Host: The very morning of our interview, Russ Hadlock had been in touch with his SBA lender. Because Russ is just now in the middle of extending the term of his loan from 10 to 20 years so that he can lower the monthly payment and get some breathing room. Russ isn't sure he's going to make it. He bought an auto glass business that seems solid, founded in the 80s, 600,000 ish of SDE, two locations, multiple lines of revenue. But as you'll hear in today's interview, what seemed solid has been anything but. A few of the business's expenses have jumped under his ownership while sales have declined. When both of those happen at once, that 20% margin that so many service businesses have closes very quickly. Russ hasn't paid himself in his 14 months of ownership. In fact, he's plowed an additional six figures into the business to keep it going. He's looking to consolidate the two locations into one. He's looking at getting a job if he can just stabilize things and keep the business going, even if he's not earning any money directly from it. So this is one of those stories about the sometimes perilous nature of buying a business, and Russ was very generous to not only share it with us, but but do so in real time. He and I have already agreed that he'll come back on later in the year. To tell you what happened in these next critical months. Here is Russ Hadlock, owner of the Auto Glass Clinic in Mobile Radio. 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. August Felker is a two time successful searcher, first with a traditional search fund. The second time around he did a self funded search. Today August runs Oberly Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberly is a specialty insurance brokerage for searchers by a former searcher. Check out oberle-risk.com oberle risk link in the show notes Russ Hadlock welcome to Acquiring Minds.

Guest: Thanks Will. I'm glad to be here.

Host: Russ, you bought an auto glass repair business in November 2022. Things were precarious for the first year, but then a few months ago, in the fall of 2023, things took a turn for the worse and really reached crisis level. So you are in the throes of a small business struggle as we speak. We're going to hear that story and how you're thinking about the future in dealing with this, but let's get started with some background on you, please. Russ.

[3:23] Guest: So I spent the bulk of my career selling in one way or another from, you know, selling tools on commission in high school, you know, all the way through, you know, B2B career sales later in life. And then in 2019, I stumbled across an idea, a product idea, if you will. It was the proverbial, like, lightning bolt moment. Developed a product and it started to garner some traction and that product turned into a company. So I left everything I had built and went all in on the product built.

Host: And Russ, before we hear that mini story, which I want to, I want to give a minute to give us just a little bit more background on you and your experience with business, because I recall you telling me you weren't always destined to become an entrepreneur. That happened maybe a little bit later in your professional maturation. So give me more on that.

Guest: I would say I was, I was, I guess, a product of my upbringing. So, you know, my, my dad was retired military and, and blue collar and I. That's what I, that's what I thought I was, know, going to be. I never, I didn't go the military route, but I thought that I would just, I would get a job and I would grind it out my entire life, you know, working for the man. I just. The concept of business ownership never really occurred to me, you know, and then, and then later in my career, I got an opportunity to become a partner in a company which gave me some exposure. And then my wife's father was a successful entrepreneur. And I think that those two things sort of changed in know, broke the frame I was living in and kind of gave me a different. A different mindset and perspective. And then I slowly shifted, you know, over the course of, you know, eight, nine years out of the, out of the W2 mindset. And I don't know that I can, I can go back successfully now if I had to.

Host: It is, it is a bit of a rabbit hole or a, or a, a red pill. I should. Russ and so you said eight or nine years ago, so call it 2013, 14, 15 is when this awakening is occurring.

Guest: That's correct.

Host: Okay. Okay. And that awakening is because of this exposure you get to kind of the, the inner workings of a business at having been promoted to partner at a business that you were an employee of and then presumably hit the books. You listen to the pods, you just start educating yourself over the next few years on all things business and entrepreneurship.

Guest: Yeah. Yeah, for sure. I, I think that there's a. I, I think if all of your guests, you know, me included, probably have a, like a, A sub level of personality, which is, is somewhat obsessive, you know, and I have. Not everybody has that, but, you know, you know, like you. I'll drink Diet Coke relentlessly for six months and then I'll bounce and do, you know, do, you know, I'll be on a water kick and a different diet and I'll obsess over that. And that type of personality trait also, you know, can take people the other way. That's where addiction comes from and things like that. You know, I, I recognize that about me, but I think that that's part of what, that's an undertone in the entrepreneurial spirit. And so, yeah, when I got exposed to business, like, really deep, really far, and it just sort of hooked, and that's. Yeah, that's how I ended up here. Podcasts and books and, you know, we all know the, the buy, then build, of course, that gets mentioned many, many times on, on here. All of those things. I couldn't consume it fast enough. I still do, even now.

[6:59] Host: And now let's return to this light bulb moment of a product concept that you had. Were you, were you still employed as partner of that previous business? And what, in what industry was that?

