Host: Today's guest was a whirlwind of activity during the COVID years. Nick Halewski bought a medical billing company in June of 2020, anticipating the impending demand for billing services. Two short years and a tripling of EBITDA later, he sold that business for more than twice what he'd acquired it for. A life changing exit. And also during those two years he started a hospice business, then acquired a home health bolt on and grew that combined business to 11 million in revenue and exited it in June 2023. Now these are big dollar figures, especially for such short time frames. But there were disappointments along the way and I think you'll agree that Nick's tone is not one of victory, but humility. So this is a story of one entrepreneur's rollercoaster through two healthcare niches that are popular among the searcher community medical billing and home care. Home health. Listen closely if you've ever considered either of these or healthcare broadly. We get philosophical about it at moments. Also listen for Nick's advice at the end where he goes against the grain. Teaser Life is long. Don't be in such a rush. I love that. And if you want more Nick, check out his podcast Nickonomics. Okay, here is Nick Halewski, buyer and builder of a medical billing business and a home health and hospice business Announcements webinars. You'll hear entrepreneurs refer to their cap table and who's on it, but do you have a good understanding of what exactly that means? Today, Thursday, October 24th attorneys James David Williams and Bill Barlow, whose entire practice is devoted to business acquisition, return for legal office hours this month's cap tables 101 how capital structure works when buying a business Structuring your deal for outside capital how to allow your seller to roll equity how to grant your new employees equity post closing Negotiating with your partner in the search if you have one, and more now as office hours there will be ample time to answer all your legal questions, not just those related to cap tables. So come get any legal question you have about your deal or your search answered by James, David and Bill that is today Thursday, October 24th, noon Eastern. Link to register for the webinar in today's show notes or on the Acquiring Minds homepage acquiringminds co. Then next Friday, November 1st, Johannes Hawk will do a presentation on how to move fast when evaluating acquisitions in order to avoid the notorious long multi year search. Increasing the velocity of your deal analysis will allow you to look at more deals and arrive at the one faster. Johannes and his partner ran a two year search in two months and closed in under six months. And he's going to show us how they bought an artificial turf business in Texas and have grown it considerably. You can hear his story in episode 186 from October of last year. So come learn how to look at deals and quickly decide Go no go a key skill for an efficient search that is next Friday, November 1st link to register for the webinar in today's show notes or on the Acquiring Minds homepage. Acquiringminds Co. 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. Running payroll, paying your bills, closing your books and producing financials. These are critical tasks every business owner must do or oversee. But spending time on them distracts you from the leadership and in growth work you want to do. So let system 6 do it for you. Owned and led by a former Searcher, Chris Williams, System 6 is a leading outsourced finance team for hundreds of SMBs, including over 50 searcher acquired businesses. Chris, Tim and the System 6 team understand firsthand the challenges, the opportunities of jumping into a business as its new owner. So whether you own your business already or have one under LOI, talk to System 6 about how they can give you time back and improve your financial operations. Mention Acquiring Minds and they'll provide a free review of your books and financial ops, a $500 value. Check out system6.com, link in the show notes or email helloystem6.com Nick Kaluski welcome to Acquiring Minds.

[5:29] Guest: Thank you for having me.

Host: Nick. This interview is going to be a challenge and that is because you have had a very eventful last four or so years. Some big splashy numbers in there. So much so that I actually pushed back a little bit on your initial email to me saying hey man, I'm a little skeptical here. These numbers are hard to believe, but as you explained, behind those headline numbers there is a roller coaster. There is some heartbreak. There is of course, good fortune. So I'm going to do my best here to wrangle your head spinning story. And along the way we'll as always try to learn a little bit about each of the various industries that you have participated in.

[6:22] Guest: Awesome.

Host: So let's get to it. Nick, as always, some background on you first, please.

Guest: Well, you're not the first person to call me difficult. My wife would definitely, my wife would definitely agree with you. And if you're going to wrangle me it's because I have adhd. So stoked to be here, man. Okay. Yeah. I. So I graduated college in 2012. I was a little bit older. I was 27 years old. And it was right around the time that President Obama was elected and the Affordable Care act was happening. And I knew I wanted to do something that was going to be really impactful. So I thought, I'll get into health care. I grew up with a twin sister who was severely developmentally delayed. And so we always had health care in our home. She had died almost, you know, a number of times. Pneumonia. There's a point where she was intubated in the hospital for six months like it was a roller coaster. And I thought, hey, if I could work in a field that would provide valuable services like that to people who can't provide it to themselves, that would be awesome. Now I can't handle blood. I'll faint at the sight of blood. So I decided to go into administration and I was an administrator for a number of years. I worked for several different companies. I started my career in Idaho and then Washington, and I went to Texas and I learned a ton and I was very successful and I kept getting promoted and then I took a job because I was very arrogant within the organization and ended up failing at that and getting fired. So that was my first job. Real kind of taste of failure. But it was an amazing experience because I, you know, I learned a lot about myself during that period of time. And at the same time, my wife and I were pregnant and our, our son was diagnosed with something called trisomy 13, which is a terminal diagnosis. And we were told he wasn't going to make it to term. And he, he was born. He ended up being born and living with us for seven days. But during those seven days, he came home on pediatric hospice, which is, it's just an insane kind of situation to be in as a parent. And I had been working in home health and hospice. So I go from this, like, administrative, I'm trying to take care of these patients and these nurses who are caring for the patients on hospice, to all of a sudden being a family member taking care of my son on hospice. So as you can imagine, it was this life changing experience, horrible and beautiful all in the, you know, in the same span of time. But after that experience, I became like, exceptionally passionate about home health and hospice. Before I thought, I get a few years of experience, I'll go back and get my mba. Now I was like, this is the thing I want to do at least for the next 10 years. So I worked in home health and hospice. I worked for a company that ended up giving me a little bit of equity. Spoiler alert. I ended up getting fired again from there. And in 2020, I decided it was time I was done being reliant on other people's generosity and bought my first company, started another company on the side, and subsequently sold both of those companies over the next four years. And over the last six months, I've been trying to find my next thing, Just trying to figure out kind of what I'm going to take my next swing on. So that's my life, and it's short.

[9:23] Host: That was very well done, Nick. That was a great story. Although there's so much in there, clearly. I want to double click on a couple things. First of all, as I've the few conversations that we've had, I don't see arrogant person sitting in front of me. So when you say you were arrogant because you were being so successful, have you gone through a big change or have you just learned to hide your arrogance? Or getting fired twice, did that humble you or what? Say more about the fact that you called yourself at one time, at least, arrogant?

Guest: Yeah, I mean, I am a. This sounds weird to say. I am a humble person. That's probably the wrong word. I'm an insecure person or can be an insecure person. Right. So it's like you're always kind of doubting yourself. But I had worked in this organization, and when I joined them, they were like a 20 million, $15 million segment of a publicly traded company. By the time that I left them, they were $150 million segment of a publicly traded company. And the first opportunity that I was thrown into, I hit it out of the park. I did exceptionally well. And the reason I did exceptionally well is because the opportunity played to my strengths. It was very analytical. It was very much a process problem. It wasn't a people problem or a growth problem. And looking back, I know that. But at the time, I didn't know that. I thought, oh, I could run this. I could do this anywhere. So I ended up going from Washington to Texas. Did well in Texas. And then I convinced my boss and my partners. We called each other partners. We weren't actually partners, but to buy a small home health company in Southern California, because I wanted to get back to Southern California. And I thought, I've been successful everywhere else. I'm going to knock this out of the park. Why would I not knock this out of the park? And while I get There I realize really quickly I'm in deep trouble because this agency was what we call them. It didn't need somebody who was analytical. It didn't need somebody who was like, smart and good with the numbers and sitting in the back office running through the spreadsheet and finding all the efficiencies. It needed someone to go out, boots on the ground, pound the pavement, knock doors and drive business. And that, at the time, definitely was not my skill set. I didn't know what to do. And so I just kind of reverted thinking, like, well, if I find some more efficiencies, if I, if I cut a little bit more, this will be successful. And, you know, obviously it wasn't successful. It ended up being one of the worst acquisitions that they had ever done up until that point. And I, I say I got fired. I didn't actually get fired, but I was going through those, those health things with my wife when she was pregnant, and the, the founder of the Home Health Hospice segment came down to visit me and he's like, what are you doing? Like, you're, you're traveling. Things aren't going well here. Why don't we give you three months to, like, just spend time with your family. You can find another job closer to home and, and we'll help you during this transition. So it wasn't like a firing in the sense that they came one day and just told me I was an idiot and fired me. They were very gracious with the exit, but, you know, know, it was still a failure on my part because I didn't recognize the things that I, that I wasn't good at.

