[00:00:00 - 00:04:07]

Will Smith: Today's guest was a successful consultant, but now in his mid-40s, Paul Callahan was becoming more aware of how many trips around the sun he had left. As he put it, he was tiring of the travel demanded by consulting. He was in a decent place financially, and he wanted to reconnect with an entrepreneurial spirit that had lain dormant for years. So in 2024 he set out on a search for a million dollar in earnings business in the Atlanta in November 2025. Six months ago, Paul closed on Metro Metalworks, a precision metal fabricator that fit the bill, though as Paul notes, that million feels like a lot less once you start paying off the SBA loan.

Paul worked with a buy side advisor.

To accomplish his acquisition.

From time to time you've heard Acquiring Minds discuss the buy side Advisor model, which I increasingly think is a good but overlooked option to explore for the right type of buyer. Paul and I also talk networking capital. You'll hear how somewhat counterintuitively, he had to come more out of pocket at close because the business had actually performed better since signing the loi.

Here is Paul Callahan, owner of Metro Metalworks Webinars Most first time business buyers spend months finding the right deal and securing financing, only to reach closing without a clear plan for the financial processes and stack they'll need. As new owner in a webinar this Thursday, Ryan Johnson of Acquisition Lab will walk through the finance and accounting decisions that matter most before and immediately after your closing, including setting up banking and payroll and payments before close, building your financial stack from day one, understanding cash flow versus Profitability and making sure you don't miss a loan, payment or payroll what SBA lenders will expect after closing and on an ongoing basis and why bookkeeping alone isn't enough. The webinar is Finance Essentials before you close and it is this Thursday, July 9, noon Eastern. Link to register is right at the top of this episode'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. Looking to secure an SBA loan to buy a business? Meet Pioneer Capital Advisory your go to partner for sophisticated buyers who want deals closed quickly and on the best possible terms.

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Visit pioneercap.com or click the link in the notes.

Paul Callahan welcome to Acquiring Minds.

[00:04:08 - 00:04:12]

Paul Callahan: Thank you. Thanks for having me. Excited to be here.

Paul.

[00:04:12 - 00:04:30]

Will Smith: You're the recent owner of a metal fabrication business. After a successful career in consulting as.

Owner, you're bringing to bear a lot of the expertise from your years as a consultant. We are going to get into it.

Let's start with some background on you please Paul.

[00:04:31 - 00:07:11]

Paul Callahan: Sure, sure. So I began my career in very technical roles during the dot com boom and startup mode. I was a developer, software engineer. Wouldn't have called myself a software engineer for sure.

Moved up the ranks technical lead architect and ended up working, I'd say what I call the holy trinity in development. I had time in consulting, worked in software development and then also spent time in an internal IT organization. So I got to see a lot of different different development landscapes and decided I want to go back and get the mba. Post mba, I knew I wanted to go back into consulting. I kind of like getting a new job every three months or at least I did in that part of my career.

Not anymore I hope. Not exactly, no. I'm kind of locked in now. But yeah, it's consulting to me was it gave me a lot of intellectual capital, a lot of energy and fuel and decided to go back into consulting but move up the food chain if you will, into more management consulting. So I spent about six or so years at Gartner in their consulting organization and then I made move to Bain and company.

I was there for about six or seven years. I was a leader in their tech strategy practice and there I really got to spread my wings and move over from more just the pure technical side of the house C suite to more of the CEO CFO led initiatives where we focus more on business value creation and performance improvement. And a lot of what I did was like where does tech play a role in that? What's the strategy around? It ended up moving to Accenture a few years ago as managing director there for a bit and then also a senior partner at IBM in their enterprise strategy team.

Again still similar context around the role. I've worked across industries, probably a couple hundred companies at this point that I've consulted to and so I've been across industry a lot of, a lot of work with mergers and acquisitions post merger integration. I've done carve outs to carve outs and, and also on the private equity side a lot of work at Bain around full potential value creation and, and how do you probably for my part it's like how do you go unblock all the barriers that come with that growth plan, especially from a technology perspective. And then most recently I've been doing more independent consulting. Had just wrapped up not too long ago.

I was a global leader for 36 country ERP transformation. So really glad to kind of get them to a successful place and now fully locked and loaded at Metro Metalworks.

[00:07:12 - 00:07:17]

Will Smith: Well how did that pivot happen? It seems like you really liked your consulting days career.

[00:07:19 - 00:08:44]

Paul Callahan: I did.

I think like a lot of folks I've heard on the podcast, you know, Covid really made me take a step back and consulting is such a social business and when you remove that element of it, I had a couple of customers that were very Covid cautious for the right reasons. But even on the tail end once things had kind of calmed down and you sit on enough teams calls webex and zoom calls and it just, it really grates on you. And I wanted to get back more in front of the customer in person and it just wasn't happening. So it just made me kind of take a step back and think about well, what I want to do in this next chapter of my life. I always say only getting a few trips around the sun and I don't, I'm on the older side of things now, so I'm thinking about those things differently.

So I started thinking about, you know, what's the next chapter and stumble upon eta. I've always wanted to go back into something more entrepreneurial but like a lot of us, I've got a lot of financial obligations, family obligations that precluded that for probably some pretty obvious reasons. But it had not dawned on me that ETA might be a direction that I could look at. And so I started digging into that, learning more and that was back In I guess September 23rd timeframe when I became interested and started the search.

[00:08:45 - 00:08:59]

Will Smith: And Paul, when you said that you started to think about your career differently at kind of a mid career point, call it in your 40s.

How did you think about things differently? What, what shifted inside?

[00:09:00 - 00:10:02]

Paul Callahan: I yeah, I think the main thing is just being at a point where you know you've got, you've got some liquidity, certainly not in time, but I've done well, been able to save. And it just gets you in a different position where you can think about things differently and not necessarily be quite as constrained in your thinking as you might be earlier on in your career, or at least I was. And also just I think the other dimension of this is the travel with consulting can get to you.

It's a lot. I mean I could have a few years ago I was doing three city weeks and like literally hopping on a plane two or three times a week. And those are the things where you just see your kids getting older. You know, I've got a couple of teenagers now. I've also got one six year old.

And you want to be a, you know, part of their lives in a way that you haven't been able to for many years. And so I started not that entrepreneurship and owning a business is going to be easier, less hours, but more flexibility. And that's one of the main things.

[00:10:02 - 00:10:08]

Will Smith: I was looking for for still 12 hour days. It's just you get to decide which 12.

[00:10:09 - 00:10:10]

Paul Callahan: Exactly. Yeah.

[00:10:10 - 00:10:10]

Will Smith: Great.

[00:10:10 - 00:10:19]

Paul Callahan: I need to go pop out during the day to run an errand for my daughter or son. It's a lot easier than if I'm across country.

So that, that helps. Yes.

[00:10:19 - 00:10:23]

Will Smith: Yeah. How did you approach your ETA project, your search?

[00:10:24 - 00:12:16]

Paul Callahan: So I, I started out, yes, it was back in September 23.

Started really just kind of tiptoeing into it to get a sense of what's the landscape, how does this work? I mean I mentioned before had done work in private equity, very familiar with M and A, but nothing in the lower middle market. And so I actually signed on with acquirer I was with. I joined their cohort. Good group of folks helped me learn.

It was great to learn from other searchers that were going down this path and so I started working with them and kind of learning more because certainly on the lower level markets it's just a different ball game and a lot to understand what the process typically looks like. And I really didn't have any exposure to SBA lending. So that was something I really need to get my arms around. It probably took two or three months of just going it alone, looking at the biz buy sales, looking at axial and things of those natures. Of that nature.

And I, I came to the conclusion pretty quickly. I feel like Atlanta is a hyper competitive market and I having said that, I doubt it's any different than any major metropolitan area. But I just, everything I ran across seemed already kind of oversold, overpriced and, and I thought, you know, I really need to go off market. Look, look to see, you know, look, how do you connect with buyers? So, and then I was also working, so I started looking for options to get some help.

Ran across collar capital at that point because I was really looking for additional help. And I knew that I wouldn't be able to spend the cycles during the day necessarily to do a lot of this myself, so signed on with them in January of 24 to kind of get underway more formally and with a support team and structure in place to help me be more successful.