Guest: It was packaging. So it's agricultural packaging. Okay. Yeah, I would say that that, that company, that business, like everything about that place was, was, Was great. I probably, you know, in hindsight, should have stayed there. I just, you know, because of the things that we just, just mentioned, I just, I can't, you know, I need to be. My mind needs to be consumed. And there was enough extra time in that to pursue other creative opportunities. And I've always been creative to some extent. You know, I've had a wood shop and I love metalworking and all of those things. And, and yeah, so I was. This, this product was all built on Peloton. So in one of my obsessive moments, I bought a peloton bike in 2017 with a quest to lose weight. And I was, you know, riding 45 minutes a day every day because I was in that obsessive moment. And then I got to a point where I'd lost the weight and I was starting to Write to just maintain. And I was starting to get bored and I wanted to keep myself engaged. I was looking for some other hook, like some other dopamine hit while I was on the bike. And so I started to, you know, play video games and other things. And I was like, I can't be the only one that's trying to ride and, and get other things accomplished. Well, I, for whatever reason, I was looking at the bike and I saw a. You know, I don't want to say vision, because that sounds easy, but I saw the, the vision of a. Of a tray on the handlebars. And I was like, if I could put my laptop on there, I could ride and then answer emails and do other things. I was kind of dabbling in Amazon Arbitrage, so I was learning Amazon Seller Central and all of those things. And so I thought, you know, if I could ride while I'm doing that or studying, you know, PPC or whatever, I could kill two birds with that one stone. And so, you know, I just, I saw. Some people might remember, but there's a. This plastic tray that goes on the, the wheel in a car for the traveling salesman and, and the, the as seen on TV ad or the pictures that float around is the guy's eating his hamburger in his, you know, in his car, and this tray is sort of pinched on the steering wheel. Why that. That tray design, I felt like a similar iteration of that would work on the handlebars of the bike. And so I created one in the wood shop and tested it. And I was like, wow, this. This might actually work. And so then, you know, to condense a. A very long story that I, I parlayed that into a successful product. And then later a company, I found a partner, we engineered a bunch of parts and, you know, built a successful E commerce company and bought our own machines and in house and manufacturing and, and we. We did a lot in a couple of years. And that. Some of that thanks to Covid and the peloton rise. But.

[9:51] Host: And Russ, the. At what point did you have the confidence to go all in on that business and quit your W2?

Guest: That's A. That's a trick question in the sense that I probably would have done. I'm a little reckless in that sense. Like, I, I feel like I came. Came from nothing, so I'm not afraid of nothing. But I have a, you know, a spouse that. That is in my ear. And I think we all understand that like every entrepreneur, you know, there's usually a good woman behind him somewhere. And or vice versa. A good man behind a good, good woman. But so it was, I think it was getting over the hurdle of convincing my w. Have an opportunity here to, to go all in on this. And I didn't want to be on my deathbed and look back and say, you know what? I, I played it safe and I wondered what could have been, you know, and so we finally got to, to a position where, you know, she agreed and I agree that it was time to go all in. We were, we were both up late at night packing, you know, until, you know, you put the kids at sev. Into bed at 7, and then we're packing orders and, and labels and everything until 11 or 12 o' clock at night. And. And we were like, you know, it was time. It was a pivotal moment. You know, we either, you know, we had to do something. And so that was, that was the moment.

Host: So fantastic. And so we're not gonna, we're not gonna spend much more time on this story, but give us the bullet points. How big did this business become? Obviously, Peloton is the, is the kind of picture of a company that benefited from, from COVID And this is in the COVID time frame. And you were kind of in the, you know, on the coattails of the Peloton platform. Yeah, I mean, that's, that's, you know, you're basically building a product on a platform, in this case, Peloton. So, so give us the, the high level of basically what happens and to put some numbers around it, if you would.

Guest: Yeah, so. So the product was at zero in July of 19, and by, I would say by the end of the year, it was that one single product was generating, you know, close to 100 grand a month. You know, so it was trending a million dollars a year in gross revenue. And that, that Q4 of that year. At that same time, I was out looking for engineering partner because I knew that there were other product opportunities within the space that were beyond my capabilities. So I would say by the end of 2019, I had found a partner. And by early 2020, you know, we were kind of like in motion. Like we were starting to produce some products, you know, some ideas, starting to put them out there. I had developed a bit of an audience, so I had, I could quickly deploy an idea. And then by, by the time Covid had hit, we had had, you know, I think, two other products kind of ready to go. They were launched and just starting to get some traction. And then the, the, you know, work from home orders started to Land and then we, we just boomed after that. So from 18, the first 18 months of COVID so after the work from home orders started, we, we did 4 million in revenue. So we just absolutely exploded. Yeah, what a ride. Yeah, it was, it was crazy.

