[00:00:00 - 00:02:43]

Will Smith: Today's guest arrived in the US just seven and a half years ago from India by way of Australia and now he is owner of a business with over $3 million in revenue. Ruchik Gandhi was a trained accountant working on financial diligence for private equity companies that were actively buying up home service businesses. These roll ups as well as his discovery of the concept of multiple arbitrage piqued his interest. Maybe he could do something similar if on a smaller scale. Well, he has taken the first step in that journey with the acquisition of a business that fabricates and installs custom window treatments and upholstery.

A workroom. In industry jargon, Ruchik provides a front row seat to the transition from white collar office work to blue collar business ownership. Listen for the segment on Ruchik earning the trust of his employees who initially reacted to him skeptically. Some Wall street guy telling them what to do. Also listen for how Ruchik found the deal from other searchers who had it under LOI and had done a fair amount of diligence before deciding the deal wasn't for them.

Ruchik purchased the deal from them. We talk about the costs there. Okay? Please enjoy this interview with Ruchik Gandhi, owner of Window 25 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. The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human Resources. It lays out the key items you should be thinking about as you transition into CEO and owner of the business you bought. The link to download it is in the show notes. Aspen is a professional employer organization or peo, run by a searcher for searchers.

Search fund veteran Mark Sinatra runs the company which provides HR compliance, flawless payroll, Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for. A fraction of the cost. Go to aspenhr.com or contact Mark directly@markspenhr.com. Ruchik Gandhi welcome to Acquiring Minds. Thanks for having me.

[00:02:43 - 00:02:48]

Ruchik Gandhi: Will. Good to be here. Ruchik. You arrived to the States seven and. A half years ago.

[00:02:49 - 00:03:06]

Will Smith: Today you are the owner of a business that you acquired about 10 months ago. Hopefully that means that the dream is still alive here in the States. Please start us off with some background. On this remarkable journey of yours. Richie Absolutely.

[00:03:07 - 00:06:09]

Ruchik Gandhi: So I'll go all the way to the back. I was born in India. I did my schooling there. I was A very bright student, so ended up getting scholarship to go to. Australia and finish off my degree over there.

Ended up liking there, so decided to migrate and started living in Australia. Started my career off there, did business management and became a CPA over there. Ended up working for a company where I ended up moving up the ladder of the corporate ladder and very quickly became a finance manager. That company got acquired and I got the taste of the financial due diligence QE world at that time and that really intrigued me. I was always an analytical person so that helped me kind of learn more about it.

And eventually I got recruited by PwC to join their financial due diligence group in Australia. Again started climbing the ladder up there. My wife was from US and her family was in us. We had a kid in Australia, so we decided to move closer to the family. So given the flexibility that my job offered at the time, we decided to migrate to the US in early 2018.

And I did not continue with PwC, although I had an opportunity to do so. I wanted to taste other firms here, see what else is out there. So I decided to join, go a bit lower and joined a middle market firm called Kohlraznik and continued my career there. Again went, you know, career is progressing really well. And then I moved on to another firm, another mid market firm, rsm and that's where I got a real taste of private equity.

You know, acquiring the home services businesses, rolling them up and growing them and exiting them. And there was always an itch of, you know, entrepreneurship and this kind of intrigued me to think that hey, if they can do it at a higher level, I can potentially replicate that at a lower level. I did not know anything about ETA at that point. Just a thought bubble, nothing more. Started researching about it.

You know, knew about biz by itself from a very long time, so been keeping an eye on it because had this itch in me that I wanted to do something entrepreneurial for a very long time, but never committed it to too seriously. Except you know, in my mind, like everybody else's, you know, startup was the only way to go with business and acquiring an existing business was not something that came across very frequently. When it did, I was kind of a little skeptical because I always thought that businesses that get listed have something wrong with them. That's the reason why they're getting listed. If they were everything perfect, then, you know, usually get acquired internally.

[00:06:09 - 00:06:47]

Will Smith: Richie, let me interrupt you. We'll will return to all of that. Sure. Couple a cup, a couple follow ups on your background. So As I a couple follow ups on your background, your time in India, you found yourself in a position where you needed.

You were somewhat responsible financially for the family. Say more about that. Yeah, so my father passed away when. I was 19, had a young family. It was a typical Indian household where, you know, father was the head of the family, responsible for winning the bread.

[00:06:48 - 00:08:21]

Ruchik Gandhi: And he passed at a very young age. So we were kind of left to fend for ourselves at the time. And I was the oldest one in the family with a younger sister and, and, and a mother. So I had to kind of grow up pretty quickly at that time. The family suffered a lot too.

You know, they also kind of had to grow up pretty quickly and figure out what are we going to do next. And because I was a bright student at that time, my mother decided that she wanted me to commit to studying and have a career path rather than if I would have joined the family business. My father had a business which had to shut down because of his passing. Had I joined that business, I would not have been able to grow because I was still too young to know all of it. But on the flip side, you know, the family was going declining financially at the time.

So I also had to take up the responsibility of some sort. And at that point, opportunity to finish my studies in Australia arrived, which for all of us, for good or bad, it felt like it was the best decision for us to make and take it. And yeah, so there were a lot of responsibilities. There were times when we struggled to even pay the fees that I had to after I moved there. But sometimes, you know, things just worked out and eventually ended up completing my studies there.

[00:08:21 - 00:09:00]

Will Smith: Great. Well, good for you on, on that first accomplishment of getting through that. Now fast forward to your working in qov. I think you said you were exposed a little bit to M A and you know, the power, the power of, of acquiring its scale in Australia. But it was real, but it was really here in the States where you start.

You were, I guess, doing QAVs for some of the home services roll ups. What did you, what, what did you see there? Just, just add a little bit more color to that. Was there a particular story, a particular roll up? I know you can't say client names, but just, but just, you know, give what so excited your imagination.

[00:09:01 - 00:10:29]

Ruchik Gandhi: Two, two particular industries that I saw. You know, getting rolled up very quickly and got very much involved with. One of them was H Vac, which was early 2021, 2022. You know, H Vac was a huge thing. It was very hot Every private equity was wanting to get their feet wet in that industry, and certainly I was not immune to that.

A lot of independent sponsors that I worked with at the time who also wanted to roll up H Vac and saw a couple of successful ones that I knew from before. So I'm like, okay, great, this is great. And then later on in my career, I came across landscaping roll ups at a scale, unimaginable scale, like, you know, rolling up like 10, 15 businesses a month type scale. So that was also pretty amazing to see. These were not sophisticated businesses that were getting rolled up.

There were like any businesses off the street, you name it, and they were rolling them up. So that intrigued me a lot. And that was actually pretty successful. I came across a concept of multiple arbitrage at the time and that made me, you know, even more intrigued to replicate probably not at that scale, but still replicate it at some scale. And Rushik, you, even though you were seeing, you know, these roll ups at quite a bit of scale, so in, in some ways it felt probably inaccessible.

[00:10:30 - 00:10:50]

Will Smith: You did see that there was a way for an individual to potentially do something like this at a smaller scale. That's right, yeah. What I saw was given the exposure. To private equity and the thought process, sitting with them in their management meeting and working very closely with them, I. Understood what is it, what that exactly they are looking for not just from.

[00:10:50 - 00:15:08]

Ruchik Gandhi: The operations standpoint, but also from the minimum financial standpoint, like the revenue and the EBITDA and everything. And I found a little sweet spot. There that they were not really active in. They thought that was too small for them, but it was too big for somebody with sufficient cash to just buy and run type thing. And I was like anywhere between 700 to a million dollar fibida.

They were not playing in that range. They were playing it anywhere above a million, million and a half of ebitda, whereas a off the street buyer was playing lower in that range. And again, bear in mind, I did not know about SBA or of course. Because here we all are. There are a lot of us right in that range.

Right, right. It's funny you call out that range because that is precisely what everybody listening wants. Right, right, exactly. So this was all through education and. Kind of analyzing how they do their business and what are they looking for.

