Host: Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs. And on this podcast, I talk to the people who do it. Today's interview with Mark Litton is about an entrepreneur who acquired a business from his father. One of the things I most enjoyed about this company conversation is Mark's enthusiasm for acquisition entrepreneurship. His excitement is infectious. He talks about how for most of his life, entrepreneurship meant starting from zero. But once he realized that acquiring a business was another path to becoming an entrepreneur, his mindset shifted and it kind of clicked. And now he's an evangelist for buying businesses. Does that sound familiar? For many of you and me, it took some time, but you we eventually learned what a great path acquiring a business can be. Another detail to Mark's story worth noting. His business is medical distribution. So you can imagine what that was like as Covid was peaking last year. And Mark talks all about it. Here he is, Mark Litton. Mark Litton, thanks for joining me today on Acquiring Minds.

Guest: Yes, sir, it's a pleasure.

Host: Will, you're the owner and president of Howard Medical, which is a medical distribution company in Chicago, and you acquired Howard Medical from your father, who was the founder. He founded the company in 1978. So obviously that's an interesting detail that we're going to get into. Also, I got to make sure that we spend some time on the fact that here you are in the medical distribution business at the height of a pandemic. So I imagine 2020 was an interesting year for you. So we'll want to hear all about that. And then lastly lastly, one of the things that stuck with me, Mark, after we talked the other week, I guess last week or the week before, was your enthusiasm for business acquisition. You were always kind of entrepreneurial, but it wasn't really on your radar to buy a business. And once you explored the opportunity and then went ahead and bought a business, now you kind of can't stop talking about it. So that makes two of us. So I kind of want to hear about that progression. But before we dive into all of that, why don't you give us start us off with two minutes on you prior to working for your dad. I know you worked for him before you bought the company. So lead us up to how you started working for Howard Medical and any relevant background before that.

Guest: Yeah, absolutely. And again, well, greatly appreciate the opportunity to be here. I can talk medical distribution, Howard Medical all day long. But yeah, my dad started the company back in 78. So when I was Born, it was a continual part of our family. We would sit down for dinner and it was always a discussion at the dinner table. And growing up, I guess I had a slightly different weekend activities in grade school because I would be repackaging gloves with my dad in the warehouse at north and Elston here in Chicago. So hard medical has always been a part of my upbringing, a part of my DNA, but outside of that, definitely very entrepreneurial. Me and my older sister would have that go door to door selling the subscriptions out of the magazine and however many points you got was what you could get. We'd get a snow cone machine or we'd get a bow and arrow set and that kind of stuff that we were. I was definitely well versed at hearing a lot of no's early on in my, in my entrepreneurial career. But yeah, I kind of grew up with the company. Started doing different, different jobs. Used to drive in the car for a couple summers, did some marketing internships. But then when I went to college, majored in entrepreneurship and I actually did a painting franchise called College Pro Painters. Did that for two years during college. That was a lot more of an education than the, than the actual school was. Then came back to Chicago, got into leasing for a little bit. My dad hooked me back in a couple of years post graduation to help him build up sales in order to sell the business. But once that conversation started gotten rolling and he asked me if I was interested and really, really took a life of its own and took over my brain. And here we are so going back

[4:14] Host: to college for a minute. The franchise, the College Painter. College Painters Pro is what it was called.

Guest: Yeah, College Pro Painters no longer in business, which is very, very sad because that was an incredible candidate for a low risk way to get into entrepreneurship when I was in college.

Host: And so in what capacity were you running a franchise? Owning a franchise, just doing painting with their T shirts. Tell me 30 seconds on that business.

Guest: Oh, absolutely. Yeah. So franchise owner was no money down. So they would take college students that were interested in entrepreneurship and they were able to run their own business. So I had a general manager who I would report into and talk to, you know, daily and then weekly. And then we have all the types of different trainings and stuff like that. But. But yeah, it was your own business. You had a turf mine with Mequon, Wisconsin. I've knocked on every single door in all of Nequan, Wisconsin multiple times. And we built out a team. I had my second year, I had three different crews going of three to four people. We painted $135,000 worth of homes and decks in Mequon, Wisconsin. I was manager of your second year in the state of Wisconsin. And. And it was great. I mean, you really learned every aspect of the business. You had to do every single thing. And so you had. I mean, I didn't even know how to paint before I was the owner of the franchise. So first I had to learn how to paint, and two weeks later had to teach a crew of people how to paint houses. So it was a very strong, strong learning curve. I mean, all aspects of the business. Accounts receivable, marketing, everything. So it was a great introduction for me personally.

Host: And when you got out of school, did you not want to continue do your own painting company or something in the home services space?

Guest: Yeah, I used College Pro to see if entrepreneurship would be a path for me in my life. And so my first year of College Pro, when I failed, I did not make money, and it was terrible. They let me do it again in my second year. It worked. I was able to profitably run a business during school. So I knew that I wanted to be an entrepreneurship in some capacity. But my thought was I was going to need money to do, so there was no way that I could just go start a business. The job that I took was leasing apartments in Chicago. I knew I could make some money out of that. Maybe I could start saving some money and then figure out what the next step was. But it did, for me, solidify that I wanted to do entrepreneurship in my life. But that just seemed more like a pipe dream because it was something that would be very difficult to attain and you would need to build a base of business. And all these preconceived notions I had about entrepreneurship, which I completely don't subscribe to any of those anymore, it's a lot more easy to get into than in my head. It seemed like this huge hill to climb.