[00:12:17 - 00:12:35]

Will Smith: Calder Capital is a name that regular listeners will have heard. They're a buy side advisor. And so when you say you wanted help, what do you mean?

Sourcing deals, I assume is what you mean. Talking about how competitive Atlanta is. That plus something else.

[00:12:35 - 00:13:47]

Paul Callahan: What it was, I would say first and foremost sourcing deals, getting introductions warm leads to owners, and knowing that I just didn't have the cycles to go, you know, build the email drips, the all the phone calls I was really looking for up front, getting deal flow out of the gates and making sure that I was having those calls with owners, figuring out where I might, may want to dig in and actually put a loi out and spend more of my time really meeting owners, getting to know them, figuring out if it's the right kind of business for me, versus having to go through all the upfront work of getting to them in the first place. And then on the back half too, just more support through the transaction and just getting to close because there's probably about a thousand ways a deal can go wrong.

And so just knowing that I had a partner there, that kind of helped me get through that and doing the right things. And also kind of sometimes a little bit of, you know, good cop, bad cop. I'm not necessarily a bad cop. So having some help from, in specific parts of negotiations just to get through the transaction.

[00:13:48 - 00:13:56]

Will Smith: And were you going to remain employed during your search?

Was it, was that a part of the calculation?

[00:13:57 - 00:13:58]

Paul Callahan: It, it, it was.

[00:13:58 - 00:14:24]

Will Smith: And, and where I'm going with this too is that Calder has a number of different plans. I, I don't want to, you know, misquote their pricing or whatever, but these are couple thousand single digit thousands per month. I think kind of two to five, all the way up to five grand a month, I believe, forgive me, Calder, if I'm misquoting, but there are a range of options, but they're, you know, not insignificant.

So how did you think about that?

[00:14:25 - 00:15:54]

Paul Callahan: Yeah, it, it is a You know, it's a significant consideration. And I, the way I looked at it was that, uh, yeah, there's a monthly fee associated with it for retaining a team. And that was doable. I mean, up front, just had to figure out is, is that something I can stomach?

And, and it was because I did want to, I did intend to continue working. Not through all of this. There's been parts of this where I, you know, didn't have a contract, any contract work and had some breaks where I could go, you know, go really full time. But those were pretty, pretty slim parts of the process for me. And, and so the biggest consideration I had is if, if this is something I really want to do and I, I, and I'm the type of person, if I set it out to do something, I'm going to do it.

I knew I needed some support to make sure that I could, you know, work on this night, some weekends, you know, tuck, you know, here and there, have a call during the day, but know that I'd be able to get through the process and actually get to where I want to be. So that's probably the biggest consideration. But yeah, there's the money aspect to it. But the other thing I would say is if, you know, this is probably the single, it is the single biggest investment risk I'd ever taken my career in my life. And so just the money associated with making sure that you get to the right business, you acquire the right business and you get through close is I think it's money well spent if it helps you get where you need to be.

So it was a calculated investment, but yeah, it's sizable.

[00:15:56 - 00:16:38]

Will Smith: You know, Paul, that's interesting and it makes a lot of sense as to Calder or firms like its value prop. As a buy side advisor, I've tended to focus on the deal sourcing as the, as the key value prop. And if they find you, your deal, you know, search is a binary outcome. There's a lot of value in that.

But this sort of more qualitative, if you will, value that they provide where they become kind of your de facto deal team. And they, they know this market very well, they're working in it all the time and they can serve as kind of a personalized coach for your search. There's a, there's a lot in that as well as in terms of value prop. From a, from a buy side advisor.

[00:16:40 - 00:16:41]

Paul Callahan: There is.

And I.

[00:16:41 - 00:16:42]

Will Smith: Do I have that right in your mind?

[00:16:43 - 00:17:33]

Paul Callahan: You do, absolutely. And look, I'm, I'm Taipei like a lot of us and I'm it's not that I'm just going to completely hand something off to someone or some team. So often it was a second set of eyes or it could be times when I was truly just completely flat out with work where I had to hand something off and it gave me the confidence.

I mean working with Sam Skarich and Hannah Navin and Logan Theodoro and they were really good about just jumping in. We checked in weekly and it was just very, very good knowing that when things got tough I could always just call Sam and call Hannah and them and then make sure that we'd get through whatever hoops we had to. Because like I said before, there's a thousand different things ways things can go sideways in every deal and we certainly ran into a number of them, you.

[00:17:33 - 00:21:03]

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Other framework that I am a fan of and I want to just run it by you and see how you respond. About the question of working with a Calder or like a like an AquaMatch Athena Simpsons AquaMatch is another big name in buy side advising in our world is the idea that if you keep your salary and pay for this pay for a buy side advisor if you're somebody who's intent on doing a full time search otherwise. So your two options are quit W2 and go all in on doing your a full time search yourself or retain the job and hire a buy side advisor. The if you quit your job and let's say you're doing well for yourself, you know you're earning $200,000 a year north of $200,000 a year, maybe quite a bit north, then the real cost of doing your own Search is the opportunity cost of walking away from that salary, not to mention all the, any associated sort of search costs that there are, that's a significant opportunity cost versus you retain the $200,000, $300,000 a year salary and you pay call it 60 ish thousand dollars a year to a buy side advisor then your yeah, that $60,000 out of pocket hurts, but the real effective but you really need to be comparing it to the full opportunity cost of quitting your job. And so from that light it looks a lot more palatable actually.

And so I kind of always say I'm surprised more people don't do this.

Now obviously my hypothetical here assumes that you make a really full salary. Not everybody makes $200,000 a year or more. But for that sort of cohort of person or person who's a little bit more mid career and is likely to have a higher salary, I feel like it's a good analysis.

And so I kind of reflect that I'm surprised. I don't see it much. And then my answer to myself is that there's just a, there's a big psychological barrier to just outlaying $5,000 a month, $3,000 a month, not knowing that it's actually going to yield an acquisition anyway. Respond to all that if you would. Paul?

[00:21:03 - 00:22:31]

Paul Callahan: Yeah, well one, one part, one aspect of that I would say is I'm in a different part of my career. You know, I'm 49 years old and earlier in my career it might have been, or for many people it could be a place where just hopping out, going full time search can make sense. And for me, you know, especially with a lot of the commitments I have just in a different place in life. So knowing that I wanted to get this done, it was important to me to have the support and to not go it alone. But I do think that I've met with a lot of folks, you know, had calls that, you know, people have asked me about this, my experience and I think to the point of, to your second point, I've always just given the, you know, make sure this is really what you want to do.

You know, if you want to lock and load and do this, they're going to support you and guide you. And by the way, the entire ETA community is extremely supportive. There's just so much support out there and I love that about this community. But know that, you know, if you know this is what you want to do, just be sure about that. I mean, I don't think this is something you want to Hop into.

If you're just testing the waters, if you're experimenting, if you truly know this is what you want to do, and you've got line of sight to what's in your strike zone, you've got good liquidity, and you know you can get a deal done, then I think it makes a lot of sense. But it's not. It's certainly not for folks that are kicking tires because it is a big.

[00:22:31 - 00:22:33]

Will Smith: Deal, and that's because of the expense.

[00:22:34 - 00:24:05]

Paul Callahan: At first, it's a tad slow because you're just starting the drip campaigns and they're getting emails out, they're starting to make phone calls and hitting the pavement.

But then it comes on pretty quickly. You need to be prepared to hop on a call with the owner. And those are some of the most valuable chats I've had and probably what I value the most through this entire process. Just meeting owners, they're amazing. You hear their stories, but you need to be ready for that because you can have two or three deals a week at some point, and that takes a meaningful amount of time.

And you're also having to work around the owner's time as well. So I think that aspect of it, you know, they're, they're, they run a tight program in terms of getting that stuff ramped up. And then depending upon where you are, if you have an loi, you may still want to passively search and still continue to look, or you may just want to turn that off for some point. If you're really digging in and getting into diligence on something, you're underway at loi. So it's really how you want to run your process.