So I'm like, I personally came across a few businesses that they passed on. Which had all the qualities but the minimum financials that they wanted. So I'm like, okay, they're passing on these opportunities, which are not bad opportunities. But Ruchik, if you didn't yet know about search and eta, how did you contemplate buying one of these businesses in this kind of dead zone as you saw it? I did not.

To be honest. At the time I was still thinking, I'm like, okay, there is potentially an opportunity and coming from Australia, I was. Not exposed to, you know, any government program that will be supporting a business buying process. So it was always like a seller. Note and you need to have at least 50% of cash available because seller would not accept a loan be a more than 50% in general ways.

So you know, it was difficult. But after coming here I'm like, okay, this is potentially an opportunity if I. Can find probably a partner or something, you know, or somehow figure out a way to make it work. And then I started researching about it and at that time I got introduced to your podcast. You know, I came across the HBR guide which helped me immensely and I'm.

Like, okay, this is not as far. Fetched as it seems. You know, it is possible. If I do the right steps in the right, you know, in the right order, right sequence, then it is possible. So that's how I, I started it.

Yeah, great. And, and we're going to hear about your falling down the rabbit hole in your search in just a second. A couple of quick other follow ups. Just what you said the you saw what private equity looked for, looked at valued in, in these acquisition plays beyond just the operations and I guess and beyond the, the floor of EBITDA that they were looking for. Was was there anything that they looked for and valued that wouldn't be obvious to us in search land or is it kind of all the stuff that we all already know?

No. The one thing that doesn't get talked about a lot in the search world, given the scale we play in, is this concept of multiple arbitrage that came across a lot like they will be pay 7x for a business that we. Typically would value at 3x 4x and. Tell us how are they able to justify paying so much more? Yeah.

So as you grow your business and. Make it grand or bigger and scale even further through non organic growth, the. Multiple that you can get when you. Exit on that business goes up and. Based on rolling up all these smaller.

Business together on a combined basis, they're EBITDA was at a level where you know, they can potentially get an exit at 10 to 15x multiples. Exactly. This 4x multiple that they added on. Top is, is what they were looking. For which people below their Level probably.

Cannot replicate it as easily or as quickly as they can. Exactly. That's the reason why they were happy. To pay double than what I, a ETA searcher, would be paying for it because they were getting, they were doubling their own investment overnight by doing that. Exactly, exactly.

[00:15:08 - 00:17:39]

Will Smith: So, so two key principles there. The, they're not thinking what the market rate is, that oh, it's 3 or 4x. They're simply thinking about what their exit multiple would be. Exactly. And that that's their own ceiling.

And so, you know, up to that. And say if they're rolling up aggressively, you know, they might be able to get a 10 15x multiple. Those are big multiples. But they might be able to get it in a hot market. Absolutely.

As long as they're paying less than 10x 10x multiple, they're getting, they're getting a spread there. And that spread is why we call it arbitrage. Because they're basically just taking the same dollar of landscaping Ebitda and there's. And they're. And they're transferring it from SMB market to a different market to a market where bigger players pay higher numbers, higher multiples, same dollar of Ebitda worth more.

So it's classic kind of arbitrage, you know, being the bridge between two different markets. Exactly, exactly. And to add to that even more so let's say they grow it to. A level where they can list it, then even bigger, then that multiple becomes 40, 50x. Yeah, yeah.

Although those, as I would understand it, I would think those are rare where there, there's rollups to the point of actually going public. But I guess Bright view, I think Bright view landscaping is what is. Yes, yeah, yeah. And then last on this, this first. Chapter of your, of your search career, Ruchik, you're seeing this stuff and having it whet your appetite.

Right. And now of course we all know that you've gone off and done it. And in the pre call we were joking. It was like a lot of people in the, in the CPA Q of the world at the sidelines or working behind the scenes on these deals joke to themselves, boy, am I in the wrong industry. You know, it's, it's either the blue collar sellers or the private equity guys who are making all the money here.

Yes, everybody says that, everybody jokes about it, but nobody goes off and does it. Or at least in my experience, and I think in your experience too, you were kind of one among nobody else. Interesting because, because there are, there is. A common pattern on acquiring minds where people who work in private equity directly as in an analyst role, let's say, are inspired and then do go off and do it. So there's a lot of former Pennsylvania folks in, in, in ETA land, but.

Not, not, not a lot of former. Kind of CTA Q of E people. I wonder why that is. Is that because accountants are notoriously conservative? I'll say to a degree, yes.

[00:17:39 - 00:19:51]

Ruchik Gandhi: You know, there is more risk obviously in this path there, you know, where. You have a stable career when you're a CPA or doing a qe. Also, I would think there is a, a very. The exposure of a QAE provider or CPA is during the deal, when the deal is actually being closed before the deal closes. The exposure limits a lot after the deal closes.

They don't see the operations of the business that closely. They don't see what happens after the business closed that much. I was one of the lucky ones. Who managed to afford some relationships. I was able to get involved a little bit on the operational side as well and learn more about it.

Although not directly involved because the firms that I used to work for would not be providing any operational, you know, services or anything around those lines. But I managed to get the taste. Of it because of forging those relationship where people will call me about topics or my clients would call me about topics that were not related to QE or accounting. And that's how I would advise on those things outside the realm of my normal day to day job. And that's what gave me the taste of what it feels like.

Because a couple of cpa, a couple of product equities that I worked with had a newish team who did not have a lot of experience in roll ups. And so they were relying on my advisor and trying to reach out to me on almost everything, whether it's relating to, you know, financial world or not. And say, what do you think? Or has any of your other clients done something like this? Or what can we do?

Have you heard about this type of stuff? That gave me a real taste of what the bottom level, ground level operational looks like and almost felt like CEO at some point that, you know, I'm giving them advice as a CEO on what to do and how to run it. And that's what I exactly ended up kind of doing. The team at Pioneer Capital Advisory has started offering peripassu debt for SBA business buyers. That means they can help unlock up to $3 million of conventional debt on top of the $5 million limit of SB SBA 7A loans.

[00:19:52 - 00:20:58]

Will Smith: So Pioneer can structure larger, more complex acquisitions. Listen to our story with Anika John. For one of their clients who did just that, buying a $10 million business as a first time self funded searcher, the Pioneer team has closed more than 100 SBA loans, averaging timelines well below industry standards. Founder and owner Matthias Smith and COO Valerie Stash bring over two decades of SBA lending experience. Matthias and Valerie have a full bench of analysts and associates who work your deals with them.

A true deal team. Not just a single point of contact. Visit pioneercap.com or click the link in the notes. You find the HBR guide, you find acquiring minds. You go down the rabbit hole.

How do things go from there? Yeah, so you know, to start with and a lot of searchers are contemplating these type of stuff, right? Should I do a full time search, quit my job, do a full time. Search or continue part time? I initially committed to part time search.

[00:20:58 - 00:25:36]

Ruchik Gandhi: I started off looking for businesses part time, starting to reach out to people in the evenings, early in the mornings. Found it very challenging to get a time response for them that then responding to them back on a timely basis. So that the interest is not lost. Especially I bought the business when the. Market was very hot in every industry, not just the one that I bought into.

So I had to be very timely in responsiveness which I was not able. To, you know, meeting sellers. I was not able to easily find. The time to go and travel and meet because of the very demanding role that I had as a QE provider. QE market was pretty hot as well at the time.

So after a few months of doing. That and kind of failing almost in every single opportunity that I came across and then kicking myself on, oh my God, this was great. Had I gotten in, I decided that, you know what, I need to put my foot down. Our family is not going to have income, but we have enough savings to be able to survive. And we laid out a plan of six to 12 months on how we're going to survive, what our expenses are going to be like.

And once we had that, you know, we basically said, okay, you know what, I'm gonna, I'm gonna quit and commit myself full time to search and search only. That's the only way I'm gonna get this done. You know, I'm hitting 40 at this point and if I don't do it now, I'm not gonna have another opportunity to do it. So this is the time I have to do it. So I, that's what I did.