[6:57] Host: So you start leasing, and you're in the real estate world in Chicago. And then your dad says, mark, I want to prepare the business for sale. Come sell for me. Come work in sales at Howard Medical and help me build up revenue planning for an eventual exit a couple years, two, three, four years later. Is that right?

Guest: That's correct. So he knew of my personal desires to start my own business, to be an entrepreneur. So he said, if you're able to grow business by X amount over the course of two years, I will then give you y percent of the sale amount. You can take that seed money and go start whatever company you want to start. So in my mind I was thinking that's a phenomenal opportunity because all I have to do is sales. All I have to do is sell. That's easy. That's just one portion of running a business. And I think I'm kind of good at that part of it. And if I could increase your sales to a point that makes your business more attractive, attractive to an acquirer, and then I can get a very small percentage of that to then go start my own business. It seemed like a rock solid idea to me.

Host: Cool. Okay. And so that starts in what year are you at Howard Medical as a salesman?

Guest: About 2013 or 2014.

Host: 2013. 14. Just looking at your LinkedIn, right?

Guest: Yes, probably 2013.

Host: Okay, so 2013. So then what? Talk us through how the prospect of actually acquiring the business starts coming about.

Guest: Yeah, so I'm doing sales for him, I'm doing decently well and we're growing revenue a little bit. And he starts to work with a broker to try to market and sell the business. And he had a couple people come knocking on the door coming in, go through all the different financials and everything, but no one was coming anywhere close to what he thought the value was. But more importantly, no one wanted to run the business in the way that it was currently being run. A lot of people wanted to sell it parts and assets and just dismantle the business and get what they could for it and not really take the business with his type of vision for what we should be doing.

[9:04] Host: Why do you think that was? Why do you think that there wasn't the right buyer or why were people coming in with different visions than his own?

Guest: Yeah, that's a very good question. I would love to have a better understanding of that. My thought was that he just worked with one broker who it was not their full time job. It wasn't really what they're. You had misaligned incentives, if you will. I don't think he understood that other ways to go about marketing a business to sell. And I just don't think they kicked enough tires. I don't think they had enough reps. And so the results weren't coming towards him and he was just getting very frustrated very quickly with it.

Host: Okay, okay. And so then what happened?

Guest: Yeah, so we would go to lunch in Wecker park one day and he just kind of goes, I don't know, Mark, since I'm going with the world, how I'm exactly hoping for, would you be interested in purchasing the company? And I just put my food down and said, no, I have no desire to do that. My intention to be here is to get this exit and start my own company. I want to be an entrepreneur. I do not want to purchase a business again. Highlighting my ridiculous frame of thoughts back in my younger years. And I shot him down pretty hard actually. But then, I don't know, that thought went in the back of my head and that little seed just kept growing and growing and growing and to the point where I couldn't stop thinking about it. I'm talking about my friends, I'm talking to my mom. It's just. It's just the opportunities that I saw in the future were quite large for the business, for the business itself. We really hadn't taken a lot of the resources and put them back into the business recently. Like our ERP system was one that my mom had personally coded back in the 80s. It's Ms. DOS.

Host: Your mom built the. Built the ERP. She's a developer.

Guest: She. In her previous Before Howard Medical days

Host: in the 80s, she was a developer.

Guest: Yep. So yeah, it's an Ms. DOS system. Have you ever seen the black. Still don't even remember what Ms. DOS even is. That's what we used up until 2016 when I purchased the company. We had a system where the sales orders are written on paper. It goes in the tray. So Jim would get them out of the tray. There was a lot of room for process improvement with the company and there still very much is. But we really didn't have a web presence. I mean, we had a website, but there's no E commerce. There's many, many things that. I was just thinking this is going in the right direction. If you could put some money into this, put some resources into here. And then also just you could look at the demographics of the country and know that medical distribution is on an upward trajectory as far as industry goes.

Host: And then also just because. Because all health care is essentially growing.

Guest: I would say without a doubt you have. It's just a certain population which is getting to that age and health care is becoming a larger part of the gdp. And also Harvard Medical has been really recession proof, if that makes sense. So when things are on the upswing, we join in that upswing. And then when things are going down, everyone's looking to save money, everyone's looking to cut costs. And hey, we're very good at that. That is a core strength of ours. Call us up. Let's do an. All right, let's take a look at what your spending is. And I'm Going to find ways for you to save money. I can guarantee it. So in all environments, it's generally been a good business. And so all of those factors just stayed in my head until the point where I came back to him a couple of weeks later and I was like, well, let's say just that I

[12:29] Host: was interested just for argument's sa how

Guest: do you see this playing out?

Host: So your initial very strong reflex was hard? No. But simply you couldn't stop thinking about it. All of the opportunity for improvement in the business was keeping you up at night and just kind of on your own and I guess talking to your network, your friends, your mom, you just started coming around to it on your own. But your dad didn't try to convince you. He left it at that one conversation and then you circled back around and said, hey dad, maybe let's talk.

