Buying a Job to Build a Business

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Will Smith: Trades Businesses are of course a popular option for entrepreneurs buying businesses. But usually the acquisition entrepreneur doesn't have experience doing H Vac servicing or plumbing. They're going to rely on the team that they acquire to actually deliver the service being sold by the business. That is the pattern that we see over and over. Well, today's guest took a different approach. Matt Raila was working as a rookie business broker and he had this listing that had generated a ton of interest, but no buyers could ever actually get serious about it. It was a termite inspection business in la. Retiring owner, nearly half a million dollars. In sde, deep network of referral business built over years, and a seller he'd built a lot of mutual trust with. So finally Matt asked himself, what if I buy this business now? Doing so meant being willing to do the work himself to learn the trade, to become a termite inspector, which if you don't know anything about that particular business, means crawling under houses with the bugs and rats. But of course that's not the end goal. This is but the first chapter in building a termite inspection empire in LA county and beyond. And it's valuable to hear why Matt is deciding to work so in the. Business for a few years rather than. Racing to be working on it. Here he is. Matt Rahla, owner of Top Termite. 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. What do the following Acquiring Minds guests. All have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator and community for people serious about buying a business. But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120 with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker. Deibel, author of Buy Then Build, the. Book that introduced so many of you to the very idea of buying a business. The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions and an active community of serious searchers. Check out acquisition lab.com link in the notes or email the Lab's co founder, Chelsea Wood. Chelsea at Buy, then Build. Com Matt Railla welcome to Acquiring Minds.

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Matt Railla: Yeah, thank you for having me on. I appreciate it.

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Will Smith: Matt, you had a stint as a business broker and during that time you. Had a listing A popular listing, but one that just wouldn't sell until you bought it yourself. We're going to hear that story today. But start us off with some background first, please, Matt.

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Matt Railla: Yeah, absolutely. So, just a brief history on my childhood. I grew up with entrepreneurial parents. My mom had a corporate job, but she also opened up her own hot sauce store in Los Angeles. Had that for about five years with a partner. So that was cool, seeing that as a kid. You know, having my mom has her own hot sauce store, that was unique and fun.

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Will Smith: Matt, what's a hot sauce store? So just for Rachael.

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Matt Railla: Yeah, yeah, it was a retail store and she sold hot sauces from all over the world. Basically, the. The whole store is lined with hundreds of different kinds of hot sauces. And how funky.

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Will Smith: So was this like a. I mean, that's obviously an entrepreneurial venture in the sense that she had kind of. It was an inspired idea. She thought there should be a store devoted just to this, because I've never heard of such a concept.

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Matt Railla: Yeah, it's. Yeah, it was fun. And then she had like spicy ice cream and jalapeno infused pretzels, and it was really cool. I mean, a lot of celebrities went in there because it was, you know, they're great for like gift baskets and corporate gifts, things like that.

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Will Smith: Oh, how cool. What was the place called?

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Matt Railla: It was called Fire Alley.

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Will Smith: Fire Alley. Perfect. And was it. You said it survived for five years. Was it. How lucrative was it or not?

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Matt Railla: I. I don't think it was very lucrative from that standpoint. And the only reason they closed it down was because her partner was. Got pregnant and didn't want to do it anymore. And my mom, you know, she. There's three of us. She was raising three kids. She was a single mom, so she didn't really have time to continue it on her own, but I think she just had a lot of fun with it. She just has that, you know, she had that spirit. Entrepreneurial spirit.

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Will Smith: That spice, if you will.

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Matt Railla: Yeah, exactly. The spice. And then my dad has also been an entrepreneurial for as long as I can remember. He has his own construction business and then he's dabbled into a few different other businesses. He helped start a indoor rock climbing gym, and he owned that for a while before selling his stake in it. And then he owned a winery, which is where kind of my entrepreneurial journey starts. When I was, I think 24 or 25, he had this winery and. But it was just a label. They were just selling wine up in Northern California. He had A. He had another partner that he was working with on it. And around 2013, he decided he wanted to open up a tasting room and grow the business. And so I decided to move up and help him open up the tasting room, help him get started. And I, I wasn't really thinking I would be a part of it. I was just going up because, you know, I. I played soccer after college. I played semi pro and was kind of figuring out what I wanted to do next. So I didn't really have a plan. So my dad just presented me the opportunity. So I went up and then after about a year, my dad realized that his partner, previous partner, had been embezzling money and, you know, doing some shady things. So that partner left. And then my dad went to me and said, hey, do you want to take over and run this winery, this business, this tasting room? And I said, sure, I'll do it. I'll, you know, I'll jump in. And for about six years I ran the winery. And that was my, that was my life for a long time, was handling the wine production and um, handling the. Managing the tasting room, selling the wine. I was selling to, to restaurants directly. I was working with a wine broker. And towards the end of it, we. We actually got into Costco, which was, which was a really cool win for us. Even though we didn't make a lot of money, it wasn't a very profitable. It was actually a failing business from the beginning. But that is as I learned I was. I had a lot of naivete going into it of just not knowing much about the wine industry. But as I learned after six years of being in it, like most wineries are lost leaders. Like none of them really generate a lot of profit unless you've been there for 70 years and you know you own vineyards and you know you have a mass production going on.

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Will Smith: Well, it's the. Right alongside restaurants. It's the kind of classic vanity business that rich people will. Will have. Have A winery sort of thing doesn't need to make money because they're already rich. Right, of course. And makes it a horrible business for the actual entrepreneur who does need to make a. Make a profit from their business. And just for the. For those who are not familiar with how it works, including yours truly, I think this is right. Winery and vineyard. Vineyard is the actual. Is the actual owner of the grapes, harvests the grapes and produces. Produces the raw materials of the wine. And then a winery is the label is, is the. Is the one that produces the final branded bottle of wine. And that can be integrated. I mean, there, obviously, I'm sure there are plenty of wineries that have their own vineyards, but in a lot of cases, there's this, there's this separation there. So you buy grapes or buy juice and then label it, and it put it out as your own brand. Right. And so you guys didn't have your own grapes. You get. You guys were just. Yeah, okay.

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Matt Railla: Yeah, we, we, we purchased the grapes directly from vineyards and we kind of had a niche. We were specializing in small vineyard zinfandels. So, like, we would find, you know, an acre of Zen that a family just planted on their property in Northern California, and we'd buy the grapes from them. So we'd be the only one sourcing from that vineyard, which made it kind of unique and, and special, but wasn't a very profitable move. And looking back at it now, it's like I just made every wrong, you know, move you could make in trying to make a successful business in the winery. It was like I chose like a niche varietal that only, you know, small pop, you know, a small amount of wine drinkers actually drink on a regular basis. And it, but it was fun.

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Will Smith: Zinfandels aren't popular. I mean, that's, that's my go to.

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Matt Railla: Yeah, no, it's a great wine, but like, in the wine world, they kind of, you know, people look down on Zen. They're like, oh, that's just like, you know, the blue collar wine. You know, it's not like.