[12:24] Host: Yeah, yeah. And to, and so to be clear, that thing was that you didn't. Weren't. A salesman, weren't somebody who's going to be good at business development or didn't realize, didn't have the strategic insight to know that's what the, with that agency needed.

Guest: No, I knew it's what the agency needed. I just didn't have a skill set. I didn't know how to do that. And I wasn't innately comfortable with going out and, and selling, which is weird because I was a Mormon missionary for two years, and that's all I did was try to sell, try to sell God, you know, door to door. But, yeah, I mean, that's the, that

Host: is the canonical, you know, sales boot camp is the Mormon mission. It is.

Guest: But, you know, I always said, like, the only thing I'm ever going to sell is God. I don't, I don't Want to sell anything? This is terrible. Going door to door. I love people, but the sales piece was always just really hard for me. And so when I got thrown into that situation, I didn't really have a good corporate tool set to draw on to understand. This is how you build a sales and marketing strategy. These are all of your A, B and C accounts. This is how much business is coming from each one of these accounts. This is how you qualify an account. This is how you actually create a strategy to check in with your reps. This is how you are measuring your conversion. Like, I just didn't know any of those things. I know them now because I went and worked for another company that taught me those things. But yeah, it was a skill set that I, that I did not have. And I, I was too afraid to lean into it. I, I just.

Host: Yeah, okay, okay. And how much your, your gracious boss quote, unquote partner gentleman mentioned the travel, that you're traveling a lot. Meanwhile you're having this challenged pregnancy, I guess. How much were you traveling?

Guest: I was traveling probably on average, well out of state. I was traveling once or twice a month, but I was driving an hour and a half each way to my, to my job. So it was, that was really, really hard on my family because I was not getting home until, you know, after 8 and I was leaving before 6 o'. Clock.

Host: You know that One of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper. But tech is complicated with tons of solutions out there. So choosing the right cloud platform, CRM, telephony, compliance and cybersecurity, not to mention implementing all that, is a job in itself. Acquiring MINDS Guest Nick Akers knows this firsthand. As a former searcher who now owns ENSO Technologies, Nick has seen the tech challenges searchers face when acquiring businesses. His team at INSO regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients. Drawing from his own experience in the search phase. Enzo dates back to 1989. So this is a company that has managed the tech for hundreds of small businesses over decades. And one last thing, no long term contracts with Enzo, a big differentiator. Check out enzotechnologies.com I N Z O or email Nick directly@nickzotechnologies.com and don't forget to tell him you're a searcher. And then you got to tell us a little bit about the, A little bit more on the next stint and how that one also didn't end in the way you would have liked.

[15:51] Guest: So, so there's an in between stint. I, I left the first company, which, if anybody knows, the Ensign Group. They were a very, they are a very large skilled nursing facility company. They incubated essentially this home health and hospice company that has since spun out publicly to become the pennant group. It's important for later. And, and you know, at the time I, I probably led one of the worst acquisitions. That's what that was, one of the worst acquisitions that they ever did at the time. So I leave them and I go and work for this company named Seasons Hospice. And they were phenomenal. And you know, I was, I was kind of down on myself. Obviously I had failed. I didn't know kind of what the direction was. I had just got, I just lost my son. It was a really hard time in my life. But I had this amazing boss. Her name is Beth Imlay. Still like one of my favorite people in the world. And she liked me for whatever reason and, and really worked with me to develop a lot of the areas that I was deficient in. So I got to this location and very quickly it became apparent they didn't need the analytical side, even though that's what I thought when I took the job. They needed business development and so I threw myself into learning that world. And over the next two years that site ended up becoming of. They were like a $300 million company that, that ended up becoming their fastest growing site for the next two years. And I was able to work through a lot of, like, I just learned a lot from them that I'm, that I've now able to carry with me from there. I left and I took a job with some friends who had started a home health and hospice company. And they had offered me the prospect of equity because at that time I was, I'd always wanted to be an entrepreneur, but my wife wasn't comfortable with me making the jump. And you know, I thought I was ready. I thought I was ready in 2012 when I graduated college, but my wife didn't think I was ready. You know, and of course I thought all these negative things like, how could she not believe in me and does she not think that I'm good enough? Looking back, I wasn't ready. Like, I just was not ready. I needed to learn a lot of things from those corporate experiences, but this seemed like the best of both worlds, right? They would offer Me some equity, but I'd also be kind of going on with an established company. And what they offered me was 3%, which in my mind was like, they're a $50 million company now. If we get to a hundred million dollars, man, I could have $3 million. It's incredible. But, but in order to get that 3%, I needed to sign essentially on the loan for the next acquisition. So they were, they were a comp, you could think of them as a, as like a privately held roll up. They weren't a private equity funded roll up of their privately held roll up. And so each one of the deals that they did, essentially they're trying to do through the sba. So they wanted me to sign on the dotted line for the next acquisition

[18:35] Host: that they did to take the personal guarantee. This audience, this audience will know well to, to, to personally guarantee their next acquisition.

Guest: And in my mind I'm thinking, yeah, that's, that's a trade off I'm willing to make. This is a, a fairly large company. If that's the slug that I need to take in order to earn that equity, great. Well, over the next two years, they had some operational struggles. They, they purchased some companies that unfortunately had IRS liens and Medicare take backs. And the long and short of it is massive cash crunch. And not in my area, but still within, within the company. And we ended up having this conversation in December of 2019 where they said, hey, okay, we're ready for you to exercise the, the loan agreement that we had in order to get this equity. And I'm like, okay. And they said, but we want you to purchase one of our existing entities and with that money we are going to fund working capital. But, but we will, we will pay down the note. It's just that this, this is your slug. And for me, I was like that, that doesn't sound like what we talked about. Like my, what I thought I was doing is purchasing a company to expand the company, right? Not playing kind of this weird shell game of buying an existing entity that they already owned so that they could have some cash flows, but they were still going to pay off the net. The note, like, it just didn't make sense to me.

Host: And, and then they were, it sounded like the initial pitch was sweat equity for 3% and now, right. I mean, you earned your 3% by, by coming in and working there. And now it was like you were also going to have to put capital in. So you were now buying 3% and it doesn't seem as sweet a deal.

Guest: Yeah, And. And again, I didn't have a ton of experience before then. Right. So looking back, I'm able to say that now.

Host: Yeah.

Guest: But at the time, I didn't. I didn't know that. So I didn't ultimately just didn't feel comfortable. I was like, I have the same downside, but nowhere near the same upside. And so in December, I said, hey, this isn't my notice. I'm not quitting. But I. I need something with more equity, and I'm going to look for something, and if we can figure out something together, great. And, you know, we had brainstormed about, well, maybe we could do a DSO together. Maybe we could, you know, start something else together that gives you more equity. And we were in the middle of those conversations. My wife is pregnant, and in February, February 19th of 2020, I get a call from one of them that says, hey, can we meet for lunch? And I'm like, yeah, that's weird. And I tell my wife, who was in labor at the time, I'm like, that's weird. The guys want to meet. And that. That doesn't usually happen, but you're in labor. And she's like, well, you know, this is our third, fourth kid at the time. She's like, we're not going to the hospital yet. Why don't you go grab lunch? It's really close by, and then we'll figure out what's going on. It's like, all right.

[21:27] Host: So I go, by the way, now that I've had my second kid recently, it is remarkable how dramatic the first labor is, and then the second labor, and I can only imagine by the third and fourth, it's like, no big deal.

Guest: Yes. I mean, am. I mean, my wife is amazing. She's like. She's the strongest person I know. So I'm grateful for her. But, yeah, we were like, okay, we know this. We know how this game goes. So I go. I go, I have lunch. And the long and short of it is that because of the cash crunch that they were in, they needed to take an investment. And one of the strings of the investment was they needed to cut their workforce. And because they knew that I wasn't long for this position, they had to eliminate my physician, which was like, what the heck? You know, my wife's. My wife's literally in labor today. What are you talking about? And I said, am I fired today? They're like, no, no, no, it's not today. February 28th is your last day. Like, okay, well, that's nine. That's nine days from now.

Host: How generous.

Guest: So don't be crazy.

Host: Not today.

Guest: Nine days from now.

Host: It was.

Guest: It was nuts. And, you know, so I go back, I'm fuming. I talk to my wife, and thankfully she calmed me down. She's like, hey, we'll figure this out. But if you're. If you're checked out for the next day while we're delivering this baby, you're never going to have that time back. So don't be an idiot. Let's focus here. And thankfully, I was able to.

Host: Wow. The presence. The presence of mind of a woman in labor saying that, dude, she's pretty. Pretty strong.

Guest: Yeah, she's pretty incredible. I'm very lucky. Yeah, I'm very lucky to have her.

Host: Good for her. Good for you. Now, these guys. Do you feel it sounded like your first time being, quote, fired? You still have goodwill toward those folks? They were gracious with you or whatever. This second, the second round, where they say, the guys who say, let's get lunch. Do you. Do you feel like they also were trying to act in good faith, or do you feel less warmth toward them?