Guest: Yeah, correct. He has never been a hard salesman.

Host: And so you're reluctant that initial reluctance or straight up resistance to buying the business was because as you said, you had this notion of what an entrepreneur was and that's somebody who starts something from absolute scratch. Was there also any resistance based on the fact that just like working in the family business, like the family aspect of it didn't like bothered you? Did that play a role one way or the other?

Guest: No. Working with family is not something that has ever caused me hesitancy. I mean, I had done it my entire life and had come back in. I think the hesitancy in my mind was that it didn't feel like true entrepreneurship because of what my preconceived notions of what entrepreneurship was. I thought that people would see that I was taking the easy way out and not starting my own business. When I had been talking about starting my own business for most of my life, I mean that had post post second year of college pro. That was my stated goal. My goal was that I was going to start a business and all of my friends knew that. I was just thinking, oh, they're going to be like, oh, we just counted out and purchased a family business. And it's like, again, I can't express how silly it just seems to think to have those thoughts run through your head. There's so many ways to get to the end result of what you're looking for. And this is an absolutely underutilized vehicle in order to be an entrepreneur, in my opinion.

Host: And so Mark, if you were talking to your less wise self of 2013, 14, 15, what would you say today to convince that Mark that he's being

Guest: short sighted Yeah, I would say just do more research in what entrepreneurship is. Read the books, listen to the podcast, do the information. Because I think as society we have these glorified notions of the founders that have been able to go and grow these businesses, but it's not the norm. This is not normal for a Zuckerberg or a Bezos to start this thing from scratch and grow it to what they're at. And I think we over glorify these individuals. Not that they don't deserve it, but it's like we keep them on a pedestal, but we don't talk about the person that took something from not from 0 to 1, from 1 to 10, or from 10 to 100. It's different skill sets and it's more common the case that someone's going to take it from 1 to 10 than from 0 to 10. And I just think that there's a million ways to get to your end result, which should be a happy life where you control your time and your energy. And I think that this is such a better way to do it. It's a lot low risk than trying to go from 0 to 100. And it just makes sense because the math makes sense. I mean the math on purchasing a business, what you're putting out every month should be less than what the business is already cash flowing. So you should be able to walk in the door profiting with a bank of business. The math, to me, it just makes sense. And I really wish that I would have had a better sense of that back in 2013, although I came around to it.

[16:20] Host: So let's tie this back into. You get excited, you start getting excited actually about all the opportunity that there was in Howard Medical, all the low hanging fruit, as they say. But you still don't yet know all of the stuff that you just said, right. About in fact, how the deal structure can be so advantageous to acquire a business versus starting something from scratch. So when did you learn that? I guess take us back into the story. So you re approach your dad and you say, hey dad, actually maybe let's talk and what happens?

Guest: Yeah, yeah. So a podcast like yours right now, if I would have been able to binge this back in 2013, would have been a lifesaver because I didn't know any of this stuff. And especially for family owned businesses, like for transitions, the only information out there that I thought was really not positive, it was 70% of businesses fell into the second generation and families are torn apart and brothers and sisters are suing each other in court. I mean, it's really some ugly stuff out there. And then from what your question is starting with is actually what information did you have in order to value a business? How did you talk to the lawyers? All of this stuff was just Google for me in a time where I was not finding results. So how do we value the business? I googled it. I asked my one friend who had been a finance major and then a friend of a friend who was kind of a CPA and we all came up with different numbers. I averaged them out. It was not great. I look back at that and just think you really had no clue what you were doing. Not that I have a great clue now, but as far as the business valuation and how to go about that process, I mean, I was quite clueless.

[18:01] Host: Well, and so was that the deal, what you took to your dad, the offer? Was that what he accepted or tell us about what the acquisition terms actually ended up being?

Guest: Yeah, yeah. So yes, I had a pretty clear idea of what he was looking for. And then I feel like I almost played with the numbers to get it to the point where it was that, if that makes sense, because I didn't really understand, I mean I understood multiples, but I didn't really understand how to find true earnings of a company. When you had the owner was being paid, the vice president was my mother, who was retaining a salary, the profits and then inventory, how does that all play into evaluation? I did not really know and I heard so many different opinions that I mean, I just kind of made a guess at it, put the numbers together in a way that made it seem like that was close to what his number was and then he was happy with it. I will say from a family owned structure like Seller Finance, you can make that be very advantageous to both parties because there's no actual bank involved. So I was able to do that with 0% down and actually hold a month. So we didn't start the payment until the second month of the business. And then as far as getting to his number, he doesn't care if that's principal or interest. So you can be a little loose with the terms of the arrangement because anything that's going to be the interest is written off from the business taxes. So you're able to do that in really friendly terms. And that was advantageous. I definitely believe that.

Host: And so it was fully seller financed then, correct?

Guest: 100%.

Host: And so can you tell any more about the terms, like how long is the payout for example?

Guest: For sure. So it was high six figures. And it's over a 17 year period.

Host: High six figures over a 17 year period. And did you and your father actually sign a contract or was it more of a handshake deal?