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Will Smith: I had no idea.

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Matt Railla: Cab or a Pinot, that's like delicate and, you know, it pairs and it's looking as like high class, high end wine. I think we're like the only winery in the area that did that, that just like made zinfandel.

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Will Smith: And what, what town was your tasting room in?

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Matt Railla: We were in Forestville. So. Small little town. Yeah, it's in between Sebastopol and Guernville in Sonoma County.

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Will Smith: Oh, oh, so, okay, so Sonoma. I was thinking Sonoma County. Yeah. Yeah. Love it over there.

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Matt Railla: Yeah, beautiful. I. I love living there. It was, it was a great time. Just didn't make any money. It was, you know, and I had like this kind of ignorance of, oh, I'm gonna build this winery up and sell it. That was, that was my dad and I's kind of long term vision. You know, we're gonna, you know, create this mass following, get this huge wine club membership list, and then sell to someone or to another winery that wants to expand. And we always had that Mindset, but I had no idea of how to get there or how to accomplish that goal. I was just kind of throwing mud at the wall and just seeing what stuck. And I was actually one of the first wineries in the area to do canned wine.

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Will Smith: I'm not familiar. What is that can? Like, like.

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Matt Railla: Yeah, put wine in a can. Aluminum? Yeah, like aluminum can. Just to see if that would, you know, strike a chord, you know, make us, you know, get us in. Into the spotlight. But it didn't. Yeah, I mean, it was a great product. People loved it. It was, you know, it worked great for, for what it was, but we just didn't have the means of getting. Working with a distributor. We just were too small and so really fast.

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Will Smith: Doubling down on the blue collar vibe of Zinfandel by putting it in a can.

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Matt Railla: Yeah, exactly. Yeah. I mean, we were going after kind of the young, hip crowd that we had artwork on all the labels. My sister did the artwork. So they're very modern looking, very artistic and bright. So very pretty much the antithesis of your, you know, classic wine label.

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Will Smith: Well, I have to say, Matt, your parents do have a. Have a taste for fun or ostensibly fun businesses, from a hot sauce store to an indoor gym to a winery. I mean, this, this sounds great. Spoiler for the audience. You bought a termite business. So you chose. You chose a not fun business, but an awesome business nonetheless. Anyway, figure I'd call that out. Carry on.

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Matt Railla: Yeah, no, that's a great point. So fast forward to the pandemic. And actually just before the pandemic, around January, we were actually packaging our winery to try and sell it. It got to a point where I was like, I can't do this anymore. I can't live not making any money. And this is like, the writing's on the wall. This is a failing business. I need to get out. And my dad agreed. So we were working with my brother in law, who's a business broker, or he had just become one. And so he was helping us, you know, kind of package it and figure out the valuation and, you know, try to, you know, find a buyer for it. And then just as we were about to put it on the market, the pandemic happened. And so obviously everything shut down. The tasting room shut down. And then we had the fires in 2020. So no one. And because of the smoke, no one was able to harvest or barely anyone was able to harvest that year in 2020 in Sonoma county and Napa. So it just, it was just like, okay, that's it we're, you know, we can't survive another year.

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Will Smith: Yeah.

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Matt Railla: In, in the red. And so we decided to just dissolve it. My dad owned the building that we're in, so he sold the building and then we sold off the rest of our inventory to Costco, got rid of it for super cheap. And then I moved. My girlfriend was going to law school, so she got into law school in Los Angeles and so we decided to move back to LA in 2021. And I had to figure out what I wanted to do next. I had no idea.

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Matt Railla: So I was 32. Okay. Yeah, pretty, pretty late.

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Will Smith: Starting over.

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Matt Railla: Yep, starting over from scratch, which was obviously very mentally taxing, draining, overwhelmed. Just like all the negative sides to that, you know, came pouring in and obviously it took a toll on my relationship and. But my girlfriend was very supportive.

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Will Smith: Really was. It was an emotional low point for you. You were having a hard time psychically.

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Matt Railla: Oh yeah. Probably the lowest point I've ever been in.

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Will Smith: Okay.

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Matt Railla: Yeah, absolutely. Because before that I already, I've always known what I was doing every day, what I wanted to do.

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Will Smith: Yeah.

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Matt Railla: And now here I am, no idea what I'm doing. And so. But then I started thinking about it, talking with my girlfriend, she's like, oh, why don't you get into real estate? And then I started thinking about commercial real estate. I was like, that's kind of interesting. You know, I think I can get into that. And I had some friends that were in commercial real estate, started talking to people, making phone calls. And then finally I talked to my brother in law who was in commercial real estate. And then he switched over to being a business broker in North Carolina and was talking to him and he gave me the idea. He's like, hey, why don't you be a business broker? You Know, you already worked with me on it. You know, you tried to sell your winery. You kind of have a taste for it, you know, kind of know what to expect. And I was like, oh, that, that sounds like a really cool idea. I think I could, I think I could do that. I kind of like that. And so I, from there I just jumped straight in. I got my real estate license as soon as I could and.

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Will Smith: You got your real estate license, the idea that you're becoming a business broker.

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Matt Railla: Yeah. So in Cal, in the state of California, in order to be a business broker, you need a real estate license. So I got my real estate license, was able to get in contact with a transworld business broker in Los Angeles who had just opened her office. So I was the first agent that she signed on and she was new to being a business broker as well. So I just jumped in, became a business broker. Uh, this was in late 2022, so like the end, like November of 2022 and just went all in. Like this is what I'm going to do. I have a five year plan. I want to, you know, sell businesses. I want to become a broker myself. I want to get my broker's license. And that was kind of my vision.

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Will Smith: And Matt, what does a business broker who's successful make every year?

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Matt Railla: That's a great question. I think it's a wide range. I mean it depends on your deal size. So if you're selling and the percentage Commission is around 10 to 12% for a business broker, and then obviously you got to split that with your broker. I would have to split that with my broker. So I'm getting about 6% on a deal. So if you sell a couple of million dollar listings, you know, that's, that's great income right there. But what I, I did understand, and I knew going into it that everyone told me you're not going to do a deal in your first year. It just, it takes too long to, to complete a deal takes about 12 months just to close a deal. So in your first year, you're just trying to get listings, you're just trying to get inventory.

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Will Smith: Well, and unlike being in the real estate business, so many of the listings in the business brokerage world, so many of the listings that we all, everyone listening sees on biz Buy, sell will never sell. I mean 75% of those or more will just never sell. Their priced incorrectly or most commonly of all, they're frankly just unsalable businesses. They're not appealing businesses. And even if they were, there are also low Revenue, low sale price businesses. So while on acquiring minds we talk about you know a million dollar business which might have 3 or 350 STE being a really small business. In fact not even half of business easily not even half of businesses on biz buy sell are selling at a million. They're selling for six figures. They're so I mean you'll see plenty of 1000-002000-00304, $500,000 businesses. You know the little restaurants and the you know the this is and that's really, really small stuff and that's pro and you know that. So anyway, so it seems like a really hard way to make a living.

