the client of the property manager might need. In fact that falls apart because your client, the landlord, the property owner wants you to not be double dipping.

They want you. Part of your role as property manager is to go out and get bids on H Vac that are, you know, the most competitive. So you can't just sell to yourself. Do we, do you follow me? And so is that not something that you'll bump into that, that, that at some point your clients are gonna want you to go hire the cheapest carpet cleaner or the one that provides the best value, not yourselves even if it's under a different brand.

You haven't encountered that yet. How we're marketing is we are, we're not another janitorial company. We're a total facility care solutions provider. Whatever a facilities care program that we've built custom for your industry, we're coming, we're going to do all of your maintenance cleaning as well as every quarter will come in and let you know what, what additional cleaning needs to be done. So it's, it's more of a, a differentiator in the market.

Okay. When, when all of these companies are used to year in and year out turning janitorial company from janitorial company whoever's the cheapest bid. And, and this, this service in this program doesn't really make sense for companies that are spending under a thousand dollars a month on, on facilities because who really cares where they buy it from? For these big companies that have a level of complexity, multiple locations, multiple buyers. Any security clearance, security clearance, multiple floors, different kinds of floors.

[01:03:50 - 01:04:09]

Kyle Boyden: If image is huge like a car dealership or a bank, the windows need to be done More frequently, any level of complexity, that's our client. Great. Guys, close us out with the. The vision in terms of how big you want to build this numbers. The plan from day one was 10 million EBITDA.

[01:04:10 - 01:04:19]

Will Smith: And how did you arrive at that? It's nice and round. We heard somewhere we get a 10x multiple at that point. It's nice and round. 10x multiple, 100 million sounded kind of nice.

[01:04:19 - 01:05:11]

Kyle Boyden: Whether or not that is true, I guess we'll find out when we get there. I think initially the plan was a really large exit. And we've had so much fun in this process, and we're enjoying the growth and the pain even, that the desire to sell has kind of fallen by the wayside. And now we're just enjoying the process and growing this company out and as Jake said, the relationship with employees and whatnot. So the goal remains the same as far as size, but what the.

What the exit looks like is to be determined. Yeah, I would be happy if there wasn't an exit. And this is kind of a legacy play more than anything, but, you know, the future, we can say, you know, this is the plan, but everybody has a plan to get punched in the mouth. And I'm sure we have a few more punches left. Sure.

[01:05:12 - 01:05:32]

Will Smith: Well, and, you know, if you get into, you know, EBITDA of. Well, already at a million, but if you get into two and three and four, I mean, every. Every incremental million of EBITDA that you generate, your options just expand. So if you're at 10 million in EBITDA, you can do whatever the heck you want. You want that?

[01:05:32 - 01:05:40]

Kyle Boyden: That's exactly right. It feels like we have the platform in place now. So now we're looking forward to organic. Growth at this point, but we're done with acquisitions. Yeah, we got some serious.

[01:05:40 - 01:06:01]

Will Smith: Okay, well, well, hold on. I was just gonna say has a reverse engineer that 10 million EBITDA number. And I assumed it was going to be lots more in organic growth. In other words, buying. Buying more businesses.

And you're saying definitively you're done with that. So you're gonna. You're gonna grow 9 million more of EBITDA through. In 6. Natural organic growth in 6 months, you might have a different.

[01:06:02 - 01:06:44]

Jake Furfaro: Yeah, I think it's one of those things where, you know, you have a child and those nine months afterwards, you can. You don't want another one right now. Right. And sometimes you could envision never having another one. And then they start to get cute, you know, two, three years old.

And then you're like, well I, I could, I could do this again. I need, just need some time to, to, to really relax as far as the transition process. So give me a year, ask me again. I'm sure we'll buy something else, but I think we have enough to stabilize and systems processes and continue to build for the future. I'm sure we'll buy something else, just not right.

[01:06:44 - 01:07:01]

Will Smith: Yeah, I'm just not sure. This is pure instinct. I can't back this up really. But I'm not sure getting to 10 million in EBITDA in your lifetimes is possible without some, without doing some acquiring. That would be a huge amount of organic growth.

[01:07:02 - 01:07:16]

Jake Furfaro: Let me, let me, let me retract my statement. Nothing small ever again. Okay, great. Well, that was going to be my next question. So these little tiny businesses that you were buying, no more of those?

[01:07:16 - 01:07:54]

Kyle Boyden: No, Kyle, I, I, I, I totally agree. And you see the, the strategies where people will bring their 3 million dollar EBITDA to a 5 million dollar even and they partner together and then have an exit together or enjoy a, a way larger valued company. So I would rule nothing off the table except for anything south of a million dollars revenue probably. But you know, it's interesting to me because I feel like now that you have kind of much more of a real platform, integrating those tiny little bolt ons would be easier now. You could, you could, you could just, you know, fuse it into the Borg pretty easily.

[01:07:54 - 01:08:15]

Will Smith: No, it's not pretty easily, but much easier than you were doing before. And, and also you have all this, all this experience at doing it. So you guys are much more experienced, there's more of an institution to, to receive the, the bolt on. No, we had just closed on these last two and a half million dollars of business acquisitions in the last two weeks. We had to absolutely will them over the finish line.