Guest: Yeah, no. We did bring in lawyers, which was very against our ways of doing things. But the lawyer that represented him. So they actually would not do the transaction if I personally did not. If Mark did not have a lawyer as well. They said we will not do a one sided transaction for both parties. We cannot possibly do our due diligence to both sides. So I went and took a recognition of theirs and had a lawyer as well.

Host: And speaking of due diligence, what did that look like? You were already really knowledgeable about the industry, having worked in it since you were a little kid and then more recently as a salesperson and to having these conversations with your father about him wanting to sell it. So you already you so much. Was there additional diligence that you needed to do?

Guest: There sure should have been. Yes, I would agree with that. You had a gentleman on. I'm forgetting his name. Who he specializes in the due diligence process for a company.

Host: Elliot Holland.

Guest: Yeah, correct. That was a fantastic interview by the way. He seems like a straight rock star. And I was just thinking that that would have been a really, really useful. When I did that. No, I just, I just, I knew the numbers and he would go over financial statements with me. But it would be farce to say that I truly had a good handle on those things at that time.

[21:12] Host: Okay. Just to talk a little bit more numbers, to give people a sense of the size of the business. Can you talk about how big the business is in terms of revenue and profit margins? And I know there's been some ebbs and flows. So tell me, going back a couple of years, if you can.

Guest: Yeah, for sure. Historically, Hard Medical has been in the $1.5 to $2 million range and generally sub 10% at the end of the day. It's been pretty steady for a long time. You can show that going back for quite some time. So from a staying power perspective, I felt very confident that this was going to be a business that was going to at least give me those types of returns moving forward. And it's been around since 1978. Been around for a long time. We're pretty entrenched in the Chicagoland area, so most of the hospitals are at least familiar with who we are. And there was just nothing really. Seemed like a lot of upside if you were able to build up. But yeah, it was historically in the

Host: $1.5 to $2 million range with 10% margins. Ish.

Guest: I would say sub. Yeah.

Host: And just so we're totally clear on what medical distribution is, you just referred to the hospitals. So are you essentially like a hospital needs more? Last year, of course, PPE was on the tip of everybody's tongue. They call you and they say, hey, we need whatever, a hundred thousand pairs of gloves, and they call you, and you make it happen. Is that. Is that essentially kind of what you're in the business of doing? To give me 30 seconds on what the business does, just so I'm totally clear?

Guest: Yeah, no, absolutely. It is not very clear. And I recognize that not everyone actually understands what medical distribution even is, but you've got all the manufacturers who physically make the products, and then you've got the healthcare, you have the hospitals, you got physicians, you got medical centers, and then you got the distributors. So the healthcare centers and the actual manufacturers, they're never going to work back and forth with each other. You'd have to work with 200 different manufacturers. The manufacturers don't want to ship to all those different locations. So we are a local resource where we're the middle person in between those. So we'll place the large POs with the manufacturers. We'll bring in all the full skids here, and we'll break those down and deliver them as needed to all the different healthcare facilities on an ongoing basis. So we have. For our end users, we have stocking capabilities. So you tell me you want to buy X, Y and Z, we keep it stocked, keep 30 days on hand for you and deliver it as needed. And we're also an emergency provider. So that's why last year was such a beneficial year for us, because a lot of the hospitals knew that when they can't get something, they call Howard Medical, and we figure it out. We are ruthless with our capabilities of not stopping until you get the products that you're telling me that you need. If your primary distributor can't take care of it, you call me up, I'll be your secondary, and I'll figure out how to get it done.

[24:03] Host: So when you say primary and secondary, so are you in some relationships you're the primary and some you're the secondary? Or do most distributors like you usually slot in and they're always the secondary or always the primary? What does that mean?

Guest: Yeah, this is a very good question. So Howard Medical is a very small player in a game of medical distribution. So we are a local, niche company. There's our nationwide competitors. Who are amazing companies who really just the scope of what they do is fairly mind blowing, but they take care of.

Host: And Mark, are any of those like household names? Would I have heard of any of Those?

Guest: Yeah, Cardinal McKesson, Amerisource, Medline. Those are, I mean it's almost silly to even call them competition. They are the nationwide competitors, I mean nationwide distributors who are taking care of the healthcare account. But in that there's so many holes, there's so many areas that you need improvement for when it comes to supply chain. And we really try to fill those holes as a secondary supplier for the acute care, like the hospital market, for the non hospital market. So more like your physicians, your medical centers. We are a primary distributor so we will stock all of their supplies to them and deliver on an as needed basis. But into the hospital market we're more of a secondary.

Host: Okay. And so your business in terms of growth is converting more doctors or private practices to use you as their primary distributors.

Guest: Yeah, I mean so that goes into the strategy that we are now looking forward to moving forward, which is going, it's growing some legs. It's being a more strong secondary for the hospitals with stocking capabilities. So really filling those gaps on an as needed basis per product categories that aren't being addressed by the primary, by their primaries and really solving the problem so that their supply chain becomes a lot more smooth moving forward. And that is a definite focus of ours right now because supply chain is just a disaster and it continues to be a disaster. And all the hospitals are currently saying we need to focus on supplier diversification. We're interested in local distribution and we're interested in transparency and supply chain. And those are things that we do very, very well. So that message be getting back and forth with the hospitals and all healthcare really in the Chicagoland area, which is where we focus, is really resonating and we're really starting to figure out how to be a more pertinent partner to these hospitals right now.