But for me, you know, I was generally, you know, looking at several things at one time and trying to dig into each one of those, learn enough to get to loi. And then. And then in several instances, we did and had a couple of at bats, a couple of otherwise that. That fell through for one reason or another. But it is a pretty big volume that you need to be prepared for.

And. But there can also be some times when it's a little bit softer and you got more time to spend with owners, and you. You wish you'd see more phone calls coming through.

[00:24:06 - 00:24:27]

Will Smith: One of the things that I know that Calder does is really press you, prospective business buyer, on your buy box. They won't let you get away with, oh, you know, I'll look at anything, or, you know, or million dollars of earnings and above.

But any industry, you know, they really want you to dial it in as. As I understand it, did they in your case and if so, what was your buy box?

[00:24:28 - 00:25:46]

Paul Callahan: I wouldn't say press as much as just make sure that I was being thoughtful about that, that I had, you know, had a. That I did have some thesis around what, what was most important to me. And, and we did and I'd already been through that process.

I. Because I am geographically constrained, I necessarily had to broaden the aperture, if you will, in terms of what I would look at, you know, looked at businesses early on had looked more, you know, B2C with more, you know, home services. That was not really a place that gave me a lot of energy. And also I think PE is just sort of drained a lot of that area too hyper competitive. But a new manufacturing, more industrial type work might be more just given some of my previous consulting work was certainly interesting to me and worked in a lot of upstream manufacturing.

So that was also a big piece as well. But I definitely had, you know, in terms of the financial parameters, the level, the size I was looking at, didn't want something too big, you know, bite off too much at one time, but also didn't want to buy a job necessarily. So we did put all that criteria in place and that helped us shape, you know, what was worthwhile when it came to owners that would actually answer the phone or the email to. To get a discussion.

[00:25:47 - 00:25:50]

Will Smith: And what was the.

Your financial buy box really look?

[00:25:50 - 00:26:50]

Paul Callahan: I mean like a lot of us trying to get something north EBITDA north of a million or SD north of a million. Again geographically constrained. So broaden the aperture around industries to. Yeah, anything from more B2C to more B2B and including manufacturing, more industrial type operations but still on the smaller side.

And also just from a personal liquidity standpoint, what I was able to bring to the table, it couldn't be too big. So there were a couple of things I looked at that were I wanted to purchase 100% of the business for no other reason that I just thought the complexity of adding investors might be a little more than I wanted to handle. I certainly would have been open to it. I just thought it'd be easier and simpler process. And so that also kind of constrained what I was able to look at just given those size parameters.

[00:26:51 - 00:26:57]

Will Smith: So take us to the next plot point of note in your search.

[00:26:57 - 00:27:43]

Paul Callahan: Yeah, so we had a few, you know, few months of looking at businesses. I got pretty far along and I would say this is the first four to five months got pretty far along with one, one deal. I looked At a. It was actually a hardscaping business.

Fantastic business, great owner.

Because of some of the life changes and some family that I support. My father's age and I decided that that was probably going to be a little bit too far away, given that I do care for him. And I came across Metro Metalworks, I think it was March or April, time frame, back in 24. Instantly fell in love with them. It's just a solid business, steady heartbeat and decent growth over the past few years.

[00:27:43 - 00:27:45]

Will Smith: I've never heard that. I've never heard that one.

[00:27:45 - 00:27:46]

Paul Callahan: What's that?

[00:27:46 - 00:27:53]

Will Smith: A steady heartbeat? A steady heartbeat as a, as a way to characterize a business.

I like it. I get it. That's a good, that's a new one and a good one.

[00:27:53 - 00:28:33]

Paul Callahan: Well, the, I mean, the interesting thing is, yeah, I would love to have seen an upward trajectory and just continue, you know, year over year growth. But also I've been around the block long enough and have worked enough in manufacturing to know how these businesses operate and the reality of growing.

And it was kind of, I won't say it was clear to me. It was like they're, they are an inflection point because. Oh yeah, it just. Meaning I think they're at a natural kind of inflection point. Level of revenues, the size of the business, where to get to the next level.

I think, yeah, there's going to be some considerable investment. It's very capital intensive business. So we would need.

[00:28:33 - 00:28:47]

Will Smith: Oh, I see. So.

So an inflection point. Meaning they were gonna kind of be stuck where they were unless they were prepared to really bring new energy and capital investment to getting to the next level.

[00:28:47 - 00:29:31]

Paul Callahan: Yeah, potentially. I mean, there's only so much you can do with headcount when you, you are, you are very, you're very tied down by the, the equipment that you've got in place. And, and they had invested, not to say that Metro, they had invested significantly over the years, you know, had bought new capabilities, had experimented with new technologies, you know, cobots and things of that nature.

And, and so that I liked as well. You know, it showed me that, you know, that the president was very open to and knew that they needed to start looking in some different directions. So when I say inflection just, I mean, I think there's significant opportunity and untapped value at stake that we can go after. And that's kind of where our, our next chapter is and where we're going now.

[00:29:32 - 00:30:07]

Will Smith: Well, then I guess it's kind of perfect because what you want to see is Steady heartbeat.

You want to see good, solid historicals that if the business just carried on doing what it's been doing, it will pay down the SBA loan and you know, and be a profitable enterprise even with just kind of no growth or GDP style growth. But you also want to see the potential for pulling levers and seeing new net new growth, real growth. So, yeah, kind of that kind of the perfect sweet spot there.

[00:30:07 - 00:30:20]

Paul Callahan: It was exciting, except for we almost got to, well, got to Loi and I got left at the altar and I was kind of. I was kind of devastated.

I'm like, oh. Because I really had my heart set there. And.

[00:30:21 - 00:30:25]

Will Smith: How much had you invested energy wise, time wise in the deal?

[00:30:26 - 00:32:28]

Paul Callahan: We're talking two or three months.

It was probably April through June timeframe, if I recall correctly. And it was significant enough. And I really liked the president, liked the owners. I just felt like it was a good fit. But yeah, I got left to the altar and I said, well, all right, Calder, let's go turn the pipes back on and get going.

And so we got search more kind of underway again, started reaching out. I had several companies I talked to, and I ended up meeting another manufacturer in the Southeast that we really hit it off. Fantastic business, great owners, great CEO. And so started talking to them and getting close to Loi with them as well. And then the president of Metro called me.

I think I was watching f. Probably watching football on a Saturday. And he said, hey, you still interested? I'm like, what are you talking about? He said, well, I. We couldn't come to terms with the buyer.

And I think, you know, we probably, probably need to reopen this conversation. You know, are you interested? I'm like, absolutely. And it. Then it became interesting because I kind of had two.

Two deals at one time, which there's some negative connotation around that. A lot. I think a lot of people look at that negatively. But I actually, when I looked at the businesses, I said, well, you know, one of the biggest constraining factors for one company is absolutely the strike zone of the other, so why would we not do both? And, you know, financially, it was.

It was. It was. I could do it. So I talked to the bank and I said, well, what do you think about this? And I gave him my thesis around it.

And yeah, there are two different NAICS codes. We could actually explore this. And so, so we got under LOI with both businesses and with the intention of going to close simultaneously or near time, near the same time with both businesses. So that's when things Got interesting.

[00:32:29 - 00:32:40]

Will Smith: Well, let me pause you there.

First of all, why do people, you said people see that negatively. Two deals at once. Oh, what is negative about it?

[00:32:40 - 00:33:16]

Paul Callahan: I think in the ETA community I've read things. You go search fund or any of the boards and you know, just some, I think some people, if, and for obvious reasons, if, if you were going to go under LOI with multiple businesses and not intend on closing both, then that, that could have a negative connotation that you're, you may be leading a seller down the path when you may not want to ultimately get, maybe they're your fallback.

And so in this case, that wasn't the case for me. I mean I really like both companies, both extremely strong, great teams.

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

Will Smith: Yeah.

[00:33:16 - 00:33:31]

Paul Callahan: Great revenues. So that wasn't the case for me.

And it was more about, you know, will these both close on their own merits? And again, the thousand different things that can go sideways during, during diligence and closing. So that.

[00:33:31 - 00:33:41]

Will Smith: Yeah. Okay.