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Matt Railla: Like again, I think I went into it a little bit of being naive and kind of over optimistic and I but I just believe that If I go 110 in that something will happen.

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Will Smith: Yeah, well and I didn't mean to. Suggest you were, you were making a bad decision. I'm just, I'm just putting myself in the shoes of. And it's, and it's, it certainly also seems like one of those where 80, 20 where I mean we, we've heard about this from countless guests and you can just. I've observed it in just looking at listings in my own geographies where 20% of the brokers are doing 80% of the listing. So if you become one of the main guys in your geography, one of the main brokers in your geography, those they probably are getting higher quality listings, more of them and are probably doing having a decent living. But you know, 80% of brokers are not. You got to get break into the elite 20% and if you don't it's going to be a long slog.

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Matt Railla: Right? Yeah and I was prepared for that mentally of it's gonna be a long, it's gonna be a long road to get to where I want to be. So I you know my plan was to sell at least four or five businesses within two years and then get my broker's license and then eventually have my own territory, have my own broker's office where I have agents working underneath me and then look to start acquiring my own businesses. Because I have obviously a first look at the business. I have an inside look. So purchasing a business was on, it was on my mind but it wasn't, it wasn't in the near future. It was more far out. I was more like I'm going to be a business broker. That was going to be my, my identity.

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Will Smith: As it turned out it happened sooner than you thought. Carry on so you get in there and how does, how does year one or two go for you as a green business broker?

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Matt Railla: Yeah, so year one, I mean, I did get, I got some good listings. You know, I had, I had about eight listings. I would say maybe only two or three of them were actually like good businesses that were sellable. The rest of them were kind of just, you know, I'm just basically padding my stats, you know, I'm padding my, my inventory. And I kind of knew that I was, you know, I just wanted to have the listing so I can get experience working with buyers, working with sellers, understanding how this process works. But I, and I was waking up at, you know, four in the morning every morning doing dropping off drop letters at businesses. I probably drove to every part of LA county that I could go to where there's businesses and dropped off letters. Like, I was dedicated, you know, there I was doing everything I could to make something happen. And then I'm dealing with, I'm getting some buyers, but nothing's happening. Deals are falling out of. Buyers are falling out, you know, or they're, you know, rescinding their offers or they're not signing the Lois, or they're just, they're not interested. And it just keeps happening. And then fast forward to finding this termite inspection business. Amazing listing. I got it over email or I got in touch with the seller over email. He reached out to me. I had a conversation with him, said, hey, you know, you might as well put your business on the market now. You know, you never know what can happen. A year, in a year, you know, you, you know, you, you could have a health issue. Something can happen. And then you're, you're, you're trying to get rid of your business in an emergency situation which you don't want. You want to sell it when, when things are going well, the business is profitable, you know, it looks great on paper. That's the time to sell. And so he agreed. And so I took his listing. And because it's such a profitable business, I think his profit is close. It's about 450 to 500,000 in SDE, and he's been doing that for the last three years. And I was like, wow, this is gonna be a home run. I'm gonna sell this. And month like this, this checks all the boxes of what I think a buyer is looking for.

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Will Smith: And so I put on more about the business. I mean, Ste looks nice. What did he want to sell it for? Was he willing to part with it for a reasonable Valuation?

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Matt Railla: Yeah, I mean we, I, I valued it at 1.3 million and, and he agreed with that. He, he was totally fine with, with listing it for that price, I think because he knew it was going to, he probably knew more than me that it was going to be hard to find a buyer because it's, it's got to be a specific person that wants to buy this type of business. And you know, me being green, I didn't, you know, I'm just like looking at the numbers. This is a great business. You know, so many people are going to want to buy this.

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Will Smith: Well, and in fact you do get a lot of interest, so.

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Matt Railla: Yes.

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Will Smith: So tell us about the interest that you get, but why none of that materializes into any real buyers.

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Matt Railla: Yeah. So almost immediately from listing it, I'm getting private equity groups contacting me. I'm getting some of the larger pest control companies from like the Midwest contacting me, wanting to learn more about it. So I was having meetings almost every day with, with potential buyers. It was kind of overwhelming how much interest I was getting. So I was feeling good. I was like, this is going to happen. And as I was having conversations and they're asking questions about the business, about the seller, about the, you know, what type of pest control it is. It's a termite inspection business. So it's not necessarily reoccurring revenue. It's not, it's not like branch. So there's three branches of pest control. There's branch one, which is dealing with like fumigation and chemicals. There's branch two, which is household pests. So dealing with like rodents and bugs and things like that. That's where your reoccurring revenue is. We're branch three. So we're dealing with wood destroying organisms.

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Will Smith: So like termites, wood destroying organisms?

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Matt Railla: Yeah. So we're dealing with the structure of the house. So we're not going back to the same house on a regular basis to.

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Will Smith: Right.

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Matt Railla: We treat it once and we move on to the next house.

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Will Smith: Right.

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Matt Railla: So our business comes from real estate agents who are doing a home transaction and typically it's the buyer agent who hires us to come do the inspection. And it's happening during escrow.

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Will Smith: And so anybody who's bought a home, or almost anybody who's bought a home will recall that the termite inspection is one of the line items that you're paying for it before you sign on the dotted line.

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Matt Railla: Exactly. It's not required in California, but everyone does it because in Southern California, I would say majority of homes have Some form of termite issues. So you'd be wise to get a termite inspection. It's, I mean, it's, you pretty much need to in this area, which is great for this business. I mean, it's never going away.

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Will Smith: Yeah.

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Matt Railla: And that's what I, that's what I love about it. I'm sure other buyers loved about it. But there's no reoccurring revenue. So all the private equity equity groups, they left him almost immediately as soon as they heard there's no recurring revenue. They're not interested.

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Will Smith: And so when they pick up the phone and call you, what they're looking for is. What did you call it? Branch two.

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Matt Railla: Branch two? Yeah. Pest control. Just like household pests, you know.

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Will Smith: Yeah.

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Matt Railla: You, you have a schedule.

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Will Smith: Mosquito Joe's franchise, for example. Exactly.

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Matt Railla: You're servicing the same houses every week or every month. You have your route and you just get your text to follow that route.

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Will Smith: Yeah.

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Matt Railla: And you know, and you come in.

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Will Smith: And you spray and.

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Matt Railla: Yeah.

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Will Smith: Go to the next house. Yeah.

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Matt Railla: Yeah. So that's not us, that's not this business. And then I started talking to individual buyers. Some of them already have pest control businesses and then some are, I'd say majority of them were from the tech world. You know, a lot of tech buyers, you know, they made their money in tech and now they're like, hey, I want to own a home service based business that is recession proof, that is highly profitable. So this business checked all those boxes on paper. But then they, they start learning. Okay. They almost need to become a termite inspector for this to make sense. They need to step into the shoes of the seller and take and learn the business like he does. They can't just sit back and be an absentee owner in this type of business. It just, it just wouldn't, it would be too much.