Host: So it sounds like the strategy is really sort of upselling and growing your footprint within existing clients, rather more so than going out and getting new clients, at least for the moment.

Guest: Yeah, yeah, yeah, yeah. Account penetration is definitely the game that we're trying to play right now. Again, we know all the hospital goals, especially after the last 18 months. They all know the benefit that we can bring to them. So it's a message that it's really turning into more of a partnership, which is where I think distribution should be going towards. I think historically a lot of people say this is an adversarial approach where, oh, you don't keep enough inventory and your prices are too high. And it's like, what are your challenges? What's the struggle that you're facing right now and how can we partner with you to fix that? Like, that's really what we're trying to focus on. And that message is really resonating right now. As a secondary supplier that's local in the city, we'll have this stuff delivered in two hours. That will guarantee stock levels. And with my new ERP system, I can show it to you that transparency in supply chain is huge right now. I will actually show you what I'm keeping on stock. If I tell you I'm going to keep 100 on stock, I'm going to show 150. I will share the information with you 247 that you can have access to. So those are really how we're trying to fix the holes that are currently in the market from the hospital's perspective.

[27:52] Host: So it sounds like a common frustration is that a hospital will be working with a distributor and they'll call that distributor to say they need 1,000 units of X. And then the distributor says, sorry, we don't have that in stock. And so it's just not a very reliable source of supply.

Guest: Often, yeah, two to three weeks is a term that is used very often that it's always two to three weeks. And it's hard, I don't say any of this to denigrate the nationwide competition out there. It's an impossible game to play right now. And I'm able to keep high stock levels because I'm playing the game in a smaller fashion. I only need to take care of Chicago. I'm not trying to take care of the whole Midwest. In the United States, it's not possible to actually keep those types of par levels. If you needed to distribute to the whole country, it's just not possible. But I can do that for the subset that I'm looking to take care of. So it's not a denigration of the other medical distribution companies out there. It's just that this is how we can support in that secondary role in our market.

Host: Yeah. So we all know the supply chain issues that are going on now. What was it like last year? Tell me what 2020 was like for your business.

Guest: Yeah, I guess. What was it like and what was the outcome from a financial perspective? And I find those to be two very different things that I'm still struggling to square away in My own psyche. But from a financial side, yeah, we went from a $2 million business to an $8 million plus business last year in one year. Now we're talking north of 10% on a profit margin. So it was 100%. All because of our ability to be agile and source. I spent a good chunk of my waking life vetting new suppliers or new connections or different manufacturers. I mean, I was working with the US President, Chamber of Commerce, talking about manufacturers in China and Malaysia, and it was not something I really ever want to go through again. And that's with me being on this side of the desk. I'm not even in, like, I'm not taking care of patients. My appreciation for healthcare is unbelievable. We didn't know if we could open our front doors and people were going into hospitals on a daily basis to care for patients. It's crazy. So anything that I've done is just behind a desk and with a phone. But yeah, it was challenging. And you have to give absolute kudos to the team of employees that we have here. I mean, there was times when the warehouse, we got 10,000 square foot here, every single square foot had pallets on it and we had trucks coming in. So we had times where we needed the truck to come pick up the 10 pallets to take it to the hospital just so the other truck could drop stuff off, just so that we could do that again. I mean, the logistics on this was absolutely crazy. And it's just as is the case in any time that there's chaos, there's just a ton of bad actors. So the information was just absolutely terrible. And everyone was out trying to get a buck at the time. And it was, it was very, very challenging. But that's again why we were successful, is that we would not say what we could do if we couldn't do it. Transparency, reliability, agility, and compassion, those are the core values of the company. And we stuck to that 100%. The mission of the company is to solve the supply chain challenges for Chicago's healthcare. And that was the all blinders only thing that we were trying to do for the entire year. The team here was just, just unbelievable. I'm in full on amazement of the employees here that were able to continue doing this in a day in, day out basis because it was tough. I mean, it was challenging. Every single hospital was in straight chaos and they would call and just straight yell at you, scream at you, cry, anything that was going to need it there. I can't imagine it from their perspective. They have employees that are going in that don't have the necessary precautions to be going into a nationwide pandemic. I mean worldwide pandemic. It was, it was a challenge.

[32:01] Host: So that's incredible. Mark, congratulations on surviving and on, on behalf of your customers and the patients that they were serving, you know, gratitude and thank you. It sounds like you guys really were working your tails off and being ethical and in a very murky environment where there was probably a lot of people being less ethical, less than ethical.

Guest: Yeah, I mean I highlight that side, but on the other end there's so much good. There's so many, there was so just. There's so many people that came together to work together in environments where they did not normally happen. There was different, different distributors who would say, I don't have this, you have this, this client's looking for this. It's like there was a lot of collaboration and that is where I see medical distribution going in the future. I see the end users having all of the information, the transparency in the supply chain. It continually goes more towards the users and collaboration happening on the back end. So it was like, I thought this was a beautiful. Of how this can work together. And I really think that, you know, over the course of time we will see, we will see more of that.