I quit my job. It was in June of 2024, quit my job, committed full time to search for, kept searching, came across a few businesses. Initially my search was focused on landscaping and H Vac. As I had exposure to those industries. Quickly found out that the sweet spot.

That I thought I had because private equity did not want to play in. It, given the competition in these industries. Private equity was kind of pushing through those boundaries and coming down. They were going for everything that was out there and whatever was available at the time is something they passed on. I looked at a couple and I passed on those two like I didn't want to do it, you know.

The other one was tree, tree servicing. I looked at those pretty closely because I worked with a lot of private equities were doing that too. And again came to the same with tree. It was slightly different. I came to the same conclusion that yes, private equity was playing there, but there was heavy capex involved in that industry because the vehicles, the equipment was.

Not very well kept for the most of them. And it required investment, an additional investment from day one. Mostly in tree and specifically in tree. Specifically in tree space. Yeah, tree servicing space.

Because the equipment is expensive there. So it's not like landscaping. You buy a mower and a van and off you go. Because the vehicle in tree, the trucks have the, the. What do you call it?

They're heavy duty trucks. Well, and they have like stuff that you know, or whatever the chippers or whatever the chipper. Thank you. Like on the truck sometimes. Yeah.

Right, right. So you look at H vac, you look at landscaping, you look at tree, you go from. You graduate from part time to full time, having the conversation with your wife, she supports you, you basically allocate or figure out a way that you can go income less for 6 to 12 months. So tell us about your discovery of the business on.

Search Funder. Thank you. Yes, I was kind of active on. Search Funder, you know, giving people advice on QA matters just because I felt like, you know, that's where I can add value to the searcher community. And along that process, I saw a.

Posting on Search Funder by a fellow. Searcher that said that, hey, we have. A business under LOI in northern New Jersey and where we cannot close on it, but everything has been agreed upon. The loi, it's under LOI and we want to transfer this LOI over to a new buyer or a new searcher for a fee, obviously. So I reached out to them and found out more about the business.

Obviously didn't know anything about this type of business. I acquired, you know, and I'll probably in. In next couple of segments, I'll explain to you what this business is all about. Yeah, but it was completely new to me. I had no idea.

But a couple of things kind of struck me. Number one is that it had strong financials, very strong deal that was negotiated. And a serious committed seller without the. Roadblocks that I experienced before.

[00:25:38 - 00:26:24]

Will Smith: So these searchers who are on search funder had a deal in hand and pretty far along had they negotiated the loi even. So they were, they were basically trying to, if you will, sell a signed LOI with negotiated terms because they couldn't, didn't want to, you'll tell us why, close on it themselves. Great. And. And you thought that.

And so you look at this, you end up liking the business which we're going to hear about. And just as importantly, you like the terms that they negotiated. That is correct. And it was actually even further along than just having a signed loi. They also had SBA commitment and they started, they just kicked off their QE process at the time.

[00:26:24 - 00:28:14]

Ruchik Gandhi: I come to find out later on. That they have had been having conversations with the sellers since May of 2024 and this was in late July of 2024. So they've been having these conversations and the process has been going on for two plus months by the time I come into the picture. So yeah, they had the deal quite far along. And given my QOE background, I was.

Kind of more inclined to look at. Things objectively and not stay too married to the industry that I was familiar with because I could be thrown into any industry and had to provide QA service there. So I have worked across ton of different type of industries. So I kind of knew that what. Are the common levers and drivers of a smaller business or a localized business.

That didn't really worry me as much. Because I saw the right growth levers being coming together like, you know, consistent growth, good profitability, good margins. Well, and Ruchik, this would be the time to tell us what the business is. Sure. So the business is actually a workroom.

So it's a window, a workroom. That's what. Okay, that's what the industry term for this is. What it does is essentially fabricates window treatments, drapes, curtains, that type of stuff, and does upholstery services and reupholstery services. And there was an additional facet of.

This one which, where we fabricate custom furniture as well, which is not common for the workrooms to do. So in theory, a workroom is something. That fabricates soft window treatments like curtains and drapes only. That's it. We are a little more extension to that, which is we have upholstery services and we also make custom furniture for our clients.

[00:28:14 - 00:28:30]

Will Smith: Upholstery service services. Meaning you'll do the, the fabric around a piece of furniture on it? Yes, so that and foam. So essentially, think about this. As you know, there are two types of upholstery, upholstery and reupholstery.

[00:28:30 - 00:29:34]

Ruchik Gandhi: So upholstery means you are building a brand new furniture. Let's say you're a millwork company and you got a contract to, I don't know, fit out a, a lounge in an airport. So you build all the seating, banquets, everything like that, but you don't have the capability to put foam and fabric on it. Send those things to us. We put fabric, we put foam.

Or you are an individual who wants a custom made sofa because you know your, your apartment in New York City is not a standard size. So you don't. Standards don't fit there. So we make a custom sofa for you and then put all the foam and your choice of fabric. So that's upholstery.

Reupholstery is, let's say you have a. Couch in your house which has a sentimental value to you, but it's old, you know, from your grandfather's time, I guess. And you know, it's old, it's ripping, but you want that couch, you don't want to get rid of it. So you send it to us. We put brand new fabric on it, we put brand new foam on it, brand new springs in it, and delivery, deliver back to your house.

[00:29:35 - 00:29:58]

Will Smith: Great, thank you. That's helpful. And then. But how can you guys do furniture fabrication as well? Because the technical skill required to build furniture is vast and complex.

So that seems like a totally different thing. So. Yeah, how do you explain that? No, so we have skilled people in. Our company who are skilled in different areas.

[00:29:58 - 00:30:19]

Ruchik Gandhi: So we have three different separate spaces where we build stuff. So drapery has its own skilled employee base. Upholstery has its own. And then furniture manufacturing is a full fledged facility with, you know, cutting machines, planers, you name it, everything is there and skilled workforce that delivers that furniture part of things. So essentially.

[00:30:19 - 00:30:28]

Will Smith: So you guys will. Could fabricate a, for example, sofa. You could make the whole thing from scratch? Absolutely. If you can envisage it, we can make it essentially.

[00:30:28 - 00:30:40]

Ruchik Gandhi: Or a lot of folks look at, you know, these design magazines, find some really cool piece of Furniture come to. Us and say can you make this for us? We can copy that. Oh wow. I didn't know that was possible.

[00:30:41 - 00:30:53]

Will Smith: And so in the industry, industry being, being what? Being interior design. What is the macro industry? Interior design. Interior design is where, you know, primarily.

[00:30:53 - 00:31:12]

Ruchik Gandhi: Our fabrication comes to play. Interior design millwork architects, EV providers who also work in, you know, high end client homes, that sort of stuff. So okay, yeah. And so and, and in that world you're called a work room and everybody in, in that macro industry understands what that means. Interesting.

[00:31:12 - 00:32:29]

Will Smith: I've never heard the. I'd never heard the phrase and apparently you had neither. Yeah.

What do the following acquiring minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator in community for people serious. About buying a business. But they represent just a sliver of.

The lab's success stories. The number of deals across the lab's cohorts now stands at over 120 with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker. Deibel, author of Buy then Build, the. Book that introduced so many of you to the very idea of buying a business.

The lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, deal team introductions and an active community of serious searchers. Check out acquisitionlab.com link in the notes or email the lab's co founder, Chelsea Wood. Chelsea atbuy then build.com. It's a workroom business. And can you share now some of the numbers around it?

[00:32:29 - 00:32:47]

Ruchik Gandhi: Yeah. So it was in north of 3. Million in revenue and you know between say 15 to 20% of SDE. Great. So that's approaching your the sweet spot that we all think of.

[00:32:47 - 00:33:03]

Will Smith: Seven hundred to a million. It's, it's low end of that range, Colin? Absolutely, 100%. With that said though, it mattered less in this business because believe it or not, this never came into private equity's. Realms or viewpoint until now.