Guest: I think they were trying to. I didn't think they were trying to act in good faith. I think that they made a lot of stupid mistakes. Okay. You know, I'd gotten really close with them as well. They, like, couldn't even look me in the eye when we had lunch. You know, they felt terrible. I think that they could have handled it differently and better, but the situation. But I also now, having been on the other side of it and owning a company and just understanding all the pressures that you have there, they had real cash issues. I mean, it was. They were in a really, really tough position. So I get that they had to make. I get that they had to make difficult decisions. However, having been on the other side of that now, I've had. I've gone through some things that tested my resolve and tested. When I say, oh, I care about people, or I would never do that, and I've passed the test for myself, so I know how I would have acted in that situation. And there's no way I would have fired a guy who I felt had sacrificed and his wife was in labor and given him nine days notice. Right. Like, I would have totally handled that differently.

[24:27] Host: Yeah.

Guest: But at the same time, I also understand it's. It's a really hard, difficult situation to be in when you're running out of cash and you're trying to make. Save the company.

Host: Wow. Okay. Well, thank you for. For sharing all of that, Nick. And by the way, before we move into your story of acquisition now, I caught on one of your Twitter threads that you are the son of, I think either way, your words, poor immigrants.

Guest: My father. Yeah, my father's a, an immigrant.

Host: Okay. You just didn't want to use the word poor. Did I? Did I mischaracterize that?

Guest: Yeah, no, very poor. Very poor. Yeah, I grew, I grew up very poor. And my father, what is Haluski, where is he from?

Host: Give us, give us, give us 30 seconds on just that.

Guest: Because.

Host: Very important context, too.

Guest: I'll try my best. My father is full blooded Ukrainian. He has never been to the Ukraine. During World War II, as the Germans were marching through the Ukraine and their conquest of Russia, they, and this is well documented, they took back Ukrainian teenagers as slaves to work in the factory. And I use the word slaves because that's what they used. And so my grandparents were actually taken back as teenagers to Germany to work in the factories. They met there. My father was born in Germany in 1947. They couldn't go back to the Ukraine. And again, this is well documented because people who returned back to the Ukraine were viewed as traitors. And they didn't want to remain in Germany, obviously, so they went to Brazil. So my father actually grew up in Brazil living on dirt floors, and came to the United States when he was a teenager and has been in the United States since, I don't know what year. 1970. And he was a professional soccer player and served in Vietnam.

Host: So is he culturally Ukrainian or Brazilian?

Guest: That's a hard question. He identifies as Latin American.

Host: Yeah, I bet. I mean, your formative years in Brazil, Brazil's a, you know, strong culture, very strong place to grow up. So.

Guest: And he's a professional soccer player. It's like all of his best friends are, you know, Brazilian or Mexican or, you know, Latin American of some sort or, you know, European, Middle Eastern. Said he's a very eclectic guy. Love him.

Host: And, and, and what's the Mormon connection here?

Guest: He converted to Mormonism? Yeah. Oh, yeah.

Host: He converted to being on the other end of a Mormon mission. Being on the receiving end of a knock on the door.

Guest: Yeah, it wasn't, it wasn't missionaries. It was a friend of his who in this message really resonated with him. That's a name. Anatole. Have you ever wondered where you're from, why you're here and where you're going? And it was just something that hit him like a ton of bricks. And he ended up investigating and converting to the church and is, is now a very, very faithful member of the, of the LDS faith. But he's always been a very religious person. Just very, very religious. His mother is the same way. And he grew up as Russian or not Russian Orthodox, Eastern Orthodox. So yeah, he's, he'd always just had a religious bent to him. Was always searching for something and in the LDS community he found community.

[27:16] Host: Great, thank you. And your mom?

Guest: My mom was also lds, but she is actually Jewish. So that's an interesting.

Host: From here, the state.

Guest: From the United States. Yep. California.

Host: Okay. Wild. I mean unusual. Let me use that word instead. It is great. All right, Nick, so it's Covid time. It's February 2020. You this is the point in the story where you buy your first business.

Guest: Yep.

Host: Why? How do you get, how do you get turned on to entrepreneurship through acquisition? How does wife decide that you're ready to be an entrepreneur? How do you decide that you're ready? Give us the the origin story of your acquisition path.

Guest: I don't know if this will resonate with many people. I think that it will. But have you ever had those moments in your life and moments, the wrong word period of time in your life where you just felt an extreme sense of urgency, like time was of the essence for me. For me, that's how I felt at that point about entrepreneurship. I was like, it's now or never. I, I, I've got to buy a business. I've got to become an entrepreneur. Because if I don't do it now, it's just going to get harder and harder the longer that I wait, luckily.

Host: And Nick, how old were you and how many kids did you have at the time?

Guest: I was 34. I was 34. And we 34 with and we had three boys. So we had a, at that time we had a somewhere in the ballpark of a six, three and new month old. Right. Six six year old, three year old and, and newborn.

Host: Great. Thank you.

Guest: And luckily after that December conversation, I had already started looking because I was like, all right. My brother in law had said to me years ago, I don't ever want to be at the mercy of someone else's generosity. And this stuck with me. And so I thought, all right, I'm not just going to wait around for them to figure something out. I'm going to go look. And so I started looking for businesses to buy. Given that experience where I got fired at my first company, I didn't want to buy something that was going to be heavily dependent on me as a Salesperson. I also didn't want to start a company from scratch because I knew that was a skill set that I just didn't enjoy or have. So I wanted to buy a company that was important to me. And so.

Host: And were you plugged into eta? Had you read the books? Had you done all of the. Had you been sucked in by SMB, Twitter, any of that? Or did you just kind of come to this path on your own?

Guest: No, I came to this path of my own. Very, very lucky because the guys that I had been working with previously, they did all of their acquisitions through the sba. And so everything that they did was, like, creatively negotiated, and I had a front row seat. I had seen it on the corporate side and seen what it was like to meet with the seller and do due diligence and negotiate the LOI and do the purchase agreement, et cetera. But I got a front seat with them to see what it was like going through the SBA and like, not having a massive corporate line of credit and not having a bunch of money to put down. So I was very lucky in the sense that I had these, like, creative deal structuring examples that I could go back to and draw on that I didn't see in the corporate setting. So I knew. I'm like, okay, I know that I could buy a business either with a mix of seller financing and the sba, or all seller financing or. Or all sba. And buying a business just made way more sense to me than starting from scratch. I did start to get into the SMB space during COVID just because we were all locked down and it was like, okay, I'll go on Twitter like everybody else. But yeah, it was. It was less. I didn't get the idea from. From the SMB space. All of a sudden I was like, oh, my gosh, there's a bunch of other people out there that are doing similar things to what I'm doing.

[30:58] Host: Great. Okay, super. And what was your. If. If you can share, what was your cash position at the time? How much money liquid did you have to put toward this project, if any?

Guest: So very lucky. We had probably at the time, I want to say, $50,000 of savings, which doesn't sound like a lot of money, but for us, felt like a ton of money back then. But we also were in the process of selling our house, which had appreciated pretty significantly. And so we knew we were going to have an additional $250,000 post sale from the house, and we weren't earmarking all of that, but in my mind I was like, okay, I've got probably 150,000 to 200,000 that I could put down on a business. So I was using that as my basis for kind of how large of a business I could end up affording. Is $150,000, $200,000 down payment on a,

Host: you know, which is going to be 10, 15, maybe 20%. So you're looking, let's call it roughly at a million dollar. A business with a purchase price of a million bucks.

Guest: Call. Yep, yep, exactly.

Host: All right, all right. What else, what else about your, your search criteria tell us how you approached this. Thinking about it. So.

Guest: Excuse me. So for me, this is something I've like created now, but looking back, I was also doing it. This is my, my framework. I, I talk to people a lot where there's a lot of self assessment that you need to do. You're identifying your business. People like to think about the business, the deal, what does the business look like? And I think that that's incomplete. There are two parts when you're buying a business. There's you and there's the business that you're buying.

Host: Right.

Guest: And many times we're just focused on the business. Well, you know, what's, what's, what are its margins? Does it have a moat? Does it have recurring revenue? What are the customers like? Right. But we spend less time here. Right on us. What are we good at, what are our skills, what's our experience, what's our risk profile, et cetera. So for me there's like this, let's call it five part criteria. I look at risk profile. So what are you comfortable with in terms of risk? What's your personality like, what's your experience like? What is your skill set and what's your available capital? So that's my framework. Now I didn't have it necessarily back then, but I knew that I wanted to buy something that I had direct or analogous experience in. I didn't want to buy something new. I was like, okay, if I'm gonna buy something, I want something with the highest level of probability of success. And I just thought buying something outside of my sphere of influence or experience would have been dumb. I wanted to buy a services business and I wanted to make sure that I could add like real value to it, that there was an opportunity to scale. I knew I wanted to buy something with, with strong tailwinds. I think Paul Graham has this quote that's says the business is less important than the industry that you, that you invest in because if you're riding the wave like, you can be dumb and. And still be really successful just because there's a ton of demand.