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Will Smith: Why not tell us about the way this business operates, that it's not something that stick it, you know, buy it, maybe operate it for a while, but then it. Then you could put in an operator.

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Matt Railla: Yeah. So I think as an owner of this, you really need to understand the business and you need to understand everything that a termite inspector does. And then also you have to have those relationships with the real estate agents. So for a lot of the buyers, they saw the risk in that. They said, okay, if the seller leaves, all those relationships go away.

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Will Smith: Yep.

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Matt Railla: With the real estate agent and they, this new guy comes in who doesn't really know what he's doing. Real estate agents aren't going to trust that they're going to be like, hey, this guy, you know, doesn't know how to properly do an inspection or how to recommend treatment or wood repair, they're just going to call someone else. You know, there's no, there's no reason for them to stay with any termite company. You know, they can just move on to the next one. So there's risk in that.

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Will Smith: Sure.

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Matt Railla: And I, I think the risk was too high for, for most buyers.

[00:31:41 - 00:32:10]

Will Smith: Well, that they're right to push on that. I, those are the very things that I would be pushing on too. And, and you're going to tell us how you mitigated those risks. But the other thing that jumps out at me, Matt, is that the, if it's so tied to home sales, home transactions, obviously it ebbs and flows with the residential real estate market, which is notoriously cyclical and we happen to be in a terrible market as we speak.

[00:32:10 - 00:32:11]

Matt Railla: Right?

[00:32:11 - 00:32:13]

Will Smith: Yeah, yeah.

[00:32:13 - 00:32:35]

Matt Railla: So it is cyclical and there are ebbs and flows. But obviously we had his tax returns going back five years and even in this year, it's obviously down. But I think just being in Los Angeles, it's always going to be a market that's moving.

[00:32:39 - 00:32:41]

Will Smith: Of homes are transacting every year.

[00:32:41 - 00:33:15]

Matt Railla: Yeah. So we haven't really slowed down that much. We've slowed down a bit. I'd say we're about maybe 15% down from last year. Last year was their highest ever in the company's history. So. And there's a few reasons for that, but that are more related to being in Los Angeles specifically. But yeah, only being 15% down from their best year ever is, you know, not too bad for, for a down market and, you know, so.

[00:33:15 - 00:33:16]

Will Smith: Exactly. That's great.

[00:33:16 - 00:33:17]

Matt Railla: Yeah.

[00:33:17 - 00:33:19]

Will Smith: How many employees did the business have?

[00:33:19 - 00:34:12]

Matt Railla: So they have one office manager and then they had, they had three inspectors. So they had the seller and then two other inspectors. Unfortunately, one of those inspectors passed away last year, last March. So as, as I was trying to sell this, I think just, just before I tried to sell this business or, you know, became their business broker, he had passed away. So that I thought that that would hurt the business because, you know, that's an inspector that's not there anymore to handle the business, but they ended up maintaining the work. You know, really, the seller took on more, more, more jobs and they made it happen. So that was really interesting that they could.

[00:34:12 - 00:34:47]

Will Smith: I mean, because that would be the classic case where I would say, okay, so there's three technicians here. If one disappears for whatever reason, passes away sadly in this case or quits, then, you know, out walks 33% of your revenue. But it sounds like the two remaining guys, and namely the owners, scrambled to just keep taking, fulfilling orders. But on the other hand, that's also clearly not sustainable. It's basically not. Each of those guys, the arithmetic would be that they're basically doing 50% more work for the same pay.

[00:34:47 - 00:34:48]

Matt Railla: Right.

[00:34:50 - 00:34:55]

Will Smith: Although, excuse me, actually not. The seller, he's got one less person to pay, so he's making more. He's making.

[00:34:55 - 00:35:07]

Matt Railla: Yeah. And, and it's commission based. So the other inspectors actually was actually making more money because he, he gets a commission split of the jobs that he, he does.

[00:35:07 - 00:35:08]

Will Smith: Okay.

[00:35:09 - 00:35:20]

Matt Railla: Which is great. You know, I want the inspectors that work here like to make the money that they bring in. You know, I want them to make as much as they want to make.

[00:35:21 - 00:35:31]

Will Smith: And you use the word commission because the inspectors are charged with doing some sales themselves. They're encouraged to close business themselves.

[00:35:32 - 00:36:06]

Matt Railla: Yeah, it's definitely, I mean, it's their responsibility to sell their recommendation on the job. So if the house requires fumigation or local treatment or subterranean treatment, they need to be able to communicate that to the customer in a knowledgeable way so that the customer feels comfortable accepting us doing that work. Yeah, so it's, it's not necessarily like you're upselling. It's more of, hey, this is what my findings were. This, these are my recommendations. And here's why you need to do these recommendations.

[00:36:06 - 00:36:07]

Will Smith: Yeah.

[00:36:08 - 00:36:13]

Matt Railla: And so, yeah, it's basically on the inspector to get that job and close the deal.

[00:36:14 - 00:36:33]

Will Smith: Let's put a pin in that because we're getting ahead of ourselves. So the PE firms are not looking for this type of pest control business. The individual buyers aren't either, maybe for different reasons. And so how does your thinking about this business evolve and how does your relationship to it evolve?

[00:36:34 - 00:37:52]

Matt Railla: Yeah, so, you know, I was doing meetings. I probably did over 100 meetings and then probably about 30 in person meetings with the seller and buyers. So I'd bring the buyers to the seller's house and we'd have a meeting and they get to meet. And so through that process, I got to know the seller really well. I was spending a lot of time with him and his wife and at his house. And so I just, you know, got to see him and, and get to know him on a personal level and see how he operates his business from the inside out. And I just really connected with, with how he did things and I began to see how genuine of a person he Is. And that kind of allowed me to start thinking in a different way of like, you know, all these people are. Are walking away from this deal. They're not interested. Why, why, why couldn't. Why is this not selling? And then now I'm thinking, okay, what if I was the buyer? What if I could step in and work with the seller? And so I started asking myself those questions to see and see where it goes.

[00:37:53 - 00:37:55]

Will Smith: And how did he respond?

[00:37:57 - 00:38:38]

Matt Railla: He was kind of confused at first. He's like, you want to buy this business? Are you sure? And he kind of laughed at me a bit. And I just said, hey, let me go on a ride with you. You know, let me do a ride along with you one day. I just want to see what you do on a daily basis. I want to see if I can do the work that you do, if it's even possible. And so, yeah, I went along with him. And funny enough, you know, the first house he ever takes me to is under it in the sub area. It's probably the most difficult sub area he's ever gone on in 30 years. There's like seven different compartments that you have to crawl into and crawl out of.

[00:38:38 - 00:38:53]

Will Smith: Well, and Matt, just for some context. So basically what he does, what a termite inspector does, is get on their backs or their hands and knees to enter below. What do we call it?

[00:38:53 - 00:38:54]

Matt Railla: The sub area?

[00:38:54 - 00:38:55]

Will Smith: Yeah, the sub area.

[00:38:55 - 00:39:05]

Matt Railla: So we have to go underneath the house, crawl to. On the whole perimeter of the. Under. Underneath the house to check for termites and water damage.