[33:07] Host: Cool. Well, going back to, I mean just the business itself. So last year you, you quadrupled the top line of the business. But that doesn't sound like that was just a one off. It sounds like some of that is going to continue on that it's you, the top line has permanently jumped up a level. Is that accurate to say? And why is that the case? Why didn't it just drop back down to where it was historically?

Guest: Yeah. So I guess one reason that you can't walk away from this is that the supply chain has still been a disaster for a good chunk of 2021. So 2020 was chaos. But we will have reverberations of this for multiple more years to come. And I personally still have boats that are still staying outside of Long beach right now, that single company under the sun. So it's anytime that there's that much chaos and confusion in the supply chain is an opportunity for my business because we are very agile, we are very quick to respond and again, we only need to take care of Chicago. So I think that plus that, plus the relationships that we've strengthened through the last 18 months, instead of me being like maybe fifth or sixth down the line of we're out of this, who do we call? I'm A pretty hard second phone call at this point. If your primary doesn't have something, I'm generally getting those phone calls at this point. And then also we're taking that strategy and putting it to play. So we're building that base of business of, look, you've called me six times in the last two months of this product. Would you be interested if I just kept 45 days of this on hand? You had it next day, guaranteed 100% of the time, and I'll show you my inventory in real time. That's a message that just resonates right now. I mean, no one's, no one's just being like, no, Mark, I'm not interested in that phone call right now. Because our incentives are very much aligned at this point. So the goal at this point is to take the resources from the last 18 months that we've been able to garner and put it right back into the business.

Host: In what way?

Guest: Yeah, so building up the infrastructure and building up the people. I have never been able to run a business that actually had financial resources just ready at hand to play with. And it's like, oh, now I have this. Well, I, well, I can do this with my ERP system. I can hire an executive vp, general manager, I can hire this ops person, I can hire additional hospital reps, non acute care reps. And it's all of these things that historically would have been not even a pipe dream. Like, I never even thought about that before. And now it's, well, I have the resources. Let's put this into play. Let's work with that marketing company that can help us, help us hone in on our message and how do we share that with the hospitals, how do we improve the website? All of these things are what we're working on right now. And it's just, I mean, it's fun. I mean, I truly enjoy the building aspect of what we're putting together right now, especially with the team that we have in place, which is actively growing. It's just, it's exciting. Last year was never fun. There was never a good point of last year. But now it's build mode. Now it's how do we take these resources and put them into play most effectively? And it's a pleasure.

[36:09] Host: Mark, in let's say 2019, how many employees did Howard Medical have and how many are you expecting to bring on? Give me a sense of the bodies and how much you're growing ratio from before and previously. I mean, coming up and before.

Guest: Oh, for sure. We have definitely had fluctuations in employees. And even this year, we've had people that have left the company. We unfortunately had one individual pass away this year. And it is a constant, evolving thing. But historically been like five to seven employees at the company we had, and we should end the year with 10 if we finish this off correctly.

Host: Okay. Okay.

Guest: Yeah.

Host: Well, so you will have grown by about 50%, plus or minus.

Guest: Give or take.

Host: Give or take.

Guest: And I would say the different types of employees. Right. So it's generally been just me in a very flat organizational structure. But with the resources, I can bring in something that's significantly better than me at running operations, I can bring in some of that significantly better than me at growing sales organizations. So even though it's not like 50 employees, the structure is just completely different than anything I've ever been able to be a part of before. And that's very exciting.

Host: Going back to the acquisition, what did you perceive as being one of the biggest risks? What were you worried about when you got in there on day one?

Guest: Yeah, that's a great question. Well, I. I have this thing where when I'm facing a decision, I will generally try to imagine the worst possible scenario, and then I will put myself 100% into that situation just so that I can say, okay, if this happens, what am I going to do now? So when I was thinking of worst possible scenarios about buying a business, it was pretty dark, especially because of the information that I had taken in. With 70% of businesses failing to the second generation families being blown apart. So I was very concerned about one just failure. Just if I try this and fail, like I'm a failed entrepreneur, like, this is not something that I was able to do with my life. And just that type of failure scared the crap out of me, which in hindsight is crazy. Most people that are successful failed at 100 different things before they found that one that worked. I just didn't know that at the time, but I was like, that one was terrifying to me. I was really scared that if it didn't work, my family would disown me. And then my brother and my sister wouldn't talk to me anymore. And then I'd force my parents back into the workforce after they retired. That was a very real threat in my head, and that was a tough one to square away. But that's the experiment that I did. If I really put myself into this. Let's say that happened. Let's say you took this business over in two years, it actually fell apart. My parents aren't going to disown me, we're going to figure this out. My brothers and sisters are still going to support me. There was no real avenue there that I could actually foresee where those negative thoughts in my head would come to fruition. And when I played that exercise through and realized that that was the case, then I was like, okay, so the only real Dante is that you fail as an entrepreneur in your first go. I'm personally okay with giving this a try, if that is a possible outcome.

[39:28] Host: I will say, though, Mark, there is a certain additional weight on your shoulders of buying the business that you and your siblings have worked in, your mother worked in, your dad founded. So even though, even if things went completely south, your parents weren't going to disown you, your siblings weren't going to disown you, there would still be much more psychic damage than if you just bought the business from a stranger.