[34:00] Host: Yeah.

Guest: So I wanted to have something with strong tailwinds. And the two areas that I looked at in terms of tailwinds were the industry and geography. So pretty quickly, I mean, I was already on the healthcare train, but then pretty quickly, I was like, all right, there's a couple geographies that I'm interested in. Boise became one of them, because Boise is growing like crazy, so there's strong tailwinds there. Utah was another market that I looked at because there's strong tailwinds in Utah. And it was in particular those. Those two markets that I was looking to buy a business in.

Host: Nick, let me. Let me jump in. So hold your. Hold your place. Hold your thought. You're in Southern California at the time. Okay. So you're. So you're. You're prepared to move. You're clearly going to look. You might be moving to Utah or Boise.

Guest: Yeah. I mean, so again, this was February, and you have to remember what it was like in the beginning of COVID Everybody was freaking out. And I. I don't know what it was at the time. I just felt like I wanted to get somewhere that was going to be less restrictive than California because. And I'm grateful for it. Looking back, you know, they closed schools for, like, two years. My kids would have been homeschooled. My wife and I would have been figuring out how to educate them. And I just think that that would have been a very difficult experience for my children. And thankfully, you know, we see, looking back, that children were the demographic that really wasn't nearly as impacted as the elderly population. And that's the second component to this is like, I am kind of grateful I got fired because what was I working in. In February of 2020, I was working in health care. Had they. Had they waited two weeks, I probably would have been traveling a ton or dealing with outbreaks or just dealing with everything that was heavy during that period of COVID And instead, I got to spend time with my newborn son and look for a business. So, like, you know, there are. There are silver. Silver linings to crack situations, for sure.

Host: Sure.

Guest: But, yes, we were already planning on moving.

Host: Great. And when you said you wanted to therefore focus based on the analysis of who you were and the value you wanted to bring, you wanted services, but specifically health care services. Yes, to be clear. Okay.

[36:04] Guest: Health care.

Host: So as you're saying within the industry, obviously, health care is an Enormous industry did. Was it, was it more dialed in? Was it sub niche within, within health care like hospice or home care or home health? Yeah, or just anything across the entire universe of health care?

Guest: Yes it was, it was niche down. My thinking was I didn't want to do something that required a physical space and required patients to come in person because my brother in law at the time had a skilled nursing facility company. I want, they had like 17 facilities at the time and there's just a ton of capital expenditures that's required to maintain those facilities. So I didn't want something that was high capex. I wanted something that could get into pretty easily and then grow without a bunch of capital expenditures right for them. Every time that they wanted to grow they had to get a new either massive lease or buy the real estate. That's really, really expensive to go through that process. So I knew I wanted services and then I knew I wanted to stay in something that I either had direct or analogous experience in. So direct experience would have obviously been home health or hospice. Analogous experience would have been any of those vendors that I worked with ever in the home health and hospice. So supplies, dme, Medical billing, medical practice, management, coding, Scribe, staffing, those types of things. Those are the things that I was looking at and had narrowed it down to. The other thing I wanted was something with 15% or more net margins because I wanted a cushion. In home health in particular, you can be a well run agency and be doing 7 or 8% net margins. Those are really thin margins. Have you ever heard what the advice is of the amount of cash on hand you should keep

Host: for? You mean like how much working capital for any business? Yeah, I've heard kind of three to six months, but that's, that's going deep into my. Don't hold me to that.

Guest: Yeah, yeah, that's what I've heard as well. Three to six months. Yep.

Host: Okay. Okay.

Guest: So like I started doing the math. Let's just say 5% is going to be an easier number for me to meet work with. Let's say your margin's 5% and you're supposed to have six months of cash on hand. Well, for me to get one month of cash on hand it's going to take me 20 months. Right. Because my, my margin's 5% and so in order for me to kind of get, or let's just say I, I have 95 cost, it's going to get me 19 months until I have one month's cash on hand. So it's going to Take me almost like 8 years before I have 6 months of cash on hand. That's freaky to me because like it just feels like I'm riding the line and I know people are listening. They're going to say, well it's not necessarily all of your expenses, cash on hand. It's, it's all of your fixed costs cash on hand because you can flex your non like okay, fine, point taken. But you still understand what I'm saying, that when you have a low margin business below 10%, it's very hard, difficult for you to build up a cash cushion. So I knew I wanted at least 15% in average net margins. And then the next thing that I knew is I wanted a business that I could buy myself. So my brother, my other brother in law had been a searcher and for those listening, they know the search fund structures. Let's say you can earn up to 30%, you get 10% when the deal closes. You get 10% if you hit certain metrics and then you get 10% upon exit if you hit certain thresholds. So like best case scenario, you go and raise money or search fund, you do all of this work, you increase the value. Best case, you're getting 30% of that and they can fire you at any time you like. You don't really have much job security. So in my mind I'm like, I don't want to go raise money so I can be beholden to people and not earn as much equity as I want and nor have the control. I want to buy something that I can 100% afford. So those were, those were like the main criteria that I had as I was searching for the business.

[39:55] Host: Great. Well a couple follow ups on that. First, just on the point about margins, you know, there's a lot of reasons in addition to what you explained to not like really tight margins. One, two, one also is that this phrase I love return on brain damage. It's like how, how don't just think about roi, think about like how much effort it costs to extract a dollar profit from a business. So let's say you have a business with 5% margins to make a half a million dollars a year of ste, you have to be doing $10 million in revenue, which if it's a services business, that's just a lot of people, a lot of moving parts, a lot of effort per dollar that comes out of that machine. That's, that's a pretty low on, you know, return on, on brain damage. The other thing is that, is that it just when you're, you just need, you just need to be that much more operationally dialed in that much, you just need that much more operational excellence. When your margins are that tight, when you have roomier margins, you have more margin for error, you have more margin to make mistakes because it's not like, you know, a point or two in either direction is going to, you know, if you, if you go from 5% margins to 4% margins one year because you make a mistake, you've just lost 20% of your profit that year. So, so, so, you know, point in either direction really matters when you're in a razor thin industry. So, and I lots to dislike about low margin businesses.

Guest: I honestly was thinking I wasn't going to do home health and hospice just because I knew the industry so well. I wanted to do something outside of it that was still analogous. And this is the exact reason why I wanted to grow a business. I wanted, I wanted it to be able to scale. But in home health and hospice, if I am billing, I am collecting 45 to 60 days later, which doesn't seem terrible. But here's the problem. If my census increases, let's say it doubles month over month, I've now got to hire nurses to take care of those patients. And on a P and L on the paper, like it looks fantastic. Oh my gosh, our revenue just doubled and we're way more profitable. But from a cash perspective, I don't have that money yet. So how do I front the cost tire those nurses to get the supplies, to get DME out to those patients? It's got to come from somewhere. So either my growth is going to be constrained or I've got to go take debt from somewhere else. And I just, that kind of freaked me out when I started thinking about scaling.

[42:22] Host: So no, and I mean I just saw a Twitter thread about this that growth in small business at least and probably all business, but certainly down here in kind of non scalable businesses, growth eats cash. So growth can. Growth is what we all want. Growth feels great, growth looks great, but it just crushes your actual cash flow coming out of the business. And you just described that. Well, the other thing I want to just call back before we get too far away from it, is your thought about what we call business buyer fit. So rather than just looking at, ooh, how appealing is this business? It's how, how do I fit as business buyer into this business? What value do I add? And it's, it's so important. And in fact like at acquisition lab, Walker Dibels Acquisition lab, full disclaimer, full disclosure, sponsor of the pod they spend at the beginning of their cohorts. They spend a lot of time on the personality assessment of you cohort member as you business buyer. Because they, they, they so believe that it really is as much about you in the type of business that you'll enjoy running, the type of business that you can add value to that you should really kind of do this introspective process before you go out there and start looking at biz by sell sort of thing. So it's key.

Guest: It made me feel good. I talked to Chelsea Wood recently and I told her, I told her my process, like the stuff that I just outlined for you, I'm like, wow, I. You've got to know yourself. You've got to be introspective. And thankfully, I had situations where I was forced to be introspective. But she was like, oh, you must have read by them build. And I have not read by them Build yet. I mean, I am now after speaking with her because she's like, that's all we do. And so I was like, oh, that's nice to hear. Like, okay, that's validating that my thought process is good.