[00:39:05 - 00:39:38]

Will Smith: And so you're crawling, you're on your. Or you're on your back or on your belly in the dark. In. I mean, just the farthest reaches under the house. Yes. So this is hard work, to put it, obviously. So go ahead. Okay, so you say. So that's why. So now it's much more. Maybe it's much more clear why he himself recognized this might be a hard business to sell. It's going to take a certain person to do this work.

[00:39:38 - 00:39:38]

Matt Railla: Right.

[00:39:38 - 00:39:43]

Will Smith: So you. And you recognize that. And so you go along on a ride along to see if you can. If you can hang.

[00:39:43 - 00:40:26]

Matt Railla: Correct. Yeah, I was like, let me just see before you get any further. Can I just crawl underneath a house or can I go into an attic and not, you know, get claustrophobic or freak out if I see a rat or a spider or something? And I went under. And yeah, it was uncomfortable at first, but then once you're crawling and you start moving, like, I just didn't think about it. Anymore. I was just following him, listening to what he's telling me, and I just was totally fine. And I was like, I got out and he told me. He's like, hey, that was probably the most difficult crawl I've done. And you survived it. And I was like, that wasn't that bad. You know, I thought it would be a lot worse.

[00:40:26 - 00:40:30]

Will Smith: And, Matt, describe the crawl again. You said seven something.

[00:40:30 - 00:40:38]

Matt Railla: What, Seven compartments. So, like, underneath that. Typically, when you're underneath the house, you. You know you can crawl anywhere. It's just one open space.

[00:40:38 - 00:40:39]

Will Smith: Yeah, yeah.

[00:40:39 - 00:40:53]

Matt Railla: But this was like seven compart, like, dug in. And they're like small compartments you have to crawl in and out of, which is very unusual. Still. I have not seen another house like that.

[00:40:55 - 00:41:23]

Will Smith: And so the kind of thing that you're testing for. Well, first of all, you're testing. I mean, it's dirty work. I mean, so there's that. It's hard work, physically hard work, and then there's basically the claustrophobia factor, I assume, and the creepy crawlies fear factor. Have I forgotten anything? Because a lot of things about this work, any of those might turn somebody away.

[00:41:23 - 00:41:34]

Matt Railla: Probably. The thing I like least about it is how dirty you get. Like, you're just covered in dirt and grime and spider webs. Yeah, I don't like that part.

[00:41:35 - 00:41:51]

Will Smith: That's not fun. Okay, all right, well, this is why he gets to earn half a million bucks a year. And now you do. Okay, so. All right, so you come out, you emerge from this first crawl, as you put it, and you say, there's something here. I can do this.

[00:41:52 - 00:43:18]

Matt Railla: Yeah. I was. The way I was looking, I was like, I'm thinking in my head, okay, I'm okay with doing work that other people don't want to do. This doesn't bother me. And then I'm thinking, okay, I. You know, this is an opportunity to do something big or bigger than what I've done before. And the. The best thing about it is I get along really well with the seller. You know, this is someone that I trust. This is someone that I look at as genuine. That's not trying to. That's. He's not greedy. He's not just trying to get over on people. Like, he's very honest. He's very forward, and he's not trying to hide anything, which I really admired. So I was like, okay, this is a perfect setup for me. This is someone who wants to mentor someone. He's looking to mentor someone. His kids don't want the business they Went off. And they're doctors and financial advisors. They went into the professional world. They didn't want to do dad's dirty work. But I'm looking at it like, hey, this is an opportunity to build something. I look at it as like, hey, I can turn this into a much bigger business. I can. Under his tutelage, I can bring that mindset to it.

[00:43:19 - 00:44:14]

Will Smith: Well, you just, in a word, captured so much of what the buying boring businesses movement is all about is having a vision that these businesses, while the actual work of the technician is hard, is difficult. It's a path to wealth that's been overlooked for a generation or two. And if you can become the owner and not a technician, then you also don't have to do that work. We're not oversimplifying, of course. There's still a lot to figure out. But that path, that trajectory and seeing these businesses from the perspective of ownership as opposed to practitioner of the. Of the trade is what this movement is about. And, you know, you're there. There you are, kind of. It's crystallizing for you, right?

[00:44:14 - 00:44:46]

Matt Railla: Yeah, 100%. It just. It became very clear, which I had been looking for, you know, for since exiting the wine industry. It's like I'm just walking in a cloud of fog, like, not really knowing where to go. And then all of a sudden, I find this. This clarity and a path to go down. And that was really motivating once I realized, okay, I can do this work, I see a path forward. And then obviously, now the hard work starts, like, trying to figure out, how do I make this deal happen?

[00:44:47 - 00:45:13]

Will Smith: Yeah. Yeah, I love it, man. That's really. That's really great. And. And so the seller, after kind of his initial reaction to your saying, well, how about I maybe look at buying this business? And he's a little skeptical, but he's warmed to you quickly and in fact, sees in you an heir apparent, a mentee, Just. Just the type of person, in fact, that he would have liked to sell to. Yeah, yeah, go ahead. No, go ahead.

[00:45:13 - 00:45:33]

Matt Railla: Yeah. I was gonna say also that his. His wife kind of pushed him along, too. Like, I think she. She saw in me the potential, and she. She really pushed for. For. For this to happen as well. She was very much on board, which I think helped a lot.

[00:45:34 - 00:46:44]

Will Smith: Well, I. I mean, from their perspective, they've. From both husband and wife's perspective, they've now seen the market reaction to this business. It's been out there for sale. They've seen a hundred buyers come through. They've talked to 30 in person and found what it sounds like the seller. Predicted which is that it was going. To be a hard business to sell. So their hunch that it was going to be a hard business to sell has in fact come true. This is going to be hard for them to sell. So they're probably much more open to any willing buyer than they were at the beginning of the process. And the willing buyer turns out to. Be the very person that's seen the. Ins on the inside of this business. I mean they trusted you. They, they now had gotten the same way that you built your, you trusted him and started to build a respect for him and how he operated. I assume that was reciprocated and they liked what they saw in you over those months. So it starts to feel like an alignment of the stars and in fact, wow, we better, if Matt really wants this business, we better grab him because it's going to be hard to find another buyer and a buyer that we like.

[00:46:44 - 00:46:46]

Matt Railla: Right? Yeah, that's a great point.

[00:46:47 - 00:47:40]

Will Smith: August Felker is a two time successful searcher. First with a traditional search fund. The second time around he did a self funded search. Today August runs Oberly Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under LOI Oberle will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberle is a specialty insurance brokerage for searchers by a former searcher. Check out oberle-risk.com O B E R L E risk.com link in the show notes. So how do you then envision buying it? Let's talk deal terms, structure.