[00:33:03 - 00:33:53]

Ruchik Gandhi: Like now I see a little bit of activity of PE world but you know how it is like private equity. Kind of starts researching and targeting one industry and then everybody goes there and. Then that industry saturated rates and then. Go to the next one. So this is probably that next one and I entered before that.

I hope. Not to burst your bubble there Ruchik, but you're not the first person on the pod to have said my industry is the next one, that private equity is going to come. I don't believe it is to Be honest, to, to be, to be fully realistic. It, it's not going to become another H Vac or, or landscaping. There's just not that many businesses out.

There to acquire and roll up which. Kind of gives a bit of an. Upper hand because you don't have many competitors in the market. You can operate and have a loyal. Customer base and, and enjoy that for a very long time in this industry.

[00:33:54 - 00:34:03]

Will Smith: Which is actually makes it a great searcher business. Exactly. And, and, and so who are your clientele? You gave us some kind of examples. But, but flesh that out.

[00:34:03 - 00:35:14]

Ruchik Gandhi: Yeah. So primarily, you know, interior designers work. Very closely with them mostly you know, high end interior designers. A lot of architects. We work with many, many millwork companies who also do commercial work for them.

Most of our work is residential except for these millwork that is more commercial in nature. But we are not the primary contractor there. The millwork company is. We subcontract for them. And architects, AV providers, people who are.

Usually in the clients houses when they want to jig things up in their house. Those are our clientele. We also directly service the customer. But that's a very small piece of our business. We are primarily to the trade, meaning we only work with these other businesses who are, who have their own clients and we have a office space.

And that's deliberately the reason why we don't have a showroom space. Because we don't want that to encroach into their world and become their competitor of our own clients. We're not going to do that. But you know, if a customer walks. In and needs some help or advice, we can provide that.

[00:35:15 - 00:35:28]

Will Smith: So you grow the business basically via channels. These interior designers are your channel. And so to grow your business you make more relationships with more designers. That, that is correct. Word of mouth is a big thing.

[00:35:29 - 00:36:41]

Ruchik Gandhi: Every interior designer is looking for these type of work. So when you are a new designer, you are getting recommendations from the places where you're doing internships and then eventually we, we sign them up as our, our client and they stay with us almost through their life. Like our oldest relationship at this point is 32 years old and we're still working with them and we keep adding. Yeah, newer. I mean designers are a loyal bunch.

They would stay with you because you make their lives easier. And what about your Home Depot contract which sounds pretty enviable. Yes. So that's another facet of our business. Which makes our business very unique.

And you know, that means we don't have any direct competition in the market. And that's that we, we have exclusive. Contract with Home Depots in the New York City area and northern New Jersey area where we do installation work for the window treatments that they sell through this course and also blinds.com which is a part of Home Depot. So they, they sell all these window treatments. We provide the installation and measurement services for them.

[00:36:42 - 00:37:03]

Will Smith: I have to say that sounds and feels like a different business than a workroom where you're fabricating things versus just going into, you know, mounting stuff on the wall. Not to, not to diminish the technical skill required in that, but it feels very like a very different beast. It is. And, but there is a natural transition. To everything we make in our workroom we install as well.

[00:37:03 - 00:37:21]

Ruchik Gandhi: Our own teams install. So essentially it's the same installation skill set that we have expanded out to. Grow that part of the business, which. Is like a third facet of the business that is related but not the same. Okay, let's return to the deal, the finder's fee.

[00:37:21 - 00:37:32]

Will Smith: These other searchers. So how did you. What was the finders fee? Finder's fee can come into like you. Would have deal terms and deal structure, right?

[00:37:32 - 00:38:41]

Ruchik Gandhi: Finder's fee. There's no one size fit all solution. It could come in multiple ways. If the searchers or people you're paying finder's fee to broker whoever they need to be continued to be involved in the business, they might seek some equity probably or equity plus a payout of. Some sort of, in my case, the.

Searchers who was handing off the deals to me, they just wanted to be devons, just wanted to offload it. They did not want to stay involved. They didn't have capacity to stay involved. So we negotiated a 1% success fee on a success fee basis only, by the way. So only if the deal closes, they get paid.

But that's the fee. There was no equity, nothing. There was some negotiation around it. Initially they wanted one. But I've always been taught protect your equity.

So I was like, no, I'm not. Giving away equity if you want a little bit more. So initially it was some equity plus half a percent. I'm like, I'm going to give you a point, but I won't give you any equity. Well, asking for equity seems a bit rich.

[00:38:41 - 00:40:01]

Will Smith: As you said, finders fees aren't as standardized, although there, I think there are some kind of working standards like the, the Lehman's fee isn't it isn't that. If you're working with a broker or a professional in this world, then yes, this was Not. And plus, honestly, for both of us, for myself as well as the searches. Who are offloading it, it was a brand new concept. We never saw another searcher wanting to offload something that another searcher was going.

I'm conflating two things. Yeah, kind of a finder's fee is. Or kind of. Yes. It's more like a referral type situation than the Lehman's fee, which is more like a.

Of the broker getting compensated for getting somebody all the way through a deal. Correct? Yeah. Okay, so 1% of enterprise value, obviously. So.

And what was the purchase price of the business? It's in the. I can't share the exact number, but north of two million dollar range. North of two million dollars. Okay.

And so what did you learn about their situation? Why had they gone so far down the road on this business only to then try to get out of the. Or not want it and actually try to monetize the work that they put in so far? So a couple of things. One is they were not geographically based in New Jersey.

[00:40:01 - 00:41:32]

Ruchik Gandhi: One of their two partners, one of. The partners based in New York City area, which is not that far, but. That was sort of, you know, this. Partner had, I believe, less experience compared to the other one. And the other partner was based out of California.

So it was. And they were not planning to move per se, they were wanting to. The California partner was going to fly and fly out and the New York partner was going to kind of run the show, although, you know, they didn't have a lot of experience in it. So they were trying to figure out their own kind of metrics on how they're going to make it work. In the meantime, it appears that they.

Found something which was more aligned to the industry of the first searcher, plus in the geography that they wanted. So they were like, okay, you know, I have found another enticing opportunity, more enticing than what I'm currently working on. Plus, based on not knowing anything about the industry, not being geographically present in the place where the business operates, they were a little skeptical about how it's all going to work out anyways because in this case the owner was not going to stay behind and be employed by the business. So essentially they were like, we're going. To pursue this other opportunity and not commit more time to this.

But since we already committed too much time, let's see and explore if we can monetize that. And that's exactly what they did. Well, it sounds like it was ultimately a wise decision on their part because as, as we're about to hear from you. It would. This was not the sort of business that can be run remotely.

[00:41:32 - 00:42:06]

Will Smith: At least not yet, not now. Yeah, and also on the finders fee bit, they, in some ways they're not just monetized. I mean they also have sunk costs here that they're trying to recoup some of. So you know, there's also, from their perspective, it's not just profiting on finding a business, it's also trying to pay themselves back for lost time and lost. And lost deal expenses.

Right? Yeah, primarily just we lost time. They did not spend anything on the deal, so there were no deal expenses. Lost it. They didn't go that far along that.

[00:42:06 - 00:42:19]

Ruchik Gandhi: They had to pay something out of. The pocket for the deal, except for. Obviously some, some flight time or something. They did come over to meet the former owner and that type of stuff. So some travel expenses possibly, but it's primarily the lost time.

[00:42:19 - 00:42:58]

Will Smith: Yeah, yeah. And then so your, your fee to them, you said it was over $2 million that you paid for the business. So your fee to them was over $200,000. Sorry, over 20. 20.

20. 20. Sorry. You're the accountant.

Over 20. Yeah, that's. That actually strikes me as money well spent on your part. $20,000 is kind of a, kind of a lot, but also in doing a deal, if especially one that's been diligence to a degree, not that much at all. So how did you think about that 20,000-ish fee?

[00:42:58 - 00:44:21]

Ruchik Gandhi: No, you're spot on there. The way I think thought about it is like a lot of other guests. In your podcast have thought about it, right? That sooner you can get into the. Industry and sooner you can get a deal done, the better it is because more you wait, there are other opportunity costs that you're incurring as the time passes, number one.