Host: Yeah, great. Good stuff. All right. Okay, so we got to. I'm just watching our time here, Nick. We got a long way to go, so. So let's just jump ahead. We're not going to spend time on your search, but let's hear about the business that you bought.

Guest: So I ended up finding a business in Boise, Idaho. It was a medical billing company that also did medical staffing and medical practice management. So those things are different. There's medical billing and coding, which means I'm a physician. I go and see a patient based on that documentation, I am then going to bill somebody. Could be Medicare, it could be a commercial insurance, could be cash pay, whatever. But there are codes associated with that encounter that visit that go on the claim, that then go to the payer in order for the payer to know what amount to bill. You would think it's just as easy as the physician going and having a conversation. And then it's billable. It's not. Someone's actually got to go through that and look and see, okay, what was documented? Does it support these codes? Did he miss a code? Right. Is there something that he documented that maybe we're not actually billing for? And so there's a whole industry sort of built around medical billing and coding because physicians do not want to do the administrative stuff. They just want to go practice. So they outsource a lot of the medical billing and medical coding to other people. Then there's medical practice management. As you can imagine, these are the other administrative functions. Hr, payroll, accounts payable, collections, not just the billing, but the actual bringing of the money in, credentialing, renegotiating, contracts, all of those administrative functions they will outs, they many times will outsource to someone who does medical practice management. Then we also had an arm that did medical staffing, so that actually provided staff to physicians offices. So those are going to be people, you know, a receptionist or a business office manager or you know, an administrative person. And then we also had a scribe program. So these would be people, physicians are just trying to get more billable hours. Right. Because like it's. Everything that they do is a billable and in order for them to make more money, they need more billables. Well, if you can take away the documentation with a scribe, they can do more encounters because somebody else is kind of writing their documentation and so.

[46:13] Host: And what does that look like exactly? Is that what I've heard where like somebody's basically FaceTimed into the, to the, to the room with me and they're taking notes as the doctor talks to me sort of thing?

Guest: Yeah, there's a couple different ways. Like some doctors just have a device on them that they record into, that they dictate into and then that goes to somebody describe. There's also the FaceTime option. We actually had physical people following these physicians around that would scribe for them. And they were part of a college program essentially that we funneled to these physicians. So it was an, it was an actual human being.

Host: Wow, sounds inefficient. Gotta say Nick.

Guest: Very, very inefficient. Very inefficient. But also very high margins. Actually that was a very high margin business for us.

Host: Oh, interesting.

Guest: So anyways, that was the business.

Host: And so Nick, you know, this is a business that does a grab bag of things. Now they're all analogous, to use your word. They're all, they're all related. You can imagine cross selling and upselling. And so maybe, maybe it's, it's wonderful. On the other hand, for such a small business, I also imagine it feels a little spread too thinny. So anyway, how did you think about a business that is doing just a million bucks in medical coding and billing versus a business that's doing a million bucks in on this grab bag of services?

Guest: Yeah, so it was actually doing $5 million in revenue.

Host: Ah, yeah, yeah. No, no, no.

Guest: Oh, right.

Host: It was a million dollar purchase price. Sorry, not, not yet.

Guest: I'll get to the purchase price, but okay, okay. I might have said a million dollars as like an example. But no, it wasn't a million dollar purchase price. So it was, it was doing $5 million in revenue. The core business was medical billing, medical coding, medical practice management. That was the core business. Okay, let's call it three and a half of the $5 million was there. The other one and a half was kind of spread across these grab bags of, of other service lines. And as I went into the due diligence, you know, at first I was like, ah, that's kind of too many to your point. Like, I don't want to be spread thin. But as I went into the due diligence, they were highly profitable lines of business. They were incredibly sticky because of the services that they were offering. And it didn't require a ton of administrative oversight. And the administrative oversight that was over, it was already also being done on the medical billing and coding side. So in my mind it was like, okay, they're running fine, they've got high margins, they're very sticky. We can grow the medical billing and coding side. And even if I just don't focus on them, even if I just get people to kind of run them, they're running themselves, they're profitable. It's, it's cherry on top. It's not, it's not the other service lines.

[48:47] Host: Yes.

Guest: Yeah, correct. And I, the reason I got comfortable with medical billing and coding is because for the other home health and hospices that I had been working with, they were acquiring many businesses. And in order to acquire those businesses, you've got to integrate them. And many times you've got to provide centralized services. So you, you build out a centralized billing team, you build out a centralized coding, you build out hr, you build out AP and accounting and all those things. So I had had experience with the build out of those functions and I felt like I knew the billing space, not the physician billing space, but I knew billing and I also knew the medical, the practice management space because I had been working on consolidating those services for the companies that I had worked at. So to me, it felt like a very analogous and transferable experience skill set that I could bring to this business that got me comfortable with, with not only the core offering, but also these sort of ancillary services that weren't necessarily where I had a lot of experience.

Host: Sure, yeah, I'm convinced. That sounds good. And, and what was SD. What did SDE look like?

Guest: So at that time, it was an SDE of $450,000.

Host: Oh, so we're back under 10% margins.

Guest: Correct, correct. And the asking price was. Well, let's just say we settled on 3.2 million as a purchase price. So if you do the back of the envelope Math, you're like 4.50of SDE 3.2. That's like above a 7x multiple, right?

Host: Yeah, yep.

Guest: And it was. You would be correct. That is correct math, Will. But, but. And this is where I'm very grateful for the experience that I had had. You know, I. I knew how to read a P and L. I knew how to actually go through the financials and see not just what the owner was running through the business, because those are easy call outs. It's like, oh, this is her car. Oh, this is her mortgage. Oh, this is her whatever travel. Those are easy. What's harder to call out is to understand what administrative functions potentially are they. Are they managing inefficiently? Or does she have, you know, members that have been a part of her team for a really long time that are potentially overpaid or are there opportunities to renegotiate a contract for their service providers? Like, as we started to dig in, there wasn't just these opportunities to add things back. There were real margin opportunities for us to become more efficient. That was the one side of the thesis. The other side of the thesis was Covid had been happening and all of the surgeries between essentially March and June of 2020 had been held up. So I was very confident that there was going to be this deluge of. Of services that we were going to be providing. Be providing to physicians that would have bumped our revenue in the second half of the year.

[51:36] Host: Yeah.

Guest: So, and so I felt comfortable saying, all right, I know that there's operational inefficiencies that I can go in because I've had experience in transitioning many businesses, and we've got this revenue that I think is built up artificially because of COVID Let's take a swing at this thing. And, and that's why for me, yes, it was $450,000 of SDE, but really, I personally underwrote it to about $700,000 of SDE EBITDA. So I'm like, okay, I can. I can be. I can get okay, with the 3.2 million, it's still a four, whatever, four, four and a half X. Yeah, but that just means it's a good business, right? Like, yeah, I'M not worried about getting a screaming deal. I think this is a very good business.

Host: And what of the fact that if you're spending $3.2 million on the business, that's going to be outside your price range? I mean, even if you put 10% down, that's 320 grand more than you said you could afford.

Guest: So this is where. This is where I, like, you know, went into my bag of. Thankfully, I'd had experience with these guys of seeing these creative deal structures. So the SBA requires at least 10% down. So I'm like, okay, $320,000. But if these are the rules back then, they're a little bit different. Now, if you're able to structure a seller note to be on full standby, the SBA will actually take that as a capital equity injection. And I was able to negotiate, you know, of the $3.2 million purchase price, seven figures of. I won't say the exact number, but seven figures of a seller note. And so the SBA took that and said, okay, you've got an additional equity injection, so we only actually need 5% down from you. So I was able to get from. Hey, 3.2 million. 20% down is going to be $640,000 to about 180 to $200,000 of cash that. That I had to inject in the business. Now, I didn't feel comfortable putting 180 to $200,000 of cash into the business because as I got onto, you know, eta, Twitter, SMB, Twitter, I started learning about the J Curve. Like, I'd never heard of that before. Like, what the freak is the J Curve? It made sense to me because I had seen it, but I, like, never actually, like, put it into place that, oh, that's a real thing. I always just thought it's because we sucked at operations. Like, well, we always suck the first three months because we just don't know how to transition these things. Like, no, the J Curve's a real thing. And so I didn't want to put all my money down. I wanted to have some cash in reserve just in case, because it freaked me out. And so I ended up getting some family members to invest, and they. They put some money in, friends and family, and I. I gave them some equity as well, but that's how we structured the deal.

[54:12] Host: Great. Great, Nick. Well, by the way, such a big seller note, you said six. You said seven figures, but you didn't want to say how much, seven. So let's call it a minimum of a Million bucks. Million bucks or more. So that's almost potentially a third, 33% seller note. That's a vote of confidence, you would think. Although sometimes an overly generous seller note could also signal that a seller just really wants out. You never know.