[00:47:40 - 00:48:56]

Matt Railla: Absolutely. So at first my first thought is and I'm working with my brother in law Scott because he has experience doing deals and I'm working with him and my first thought is to do like 10% down and 90% seller financing. Like let me just present this to him and see what happens because in my head I'm thinking, you know, this is going to be the best way to do it. That'll, that'll give him incentive to stay around for, for a couple years and I need him to stay around so if I do seller financing I can pay him off, you know, over time and you know, we can make this happen. And he, he was not for that. He just said no, if we're going to do seller financing, I need 50% down because you know, I think he was kind of like, okay, if this new guy comes in and he doesn't work out, I'm not going to get paid. You know, if I come in and ruin the business, you know, he wants some insurance, you know, he wants some cash up front and which I totally understood. I, I was like, totally understand. I just thought I would try it, you know.

[00:48:56 - 00:48:57]

Will Smith: Yeah.

[00:48:57 - 00:48:58]

Matt Railla: See what happens.

[00:48:58 - 00:49:19]

Will Smith: Yeah. I mean a 90, 90% seller finance deal is, let's call it effectively, It's a fully 100% seller, it's close to 100 fully seller financed. And, and, and while some of the business buying gurus will tell you such a thing is possible, they are unicorn deals precisely because how few sellers are actually going to want to take that deal.

[00:49:19 - 00:49:19]

Matt Railla: Right.

[00:49:19 - 00:49:21]

Will Smith: But hey, you tried.

[00:49:21 - 00:50:35]

Matt Railla: I tried. So I went back to the drawing board and my brother in law connected me with a loan broker, Francis Miller, with, with multi Funding and he's the one who helped me structure the deal and he was awesome. I mean I, he was fantastic with, with, with me along the whole process. So basically what we came up with is doing a partial buyout with an SBA loan. And so it's kind of a new, new deal structure that SBA loans are doing where the buyer buys at least 80% of the business, seller has to retain at least 20% and they have to stay around for two years. So they, they have to remain in as an officer of the business for two years. And I was like that sounds awesome to me. That sounds like a great deal. And I, the buyer only have to put 5% down. So even better, I'm like, okay, I can make that happen. That you know, this is, this is a win, win for everyone.

[00:50:35 - 00:51:28]

Will Smith: And Matt, let me just stop you on that. So, so, so right. There were rule changes just A year ago, 2023 Regular listeners will have heard this talked about and rule changes at the sba. The biggest probably among them that, that you can now do these partial buyouts where the seller retains ownership in the business and it can actually really facilitate transactions where there are, there's license or licensure requirements which I think is the case here. You'll let, you'll let, you'll let us know. But your thing about the 20%, I don't, I didn't, I don't think I knew that part. So the, in a partial ownership SBA transaction, the seller has to retain 20. But you said the buyer has to retain, it has to buy. Go ahead 20 or less.

[00:51:28 - 00:51:37]

Matt Railla: It's 20 or less. Twenty or less. 20 or less. So we did 15. We did 15. So I bought 85, seller retained 15. And you only.

[00:51:37 - 00:51:40]

Will Smith: I think it just put 5% down.

[00:51:40 - 00:51:43]

Matt Railla: Exactly correct. Yeah.

[00:51:43 - 00:51:44]

Will Smith: You were gonna say.

[00:51:44 - 00:51:54]

Matt Railla: Sorry, I was just gonna say it just has to be. At least. It has to be under 20. 20 or under. For what they retain.

[00:51:54 - 00:52:06]

Will Smith: Fantastic. And. Sorry, did you say. Just rewinding a second. Did you say why you didn't end up doing the 50. 50 where the 50% seller financed. Because that would require you to bring 50% cash, which you didn't have.

[00:52:06 - 00:52:08]

Matt Railla: Yeah, right. Correct. Correct.

[00:52:08 - 00:52:23]

Will Smith: Okay, so we. Now we've arrived at an sba, frankly, pretty typical SBA transaction for my guests. Great. And. And what about now, the licensure here? Licensing.

[00:52:23 - 00:52:52]

Matt Railla: Yeah. So in order. You don't need a license in order to own a pest control business in California. You just need someone who holds an operator's license working within your business, which. The seller holds that license. He has an operator's license. So I can operate the business under his license until I get my own operator's license, which takes about four years to obtain, which is.

[00:52:52 - 00:52:55]

Will Smith: That's. That's a lot of time.

[00:52:55 - 00:53:10]

Matt Railla: Exactly. Yeah. And it. So obviously. No, you. You. Most people can't just step into this and, you know, become an operator of a pest control business. You need a lot of experience to do that.

[00:53:11 - 00:53:27]

Will Smith: Yeah. And that four years of. So is that four years of, like, classes, courses, formal education, or is it some formal education and then years in the fields that you're just have accumulated and can point to.

[00:53:27 - 00:53:58]

Matt Railla: It's more so in the field. And then you have to get education credits, and then you have to take a test. So I believe I can get my operator's license sooner than four years based on how many hours I put in as a field rep. So it is possible to do it sooner than that. It's just. You have to, you know, you have to do it a lot, which I am. So I'm hoping to do it sooner than that, but frankly, that's a lot.

[00:53:59 - 00:54:26]

Will Smith: More time than, I guess it suggests that there's a lot of skill in this trade, that there's a lot to learn. Is that true? I think most of us who know nothing about it would think, you know, you look for some evidence of termites on the wood under the house, and then when you see them, it just. It doesn't seem as technical as whatever, plumbing, let's say. But I'm naive. So tell me what it's like if.

[00:54:26 - 00:54:59]

Matt Railla: You have a construction background, you'll have no problem. So it's very much related to the construction of the house. I think what gets really technical is how termite damage relates to water damage, which relates to the structure of the house. So you kind of have to put all those things together. So we're not only looking for termites, we're work, we're looking for leaks, water damage. And then I need to be able to identify where that leak is coming from and then I need to be able to recommend how to fix that problem.

[00:55:00 - 00:55:00]

Will Smith: Yes.

[00:55:00 - 00:55:11]

Matt Railla: And, and so that takes years of experience to know that it's not something you can read in the book and, and understand. It's. It's just being on the field and being exposed to it.

[00:55:11 - 00:55:31]

Will Smith: Right. So if you've got, of course, so you've got. What happens with a lot of, with termite damage is right. Leakage and water gets around, which leads to all sorts of other problems. And then I guess if the termite damage is bad enough in particular places, it can present a structural problem. Like it can actually start to be a, a load bearing issue.

[00:55:32 - 00:56:01]

Matt Railla: It can, yeah, absolutely. It, that, that issue can come up. I don't see it too much. We usually catch the termite issues before that happens and, and we, you know, do the treatment so that it doesn't get to that point. Um, but if the, if we did find that the structural integrity was compromised, we would bring in a GC or someone else to fix that problem. It wouldn't be us, but we need to be able to recommend that that problem needs to be fixed.

[00:56:03 - 00:56:50]

Will Smith: So this brings us back to your commission based structure. The commission based structure of the business where you are paid a flat fee for the inspection. And then when, and if you find repairs that need to occur, you, you didn't want to use the word upsell, but you offer your, your services to repair, make those repairs. And so I guess there's, there's a band of repairs that you can handle if they become like you just said, if it's their structural integrity issues, you would outsource. You would hand that off to a gc. What, what sorts of, what does it look like the, the repair work that you guys do do? Like give us an example or two of what that would look like in size and scope and revenue sort of thing.