Number two, it was a pre negotiated deal which would have taken me at least a month or two to get. To that point, which I basically got back because I didn't have to go through that process. It's like a shortcut in my mind that, you know, I ended up getting a pre negotiated deal and the part. Where you kind of have the biggest. You know, clashes, I mean clash is a little strong word, but when you're negotiating a deal with a seller and things that they don't like, you know, is what you are kind of trying to negotiate on and that creates a little bit of bad blood between you and the seller.

Although it kind of turns around eventually, but it's always a bad Blood that gets created. I found myself in a situation where I didn't have to go through it. So yeah, that situation remained with them and I created a brand new relationship with the seller, which I'm even more closer today than I was at the time. And there is literally no bad blood between us. So you could outsource the bad copy to the previous guys and you just get to be good cop.

Exactly. Great dynamic. Yeah. What this meant 100%. How do you structure the deal?

[00:44:21 - 00:44:32]

Will Smith: I know you can't give us super specificity on numbers, but. No, I can tell you with the percentage. So, you know, this was a partial buyout. This was pre. You know, this became a problem with SBA.

[00:44:33 - 00:44:58]

Ruchik Gandhi: So it. That there's an owner retains about 9% equity. There is a 19% seller note, so that adds up to like 28%, 10% cash and the rest is SBA. So 10% cash from my side, like my investment. Yeah, right, right, right.

[00:44:58 - 00:45:07]

Will Smith: And, and why the partial ownership? Why, why did he retain 9%? Why did he want that? Why did you want that? He didn't.

[00:45:07 - 00:45:47]

Ruchik Gandhi: He was agnostic. He did not care. He could have sold the whole thing. I got the deal negotiated this way and I thought to myself, for two reasons. You know, one is I was entering an industry that I knew nothing about.

So having a partial ownership keeps the owner kind of more involved. And, and obviously I didn't know the owner as well at the time. Had I known, I probably would not have cared either. But you know, in my mind I was like, if there is a bit of ownership left in the business, it keeps them entertained and keeps them kind of involved in the business and to answer my calls when I need to. Invested.

[00:45:47 - 00:46:10]

Will Smith: Literally. Correct. And secondly, that reduced my cash outflow. Initially and lesser debt that I had to absorb at the time. So I could literally, my viewpoint was that, you know, as the business grows or starts generating income, I can use that income to buy out that 10% without assuming any debt towards it.

[00:46:12 - 00:46:29]

Ruchik Gandhi: So there is a call option in place which kind of made me feel like comfortable that let's do this and you know, less risk. It just, it's not a hell lot of rest risk, but lesser risk than. Me buying 100% of it. It up front. Yeah.

[00:46:29 - 00:47:02]

Will Smith: And, and, and really it was already negotiated there. Correct. And you could rationalize just keeping it that way. Correct. For all the reasons you just gave us.

And in very importantly, you had this call option so that at any point in the future you could, you could get that 9% back at at a, at a previously agreed upon price. How is that call option structured or priced? It's a call option structured. As you know, the, the only. I, I have the call option to buy this piece anytime I require to.

[00:47:02 - 00:47:17]

Ruchik Gandhi: If up until the seller note is in existence. At the end of seller note, I have to buy it out regardless. But up until that time I can exercise upon it whenever I need. I, I want to. At 3x EBITDA.

[00:47:17 - 00:47:40]

Will Smith: At 3x EBITDA. So. Of that year. Of that year, yeah. Correct.

Great. Also, I should add that I did. Sweeten a deal a little bit. It was Pre negotiated with 19% hold back. Seller carry.

Seller financing. No, not seller financing. The seller equity portion. Oh, sorry. Was 19% of the time.

[00:47:41 - 00:48:00]

Ruchik Gandhi: I sweetened it up for the seller. Because seller obviously wanted to exit 100% if it could. So I kind of came in the middle and said, we're going to go let you have 9%, but I'm gonna basically buy out that 10% more than what the other guys were. Ah, okay. So in fact you didn't just accept the terms as they were you actually.

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

Will Smith: Yes. Yeah, yeah. Great.

And the partial ownership bit about the sba, just a reminder for the audience. Partial ownership simply means that the seller retains some piece of equity from anything, you know, as little as 1%. And that became much more complicated in the rule, in the recent rule changes. Where to retain. I believe it is to retain any partial ownership, the seller has to carry a personal guarantee.

So which effectively neutralizes that structure. Although I'm hearing that in fact some sellers will accept it. But you could have, we all thought that it was going to neutralize the structure because what seller is going to want to carry a personal guarantee like your seller for just having 9% of the business? That's way too little equity for way too much risk. Yes, exactly right.

[00:48:57 - 00:49:06]

Ruchik Gandhi: And before that it was 20% where you had to carry a personal guarantee. That's why it was structured as seller. Is going to retain 19%. Sure. Just to be below that threshold.

[00:49:06 - 00:49:39]

Will Smith: And by the way, it still is 20% for everybody. But the partial ownership thing applies to the seller. Yeah, correct. Great. Ruchik, this is wonderful.

Anything more to say about the structure of the deal or can we get into your tenure as owner? Yeah, just real quick. You know, it was a pretty standard deal other than that you had working. Capital incorporated in it. In the deal structure there is a two year standby on seller note, which also was a pretty, pretty sweet part of that deal.

[00:49:40 - 00:58:43]

Ruchik Gandhi: And that's about it. Yeah. And how liquid were you? How much of your own personal balance sheet, your family's balance sheet did you put toward this project? About 30%.

So not, not, not too crazy. Yeah. Oh, great. Okay, great, great. So you have, you had, have and had some assets?

Yeah, yeah, yeah, I owned a house and yeah, I had some investments and stuff like that. Yeah. Great. How has it gone from being a Q of the cpa, you know, in the, in the bowels of a big, big accounting firms, to owner of a blue collar small business? If I was to say that it, it was all hunky dory, everything went great, I'll be lying.

It's been a roller coaster of a ride, you know, because I did not. Have any understanding of this industry or experience in the technical elements of this business. It took me a while to get on my feet. Although I must say that the one. Thing that helped me a lot is I'm a very handy person.

I have done, I have done a lot of projects in my own house. I enjoy doing that. So that helped me kind of have some sort of background on some of the handy elements of this business. That helped me a lot, essentially. You know, the good thing about this.

Is that I had a full three months transition period from the former owner. So I got very well versed in a lot of aspects of this business. Although not as good as he was. But on the flip side, I come to realize that we have a staff in place who have always had this knowledge and experience but never got a chance to shine themselves because the former owner always, you know, was there and they didn't need to, you know, so he was, he was able to manage everything. But they heard him, they learned from him, they did things, but they never applied it in practice.

So over time I elevated a couple of people to be able to do that. But going back to the transition period, I shadowed him almost everywhere. So I learned a lot around that time. Got experience with the customers and I also learned where the business was lacking. Where are the weaknesses that, you know, I probably would need to address?

And one of them obviously was people and blue collar industry. It is very difficult to understand the morale as well as the factors, the incentivizing factors that you need to put in place for people to be motivated. And that's something I learned very hard way that, you know, you need to garner their trust. It's not as easy as, you know, you throw some money. That's how I was made to feel.

Then you throw some money. Did you try that at first? Raises or something. Yes and no. Because I was also made to believe.

That if you start throwing the raises from the get go, they want even more. So there's not going to be any end to that. And you kind of get yourself into this vicious cycle of just constantly throwing more money. So I was very cautious on how I was approaching it. And you know, I was taking things by the merit, taking slow, but sometimes way too slow to realize that, okay, no, I should not have done it.

And I had to retract a couple of decisions that way. But what I realized over time, like say spending. So when the former owner was there. For first three months, I didn't realize it enough because he was kind of the go to person for most of the people. And if there was anything, there was a trusted person still in this seat that they were going to.

Once he left in the first month or two, I started realizing that, okay, people lost that trusted person and then the morale was different. Our productivity was low. We had some turnover at that time. And I was like, what is going on? Like it feels like the ship was perfectly sailing and suddenly every single part of it is breaking apart.