[01:08:15 - 01:08:38]

Kyle Boyden: And we are, we are tired, we do have deal fatigue. So it would be nice to catch our breath, experience some more organic growth and then we might come back on your show in a couple years with a whole different 20, 28. Yeah, if we held true to what we said. Great. Well let's, let's assume you do hold true to it and no more acquisitions, no more inorganic growth.

[01:08:39 - 01:09:25]

Will Smith: How, what, what is the plan to grow, to grow these organically. What, what, what are the levers you're pulling? A combination of obviously paid marketing, but cross selling as much as we can and getting, you know, really increasing that LTD of a client for as much, as much as we possibly can. And that's to get them in the ecosystem and then nourish and, and provide phenomenal service. Yep, that's it.

So cross, cross selling is a big part of it. Get them in the door for cleaning or for something and then eventually also be providing them these, these other ancillary services that they will eventually need. Correct. That's kind of the golden egg right there. And your focus equally on commercial and residential.

[01:09:26 - 01:09:49]

Jake Furfaro: 100 of Kyle's focus is focused on growing the janitorial side of the company. 100 my focus is on the residential side in the bolt on carpets and windows. Okay. And you don't feel like going all in on either residential or commercial is the strategy you want to do? Because don't you feel like a future acquirer?

[01:09:50 - 01:10:09]

Will Smith: You know, generally like the, the big janitorial companies, they don't also do house cleaning. They just strictly do commercial. So how do you think about that? I mean that's 100 the advice that everybody has given us. But the nature of window cleaning, exterior cleaning and then all the floor cleaning is they service both.

[01:10:09 - 01:10:57]

Kyle Boyden: It's the same employee servicing both. So in the short term it doesn't make sense for us right now to just chop it in half and completely pull the plug on one of the plans when it comes time to an exit. If it comes time to an exit, we'll have to make some strategic moves to line up for that. Because you're right, most people aren't going to want a commercial residential play. And maybe there's a day where the residential side gets sold and the commercial side gets held onto so that there's.

All doors are still open at this point. Mm. And I think that's the, the nice thing about having two of us. That 100 of his focus can be on janitorial. And I'm, I'm helping that in the sense of, you know, we're, we're really pushing the, the carpet and the window cleaning company towards the commercial side.

[01:10:57 - 01:11:16]

Jake Furfaro: However, we have a great database of residential customers. We might as well service them and make money. Yeah, sure. And now that you're taking a breather from acquisitions, you're both full time operators, your day to day operations, seven days a week.

[01:11:18 - 01:11:57]

Will Smith: And the business of commercial cleaning is. What would you say to people? We already heard your opinion on property management. We heard your opinion on home cleaning, house cleaning. So what of commercial cleaning?

A lot of people seem to like it, you know, recurring, you know, commercial clients, business to business, high quality revenue. Of course I've also heard, you know, very tight margins. I just heard you guys say that every year you're, it's not, it's not that recurring because every year you need to rebid for the business people heart labor's hard right? Because, because commercial cleaning's done in the middle of the night. Say, say more about pros and cons of pro commercial cleaning please.

[01:11:58 - 01:12:51]

Kyle Boyden: It, it is hard but again hard is okay. Hard means less people are going to do it. A A lot of at least is what I tell myself in my head to justify this decision. But I think a lot of really really sharp business owners aren't starting commercial cleaning companies. So I feel like our, our efforts combined with our wherewithal are going to automatically separate us from 90% of the competition.

I think it's really easy to go from nothing to good and then it's really, really hard to go from good to great. So that's just focusing on being the greatest that we can be from the customer experience to controlling back end costs scales of economy on, on, on the back end how we're combining all of our companies together. We definitely have some major advantages and and Jake said earlier but I think our, our greatest cheat code is the fact that there's two of us. We twice as fast twice as far as most people that, that you we're competing against. Yeah.

[01:12:52 - 01:13:11]

Will Smith: 5 million in revenue. A million issue of EBITDA and of that ebitda how much of it is is actually not going to debt payments? I mean how much free cash flow does the business generating before paying yourselves? About 700k. About 600.

[01:13:11 - 01:13:24]

Kyle Boyden: About 650. So 650s SDE after after servicing debt. And a couple after servicing fall off in the next two years. That's great. On a hundred thousand dollar investment combined.

[01:13:25 - 01:13:50]

Jake Furfaro: And we've retained 90% equity. That's not bad. And how long two and a half years at this point I mean that feels like a, a pretty amazing. I mean going back to our real estate comparison that's an incredible return on equity. It's, it's been fun.

It really has. It's been hard. It's been hard right? It's been fun and I, I wouldn't change it for nothing. Great.

[01:13:50 - 01:14:22]

Will Smith: Well anything else to add guys? No, no, no. Appreciate it. Appreciate that opportunity. Yeah no, thank you guys for coming on.

Thank you for being so transparent. I'll provide links to your LinkedIn in the show notes people can reach out if they are interested in in cleaning or want to stack revenue 100 and $200,000 businesses and go about it that way they'll they can reach out. Kyle Boyden and Jake for Faro. Thank you guys for coming on Acquiring Minds. Thank you.

[01:14:23 - 01:14:48]

Jake Furfaro: Appreciate it. Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode with an introduction to the interview, a link to the video version on YouTube, and soon key takeaways, numbers and more essentials from the interview. For those of you who don't have time to listen or watch it, subscribe at acquiringminds.co.

[01:14:49 - 01:15:08]

Will Smith: you'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars. At this point point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business. Acquiring Minds Co.