[00:56:50 - 00:57:13]

Matt Railla: Yeah, absolutely. Yeah. So the majority of the repair work that we handle ourselves is like rafter tails or fascia boards or posts on a railing, you know, just simple wood pieces that, you know, we can replace. You know, in a day we can handle that type of wood repair. Yeah, no problem.

[00:57:13 - 00:57:22]

Will Smith: So you cut out the offending piece of wood and replace it with a fresh piece of wood. Is correct, is what it often looks like.

[00:57:22 - 00:57:23]

Matt Railla: Exactly.

[00:57:23 - 00:58:07]

Will Smith: Okay, Matt. Well, I want to start wrapping us up here. What this story could be potentially is an entrepreneur buying a very small technician based business, becoming that technician himself. And then I assume the goal here is to grow it to not be just, you know, buying a job, but have a termite inspection empire across Southern California. You know, in your fantasies, I imagine those are they. Correct me if I'm wrong. And so if that's all right, how do you envision that playing out? How are you going to do that?

[00:58:07 - 00:59:21]

Matt Railla: Yeah, that's definitely all true. I mean, my vision is to grow the business and bring expansion into the game plan. So the way I envision it is slowly but surely. So right now I'm actually in the middle of hiring another inspector to bring onto the team. And then I want to bring on at least another two inspectors next year, along with another office person, you know, to handle all of the workload that's going to be coming in. And then I would say in the next five years I would like to expand territory, so opening another branch in another county, so expanding into Orange County. So that's kind of my longer term goal is to just expand territories, you know, branch out because we, we with termites, you want to stay close to the coast. That's where most of the, you know, wherever there's water, there's going to be termite issues. So we want to be in a coastal area. So Orange county would, would be an amazing territory for us down the road.

[00:59:22 - 00:59:42]

Will Smith: And help me understand this, the particular hurdle or challenge of you've got your seller who's a, who's a part owner in the business, 15%. He also holds the operator's license and he's there for two years or indefinitely?

[00:59:42 - 00:59:42]

Matt Railla: Two years.

[00:59:43 - 00:59:58]

Will Smith: And that was, that was part of your agreement with him? That was, that was written into the, into the purchase agreement. And so what happens at two years? He no longer has a job or he also, you buy his equity, you buy him fully out at that point. What happens at two years?

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

Matt Railla: In two years he's going to retire. So he's 63 now. So it just, the timing works perfectly for, for him to retire. And so what happens is, yeah, I'll, I'll buy out the rest of his shares at, at that point and then, yeah, I'll be on my own and so within those two years, it's really on me to build the team and get as many inspectors training underneath him as I can while he's here. So that's, that's the hurdle is I need people to work under him and be trained by him, because I call him Yoda. He's the Yoda of termite inspection. And I need to find a bunch of more Luke Skywalkers who are ready and willing to learn and be under his tutelage.

[01:00:53 - 01:01:11]

Will Smith: And just going back to the license piece, the operator's license. So wait, I thought it took basically four years for you to get it. You said you hoped that to be on a bit of an accelerated timeline, but yep, not all the way down to two years. So. So what happens at two years when.

[01:01:11 - 01:01:49]

Matt Railla: He retires, if, if I can't get my operator's license at that time, I can still use his operator's license underneath the business. So in California, the operator, whoever holds the license, they only need to be in the office like once every three months, so they don't need to be active in the business. It's like I can kind of operate under his license. Oh, and the other inspector actually holds an operator's license as well that's currently working for me, so I could use his license. Oh, okay. So there's solutions to the problem. Yeah.

[01:01:49 - 01:02:36]

Will Smith: Well, so then the question is, I. Kind of had the impression, Matt, that you were going to be doing the work of a technician of a termite inspector under your seller because you needed to get your operator's license. But if you don't, because the seller has it and he continue to can have the license, you can continue to use to operate under his license even after he retires and you've got a backup with your other technician. Why are you choosing to get in the business as opposed to just spend your time learning as kind of the sweet spot, learning enough about the business, but not actually getting under houses and instead spending time on hiring as many inspectors as you can, for example.

[01:02:36 - 01:04:11]

Matt Railla: Right. I think, I think for me and the seller, it mitigates the risk. If I can be an inspector, you know, worst case scenario, if one of the inspectors goes away, I need to be able to step in at any time and be able to fulfill that role. So I think it just mitigates risk in the long term, and then it's going to help me to be able to train once the seller is gone. I need to be able to train and new inspectors and be able to continue the work that we do. Because he, he's highly specialized. I mean it, the, the knowledge that he has is incredible. I mean it's 30 years worth of knowledge. And I like it just takes time to become a, an inspector on that level. You know, we're not, look, it's not something where you can just jump in and in a couple months you, you understand it. It's like it takes a long time to be highly skilled in this position. So I want to be highly skilled while he's still here, learn under him and then event. Yes. In 3, 4, 5 years be able to take a step back and focus on growth and not be a technician on a day to day basis. But if, if there's an emergency situation where I need to step in, I, I need to be able to be, be an inspector for a day or to handle a situation.

[01:04:11 - 01:04:47]

Will Smith: Yeah, yeah. Makes sense. And certainly to the extent that you're educated and trained and experienced in the field, the better you'll be able to basically understand every other facet of the business from hiring to estimating to, I mean to acquiring competitors maybe. By the way, why don't you, why don't you mention here what you mentioned to me on the pre call that this is a classic blue collar, fragmented boomer business where lots of your competitors are on their way out to their own retirement.

[01:04:47 - 01:05:50]

Matt Railla: Yeah. Which is, it's not something that I knew going into it, but being in the business now and learning and experiencing the industry, a lot of competing inspectors, like they're just retiring. You know, there's sole proprietors and you know, they're just retiring or moving or you know, just stopping business. And obviously that creates opportunity for me to continue this business and step in and bring it, the next generation into it. So yeah, it's fascinating that there's still so much work to do. Los Angeles is a huge market and the housing market's not going to die off anytime soon. So it's like there's, there's just so much work to be done and so much opportunity that you know, it, it, it's exciting. Yeah. It keeps me motivated every day.

[01:05:50 - 01:05:50]

Will Smith: Yeah.

[01:05:50 - 01:05:53]

Matt Railla: That you know how much work that needs to be done.

[01:05:53 - 01:06:50]

Will Smith: Well, the. Despite the fact that we, we Talked about how 100% seller financing deals are nearly impossible to find one context where you do hear about them happening and they're not terribly uncommon is a situation like this where you are now in the business and there's a retiring owner who's a pretty small shop, maybe just you know, a guy or two or three in his truck and somebody like that who might not have any other buyers and you're his competitor. You, he may in fact, and you now, you're in the business so you can demonstrate to him that you know what you're doing. You, you've successfully run a termite business for a year or two or three. And so his risk of selling to you is mitigated because he sees that you're a competent operator. He may be willing to sell to you for 100% seller financing and you can, you know, accumulate some, some more assets.