And then the two different NAICS codes that your bank observed, what was the significance of that observation?

[00:33:41 - 00:33:58]

Paul Callahan: They made that, that had to do with the SBA caps. So there's the 5 million cap on the, on the 7A. Because these were different NAICS codes, they were able to entertain this as looking at two independent deals with two separate caps.

[00:33:58 - 00:34:03]

Will Smith: But you're not suggesting that the $5 million cap is per NAICS code.

That's per individual.

[00:34:04 - 00:34:15]

Paul Callahan: It, it's per individual. But because they were multiple, they were different NAICS codes, it was permissible, by the way they view the SBA rules, that you could have multiple caps. Yeah.

[00:34:15 - 00:34:25]

Will Smith: So in other, and, and so implication being that it was going to require more than $5 million of debt to take these two down and they were comfortable with that.

[00:34:25 - 00:35:58]

Paul Callahan: Yeah. Without doing. There's a, there was a, there was going to be a tad of parapassu type model for one of those. But we, we ended up not, we, we paused the, the work with the other company and you know, there were a few reasons that we looked to, you know, just bring that down as we got through diligence and closing. And I think the main thing is when I looked at where they were at, we did see some areas where I still think there's opportunity for us to still work together and explore an acquisition, but wanted to pause and hold on that.

And now that I've been in the seat at Metro, I see how overwhelming the day to day can be. And in some ways I'm thankful that I did pause that. But the upside of it is we are still working together. We're actually doing a project together. We're doing a project for that other company right now, but just great team and I'm just so thankful that, you know, when I came back to them I said, why don't we do this?

Why don't we. The very thing that we talked about doing, why don't we do a bit of that outsourcing? You know, let us show you what we can do. And I think we've, you know, we've successfully done that. We're completing a project for them now.

They're, they'll actually be at our shop tomorrow. I can't wait to see them. And I'm hoping that it starts, you know, a longer term relationship and then maybe down the road we can reopen that at some point.

[00:36:00 - 00:36:36]

Will Smith: Yeah, well, you'll certainly be better positioned in terms of, you know, information and really understanding the, the synergies or not the cost, et cetera. As you said, you know, once you got got into the seat at Metro, you, you, you, you realize just how much, how much it is to, to, to, to own and operate a single business, let alone two that you're going to have to integrate.

And actually on that point, Paul, I'm pressing you a little bit, but it seems like maybe you were too ambitious. But you know, I, I applaud ambition, but at the same time, you know, for a first time searcher that seemed like a lot.

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

Paul Callahan: I, I don't disagree with you at all. It was very ambitious. I, I think that there's several things that made it reasonable in this case Metro on its own because of the type of business we operate.

I, I didn't, there was no need to necessarily have to attain those synergies. I do think for both sides it was advantageous. But these did not have to be joined up from the get go. I've got the, you know, I've got the experience, you know, post merger integration. But yeah, you know, just like you said, in a different or I'd say in a different way, everybody's got a strategy until you get punched in the face.

So it's,.

[00:37:20 - 00:37:29]

Will Smith: Yeah, all right, so you don't proceed with that business. Obviously you do proceed with Metro Metalworks, carry on with that, how that acquisition goes down.

[00:37:29 - 00:39:21]

Paul Callahan: Yeah. So by the time we got to loi, I got that signed, got an agreement, alignment with the owners, that was end of 24 and around, beginning of 25 and getting underway in diligence.

We had a pretty major family transition that we needed to manage through and so it was something that, you know, it. First of all, it made me pause whether I really was this the right time to, you know, continue down this path? I knew it was something I wanted, but also knew just the dynamics of working on this type of deal. It's, you know, you could easily lose it if you can't keep momentum. So we did have to, I won't say pause, but necessarily I needed to dial back a little bit to handle some stuff on the life front.

And in doing so, I think it helped me also probably think a little bit more deeply about what I wanted out of this. If it was really the right deal for me, you know, financially, there were some implications I had to think through. So in the end, I think it ended up being a good thing that we took our time through this, and the bank was very understanding because we had the. The PLP number, the approval in the system. So that was not really a barrier.

We'd gotten through the deal, we'd gotten through underwriting, had moved into the early part of closing. It just really kind of took a lot longer for the closing process to get finalized. And then the other aspect of this. This deal also included the real estate. So that was a separate loan process that was being done in parallel as well.

So in some ways, given all that was going on, it probably not a bad thing that we had to take a little bit of time to get through it either. I'm sure the owners would have liked for it to go a little bit.

[00:39:21 - 00:39:41]

Will Smith: Faster than it did, but they never. There was never a sense that you'd lose the deal because they didn't know. This is a wild card, this personal family stuff going on with you.

So they don't know if you're actually. You know, I'm sure in their minds, it was like, you know, maybe. Maybe Paul says he's going to close, but maybe he's not going to close anymore.

[00:39:43 - 00:40:35]

Paul Callahan: I can't speak for the owners. I can just speak for.

I was very transparent with them on where things were, and I'll always be thankful how gracious they were and understanding the owners, you know, I had very clear line of communication with them. We got each other's cell phone numbers. They were not active in the business for years. You know, they had not been active in the business for about 20 years. And so, you know, but they're also pushing 80.

They're ready to get out. And they did need to. Need to get this done. But a lot of it, I think, was just giving them the assurance that, yes, we're going to get through this. Being very transparent around timeline to the degree that could be gave them a lot of confidence I believe and I and I did intend it was not to step away.

It just needed to take a little bit longer.

[00:40:36 - 00:41:53]

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Anything to say about buying the real estate other than it kind of further complicated everything?

[00:41:54 - 00:42:54]

Paul Callahan: No, I just we did from the get go new knowing that I wanted to get you know get this closed I separated out the real estate from the from the business transaction. So what I what we put in place was the lease purchase agreement that gave us a certain number of months to lease the property at a somewhat higher rate to incentivize me to get get the real estate perfect purchased. So we had a lease purchase agreement which basically it's a lease agreement that also has the purchase the purchase contract in it as well with the parameters around how many months we would lease giving notification for when I purchased the real estate we did a 504 on that so a separate bank the SBA process is a little bit different with that you go through the state level CDCs so it really just that was a parallel process and it it lagged the business transition transaction a bit. We closed on the real estate in mid April so we finalized that then.

[00:42:55 - 00:43:19]

Will Smith: A couple of things there so this lease so they increase the lease on you because increase the lease on you to incentivize that you would follow through with acquiring it because you buy the business and say yeah I'm going to buy the real estate after a few months later but you could decide not to but they made it worth your but you guys agreed kind of in advance like well we're going to raise the rent on you so that you hurry up and buy the real estate.

[00:43:19 - 00:43:42]

Paul Callahan: Yeah, it sucked for a couple months for sure. And look, I was willing because I knew we, we had, we had the 504 approved. We were, it was just a, it wasn't a matter of, of if, but when. So I, you know, that was just a negotiation point.

I said, yeah, I get it, let's, let's do that. And I am incentivized. But yeah, it kind of ate into earnings a bit for a couple months there.

[00:43:43 - 00:44:12]

Will Smith: And why didn't you buy the real estate with the 7A? Because if you buy it with the 7A, that's when you can get the full blended amortization.

Right. And you can, you know, if the real estate is actually worth 51% worth more than the business, then you can get the full 25 year amortization of the entire loan thanks to the real estate's value. So there are benefits to doing it all under 7A.

[00:44:13 - 00:44:37]

Paul Callahan: Yeah, you just, you just answered that question for me. It's, it's the amortization.

So the real estate wasn't worth 51%. So, yeah, you know, by virtue of that, the 10 year amortization and also the higher rate on the 7A just didn't make a lot of sense. The 504 is a way better vehicle. But yeah, it adds the complexity of having to do a separate, you know, separate transaction.

[00:44:37 - 00:44:45]

Will Smith: And sorry to be clear, the reason that they were separate transactions is simply because they're two completely different processes.

And 504 takes longer, 504 takes a.

[00:44:45 - 00:45:04]

Paul Callahan: Little bit longer because you, you actually close. You're, you're closing two loans. You're, you're closing a commercial component and then you're closing a component that's backed by the sba. And, and yeah, and then you get the, you get the benefit though, of, you know, the, the 25 year amortization on the SBA portion, not on the commercial portion.