So what's going on? Then I kind of started introspecting, learning more about how a blue collar workforce can be managed. The two managers that I promoted, I started to talk to them about it to realize that okay, they are at the ground level. One of the person that I elevated was actually an installer for us before he got elevated to that management position. So he told me that, okay, you know, what we are actually looking for is somebody who's like us.

Like they see you as a white collar hot shot from Wall street that walks in and starts barking orders. He said that to you? Yeah, you know, different, different words, but same, same, same. I hope so. Yeah, no, but, yeah, but, but the gist.

Yeah. And the previous, and the previous owner had, had been more like them than like you. Yeah. So previous owner was almost the same. Background as almost every staff we've had.

He's a real rags to riches story. Like he came from nothing. He was on the street. He built this business from scratch, lost everything around GFC time, rebuild it to a level where it is right now, having trusted people around him. So all these people had some sort of connection.

It was from the same community that he belonged to. So most of the people had some connection. They spoke, he spoke the language, you know, they spoke Spanish, Portuguese. He spoke them both fluently. So they felt that connection.

I can come in. I don't speak Spanish. I have no idea about Portuguese, you know, so I don't look like them, I don't act like them. They don't know anything about my type of background. So they started looking at me with a lot of skepticism at that time.

Like, you know, who is this person that he is transitioning over to? Like, obviously he had all these rosy pictures painted about me during that first day or first few weeks when we were transitioning, that we're in good hands and it's going to grow and all that, but everybody just took them on. As, you know, this is something that he talks. Yes. Just to talk.

It's not that. And so when your manager comes to you and says that people see you as some. He said more diplomatically, they just see you as some Wall street hotshot. What did he advise and what did you. How did you change?

So actually, it was not just him. Both of them did. And when they advised me, the things. That advised me was start going down to the ground level. Like, start understanding them, their backgrounds, their families.

What do they take interest in them. Show them that you can do things, too. You're not just somebody who sits on the chair and just sparks orders, essentially. So what I started doing was I'll be the one fixing our cars if they break down, and they'll see me fixing it like a mechanic. Or I'll go out as a helper to my installers when we need helpers and we're short of installers and actually.

Help do the job of a helper. Which is, you know, opening things up, cleaning the area after the job is done, that type of stuff. Like, you know, so way beneath what a boss should be doing, but I'll do them. And at that point, that guy is my boss, even though I own the business. Wow.

So, you know, they saw me coming down even below their own levels. They saw me taking interest in the business. A lot of your guests have mentioned that I'm the first in and the last out. I'm still the same. I'm also the same.

Same way. I'm not probably the first one in. But I'm always there. They see me every day. I'm the last one out.

So they see me committed to the business. They see the growth. They see that, you know, I'm kind of bringing in the changes. I'm taking interest in their families. That previously was not the case.

You know, when I have a company party, I will call the families as well, and my kids will be playing with their kids. And they started seeing that ground level. Who I am. And that started giving me a lot of respect in the company. So, you know, now people start to come to me, you know, talk to me.

Previously it was like a principal's office. You only go there if you've done something wrong. Now it is more like a friend's place. You know, they come the chat, they talk about their interests, sports, that type of stuff. Although, you know, this is the.

With the staff that speaks English as well. I do have a few staff that does not speak English. And also I also committed myself to learn a little bit of Spanish and they saw that, that I am trying to learn their language to a degree where one person actually said, instead of. You learning our language, we should be. The one learning your language.

You are our boss. Like, you know, I don't believe in that. I'm like, we're all here together for the same goal. We all want this company to succeed. So it doesn't matter if I have.

[00:58:43 - 00:59:27]

Will Smith: To learn your language on that point, Ruchik, so you. All this stuff that you just share that you. This change in behavior on your part, Fascinating, by the way. Thank you for all that. But do you think there was.

Do you think that you had an attitude, your overall attitude was a little bit distant or. No. You always, you always felt like part of the team, you were willing to do anything. You just, you just needed to be told explicitly to, to, to kind of show it more? Or, or do you think that there was part of you that was a little aloof maybe, or not at all?

I'm not accusing you. I'm genuinely, I'm genuinely curious. What it was, was that I didn't. Know what to do because I never had to deal with directly with a blue cult workforce. Yes, I would.

[00:59:27 - 01:00:57]

Ruchik Gandhi: You know, when I was kind of. Kind of, sort of acting CEO of these private equity businesses, I'll be advising on these things. But I was not the one doing it. Like, I was not the one firing people. I was not the one making changes or things like that.

You know, they were the ones. I was not the face of it. Now I suddenly am the face of everything as well. I didn't know what sort of behavior is expected of me. So I always had that attitude that, you know, nobody is a boss and nobody is an employee type thing.

I always had that idea that everybody is together here for one simple reason. That is company success. It doesn't matter who you are. That attitude was there, but it wasn't showing. And because I was not familiar with the cultures of the people we employ I didn't know how to get through to them and crack through.

And the managers that we elevated, they were of that background. So they explained me how it works in their cultures and what is acceptable, what is not acceptable, how they think. And so I started changing my thought process to think like them. And that's what led me to kind. Of act it that I always was.

Willing to or wanting to, but didn't know I had to or how to, though. Yeah. How fascinating. Yeah. Shifting gears a little bit, but still on your operations, the you've been working, you know, you said, first in, last out, Philo, and you.

[01:00:58 - 01:01:44]

Will Smith: So you're working and, you know, actually doing the work and going out with the crews and so on. So you're working very in the business. Part of that was, as you just finished explaining that that was kind of building camaraderie with your team. Yes. But also, also I will assume that part of it was like you, that's just.

You were just doing work that needed to get done. Where I'm going with this is how do you think about your ability to work on versus in this business? And. Yeah. And can the business survive without a super, super active owner?

That whole question, which is of course a very central one in so many. And a great question, by the way, I kept. I keep thinking about it all the time. You know, I didn't buy the business to be kind of working like. Like this.

[01:01:44 - 01:03:17]

Ruchik Gandhi: Right. So I bought it to grow it. And if I'm not paying attention to the strategy of the business or the growth factors of the business or other elements of the business which are more managerial in nature, are basically saying we're not working on the business, then I'm not leading towards that goal. But what the way I thought about. It and convinced myself is that first six months I got, I gotta slow things down a little bit.

I gotta make sure that I am first comfortable with the business itself and sustain it before I start thinking about growth levers and things like that. And the way for me to do that is build that connection with my team first and foremost. That obviously doesn't come overnight. People don't start trusting you just because now, one fine morning, you are their boss. So you need to build that trust in them.

And for me to do that, I needed to give that time to it, which I did. And obviously you're right that there were operational needs as well, that I was fulfilling at the time. But it has come down to a. Point, at this point, very quickly or. A lot quicker than what I thought.

Is that now I'm not as much needed. Like I don't need to do all of those things. I'm able to focus on the, on the business aspect of it a lot more than what I used to, you know, say two or three months ago. And for me, I had written off. My first year as in the business, no business.

Sure, I was able to, yeah, I. Was able to do it faster than that. But in my mind I was like. Investing to, in the business that way. To be able to grow it later on, to have a long term vision of it essentially in the short and.

[01:03:18 - 01:03:35]

Will Smith: Sorry, why has it gone faster? Number one, because of all these things. And the optics of it, people have started trusting me, I guess, a little. Bit more than what they were before. I've had less turnovers, been able to recruit more easily.

[01:03:36 - 01:05:35]

Ruchik Gandhi: We are able to show people that there is growth and there is an opportunity to create a career out of it. Although blue collar workers don't really care about it as much, but they still see like they don't want to keep doing the same thing over and over again for the rest of their life. So. And they see an opportunity where they can become supervisors, for example, if they, you know, show that they, they're capable to do so that type of stuff, they start seeing that there is. When I elevated the two people, it.