Guest: Correct.

Host: So there was still some familial pressure there, even if your family wouldn't have straight up disowned you. And I imagine that that was something that you had to manage.

Guest: Yeah, I guess the way that I managed that was just with straight cockiness. I just assumed that anything that I was going to touch, I was going to be able to figure out. And I just had that real faith that if I give something 100% of what my time and my energy is, it will end up working, because that is just a belief that I personally have always had in myself. And you really needed that because. Yeah. No, what you're saying is, to be fair, it still scares me. I'm making decisions right now that I'm putting a lot of resources back into the company right now. If we don't continue to scale and grow this company, we would not be operating at a profitable level. If we went back to 2019 levels based on what I'm putting into the company right now, that's a risk right now. So those thoughts. I still have those thoughts. I don't know if those are ever really going to go away. I did have the support of my mom and my dad. I did have the support of my siblings. And it was a combined effort, if you will. It's not like I bought the building and my dad was like, okay, I'll see you later now. So they were with me. But I will say that first year, I did nosed out that revenue real hard.

Host: Yeah, it was a rocky start. So tell me about that. I mean, you told me offline, but tell the people about year one.

Guest: Yeah. So I guess that utmost base, that faith that I had in myself got pushed pretty hard in 2016. Yeah, we had done. I think it was like 1.6 in 2015. I took that down to about 1.45, which was not profitable in my first year in business. And that was dark. That was not a. I mean, if it wasn't for last year, I would say that was one of the darkest moments of my entrepreneurial journey that I've had. Getting to the end of 2016, looking at my income statement and balance sheet, seeing a negative number and being like, that's all I did was my year. That's all I did was this business, and I didn't make a dollar. That was crazy to.

[42:16] Host: Well, what happened? Why did their revenue dip?

Guest: Yeah, that's a good question. A lot of the clients that we had were relationships that my father had had for 20 plus years that I just assumed would transition really easily to me. But they looked at it did not happen as easily as I thought it was going to. So a lot of those relationships didn't transfer over to me. And because of that, we definitely saw some sales slide. I think a lot of people, if they had issues, they call Ross, and Ross would take care of those issues. And they saw this young kid come walk into the door, hot shot, thinking he's gonna go run the world, put the new ERP system and all this stuff. And, you know, to be fair, they were right. I really had no clue what I was doing at that time. And I. And I did not transition a lot of those relationships as well as I. As I could have.

Host: And then what happened in 2017? How did you. How did you claw back? Or did you. I mean, what did you do January 1, 2017, to write the shift?

Guest: Yeah, claw back would be a great term. I remember because I was living with a couple of my high school buddies at the time, and it was New Year's Eve, and I'm sitting there and I was just crushed because I was looking at my numbers and I don't know, they both kind of looked at me and just said, mark, there's no world in which you don't bring this back. It doesn't exist. We know you. We know what you're going to go do right now. You may not have that faith in yourself, but you're not going to fail at this. Like, you're going to figure this out. So get that out of your head and just go do it. Stop. Stop doing this. It was basically the message that they threw my way, and that was huge for me personally. So Then I was like, okay, I really don't understand the numbers. There's a lot of parts of business that I thought I knew before, but I really had no clue on a lot of this stuff. And I reached out to the sba, so they have an emerging leaders program through the Small Business association, which was a four month program. And every other week you'd sit down with a group of other business owners and you would kind of go through those, the steps of business. Like, we're going to talk about finances, we're going to talk about marketing, we're going to talk about operations, we're going to talk about sales. Like a month on each thing there are books and resources. My way we got to talk about it. We do presentations in class. I learned so much that year. I mean, it was unbelievable. Just talking about your strategy or message. I mean, we had 17 different segments of clients that I calculated in 2017. And we were just really thin everywhere. We did nothing exceptionally well, and we did everything. And it was really hone in what are your strengths? What are you the best at that you can do moving forward? And that class through the fda, which was a free program by the way, was unbelievable. So that for me helped tremendously to get the feedback underneath me. So then 2017 got back up to that 1.6 level, got up to 1.7 and at 1.8. So we actually had our feet underneath us by, by 2020, which was huge. Because if we would have had that opportunity of anything that you bring in, the door is going to go out the door with no money. It wouldn't have mattered. I wouldn't have any money. I wouldn't be able to turn business. So those couple of years to really get my feet underneath me, understand how to run this business, understand all the aspects of it, you need to, that was definitely very beneficial.

[45:26] Host: What was it in those SBA classes that was the. That you learned and helped you kind of develop a strategy for, to correct things and put you on a stronger footing and path.