[00:45:04 - 00:45:06]

Will Smith: Okay, what do you mean not on the commercial portion?

[00:45:06 - 00:45:53]

Paul Callahan: So there's, it's complicated. So the bank issues their loan, their primary loan for their component of a 504, they also issue a secondary loan that fills the time period when the SBA debenture is going to be fulfilled by the SBA through the cdc. So you go to closing and you're essentially closing a primary loan, a commercial loan, and you're closing a secondary loan that's temporary at your second closing for the 504 with the CDC or the SBA component that's when they close out that temporary loan and the SBA loan takes effect. So we just got through that last component.

[00:45:53 - 00:46:20]

Will Smith: Okay, okay. That's right now. Okay, this, this is coming back to me actually. We did a webinar with Heather Anderson last week because of the new limits of the to 10 million combined 7A and 504. And we get into a lot of the details about how 504 works, which was.

I didn't know at all and. Right. I recall this kind of how this goes and it's kind of weird.

[00:46:21 - 00:46:39]

Paul Callahan: It is. And you know, my, a lot of the, a lot of the big 7A preferred lenders are not as active in the 504 space.

And my bank was not. They just didn't do that type of loan. So we did, we did kick the tires on putting under the 7A. It just didn't make sense financially when the 504 is there.

[00:46:39 - 00:46:48]

Will Smith: Okay.

We haven't heard any numbers around Metro Metal Works. Can you tell us more about the business and what it does?

[00:46:49 - 00:49:14]

Paul Callahan: Yeah, so we're, we're in the mid single digits, millions in terms of revenues. Like I said, it'd been pretty consistent over the past four to five years. We're a precision metal fabricator and we're based in McDonough, Georgia.

And for those that don't know what metal fabrication is, we cut, bend or form and weld metal to make the things that you see every day in everyday life. So things as varied as we may work on, let's say building carts that go in a warehouse or a distribution center, like specialized types of carts or pallets. We may build things that are parts for electrical substations or for data centers, even let's say components that will go into like a launch pad for a rocket. It's extremely varied. So we're what you call a high mix, low volume business.

And that's the big difference between a lot of fabricators and folks that do sheet metal work. Meaning that we do a lot of varied projects, but they're not typically. We're not like a high volume, low mix shop that does, let's say thousands of parts there may be for an OEM and just churn those out on a contract. We do more project based work. So we buy the buyer inventory when we have our projects come in the door.

And so that by that nature we're passing through the material cost at the time when the project starts off and we're not generally not holding a lot of inventory. So it's a little bit different model, extremely strong Business. Great team. They've just been, they've been, they've welcomed me with open arms and you know, given we, we also have had some challenges this year and given everything that we've been through, I'm just, I'm very thankful how strong the team has been and they just pick things up and run with it. And I think a lot of that has to do with the very nature of what we do in our business.

You've got to be extremely flexible to not only quote fast and get quotes out to customers, but you've got to be very nimble and flexible in how you schedule to meet their needs. And I think that's where we punch above our weight is just meeting the critical deadlines for customers. Most critical projects.

[00:49:15 - 00:49:21]

Will Smith: You said mid single digits on revenue. Did it meet your earnings criterion?

[00:49:22 - 00:49:45]

Paul Callahan: It did, it did, yeah. So from an earnings perspective, hovering around, hovering around a million. So it was certainly in the buy box and you know that million feels like a lot less once you start paying off the SBA loan. But yeah, it's sufficient for what we need.

[00:49:46 - 00:49:55]

Will Smith: Well also a capex intensive business and we're going to unpack the business here in a minute.

And your acquisition was, can you share the deal terms?

[00:49:57 - 00:50:30]

Paul Callahan: Yeah, so we were around, probably around 3.5x on the purchase. Had a, the primary, obviously the primary note with the bank, the 7A and then had a seller note, a couple hundred thousand on that. So still have a seller component as well. That didn't count toward the equity injection.

We actually didn't meet the cutoff. I think it was June of 25 or so. And so I put in just the full equity injection on that of 10%. Yeah, yeah.

[00:50:31 - 00:51:04]

Will Smith: So call it 350ish thousand dollars out of your pocket.

Great.

Let's talk about networking capital and how you thought about it and structured it. Because as regular listeners know, this is a notoriously tricky feature of small businesses, almost any small business, but particularly in kind of project based manufacturing or construction businesses where there's works in progress as there is in yours. So if you would explain to us that feature of the acquisition, please.

[00:51:04 - 00:51:47]

Paul Callahan: Yeah.

So it was a stock deal and by the way, I hope I do this justice because it's tricky and it was something I had to get my head around. But you want to make sure that you're buying the business with enough gas in the tank, so to speak, or often that metaphor will be used. And so when we looked at the stock deal, we put a networking capital peg in the agreement, just basically saying that our expectation was that it close the net working capital, meaning the accounts receivable minus the accounts payable, but also inclusive of the inventory and the work in progress, or the WIP would be around over. I think we pegged her about a million at the time.

[00:51:48 - 00:51:51]

Will Smith: Say those components again, please, of that million.

[00:51:51 - 00:53:58]

Paul Callahan: So that's the accounts receivable plus the work in progress. What's on the floor underway inventory at the time and all that, minus the. Minus the accounts payable. That, that would. That would come up to around the million market.

And when we arrived at that, you know, worked with Calder on it, the sell side broker, they had their view on it. We had our view. We looked at 24 months of balance sheet and arrived at that figure. Manufacturing is tricky. Most businesses are not walking around with a clipboard every day measuring whip.

So that was probably the toughest component. But we got to something that I think was a reasonable assumption. And so once we had that, we were able to go back and look at 24 months, get to what we thought was a reasonable number. And it turns out the business had really some good tailwinds at the end of the year last year and rounded out with much higher AR, I think, than we anticipated. Inventory was a little bit.

A little bit higher as well. So it meant at close or three days or so before close, the seller was supposed to deliver their estimate of the network and capital. They did and ended up, you know, they were a little bit higher than we anticipated, which in many respects is a good thing. It means the business is doing well. But it also means, you know, based on what we.

How we. How we had valued the business and what the offer that we had locked and loaded on, we owed some money. After close, we had a $50,000 collar. So that just meant anything above or below anything outside of that $50,000 collar we needed to true up. So we went through the process of.

After close, had a look at what they had provided, make sure I kind of understood and verified that that was actually the numbers and it was. And ended up cutting a check to compensate on the networking capital after we were, I think it was 30 days or so after we closed.

[00:53:58 - 00:54:06]

Will Smith: And how big was the check? How big was the difference? I guess if it was the networking capital, then was more than $50,000 off the peg in their favor.

[00:54:06 - 00:55:11]

Paul Callahan: Yeah, it was. It was a couple hundred thousand dollars. So it was a big, big check. That was, you know, that's. But that's part of going into this.

We could have pegged it higher and it would have, it swings both ways. So the seller could have been on the, on the other end of that if they couldn't deliver it. So, you know, going back and looking at this and saying, could we done something better, done it differently, could we have paid it out differently? You know, there's other ways of doing this. You know, we could have, you know, paid out some of that, had an agreement to pay it out through the AR over several months.

That could have been something we looked at as well. It's just, it's by nature of what we put in the agreement and I don't think it was poorly structured. It's just a matter of this is where the business was and frankly the, you know, the, that networking capital being at the level it was, was helpful as I get in the first few months to know that we had a good stable AR to land on and I didn't have to bring a ton of cash to the table to put gas in the tank. This new vehicle I've got.

[00:55:12 - 00:56:33]

Will Smith: Yeah, okay, well it, it's, it's, it's a little complex so we're not going to pick it apart much than you already have.

But I do want to take a shot at, at distilling what you just said there. Just for the benefit of repetition, you at the LOI stage come up with a working capital calculation and that's the, that's the peg. Everybody agrees that, that, that that's kind of where you're anchoring. And then in a working capital intensive business that, that that's going to ebb and flow and change and shift. And so you have a true up at close where if the peg is more than $50 more or more than $50 less, then one party will owe the other the difference.