Guest: No, this is, this is something that, again, that I learned not just in the corporate side, but also in the. In the other company that I worked at is the seller relationship is incredibly important. And I would say that to anybody who's looking to buy a business. It's one of the reasons why I prefer to buy businesses off market. Now, I think you should always have somebody on your side who's buy side that is helping you qualify these deals. But if you don't have a good relationship with the seller, it makes things very, very difficult. So, thankfully, I had a very good relationship with the seller and we were able to negotiate a large seller note that allowed me to, you know, not have to put as much money down. And she was invested in our success like it was. It was a very, very good relationship for us to have. But if, if you're looking to buy a business you like, you've got to have a good relationship with the seller. You've got, got to.

Host: Yeah, we certainly hear that a lot here. So good to have it reinforced. An SBA loan broker, as opposed to a direct lender, doesn't work for a particular bank. Instead, the broker pairs you with the right SBA lender for your deal based on industry terms risk thresholds, then helps you navigate the process better than many lenders themselves do. Matthias Smith of Pioneer Capital Advisory is just such a broker. Matthias worked at two of the country's top 10 SBA lenders. So he's been on the inside of the SBA process and knows well the pitfalls and hurdles and how to avoid them. He struck out on his own to laser focus on the ETA and search space. Our niche is his niche. You'll see Mathias at all the ETA conferences. He's closed over 30 search deals since starting Pioneer in May of 2022, including some acquiring minds guests. To learn more and get in touch, go to PioneerCapitalAdvisory.com or click the link in the notes. Because we got so much ground to cover here, Nick. You got to blow through the rise and exit of this, of this business. So you started at about 5 million bucks in revenue. 303. 3 and a half million of which was, was medical billing, coding and physician management. Office management. Sorry, what is it called? Practice.

Guest: Medical practice management.

Host: Yep, Medical practice management. The other Million and a half is the other stuff. Take us from that.

Guest: Okay, this is going to be a three minute speed round. There's a wrinkle that I didn't mention that I, that I need to mention. During the process. We were, we were done with negotiating. I mean financing was lined up. Obviously finance funds hadn't transferred, but everything was lined up. My brother in law who lived here in Boise called me and was like, hey, if you're moving to Boise, we should do home health and hospice together. He had skilled nursing facilities. These are patients who are discharging into the community. It just made a lot of sense to capture those patients and provide services to them. So I'm like, well I have this medical billing company that I'm going to go do. He's like, well, can we figure something out? So I get my other brother in law, very incestuous. Remember I told you I was Mormon. So there's lots of us. I get my other brother in law to come up. He give him some equity. He runs the medical billing company. I start a home health and hospice from scratch with my brother in law and three other partners. So my brother in law has a skilled nursing facility company with 17 facilities at the time. He's got three partners and we decide to form all equal partners, a home health and hospice entity. So I moved to Idaho in May. I've got one, one brother in law A running the medical billing company, partnering with brother in law B for the home health and hospice. I'm spending the majority of my time on home health and hospice. We're growing that In March of 2021 we get our license. In May of 2021, we buy a home health and pair it with a hospice and home care and we are off to the races. The medical billing company thankfully did what I thought it was going to do. We had a bump in revenue. We were also able to realize a lot of operational efficiencies and we, we end up in the, in the trailing 12 months of the year that we sold it, we end up doing $1.2 million in profit and about $6 million in sales. Fantastic.

[58:38] Host: Wow.

Guest: The home health and hospice.

Host: Nick, Nick, let me, let me pause you just because what you've effectively done is bought a business and installed an operator. I know not well, it's the thing I, it's a family member. So there, there is some risk mitigation there or maybe there's some additional risk there because that can be sticky. But at least you, you know, you, you presumably trust this person's character. So. But this brother in law of yours you obviously felt was qualified. You had the trust. You, you just installed him and it was, and you were like, and you were going to be providing counsel to him. But, but what? Like how, how does he grow a business from 4 450se to 1.2 when you, the expert, the buyer of the business is focused on some other things.

Guest: Same brother in law who was doing the search fund. So I mean he had, he had, had, he wants, he wanted to be an entrepreneur. He also had run skilled nursing facilities, so he had experience in healthcare actually running these small businesses. So I knew that he had a track record where he understood how to, how to run operations. It wasn't necessarily the analogous experience that I had, but he had had the track record. Essentially I served as a board member to him and we met very frequently and we talked about the business and we walked through how we would run and operate the business. It's, it's relevant. In the years before I, I became an entrepreneur, my job was to manage operators.

[1:00:02] Host: Yeah.

Guest: So in these home health and hospice companies we would buy agencies, that's what we call them, individual locations. Agencies can be anywhere from a million dollars a year to $20 million a year in revenue. Right. So like they're, they're real businesses. The administrator manages the P and L and my job to manage the administrators. So I'm not going to say it was the exact same, but I had experience hiring operators and managing operators who were also running different business lines. So I knew how to have the conversations, how to make the most effective like okay, what are we focusing on? What are the goals that we need to actually look at? What are the key drivers in the business? Let's meet on a weekly basis, let's talk about our cash position, etc. Thankfully, I had that experience to sort of set me up with the relationship with my brother in law now.

Host: Yeah.

Guest: Was it easy? No, it was not easy. And you know, there were family dynamics and business dynamics that got sticky at times, but we were able to work through that. While I was focusing on.

Host: Did you give him equity?

Guest: I did, yeah. Okay. While I was focusing on the home health and hospice because the home health and hospice was growing like crazy. Within two years we were doing about $10 million in like by the time we sold, we were doing $10 million in revenue on a, on a run rate. And they've since grown even after we sold to. I think they're doing $12 million this year. So I had a very high growth Home health and hospice company that I was managing at the same time that we were managing the medical billing company. But in 2022, December of 2022, a couple of things were happening. Number one, my brother in law who was managing and running the medical billing company was like, I want, I want more equity than this and I want to like continue to grow. I want to, I want to buy another business. I want to be the majority equity holder. And you know, he was not a majority equity holder in this business. So that those conversations started bubbling up between he and I at the same time the Fed was starting to signal, hey, we're going to raise rates. And so I started looking at that. I'm like, man, asset prices, I think that's really going to affect asset prices. We potentially go into a recession. I started getting really scared to be honest, as you can imagine, right. Like I wasn't managing or running this business on a day to day basis and I'm seeing potential economic headwinds in the future. My brother in law is telling me he wants more equity and, and to do his own thing. It, I, I got scared and so I was like, you know what, why don't we exit from this? We've done a good job. We have strong trailing financials. It's a strong business. Asset values are really high right now. Let's exit. And so we ended up putting that business on the market and selling it in June of 2022, which was a great financial outcome for all of us. He's now in the process of buying a business assisted by, you know, some of the exit proceeds that he made. And I was able to obviously secure a nice win which was fantastic and then focus on the home health and hospice side of things.

Host: Nick, so you bought the business for 3.2 million. Would you sell it for.

Guest: Correct. I won't tell you the exact number, but more than, more than 2x, more than 2, more than 2x and less than 3x. I'll give you, I'll give you a fairly tight range of what we bought it for. So.

[1:03:11] Host: And having only put in 5% with some, you know, some investors helping you. So, so yeah man, that Delta more than 2. So more than 2x is 3.2 mil. An additional 3.2 million on a whatever 102. What did you say? 200ish thousand dollar investment. Correct, of course, minus whatever you pay to investors and, but also plus whatever, whatever between two and three that you're not telling us. So yeah, considerable. That's great. And in what was it June 2022 or December 2022?

Guest: June 2020.

Host: So in two years.

Guest: Yes. Yep, almost exactly two years.

Host: That's so that must have brought that old confidence back. I mean, that's quite a success. I mean that's life changing.

Guest: It did. Oh yeah, yeah, very life changing. I mean, from the perspective of, you know, you get a big win under your belt and it allows you a lot of freedom of flexibility. Frankly, I'm kind of bummed we sold it because I think it was such a great business and I think that I got too scared. But I also think that there's something really valuable to like securing that first win and, and you know, giving your family the financial security that, that we have now. So I don't know, I waffle back and forth about the decision to sell.

Host: Yeah, well the, the thing though too is that you weren't selling and then having nothing to do. You also had this other high growth business that you could devote your, your energy you already were devoting your energies to. So it's like you had these two very compelling bets going on contemporaneously.

Guest: Yeah. So, so we sell in, in June of 2022 and I'm able to, to focus my entire attention on the home health and hospice. Now I did bring on an operator for the home health and hospice because I knew that the startup phase was going to require things that I wasn't good at, hearkening back to, you know, my experience in marketing. But I, you know, I was able to. There's a mental tax of, of having ownership in another business that doesn't just go away even if you're not running the thing day to day.

Host: Yeah, sure.

Guest: So I started focusing on the home health and hospice. Now at the same time, my brother in law B, who owns the skilled nursing facility company had grown from 17 facilities to like 50 over a two year span.