Guest: Gotcha. Yeah. Yeah. I mean, like the biggest one was I read this book called Managing by the Numbers. And I never, never read this before. And this is like a 200 page book. And it really just walked you through start to finish. What financial literacy looks like in a business. How does your cash flow statement tie it to your income statement tied to your balance sheet? Just really basic things that I didn't understand. I mean, I didn't. No, I graduated with an entrepreneurship degree. I didn't run those types of numbers when I was doing college Pro. The math was just different. It was just an easier way of going about it. So that right there, now I'm able to sit down and actually look at my numbers, understand how to segment the markets that I'm selling, to make decisions based off of that. Those types of things in the first few months of the program were crucial to me. I do think that to give advice to anyone that's looking into this space is that so much information exists in the world right now. You can find the absolute expert of an industry and they will have probably put a blueprint out on their body of knowledge that you can just go read for free. You can go watch these YouTube videos of the experts of an industry, talk about their industry. I mean, the breadth of information out there is just unbelievable right now. It's almost overwhelming and it's a beautiful thing right now. So I really think that if you have a whole lot, the ability to fill that quickly is just easy. If you have the energy and the wherewithal to go track that information down and learn it.

Host: You had also mentioned that you worked with Cultivate and had like weekly calls or maybe it was bi weekly calls. So tell me what that was about.

Guest: Yeah.

Host: And when did those start?

Guest: Yeah, no, for sure. So when I was running the college program, my general manager, his name is Dan Groman, him and Casey, a fellow general manager, went and started their own business advisory company called Cultivate. So in the middle of 2020, I'm absolutely swimming. We're actually making money now, but I am working every second of the day and I'm doing everything reactively. I'm not proactively making decisions. I really, really am treading water at that point. And I was just like, I need help. I need to talk to someone. I need help. At this point, I reached out to Dan and he was like, absol know the woman I'm going to put you in touch with. She's fantastic and so huge. Shout out to Dan Groman and Autumn at Cultivate, because I started talking with her once a week and it was their work on the business, not in your business. That's a really throwaway phrase that everyone uses that. It's unbelievable how important that is because I will just work, I will just put my head down and I will never look up to breathe, ever. So this once a week, taking two hours to say, okay, what decisions are you trying to make? What is your ultimate goal with the company? What should we really get done from this Friday to the next Friday that will help you get closer to your vision of the company. I mean, just things that I was not doing. And then from her perspective, it was pretty clear. She goes, you have resources and you have no time. Go hire, go hire, go hire an ops person, go hire the salesperson. And it seems like incredibly obvious after the fact, but it just wasn't for me. I would still have my nose in the grind of never looking up. Yeah, I cannot say enough about their services and really Autumn in general, because it's been just absolutely tremendous to work with her.

[49:07] Host: What would you say, Mark, to somebody considering buying the family business or buying a business from a parent? Any advice for somebody like that who was in your shoes a few years ago?

Guest: Yeah, that's a great question. And honestly I love talking about it. So I wish that I had resources to pick brains of when I was trying to do that. And I actively looked and I could not find it. And now there just are networks that are available. You can reach out to me personally. I can guarantee you I will give you two hours in any one of my days to just sit and talk about it. Because I love this stuff. I love talking about businesses, I love talking about acquiring businesses and what you can do with them. I would really say that if you're interested in just find the resources that are out there and available to really find out what you want to do. That's the whole thing. Is this going to get you in your life where you're trying to go to? I think a lot of people don't really have that understood, so that's probably where you'd really want to start. But yeah, I think just understanding that the resources are out there to help you with that decision process and go after them.

Host: Was there anything, Mark, just to wrap up that you've alluded twice now to that statistic that 70% of second generation businesses fail. Was there anything you think that you did to put yourself in the 30%?

Guest: That's a very good question. Again? Well, I really have it. When my back's against the wall mentality, I'm just going to keep going until it works. And I think you have to have that as an entrepreneur because no matter what business you're in or, or really in life, your back is going to be against the wall when it comes to it. No business runs smoothly. No business is just up, up, up every single month. And it's. When you get to that point, what are you going to do? Do you have a network of friends that will help push you in the direction that you know you need to get to. And then I think just having that really utmost faith that you're going to figure it out when it, when it gets to that point that you have to have that if you want to be able to push through those dark times, that's great. Although at the same time, I will say I don't think if you got something that's not working for you, you shouldn't just put the next 20 years of your life towards something. You should always know what the ultimate goal of what you're trying to do is, if that makes sense.

[51:26] Host: Mark, you just generously offered to give people two hours of your time, words you might regret. How can people reach you?

Guest: I can guarantee I won't regret it. I mentor for this company called MHUB here in Chicago and these people. RJ, I'm like, I'd love to get 20 minutes on your calendar, discuss this idea and then we just talk for an hour and a half because it's fascinating. I love entrepreneurs. I love people that are building and growing and bringing new ideas to market. It's just, it's just fantastic. Yeah, me personally, my email address, I'm on it like a hawk. It's Mark M A R k@howard medical.com. i'm also on LinkedIn at. It's just Mark Lytton.

Host: Great, Mark, this was a really fun interview. Thanks for sitting with me and telling me the whole story of buying a family business, getting through Covid, quadrupling top line revenue. A lot of fun details to this story. So have to circle back with you again in a year and see where things stand.

Guest: Absolutely. No, Will, I definitely appreciate that opportunity and I really appreciate you putting this kind of content out there. I really, really wish I would have had more of this when I was, when I was working.

Host: Well, I'm glad it's helpful and entertaining to you now and I appreciate the compliment. Thank you, sir.

Guest: Absolutely.