And so between when you agreed in the LOI to that structure and peg and close, the business actually became more performant or had more in the pipeline. And so it was actually a good thing for the forward looking health of the business. But it meant that you needed to come out of pocket to true up against the peg. Another couple hundred thousand dollars.

[00:56:33 - 00:56:34]

Paul Callahan: Yes.

[00:56:34 - 00:56:35]

Will Smith: Is that correct?

[00:56:35 - 00:56:54]

Paul Callahan: Okay, that's correct. And I mean the big thing is you just, you don't wait to close to figure these things out. This is something that you need to get alignment on in the LOI stage and just know that you know something you need to manage as you get to closing. But you don't wait until closing to align on networking capital.

[00:56:55 - 00:56:56]

Will Smith: Right.

[00:56:56 - 00:57:04]

Paul Callahan: This is something you got to get locked in, locked in with the buyer. Or the seller early on as you, you get the LOI buttoned up.

[00:57:06 - 00:57:48]

Will Smith: But, you know, one wonders if there is a situation like yours, if the one thing that maybe to be, to have done differently is, is the $200,000 that you had to stroke a check or whatever it was a couple hundred thousand dollars. You didn't say specifically, but the fact that you had to, that.

That came right out of your pocket as opposed to being financeable in some way or as, as I think you said, maybe coming out of ar. Yeah, because that, that could, for, for somebody without a balance sheet that could clean them out. I mean, an extra two. A lot of people don't have an extra $200,000 lying around or whatever it was. I keep saying 200, whatever it was.

100, 300. Right.

[00:57:48 - 00:58:37]

Paul Callahan: Yeah, I don't have a lot of those lying around either. So, I mean, that was painful. But you know, again, if I, if I went back and I could have spent more time about thinking about how we would carefully structure that, you know, can it come out of.

Can it come out gradually? And I had thought about that at a point and honestly, I think, you know, both, I would imagine in most deals that both the buyer and seller just want there to be no, no striking of checks. It's just to get a clean deal at the end. But you also, you put this in place based on historicals and yeah, there's been good tell. There were good tailwinds end of last year and still are right now.

And so we've had the benefit of that. So, yeah, it's just something I had to come to terms with.

[00:58:37 - 00:59:03]

Will Smith: Great. Well, thank you for that, Paul. Really an important topic.

And, and, and just to underline, like in a business like yours, fabrication project based, as you said, high mix, low volume. So lots of projects going on at a given time. Working capital is, is, is devilishly tricky. By the way, when you say a lot of projects at any given time, like, give us a sense how many individual projects on a given day, just to give us a ballpark.

[00:59:04 - 01:00:22]

Paul Callahan: So I mean, I'll give you.

It's. The terminology is a little different. You know, we talk about work orders and our customers have purchase orders. And I mean, we have, you know, probably 400 work orders just for our largest customer right now. So it's.

Now that doesn't mean there's 400 active work orders happening on the project floor, on the shop floor each day. That just means things that are in our pipeline that are getting scheduled day by day. Um, you know, any given Day you may have, you know, three, four, five different customers projects happening on the shop floor. But it, it's really the dynamics of the, you know, how quickly the customer needs something, what materials we actually have on hand. Are we still waiting on something?

Do we have someone out sick that day that needs to work on that particular project? And then in our case the biggest constraint is we had a laser that we've been out of laser for two months and so we just, we swapped a major piece of equipment. We actually just got that up fully running over the past week. So it's been a really big challenge to keep, maintain the same clip of workload and capacity that we have with one of our lasers down.

[01:00:24 - 01:00:27]

Will Smith: One down. Because you were swapping in a new one.

[01:00:27 - 01:01:40]

Paul Callahan: Yes, yes, we had a Ferrari and what we really needed was a Toyota. We had a fast machine but it was also one that was pretty expensive to, to operate and maintain. And we needed more of the Toyota.

It's not literally a Toyota, but something that, a lot lower maintenance, still very high performance machine. So we went ahead and decided to purchase that and you know, and that, that's, that in and of itself it's like, well, you're, you're now spending more money on something that, you know, you'd already baked into what you thought the business could generate and that's what drove the valuation. So that's a tough pill to swallow. But I'm, I'm not going anywhere anytime soon. I mean I'm here for quite some time and so if I thought about, you know, what we needed in place, we needed a new laser and we also have a new automated loader that will let us, you know, load in say a couple five, ten sheets of metal and just have those go through and be processed automatically.

Not fully, hands off. But we're going lights out or anything. But that's where you can walk away from the machine and just have it do its work while people are doing other, you know, value add work throughout the shop.

[01:01:41 - 01:02:08]

Will Smith: Yeah, well, sorry to keep focusing on all these places. You spent additional money, Paul, for the benefit, for the benefit of the.

Yeah, for the benefit of the audience. You know, another illustration of.

Feature of.

This business which is the capex. Capex intensive nature. So you get in there and you got to buy a new laser. Now maybe you were able to in, in this other thing that, what did you call it?

[01:02:08 - 01:02:12]

Paul Callahan: The. Just a server. It's a, it's a loader. Loader. Yeah, it's a loader.

Yeah, yeah.

[01:02:13 - 01:02:25]

Will Smith: The Toyota, as you put it did you, were you able to sell the Ferrari? We did get the money for the Toyota. Because in that case then it was an even. You didn't have to come further out of pocket.

[01:02:25 - 01:02:59]

Paul Callahan: Oh no, we came out of pocket. No, this, that machine was several years old. It's still, still very good Ferrari. Yeah, very, very good machine. It's just, it, I don't think is great fit for where we are in our business.

And so yeah, we bought a brand new, a brand new machine that's like another one that we have, our other laser, just a newer model, higher power, lets us cut thicker pieces of metal. But no, it was a significant investment. And because of the sb, because we have the SBA loan, you sell the old equipment and you have to send that money straight back to the bank.

[01:03:00 - 01:03:05]

Will Smith: Oh boy, I haven't heard that detail for a long time. I forgot about that.

[01:03:05 - 01:03:21]

Paul Callahan: Yeah. So all these checks that I'm selling, yet another check that I can't take that money from the ways that we sold and use it for the new equipment. I had then go write a check for the investment in the new machine. So yeah, very capital intensive.

[01:03:23 - 01:03:43]

Will Smith: And what, and what is that? What is that about? That must be the, the sba, an SBA policy or an SBA lender policy that any big divestiture has to immediately go to paying down the loan. Because they, why would, I wonder why would that be? Because probably there's an opportunity for bad actors to what?

I don't know.

[01:03:43 - 01:04:44]

Paul Callahan: Well, they, I mean they, they have the UCC on it. My understanding from talking to the bank was because, you know, because the bank is not, we went with a third party for financing on this, on this, on the laser. So in order for the, you know, for the, the new third party to take, take first lien position and for the, for our 7A bank to have the secondary, you know, all inclusive lien, it meant that we had to, you know, we, we couldn't use that, that was, already had the lien on it. We couldn't use that against the new laser.

Now if we would have purchased through the bank, that might have been an opportunity. But you're talking about a preferred lender that primarily, primarily does seven A's. They're not, they're not doing 504s and generally not work even working at that level. I mean, but this laser costs as much as a small business itself. So it is big, but it's not quite big enough for a preferred lender, I think to, to work, work with this.

[01:04:45 - 01:05:01]

Will Smith: Right, okay. And so the, the point I missed, of course, is that when you buy a piece of equipment like this that's so expensive, you finance it. And so then it becomes, then, then you, then you, your other lenders, namely your SBA lender, who are already involved in the business, have a say in, in kind of how that. Yeah.

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

Paul Callahan: Okay.

[01:05:02 - 01:05:20]

Will Smith: All right. Paul, I heard you mention when I asked you about the number of projects going on at any given time that for, for your biggest client, you have 400 work orders. So is there customer concentration in the business? That sounds like a lot of business to be doing for a customer.

[01:05:20 - 01:05:44]

Paul Callahan: There is.

I mean, they're a substantial component of our business.