Host: Wow.

Guest: And he and his partners, who I was partners with, had just changed their philosophy. They had made a couple of different bets, home health and hospice being one of them. And they decided like we should just double down on skilled nursing facilities. So I thought we were going to be expanding into other markets, but we ended up only staying in Boise, which I was unhappy with. And they were trying to take down some really big deals and they had invested quite a bit of capital and so they wanted that capital out and we, we weren't, you know, we weren't going to bring that capital out anytime soon. So a year later we got to the point where we actually sold the home health and Hospice. We're on good terms. It's like it was a great agreement. Everybody won in that situation, but in a very short period of time, within a year, all of a sudden, I had sold almost everything that I had and took the wins for what it was. I didn't want to sell the Home health and hospice. I wish I was still running it. I love that business. I think it's a fantastic business. But it just, it taught me a lot about what I want to do next. And I've just been taking my time to figure out kind of what that next big swing is going to be.

[1:06:36] Host: Well, can you tell us anything about what the exit was or how what you did, what you personally benefited from financially? From the sale of the home and health care. Home hospital healthcare and hospice.

Guest: Home health.

Host: Home in hospice. Thank you.

Guest: Yeah.

Host: Yeah.

Guest: We sold to a publicly traded company, so I'm not, I can't give you like, all of the specifics, but we were about $10 million in revenue, and the purchase price of a company of that size is going to be anywhere between 0.6 and 1 times revenue.

Host: Wow.

Guest: So that was the sales price, and we had about $2 million of debt on the business. So a fifth. I was a fifth partner. Great in that business. Right.

Host: Well, people can do some quick multiplication and figure out range.

Guest: People can do some quick math. Yeah. It wasn't, it wasn't as big as a win as the, as the previous company, but it was still, I mean, I felt great about it. We built a great company. And this is the full circle moment. Remember the company I got fired from for doing the worst acquisition in company history?

Host: Yeah.

Guest: Well, my friends who I had started with there are, you know, now executives in the company and had been trying to bring me on for a number of years. Hey, how can we get you back? Well, we, you know, we'd really love for you to join us again. They ended up buying my home health and hospice. Oh, you're kidding.

Host: It was them.

Guest: No. And so the, so the company that I had gone through all that stuff with bought it. And I actually just had lunch with the coo and he was like, it was very, it was very nice. It was a full circle moment where he's like, this was probably one of the best acquisitions we've ever done, like, top two. So, you know, you should be proud of the company that you built. So that was a really cool moment for me.

Host: Yeah.

Guest: To, to have that conversation with him.

Host: Well, I, I, that is a beautiful full circle. Full circle moment. Nick, I want to. So congratulations on all of this. Like I said at the beginning, pretty head spinning. I think you probably felt disoriented through this, through this journey. I mean, it just goes to show how sometimes in life, in business, things can really move fast. A lot can happen in a short amount of time. We all have had dry seasons that are painfully long, but then sometimes we get those exciting bursts of, you know, our careers turned upside down for the better. So congratulations on that, Nick. And, but I want to now we're going to kind of, I'm going to jump around here for the remainder of our few minutes together. But you mentioned what you want to do next. You've been, you've been thinking about what you want to do next. You've been getting out there. You've got a podcast, by the way. Plug your podcast, please.

[1:09:18] Guest: Nickonomics. N I K O N I M I C S Nickonomics Economics.

Host: Yep. Nickonomics Nik. I assume that's the Ukrainian spelling.

Guest: That's me, yeah. Nick.

Host: Yeah. Right, great. And you've, you know, you're out there, you, you've been out there on social media. You now you have had, you had all that experience in healthcare, in home and home health, in hospice, and then that's what led you to buy the businesses that you did. And now you've bought those businesses and had exits in two different categories in home care, in healthcare. Why not go back to the well again? And I mean, your expertise is that much deeper now. Your confidence is that much greater now. Is that something you're contemplating? Are you kind of done with the category?

Guest: I'm not done with the category. I absolutely would go back into that category. The medical billing space. I have a, let's see here, three years left on a, on a non compete. So I can't do anything in, in medical billing, home health and hospice. I could absolutely go and do something again in that space. I just know how much it would take in order to generate the types of returns that I'd want to, to generate. I'd have to do a lot of traveling potentially. I'd have to be gone a lot. And I'm just not at a place where I want to miss. You know, My kids are 2, 2, 5, 7 and 10. So I, I want to be there for basketball and soccer and school recitals and, and in my mind it would be very difficult to do that. Jumping back into this space, I've had a couple private equity funds reach out to me and say, hey, you know, would you want to partner with us? And do a roll up and financially it's very attractive and it is something I'm very good at. But yeah, it's not something I'm eager to jump back into at the moment. I think the thing for me that has been distilled, you know, there's this saying in venture that first time founders focus on product, second time founders focus on distribution. And for the last year I have been going really hard on social media because I think I'm never going to regret building a network or an audience. And it's been so intellectually satisfying to my curiosity to just meet people and learn and have conversations. I mean, the whole genesis of the podcast Nickonomics was because I wanted to talk to cool people. I didn't know how other businesses work. I didn't know what CAC was. I'd never even heard the term like cac. What is, what is cac? Oh, oh, okay. Ltv. What is ltv? Lifetime value. Oh, okay. Well, the lifetime value of a customer should be the profit times how long they've been on. No, no, no, it's not the profit, it's the revenue times how long they've been on. Like, well, how is that lifetime? Anyway, so there's like, just like a bunch of things that I didn't know and I'm having a ton of fun learning all these things because I, I think there's a lot of value in learning how other things work and seeing if I can bring my sort of skill set and expertise into other markets. But at the end of the day, I'm trying to figure out what the next big swing will be because I think I have a couple other big swings in the chamber. But I'm, I'm very much invested in this audience distribution building mode because it gives a ton of optionality and thankfully I'm in a financial position where I can kind of invest in that for a period of time.

[1:12:26] Host: Yep, yep. Well, preaching to the choir, sir. I didn't start it for that reason, but one, you know, having an audience we all know, I mean, it's a cliche at this point. It's a very valuable thing. And yeah, and optionality. It provides optionality. And the other thing, like you said, that for me is so rewarding is just, it's incredibly stimulating. I mean, it's really so much fun doing this. And just give us two or three minutes. Nick, on medical billing as a target industry for people listening to this right now who are searchers and have come across medical billing companies. Do you think they're Good targets. And let's qualify that. Do you think they're good target businesses for people who don't have any healthcare experience?

Guest: I think they can be good target businesses for people who don't have healthcare experience. Here's the pro case for medical billing. It's not ever going away. We're always going to need to build, we're always going to need to bill for encounters that physicians have with patients, period. Um, it's also not going to be eliminated by artificial intelligence. I, I actually think it's going to be accelerated. I think it'll be augmented by artificial intelligence, but it's not going to be something that just, oh, now we have AI and it'll bill very 100% correct every single time. That's not going to happen. There's so many nuances to the space that I think it's going to take, I don't know, 30 years before there's even any LLMs that are probably fully trained to, to, to really automate out everything within the space. Number three is physicians don't want to do this stuff. They don't want to do billing, they don't want to do coding, they don't bring the administrative functions in house. So there's always going to be demand for it. That's the bull case, I think the, the con, I don't know what the opposite. The bear. Here we go. The bear case for that would be if you are somebody who is just process oriented and you like sitting in your cubicle and messing around spreadsheets, Medical billings is probably not a business for you. If you're buying, you know, a sub 5 or $10 million medical billing company, you're going to need to go out, pound the pavement, build relationships with physicians, manage a sales team, all of those things. They're very sticky customers once you get them. But you've still got to go out and grow the business and get those customers. So if you're a people person, I think it could be a great business. If you're not a people person, it would make it really, really hard to grow. At the same time, you also need to have very, very good operations. Very good operations, because these physicians are trusting you with billing. If you screw that up, they have a ton of legal liability. Right. If you're over billing, for example, that's a criminal charge. That's a criminal liability. So there are some significant downsides to doing a bad job operationally. So you want to make sure that you have a very well run medical billing company that you're Purchasing that. Then you're throwing your personality of sales on top of in order to juice business.

[1:15:18] Host: Wow, that was fantastic. Thank you, Nick. Jumping around now. One of the other things, we're not going to have time for this story, but you have a business partner in Chris Kerner. Chris has been on the podcast about a year and a half ish ago. Chris is just an entrepreneur's entrepreneur, as scrappy as they come. You know, spin stuff up, start stuff experiments, loves marketing, loves finding the hack. And he. So everybody go listen to buying a bitcoin mining facility. That was Chris Kerner's episode. Yeah, you were involved in that buying the bitcoin mining facility deal. So we're not going to tell the story here because you can, people can listen to Chris's interview. But, but give us, give us a minute or two on it. Just give us the very abbreviated version so people know this other stuff that you've gotten into. And then I want to hear about the tree trimming business.