Was those two people were basically one. Of them at one point in time and now they are the managers and they're absolutely amazing by the way. So you know, when. So you had these two people that were. One was an installer, both came from the business and I guess lucky for you, fortunately for you.

Yeah. You thought that they were supervisor capable of being supervisors, correct? Yeah, it was. Yeah, it was. Basically I identified them to be, to be able to do so and you know, I put them into the position and when I give them the autonomy to do it, they are running it a lot better than I would have had I not given them the autonomy to do it.

So you know, and they're like Spanish. Speakers, both of them multilingual. So Spanish and Portuguese both. And Portuguese English. Yes, so.

And they all come from almost the. Same background as the former owner was or the other employees we, we employ. So everybody relates to them and they're my eyes and ears. They're my everything at the moment. And that has reduced my involvement in the business.

So I'm able to focus more on the growth aspects of it. As I told you, the best thing I know to do and how to grow is inorganic. And I'M able to focus on that now, which I was not able to before, so that type of stuff. So yes, to your point, it has. Been been fortunate from my part that I was able to find two really good gems out of what we had.

[01:05:35 - 01:05:47]

Will Smith: Great. And probably we're going to close, close here in a minute and hear about your growth plans. But I've heard you say turnover a couple times. Any stories or lessons there? Yeah.

[01:05:47 - 01:09:24]

Ruchik Gandhi: So, you know, obviously the day, not. The day, but the month that I bought this business, I started hearing about grievances from the production staff. And these are very critical people. Like, you know, there's our skilled trade people that are hard to find and that that's what the core of the business is. And one of the grievances before the former owner finished his transition ended up, ended up leaving for, for the reasons, you know, that were like you, all.

The reasons like you. They were not happy with the work. Environment, they were not happy with the transition, they were not happy with the pay, they were not happy with it. So I was pretty egoistic at the time. Like to your point, to your previous point, like, you know, where your was, your demeanor probably more towards that watch it, hotshot type.

Maybe it was because when they came. To me with grievances, I wash it. Off as, come on, grow up, you got to do this. And, and, and, and then, you know, then they supported that with I want a pay rise and blah, blah, blah, like, what have you done to deserve that? You know, if you don't want to work, don't want, don't work with the fact that, hey, these are, these people don't understand.

This is not how it works. You know, it needs to be gradual. It need, they need to show me and prove themselves to me first. But what I was not realizing at the time was they have been long standing employee of, of my company and they have proven themselves the former owner, they have, you know, a personality which is resulting in this. And instead of kind of sitting down, hearing them out and trying to solve the situation, I took a defensive approach.

I said, you know what, if you, if you can find a job somewhere else, go right ahead because I guarantee you that you're going to come back. And I let them go. And this was in like week one, week two. No, this was in month two. Month two.

Okay, so let them go. And only to realize that, you know, I should, I should have kept my emotions at bay. I should have taken a more objective approach. I mean, you learn as a, as an entrepreneur as well as an Owner of the business that you make mistakes. The good thing about what I realized.

For, about myself is I can own up to my mistake pretty easily as well. So I sucked it up, sucked up my pride, called them back, had a conversation, did not agree to every single demand, but agreed to quite a few that I would not have. My ego would not have let me because I was the one who said that go, you know, I don't care. But I sucked it up, humbled myself. And, and brought them back.

And they are the best employee we have right now. So, you know, it was a, it was a great thing. But that made me learn a lot. That, you know, when you talk to employees, they especially blue collar employees, it is not the same way you should be talking to a white collar guy. Like if a white collar guy would have have gotten me and told me that, hey, I'm not happy with work environment, I'll be like, I'm paying you a lot of bonus, man.

Dude, go figure yourself out. I don't care. You know, you're getting paid a lot to be in this environment. Whereas it doesn't work the same way with blue collar. Blue collar wars workforce requires a more personalized approach.

More, more, you know, emotional emotions are involved. Whereas my former white collar, you know, reportees, people reported to me, I would have said, you gotta grow up, man. I don't care. I don't want to know about your personal life or your situation. You just do your job.

That's what you're here for. But that's not the approach that works here.

[01:09:26 - 01:09:46]

Will Smith: So fascinating routine. And one other thing that strikes me, maybe you did this, but a best practice here would have been to ask the previous owner about this person and how, what their performance is, how integral or not they are sort of thing. I did. I mean, the former owner was still. Here at the time when that happened.

[01:09:46 - 01:11:46]

Ruchik Gandhi: Right, right in the middle of the transition. And apparently they were accusatory to this. Former owner that you did not give me the right environment. And now retrospectively looking back at it. A lot of people felt at that time betrayed because they've been working with him for such a long time that they thought that then when he was about to sell and retire, they would have, he would have intimated them because they felt in their minds that they were really close to him.

But in reality, he kept a very. Professional relationship with everybody. They were not his personal friends. So he did what anyone should have done. I did exactly.

What he should have been doing is to tell them after the deal closed and not before. And that led to a lot of. Emotional pain in a few people that came out in a different way. So they were accusatory to the former owner that you did not give us a good work environment. And he did not take lightly.

He took it very emotionally as well. He was like, you know what, Rashik, I don't want these guys. Rushik, why, why should every owner not let his employees know that he's contemplating a sale? Because they'll start looking around for other. Jobs, that's one thing.

But a lot of employees would also feel insecure. They don't. They are very comfortable with environment. Especially business like this has been established for 30 years. The average employee tenure with this business is eight plus years.

So people have been with the business for a very long time. They've gotten super comfortable right. With the way things work. And now the tree is going to be shaken. It's going to be a different owner, a different boss who has different vision of the business, different ways to do.

Things, and they don't even know who this person is. Whereas now they have the trust in. This guy because they know him in everything, shape and form. They know him personally, they know his family, they know everything. Sure.

[01:11:46 - 01:11:59]

Will Smith: And so. But how does, how does that whole dynamic inform when you let them know? Is your point like don't create anxiety in them before it's a done deal? Essentially Correct. And honestly, if I was the owner.

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

Ruchik Gandhi: Right, And I am getting out of the business, it's not my problem anymore, it's the other guy's problem. Not that this person thinks this way, the former owner, but that's the generalized. View that you're basically passing on the. Problem to the next guy to build his trust. And to be honest with you, as a new owner, it is my responsibility to build that trust in my employees.

Again, it is not the former owner's responsibility to help. He can help me build that trust by explaining them who I am. But then it's up to me to showcase who I am. So sure, that's where it is. Like, you know, I can argue both.

Ways to be honest about this, where you can be extremely transparent and some, sometimes people take it more positively if you're transparent. But to be honest with you, nobody. Has a crystal ball. Nobody would ever find out what's. Sure, sure.

[01:12:50 - 01:13:45]

Will Smith: Well, and because I guess I feel. Like there, I've heard stories where the seller was clearly nearing retirement and so while he might not have announced, you know, to the whole company that he was going to sell, it was obvious and Sort of implied. And so when the time when he did sell to my guest, nobody felt, nobody felt like they'd been betrayed because it was all just, it was just kind of an expectation that everybody had that eventually it would happen. And when you buy a business where the, the seller is like a boomer business where the seller is of retirement age, you, you wonder if maybe that should just kind of be universal that, that, that people should expect that. What, that a 60 something owner is going to stay there forever?

Of course they're not. No, you're spot on. You're spot on. But with my case, you know, the. The former owner or the seller of this business was not exactly the return.

[01:13:45 - 01:14:48]

Ruchik Gandhi: He was like five or so years. Away from retirement at that point. Yeah, but can would have people, people. Have noticed that, you know, his interest was declining in the business. Sure they would have.

But again, this is a very, very. Foreign concept to people in this industry, this world, blue collar employees, especially about buying and selling businesses. Like businesses being bought and sold, they don't know that it happens. For them either business is starting or business is closing down forever. And that's what they would have been worried about, that, hey, our owner is not really focused on the business, so our business might close down at some point.

But if they say that I'm going. To transition it over to another person. That might create a whole new reaction. That, that nobody knows what it could. Be and that could shake up the ship too much at the wrong time.