I wouldn't say it's overly concentrated, but they're a very large customer of ours and had a long running relationship. Fantastic customer. And, and we did great work with them and I want to grow that relationship. If anything, that's where we want to go. But yeah.

[01:05:44 - 01:06:21]

Will Smith: So this isn't a case where you looked at the revenue sources and it was an outsized amount coming from a single customer that you had to get comfortable with. It was within the range of your comfort. Okay. And the reason I'm asking is not only because of what you just said, but I just interviewed Caleb Standifer last week who also bought a metal business in South Carolina and he had similar to your business, I think, and similar size too. And, but there was serious concentration and so we spent time on it.

So I thought it might, it might be like a pattern in, in these types of businesses.

[01:06:22 - 01:06:47]

Paul Callahan: Yeah, I mean, I would say if, if there's more contract manufacturing style of work versus what we do is more project by project. I think certainly for us, again, top customer, not overly concentrated. And if anything, our intention you know, is, is to grow significantly with them. But again, that's, that's a place where we have to invest in order to be able to do that.

[01:06:47 - 01:06:54]

Will Smith: You bought this as a, this was a stock sale as opposed to asset, I think you said. Anything for us to learn from that?

[01:06:56 - 01:07:02]

Paul Callahan: Just the 338 was interesting. I was not familiar with that construct.

[01:07:02 - 01:07:04]

Will Smith: Remind us what it is.

[01:07:04 - 01:08:31]

Paul Callahan: So it's basically we did a stock sale, but the 338 lets you treat the sale as similar to the way you treat the assets in an asset deal. And so as part of the process and even in the sale contract, we took the asset allocation, meaning what part of this was equipment, what part of it was goodwill. And we had to align with the seller on those values because on both sides we had to have on our tax returns. We had to have that match as to the value of that. And obviously that's a negotiation point because the assets that are in certain classes, especially the equipment that has a different tax treatment than let's say the goodwill.

And so that was one tricky part. We got. I think we got to. Yeah, we got something we both agreed upon and it. We didn't step up the assets I think much at all.

It was really more around book value and aligning on what is that book value is that look and feel right. Based on what you see and. Or market value. And. And then that was a big part of the.

The end. As we got to the end to make sure we buttoned down everything in the sale agreement getting to agreement on that because it does have tax consequences on either side. Right, right.

[01:08:32 - 01:08:46]

Will Smith: And that really gets to the heart of kind of why you're doing this anyway. Doing a stock sale as a.

Well, for the stock sale for. For them is a better tax treatment.

[01:08:47 - 01:08:48]

Paul Callahan: Yes, yes.

[01:08:48 - 01:08:51]

Will Smith: But it can't all. It can't.

But some of it still needs to be treated as assets.

[01:08:52 - 01:09:23]

Paul Callahan: That. That's right. And you know the stock sale just given all the equipment and we only have one vehicle, so that's not an issue. But just all the contracts and stock sales.

So much simpler in my mind. But yeah, there's certainly cases where an asset deal would. Might make more sense. You know, if it's. Let's say it's more just purely bringing down a business and buying it for the assets.

But in our case it certainly made. Made everyone's lives easier just to get alignment on the asset allocation and move forward with a stock. A stock sale.

[01:09:26 - 01:09:28]

Will Smith: Okay, Paul, great. And when did you close?

[01:09:28 - 01:09:32]

Paul Callahan: So we closed in November of 25. So.

[01:09:32 - 01:09:34]

Will Smith: Okay, so you're six months in.

[01:09:34 - 01:09:36]

Paul Callahan: Yeah, been in the role six months.

[01:09:37 - 01:10:04]

Will Smith: Let's. Let's close by just hearing how these six months have gone. First say more about the. The team that, that it's been a great team.

You'd also said that the sellers hadn't had been kind of checked out, not involved for 20 years. So what you said as 80 year olds. So for the last 20 years they've been effectively retired. So the business has kind of been running itself.

[01:10:05 - 01:10:07]

Paul Callahan: No, no, they have a. I mean.

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

Will Smith: With, with a management with leadership.

[01:10:09 - 01:12:43]

Paul Callahan: So they have a. We have, you know, I talk about it as our office team and our shop team. So we've got a handful of us in the office team. The leader of that team has been the president for around 20 years and he stayed on.

He's fantastic. Any given day, I have no idea how he does what he does and with all the experience and knowledge that he has, but he was the, he's the son of the, the owners and very thankful to have him to stay on. He's been a fantastic mentor to me. The team really relies on him and his, his knowledge, I think, to the point where they, they themselves are so experienced and how much value they bring to our customers every day, it's. It's really insane to me.

Even where we are this year with the laser down, I'm so thankful. I'm just. It blows my doors off. I told a couple of the guys this week, I was like, I don't think you understand what we've done. And by the way, there's a laser out over here for two months.

So. But yeah, the president stayed on and then also we have. I'm thankful to have the owners. Their daughter was our finance or our business operations manager and so she's stayed on as well. And the intention is over time.

The president is. He certainly is going to want to dial back some at some point. But right now, you know, we've, we put together a growth plan. You know, we've got some ambitious goals and I think we're both, I think we're both getting energy from one another because I'm getting to see something that I just, it's not stuff that I do day to day or have done day to day in my career and I think I'm bringing something to the table that he's seeing things differently. So it's been really exciting for us to work together because we're feeling, I think, I think we're fueling each other's fire a little bit and getting excited about, oh, yeah, that we could do that.

And it's like, yeah, we can. So we're just going and doing it. So. But I also, I just, I really want to give a big shout out to the entire team again. We are on a growth trajectory for this year and given what we've gone through and having a major piece of equipment out and this place just, it does not stop.

It's like a heartbeat. And they've been extremely welcoming and we've got folks that have been there 20 years, 30 years, extremely, extremely strong team. So definitely want to give everyone a shout out and big, huge thanks to them for everything they've done and welcome me on board.

[01:12:44 - 01:12:54]

Will Smith: Paul, you mentioned what your president brings to the table and what you bring to the table and So I wanted to ask you what, what you think you bring to the table.

[01:12:54 - 01:15:09]

Paul Callahan: Yeah, yeah.

Like what on earth does this consulting do bring? I. So the, the no given. Given where I'm coming from with more of a technology. A lot of what I've been doing, what's written built in the back of my t shirt for years is, you know, business performance improvement transformation that has a big technology enablement component to it.

So I've been trying to take more of a tech first approach to what we're doing and how we're, how we're growing in a way that we've just not, I don't, we've really not done this for years because, and I know I mentioned this in the pre call, but if you look at the oshcuts or the send cut sends of the world, if you're not looking at what they're doing, then you really need to take a hard look because there's so much automation, so much technology that is being put in place. And yeah, there's the AI component, but there's, it's broader than that. I think there's a ton of opportunity, but this is moving really quickly and so I want to try. What I'm doing now is coming in and making sure that we're starting to adopt and adapt our processes to use some of these new, new technologies. Having said that, I've been a consultant long enough to know how disruptive technology is.

I've been very careful about how we put some things in place. So it's been a slow roll. Like I've been doing a lot of work on the side, I'd say on the side to begin to get that footprint in place and to roll those, those things out over time. Yeah, because it just don't want to be too disruptive, especially with all that we've had going on. But I'm excited about, you know, the being able to leverage technology to help rent, you know, remove the friction with our customers.

You know, we don't need to have emails flying for flying back and forth all day long with status on work orders that should be on a customer portal. You know, we, we need, and we need to improve the capabilities around our erp. We need better CRM and so there, there's quite a few investments we're making there. I'm excited about those and that's, that's a lot of what, you know, the president and I have been working through over the past few months, like where and how to invest and when do we put those things in place.

[01:15:10 - 01:15:22]

Will Smith: But you're excited by the prospect of it understanding that you need to go slow, change management, etc.

All the best practices that a business buyer should know or, or, or adhere to.

[01:15:23 - 01:16:33]

Paul Callahan: Yeah, it's, it's tough to. I mean I tell. You know, I wrapped up that, the ERP program that I mentioned before and I've, I've told folks on that project. It's, it's never the tech, it's the tech is not the problem.