Guest: The abbreviated version is Chris and I met as Mormon missionaries almost 20 years ago. We've been best friends ever since. And in, we've been talking about doing something together for a really long time, investing together. And in 2021 there came an opportunity for us to essentially buy bitcoin mining company where we started selling bitcoin mining rigs. And that has been one of the biggest roller coasters of my life. First three months, you know, we did $10 million in sales and like a million dollars in Ebitda. And the, you know, subsequent 20 months we've probably lost $800,000 just because we're, we're trying to keep the business afloat and around for the next bull market. It's, it's very analogous to like traditional mining, oil and gas, for example, right. There's boom and bust cycles. And so you make your money during the boom and you sort of sustain during the bust. And that's been a really weird sort of business experience to go through. That was the first. But we, we started this company called Co Founders where we invest in individuals who are entrepreneurially minded to start businesses and partner with them to run them. Chris is not an operator. He's an ideas guy. I have no inclination or desire at this point to be an operator. And so we find individuals who are hungry, passionate, have experience, find opportunities that might fit their skill set and then we serve as board members essentially in, in them running those companies. And one of those companies is a tree trimming business called Fast Tree Care in Dallas where we had an idea. Hey, we could probably launch a tree trimming business based on a lot of these growth hacks that Chris has been talking about for the last 10 years. And we launched it a little over a year ago and it's been running. James Ray is the, is the name of the co founder who's running that business and he's been doing a great job. I think trailing 12 months, we're like a half a million dollars in revenue. We're probably doing between 50 and 60 thousand dollars a month in revenue at the moment. But it's small, it's just in the Dallas market and it's been a cool experiment for us to have. We've also invested in a healthcare startup with somebody who's building some AI technology in the healthcare space. And we have a couple businesses that we're launching over the, over the fourth quarter. One is a lead generation business and the other is a perfume vending business. So it's kind of all over the place, but it's, it's fun.

[1:18:32] Host: Well, there'd be a lot of places we could spend, a lot of time we could spend on exploring each of those. The tree trimming business I want to double click on. Yeah, the so. So the whole pitch of entrepreneurship through acquisition is that a lot of these businesses are not appealing businesses to start from scratch for all the reasons that the audience knows. But buying such a business can be appealing. This tree trimming business getting to half a million dollars a year in revenue in a year and presumably it's continuing to grow, feels like a business that could get to a million, million and a half, $2 million in maybe not such a long amount of time. So how does that inform how you think about ETA entrepreneurship through acquisition versus spinning up one of these quote, boring businesses from scratch?

Guest: So for me personally, if I was doing it by myself, I would have never done the tree trimming business because it's not something I'm confident in doing. But Chris, like you said, is the entrepreneur's entrepreneur. So I felt like, all right, he'd have my bases covered in terms of business development, growth, those types of things. The thesis is there's a ton of boomer businesses, right? Like you see it, you see it on whatever Facebook, Instagram, YouTube, whatever. 10,000 baby boomers are retiring every day. That means there's 3 million businesses for sale that you could buy. Here's the problem. These baby boomers are still tied to Covid asset valuations. So they want a ton of money for their businesses. They got more demand than they can Meet and they're just, they're just not open to necessarily selling at the terms that you want to buy them for. And they're not necessarily the types of business that you'd want to have. They're businesses that have a ton of deferred maintenance. You may be buying a fleet of vehicles that are really, really old and that are, that are fully depreciated. And you're probably going to have to reinvest in a new fleet of vehicles in the next few years. They've got old systems and processes that they're running on their tech. Their tech stack is totally antiquated. So you start looking at that and you think, is it worth me buying this business knowing I'm going to have to invest all of this money, or is there a way I could go out and steal the business? Essentially, is the way I think about it, is there a way that I could spin up something that's capital light, that allows me to take advantage of the same trend? That doesn't make me buy from one of these baby boomers who are retiring at a price that doesn't make sense for an asset that really isn't where I think it should be. And as we thought about it, we have this model and tree trimming in particular, which is we're essentially a lead generation company. So we have James and we have a way that we're generating lots of leads. Some are through Facebook, some are through texting, some are through calls. Not a lot of paid ads. This is all kind of like our own growth hacky stuff. Leads come in, James goes out, he meets with those potential customers, gives them a quote, and then we sub it out. We have, we have no trucks, we have no equipment. We work with subcontractors who have all of that stuff. And that's been a very capital light way for us to grow those businesses. So I think if you're an entrepreneur and you have an opportunity looking, you know, that you're looking at and you're like, well, I could take a bunch of debt and buy this business or I, I know that these are the funnels that I can use in order to generate business and I could test it and I have subcontractor relationships. Yeah. I mean, why not take the swing, right? I didn't have any of those things. That's kind of like what, what Chris sort of brought to the table.

[1:21:56] Host: Yeah.

Guest: So. So in my mind, it's a risk mitigating game. If you feel like that's a low risk strategy for you to try out, you should try that out. But if you don't have any of that stuff, I, I, I don't think you should start something whole cloth. I think you should buy a business that has an operating history that has systems and processes, even if it's going to take you time and money to invest and update them because otherwise you're going to, you're going to learn it and spend a lot more kind of on this side of things, growth hacking than you otherwise would just stepping into a business that's fully functioning.

Host: Yeah, yeah, yeah. And, and I think that's a really important point. I mean this, this, this ingredient that Chris brings of the growth hacking that is not that there's a, there's a really a special sauce to that that, I mean that is his genius and it's, and it's a pretty unique skill talent that he has at that. So it's not one where you just, you know, know, learn about digital marketing and you too can go do it. I mean Chris is really quite talented at that. So, so I think people just need to keep that in mind that developing funnels in this incredible lead generation engine that's not even paid. That is a, that is some special sauce right there. So don't underestimate, don't underestimate that last question. The, which is related to the one I just said, but just kind of zooming out more and thinking big picture about opportunities for the people who are listening to this podcast who may have not even started to search do but or are searching but the point is they haven't yet committed to a path of buying a business or something else. Do you have now that you have, have a lot of corporate experience that you have experience buying businesses, doing some starting from scratch stuff, investing in others as somebody who wants to take the reins of their own career and do something entrepreneurial. Do you have a favorite prescription is are you an evangelist like so many of us here are, that buying a business is really the way to go or not necessarily. How do you blanket advice? How do you, what do you tell people to, to what do you think is the kind of the, the best path for the most people?

[1:24:04] Guest: Okay, I'll try not to be too long winded. The first step is to know thyself like you, you just have to know what your temperament is. And I fundamentally believe that the minority of entrepreneurs are built like Chris. Like there's being an entrepreneur, you're already in the minority, but it's an even smaller subset of people who are like I'm going to start from scratch and build something from like that. Either you've got to be really passionate about something and have a lot of capital behind you in order to make that succeed, or you've got to be really, really good at generating business and closing that business and building systems and processes and scaling.

Host: So

Guest: I, I think that's a, that's a small minority of people. My blanket statement would be, you know, you need to learn yourself and see which one of those two things make the most sense. I would generally recommend buying a business, but first I would recommend go get experience on somebody else's dime. Yeah, I don't care if you get paid less. I don't care if it's a step quote unquote, back in your career. If you have the opportunity to go work somewhere that gives you P and L management, go do that, like understand how you manage costs, how you manage people, how you manage cash flow, collections. All of those things fail on somebody else's dime because you are going to fail. It's just like, that's okay. That's part of the process of learning. And then once you've had some experiences where you have failed and you kind of know yourself really well, that's where I would say jump into entrepreneurship. Like, life is long. I know it doesn't feel that way, but life, life is long. If you're in your 20s, don't be so in a hurry to get somewhere you're not ready for because it's going to be a bad experience for you. Go buy a business that's, that's a much safer route to take. And once it's running well and once you've made your money, then go expand into things that you're passionate about and then sell it and you know, do your startup like, then you can go not worry about losing or wasting money. But until then, stick to the strategy that's going, that's going to get you the highest probability of success and that is going to make your fan, you and your family financially secure for the rest of your lives. And then you can go play fantasy business person on Twitter like me.

Host: Okay, all right, let's, let's end it there. That was great, Nick. How could people find you online? Nickonomics is the name of the pod. But give us more, give us more.

Guest: And Nickonomics is the name of the pod. Co founders.com is the name of Chris and I's company. We spent a lot of money for that website or Twitter Co founders Nick is where I hang out the most and yeah. Would love to connect with anybody who has any questions.

Host: Great. Nick Kaluski. What a ride. Thanks for sharing it with us. Great interview. Appreciate your time, sir.

Guest: Thanks for having me. Will.