[01:06:50 - 01:07:08]

Matt Railla: Yeah, that's a great point. I hope I come across, you know, some, some operators like that and who are looking to, to retire and move on and I could step in and, and you know, help with that and then obviously help grow my business at the same time.

[01:07:10 - 01:09:55]

Will Smith: Great, Matt. Well, and let me just, so I just want to distill because I think that there are the, there's the outline here of a very common situation that people might encounter, which is a small blue collar business that's quite technical. And you as an outsider, a hungry entrepreneur who wants to buy this business is struggling with, you know, but I, I don't, I don't know how to run this business. And so there are, there are a number of ways to approach that. But just to distill how you're going to do it, you are going to become a technician, you're going to become a termite guy. You are learning at his elbow or at his, whatever the soles of his feet as you crawl under him. And, and you're going to, you're going to probably going to get your operator's license. So you are going to become a true technician and that'll make you a better operator, that'll make you a better hire. That'll just, as we just talked about, make you just understand every facet of the business. But in, you know, the three, four, five year plan is that you step up and out and then really start working on the business maybe almost exclusively. You'll, you'll drop in where you have to if one of your technicians calls in sick. But you'll mostly at that point be an owner and not a technician, but really deeply understand the business at that point because you will have been a technician for some years and. Yeah, and so I guess. So that's, that's one way to do it. Yeah, I think that's one way to do it. I think that for a lot of people listening, I still do think, Matt, that you are unusual in that you're so Willing to do the work. You know, a lot of, a lot of people are willing to get their hands dirty. But, you know, the person out there buying an H Vac business is not actually learning how to be an H Vac technician. There are, you know, so many of my guests who've done bought blue collars business. They're, they bring to the team a different value proposition. I can be, you know, I don't know H Vac, I don't know plumbing, I don't know landscaping. But I know how to operate a business. I know how to grow this. I know how to support you. I know how to help you do your job better. But they don't ever even entertain becoming the technicians themselves. And so your path is a little bit different, which is just notable. And I think it's, it's great. And so then zooming out, Matt, is this, is this what you think you'll do indefinitely? Is this from here on out? I mean, of course, you know, who knows what happens in 20 years, but for the moment, is this something where you see doing this as a chapter or something you see for the long run of your career?

[01:09:55 - 01:11:09]

Matt Railla: Yeah, it's, it's a great question. I think in the. It's both. I think this could be, you know, something that I can do for a very long time. As long as I can step out and away from the business and be able to just, you know, run it from afar. And I'm sure, you know, with my entrepreneurial spirit that I got from my parents, that I will look to get involved with acquiring other types of businesses or starting other businesses. You know, I'm not looking at this as like I have to do this for the rest of my life. This is the only thing I'm going to do. I look at this as an opportunity to grow something amazing and give me the opportunity to do other businesses and do other, other things that interest me on a deep level. So, you know, I'm not emotionally invested in it, in being a termite inspector. I'm more emotionally invested in how can I grow a business, how can I be better as an entrepreneur and then, you know, go from there.

[01:11:09 - 01:11:49]

Will Smith: Yeah. Well, Matt, I'll just one last observation, which is just that moment, how, how this opportunity provided you the clarity that was so lacking and you, you know, you were. Didn't know which way you were going to turn. I've often said that one of my favorite things about the path of buying a business is that it provides possibility where an entrepreneurial person might otherwise not see any and, and you really seize this. When it became clear the opportunity, you really, you really seized it and have gone after it, which is so awesome to see. Any themes we didn't get to. Matt?

[01:11:50 - 01:12:59]

Matt Railla: I think, I think a good theme. Theme is, you know, committing, committing 100%. You know, when I made the decision to go after and buy this business, I mean, it was a long road. We didn't really touch on it, but just the whole process of dealing with the SBA lender and getting the deal done was. It was pretty arduous and. But I committed to it and I followed through with it. And there was a lot of times during the deal that I thought it wasn't going to happen. Not because the seller didn't want. Want to sell or I didn't want to buy. It was more of just dealing with a lender and everything that needed to happen, you know, everything that needed to be put in order for it to happen. It was, it was just. Yeah, it was a crazy process. But yeah, committing to it and staying on top of what you really want. You know, being diligent about going after what you want and not giving up and not letting hurdles get in the way. You know, that was a big one.

[01:13:01 - 01:13:10]

Will Smith: And we. Was there a hurdle or two in your SBA getting this deal financed? That is a teachable moment. Anything to share there?

[01:13:10 - 01:13:50]

Matt Railla: Yeah, I picked. Honestly, the biggest hurdle was dealing with insurance. And I think just. I don't know if this is different state by state, but just being here in California, it was an arduous process and I wish I had started on dealing with the insurance sooner in the process. I kind of waited on that because I didn't know how difficult it was going to be. But just getting all the insurances transferred over to mining because it was a stock sale, it just. Yeah, it was a pain and it was really not fun. And I wish I had. If I do it over again, I would have done it differently. I would have been more on top of it.

[01:13:51 - 01:13:58]

Will Smith: Okay. All right. And the. It was a stock sale because of that operating license, I assume.

[01:13:59 - 01:14:03]

Matt Railla: Yeah. And because we did a partial buyout, so everything remained the same.

[01:14:03 - 01:14:04]

Will Smith: Right.

[01:14:04 - 01:14:08]

Matt Railla: We just transfer the stock over to mining the 85%.

[01:14:09 - 01:14:54]

Will Smith: Well, the, the audience will have heard when this airs just a couple weeks ago or just a couple episodes ago. Another Southern California, Louisiana based buyer of a blue collar business, a pool cleaning and service business. Similar situation, actually. Similar. Both quite small businesses. Although yours is actually a little bit larger, I think, in terms of SDE and partial buyout. Sba, partial buyout deals, asset. Excuse me, stock deals, license needs. So a lot of. A lot of parallels between you and Christiana Laugan. Awesome. By the way, I never got the revenue of the business. We just talked SDE.

[01:14:54 - 01:14:59]

Matt Railla: Yeah, it's about 1.8 million.

[01:14:59 - 01:15:02]

Will Smith: Okay. Matt, if people want to reach out to you, how do you prefer they do that?

[01:15:03 - 01:15:13]

Matt Railla: Definitely over email. It's a great way to reach me. I'm. I'm not too active on social media. Yeah, just matt@toptermiteco.com.

[01:15:15 - 01:15:45]

Will Smith: Well, Matt Railla, I congratulate you on finding a path that you are charging after. Seems like there's a lot of opportunity here and even more so because you are not afraid to do the actual work of the business, which oftentimes we all. We all are. And you are. You're diving, diving underground and doing it. I think that'll just mitigate a lot of the risk and set you up for that much more success. So look forward to hearing how it goes. Matt, thanks for coming on.

[01:15:45 - 01:15:49]

Matt Railla: I appreciate it. Thank you. Sa.