You see what I mean? Like it's about to transition out and. You'Ve already shaken up the ship and now you can't transition. Yeah, yeah, yeah. So that was the, probably the fear.

[01:14:48 - 01:15:13]

Will Smith: Yeah. Great, Ruchik. And so now that you are able to turn at least some of your attention to growing a business. Working on it. How does this business grow?

What is your plan here? Yeah, so you know, as I said, like I'm not very well versed with. The organic part of the growth like marketing and all that. I know that it can, but I. Don'T understand that very well.

[01:15:13 - 01:16:32]

Ruchik Gandhi: But that's the reason why I elevated. A person as a sales manager. He's awesome at it. So he is looking at organic side of the growth. But what I am good at is.

Finding targets that are suitable and then integrating them into my business. And what I realized is that there are a lot of small mom and pop shops in this industry. They offer one facet or another of the business that I am in, not all. So you know, there are a natural fit to our business. And that allows us to kind of.

Extend our reach beyond what we currently have in geographical standpoint as well. So my focus right now has moved to finding these smaller targets. Already have found a couple. I've been in active talks with them. Almost everybody in this industry is at that age where they are ready to take the next step in their life.

So it's not a very capital intensive business either. So a lot of folks run it very leanly, which means it's easier for me to integrate that existing workforce into my business. You know, it's literally somewhere and some tables. That's it. So yeah, I realized that and that's what I've been focused on at this point.

[01:16:33 - 01:17:33]

Will Smith: And Ruchik, okay, so the strategy first of all is inorganic. I mean you're going to of course do organic as well, but you feel less comfortable there. Your, your reflex is. Is inorganic or inorganic. Yes.

Your strengths. Yeah. And, and so the strategy here would be there's kind of a portfolio of solutions that you offer to your customers. So augmenting that, building out more and more things that are adjacent to what you, the services you currently offer, more of those coupled with geographic expansion. And so now in general in this.

World, it sounds like it's qu. It's like so many small businesses, it's quite local. So you have these, this relationship with the Home Depots in, in the New York City area, you have interior relationships with interior designers in this geography. So you can, expanding market share means penetrating other geographies and you could kind of have a dots on the map strategy sort of thing. Yes and no.

[01:17:33 - 01:19:59]

Ruchik Gandhi: So the, the, the Home Depot part is yes, localized. But the interior designers we work for. They could be doing a job in California and we'll be shipping to California. They could be doing a job in Florida, even international. So because these are mostly a lot.

Of the designers that we work with are high end designers. So they'll be doing celebrity homes all over the world and they want to keep things, you know, at one point, so we'll be shipping things to them. All we cannot do is install in. A geography outside the tri state area, more or less. But we can always fabricate and ship.

Anywhere in the world, more or less. And we do. So that's one part of the growth. But what I am looking for is growing the relationship. As I said, interior designers are a very loyal bunch.

When they start working with one company, they stay with them for almost ever. So by acquiring these businesses, I'm acquiring those, those, those interdesigners. Relationships working. Yes, the relationships. Thank you.

That are working with them that they can now start tasting us and, and keep the, the flavor of the original company still that they were working with. They're still comfortable but now getting more. Services than what a previous company offered them. Like for an example, most of the companies don't have both upholstery and window treatment part. So let's say we acquire a window treatment business now we can say look, we also offer upholstery and you can now bring that under one roof too.

And that's a natural transition because almost every single interior designer when they're working on a full blown project, window treatment and furniture are two main elements of it. So we're kind of addressing them both at the same time. They don't have to go to multiple, you know, vendors for that. Yeah, the One stop shop. One stop shop, exactly.

So that's what, that's a great point. Like we call ourselves an end to end service provider. We a solutions provider. Rather we're not a service provider, meaning we're the one. Once you contact us, we take care.

Of it from the beginning, which is the measurement to the end. It is the installation or delivery and placement of a piece of furniture or installation of a window treatment. We take care of it all. You don't have to find other third party subcontractor installer to install what you buy from us and that type of stuff, which most of the other folks don't have this installation fleet with them, which we do. And so, and again the word is workroom.

[01:19:59 - 01:20:43]

Will Smith: So you could, a listener could look around on biz by sell for work, like search biz myself for workroom or search their local geography for workroom. And that's the name of this category of business? Yes, it is a work room. Yes. And, and, and if you told us top line is over 3 million Ruchik, so what do you think this business could become?

I know that's like, who knows? But like, you know, is it crazy to think it could become a $20 million business or. No, that seems very realistic. It is realistic if you play your cards right. Essentially as you said that there are many solutions you can integrate with this type of business and there are a.

[01:20:43 - 01:21:57]

Ruchik Gandhi: Couple which could lead to exponential growth. And that is mass producing some of the window treatments which. There are companies that do that, but. They'Re only for becoming a manufacturer. Becoming.

We are a manufacturer in a way, but we are not. Right, but you're a custom manufacturer. Customer manufacturer. Correct. So you know, expanding that out and providing the custom solutions still, but at a grander scale.

Like for example, you know, having designers from all over the country reach out to us and we're shipping to them all over that will lead us to exponential growth. The cam of this industry is over almost $20 billion in America only. That's the TAM. So. And we are a very tiny piece.

So thinking about, you know, where the growth can come from and how big we can become. 7, 8 figures is. Is not an exaggerated goal either. If you focus things in the right way. Would I say that?

Does that come overnight? No, it takes a lot of hard work and lots and time to get there. But you can get there there. And you said that many of the owners in this business are boomer age without succession plans, kind of, you know. Correct.

[01:21:58 - 01:22:12]

Will Smith: A great industry to buy business in for that, a great dynamic to buy business into. Are there any. And you said private equity. There's a little bit of activity. Are there other kind of enterprising younger new owners, maybe searchers in this space that you've come across at all?

[01:22:12 - 01:22:24]

Ruchik Gandhi: I have not come across anybody, to be honest. And to be honest with you, had I not been introduced, I probably have. Not looked in this direction either. Had you not come across that, that search funder where they were trying to. Right, yeah.

[01:22:24 - 01:22:34]

Will Smith: Right. Yeah, yeah. You said to me on the pre call that if you had seen, you know, the listing with something called Workroom and Biz by Sell, you wouldn't have even clicked on it. Right. Because I don't understand.

[01:22:34 - 01:22:47]

Ruchik Gandhi: Plus I saw the listing of this business and I would have not clicked on was not an attractive listing. They did not put good pictures. Nothing. Like it was like a crazy, you know, declining business that somebody just wants. To get rid of type listing.

[01:22:47 - 01:23:51]

Will Smith: Oh, it's declining. No, no, that's what it felt like from the listing they did. This didn't do a good justice to the business when they listed it online. Yeah, it was like a very generic listing. Yeah.

Well, as I've had some guests who bought businesses like that they saw in Biz by Sell with really unflattering listings. There's, there's an analogy to the real estate world where there are some of the. You can find gems if you look at the unattractive listings where a broker just hasn't done a good job of listing a home. And so everybody skips over it. So don't, don't skip over those.

Those. I didn't know about that until, until I found this one. Now I'm going to keep an eye out. Yeah, yeah. As I said at the very top, I hope your story still means that the, the dream is alive.

You know, we're, it is. We're, we're discouraged here in the US A lot of these days by the political climate. Easy to get down on things. So always wonderful to, to, to see success stories and, and feel hope. 100%.

[01:23:51 - 01:24:11]

Ruchik Gandhi: Can't agree more. Great. Ruchi Gandhi. We'll put a link to your LinkedIn and name of the business window25warow25.com thanks very much sir. Have a good one.

Thank you for having me, Bill. It's a pleasure. Have a good one. Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter.

[01:24:11 - 01:24:53]

Will Smith: We send an email for every episode with an introduction to the interview, a link to the video version on YouTube, and soon, key takeaways, numbers and more essentials from the interview. For those of you who don't have time to listen or watch it, subscribe at Acquiringminds code. You'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars. At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business. Acquiringminds copy.