I don't think I've ever been on tech a tech program where tech was the issue. It's the people and their ability to adapt. The ability to leverage the technology in a way that doesn't erode capabilities or efficiencies but actually improves them. And that's tricky. That's the hard part.

It's like how to get people adapting and adopting their ways of working to leverage the tech. And so that, that's where I'm trying to be more conscious around that given. Yeah, I've lived this, I've been there, done it, got the T shirt many times over and so I just don't want to come in and start. Believe that I can just put something in place. Yeah, we can throw a CRM in place.

It's not going to do anything for us unless we figure out what are we actually trying to do achieve with that or if we want to improve our customer our way we work with customers, create a customer portal. Well, it actually needs to be modeled and work in the way that our customers work or it's just going to be another added layer of stuff that they don't want to log into.

[01:16:33 - 01:16:34]

Will Smith: Yeah, totally.

[01:16:34 - 01:16:53]

Paul Callahan: But I'm having a lot of fun. I really enjoy that part because I'm getting to see the business dive in but also put my lens and my kind of my thinking around what good could look like.

And I just think there's a lot of change coming in manufacturing and everyone needs to be know. Paying attention to what you know how to improve in that area.

[01:16:55 - 01:17:18]

Will Smith: And to the. What the business actually does. The, the, the metal fabrication are. You're learn. I'm sure you're absorbing a lot but of course there's, I mean it's a whole trade and profession.

So you're only going to. What is the expression? You're only going to learn as much as your main guy forgot. What is the expression?

[01:17:18 - 01:18:28]

Paul Callahan: I'll put the.

I've, I've told the team, I've told the shop. If you see me out here welding, the business is going the wrong Direction you need to get your resume ready. I'm not a welder. I don't, I don't have. Yeah, these are all things I want to learn, I want to explore.

But yeah, it's, it's. I'm not, I'm not. I have not done that work in my past. I've worked in upstream manufacturing. So there's a lot of things.

Everything's pizza. It's like, wow, this is great. This is so amazing. You know, it's just brand new. And when you get into a lot of the specifics of how we fabricate things for customers and what I tell our folks at our company is we're not a project shop.

I mean, what we do time and time again is we deliver on our customers. Most critical projects, we hear dates and we also just very high quality. And it's not just when people send in rfq, it's not just to get something cut or bent or welded. It's. It's a critical project for them and they depend on us.

So that customer service component, I think we punch above our weight because we go, we will go to all ends to make sure that we're flexible on schedule and get things, you know, out to the customers as they need them.

[01:18:30 - 01:19:34]

Will Smith: One of the observations made by Caleb Stander, for who I mentioned earlier, whose episode will air just a couple before this one, he'd been on the other side of buying work from metal fabricators and saw just how difficult it is to find reliable vendors when you're the ones buying the metal or needing metal work done. And so he appreciated being now on the other side as an owner of one of these businesses that can be a real differentiator. And this is actually a pattern we see in across ETA and small businesses that a lot of small businesses, the cliche would be sort of the home services business that doesn't return calls sort of thing. But that exists, that a version of that exists in B2B land, I guess as well.

And so you can really just differentiate yourself on being high quality, high customer service. High quality customer service. And it sounds like your observation is kind of the same.

[01:19:34 - 01:20:55]

Paul Callahan: Yeah, very, very similar to my thesis. The good part is I feel like this is where we've been punching above our weight for years.

And we don't do marketing, we don't do sales. It's by virtue of having done great work for our customers in the past. And yeah, we'll have the. Occasionally there'll be an issue or we'll have something sent back and we'll have to fix it, but that's going to happen anywhere. But I think we've, we've always had a strong history of that and that that's why if I, when I, when I say to the team, you know, we're not a project shop, I just want them to, you know, keep in the center of gravity for us should always be and how do we best serve our customers and hit those critical dates?

And if we can do that consistently, then I think it helps, you know, not only helps the customer, but it helps us because it will let us make sure that we can choose who we want our customers to be. And that means we can do more profitable work. We work, we work on things that are more, are better in our strike zone. We can do more efficiently, more effectively. And yeah, there's a lot of work that is not in our strike zone and we just, we don't work on those things.

And so I think the more we can do to improve there and we're already doing a great job, I think we got a great place in the Southeast and the region overall to really continue serving customers in a way that meets their critical dates.

[01:20:58 - 01:23:01]

Will Smith: Right. Last question for you, Paul, and I'll let you go.

Joe Wexler, also somebody whose episode aired already, I guess last week, so a few weeks when people hear this, it'll will have been a few weeks ago, was a former consultant and now bought his first business and is bought multiple and has kind of built a private equity fund with some partners around buying small business businesses. And he talks about how applicable his consulting experience was to what he's now doing, that he can go into a new industry, a new unfamiliar industry and learn it quickly and that he, he credits his consulting years to that. And so I make the observation that a lot of people in our world looking, contemplating getting into buying businesses, small business eta that they, they feel insecure if they don't come up from a finance background. Because we kind of talk about the models and financial concepts here and so on and the acquisition is, is a financial acquisition after all. But after hearing all of the value that Joe really thought his career gave him and his consulting career gave him, made me wonder if like that's, that's really the career you want to come into this world with, not a hardcore finance background.

You have a consulting background. Not sure it's, you know, analogous to, to Joe's, but. But I'll just put the question to you. Do you feel like your consulting background, you're leveraging it in a big way and and by the way, you, you have kind of industry, you know, you keep talking about upstream or industrial. So it's not, it's not, it didn't play in the same place as, as your now business does, but it, but it's, it kind of feels somewhat related.

So I don't mean that exactly. I don't mean industry expertise. I mean, I mean the perspective and the skill set of a consultant whose job is to go into multiple environments and understand the environment quickly and prescribe solutions. That skill set, do you feel like it sets you up?

[01:23:01 - 01:25:02]

Paul Callahan: Well, absolutely.

I mean, I think you hit the nail on the head a lot of consulting and the value that you bring when you get to the partner level especially. Yeah, obviously at a partner level, you're generally selling more than serving. But in my personal consulting career trajectory, I've always been serving, if you will, more on the ground working through client problems. Yes. As a senior leader, but still focused on like the consulting process.

And I think, you know, the toolkit that you get in consulting is extremely important, extremely valuable. And you know, I've told consultants and prior firms that I worked at, you know, just know that the worst thing that can happen if you have a couple of decent years and a good consulting firm firm is you're going to build a great general manager skill set and toolkit and learn how to break down problems, how to solve complex problems. The consulting naysayers will say, yeah, you're just going to give, you know, take the client's watch and tell them their time or put it in PowerPoint. But that doesn't, consulting is more than that because you have to be hypothesis driven. You have to go in with limited information and use your muscle memory to know and gain confidence around your hypothesis.

And in doing all that means you can work with a lot less information. You don't have to go down so many rabbit holes. And also just the repetitions help. You've seen so many different environments. Like I said, I've worked with a couple hundred companies and I've seen a lot.

So I've seen the good, bad and ugly. So it helps me kind of avoid, I think, some of the pitfalls that you might get into if you start to go down certain rabbit holes. And I've got the muscle memory and the experience and working across industries too, that lets me bring in some new thinking that you may not ordinarily kind of bring to bear if you're just 25 years, let's say in manufacturing. So that can also be a liability. But I'm hoping it's going to be an asset.

Great.

[01:25:03 - 01:25:34]

Will Smith: Well, interesting I guess that we don't see more former consultants in our world. See some, but not like we see former finance people for example. Anyway, Paul Callahan, thank you for coming on and sharing and tolerating me. Really putting a magnifying glass on on all the the painful parts, the money spent parts.

You've been a great sport. We'll link to your LinkedIn in the show notes and to Metro Metal Works.

Any last thoughts?

[01:25:34 - 01:25:50]

Paul Callahan: No. Thank you so much for having me. And I like I said in the pre call, I'm a huge fan. Thank you for all you do for the ETA community.

And thanks to the ETA community I've met so many great searchers and owners that have helped me through this. So thanks a lot. I really enjoyed this.

[01:25:51 - 01:26:39]

Will Smith: Great. Thank you Paul.

Hope you enjoyed that interview.

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