[13:15] Host: So 4 million over the first 18 months of COVID So annualized, that's what, 2.6 ish? 2.6 million from an absolute standstill the year before. Okay, and, and then what?

Guest: And then the Amazon aggregators started to reach out. Like we had garnered some attention and, and we had. My partner and I had no intent to sell. Like we, we knew that there, there, it may not have been evergreen within peloton, but we thought that we would parlay the manufacturing. Like we had purchased all of our own equipment and a building and everything we had in house to everything. And we thought that we could parlay that into additional manufacturing opportunities. So we would go, you know, aerospace or whatever, that's where his background was from. And I could sell and so that's, that's the idea was to build a company into that. And then the aggregator started to call and we got a lot of interest in the acquisition and we thought, wow, this, you know, this was an opportunity we didn't even think about. And the multiples were so good it seemed like a no brainer. So we then latched onto another company that was going to help us build the books and everything to prepare for sale. Here's what the aggregators look for. Here's what your books need to look like. We had to separate the brand from the manufacturing. The aggregators didn't want the machines and the employees. And so we started to like, you know, segregate the company in such a way that those things looked optimal for the aggregator. And then I would say at the, halfway through 22, so my wife is a teacher and we were ending, nearing the end of the school year. So it's April, May of 22. I started to communicate with that company that was helping us. I was like, listen, I'll make you a discount if to sell you my half to give us the opportunity to move. So my wife wanted to move across the state and you know, get closer to the water and whatever. And so I extended an offer to that company and they ended up seizing it. And so they purchased me out and they became, you know, the stand in for my partner. The original, my engineering partner is still, still behind doing his thing. And so I took that, that funding, we moved and then we, the search began.

[15:36] Host: You moved from Eastern Washington to the Seattle side, correct?

Guest: Yep. I'm on the other side of the Puget Sound from Seattle, but yep.

Host: Others.

Guest: That's correct.

Host: Great. And was that exit. Life changing moment for you financially?

Guest: It was. I had dreamed of, you know, developing a, you know, a million dollar product when I was a kid. Like I always thought the million dollar idea was the end all, be all. Um, you know, I didn't have the entrepreneurial concept. I didn't think about building a million dollar company, but I thought if I could, you know, if I could create a widget, you know, make a million dollars off of it, I wouldn't have to work anymore.

Host: I was thinking when you were a kid, a million dollars would have done the trick.

Guest: Yeah, yeah. When I was 10, that seemed like a really big deal. So I, you know, all, all told, that product generated a million dollars. Obviously that didn't end up in my pocket. The acquisition was, you know, high six digits. I didn't, you know, I didn't break that threshold. But it was enough for me to, it was, it was a life changing amount and I felt like it was enough for me to, to help me create the next step, the next layer, you know, and I wanted some stability. I've heard many times that selling on Amazon is like picking up pennies in front of a steamroller. Like you're sort of at their mercy and a lot of frustration with China and in the Amazon way of doing things. And I thought, you know what, I wanted to go safe and stable and you know, like we discussed in our pre call, I looked at everything, you know, from accounting practices and H vac to landscaping and, and I thought, you know, I wanted to be, I wanted to be safe, you know, something that, that I could do. And that's, that's the precipice.

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[18:44] Guest: I, I didn't, you know, I didn't think, you know, I thought that everybody sold to, you know, bigger firms, PE firms or like the aggregators. Those, those were the guys I was talking to. Right. Like these big, these institutions that went out and, and gathered capital and consumed a bunch of companies. I, I, you're, I, I, I don't want to sound like I'm, you know, trying to flatter you or, or sell the podcast, but a lot of it has to do, Yeah, a lot of it has to do with acquiring minds. Like, I, I'd listen to a ton of stories. I can't, I don't know the exact day or the exact story that, you know, flipped that switch, but that's where that data came from. That's where that idea, you know, came from. So in the, in my obsession into business, I had stumbled across, you know, acquiring Minds, you know, amongst the half a dozen other podcasts and the stories that I had heard from, you know, from people with nothing doing a business acquisition. I'm still a huge advocate even in the, you know, I'm struggling now, but I still think that, that from, from a stand, there's no better way to create wealth. You know, like, there's, hands down, no better way. And I'm, I'm convinced of that wholeheartedly. And so, yeah, that's how I'm, that's how I'm listening to your stories. That's, that's what got me into this mess.

Host: I don't know whether to be gratified or horrified here. Rusty.

Guest: Yeah, yeah.

Host: Well, well, one more, just follow up on that. Yes, you did. You said you wanted something safe. Sure. Or safer than the, certainly the, you know, building on the Amazon platform, which is, which is so unpredictable as you, just as you just said. But still, you, you were somebody who had started something from scratch and, and created a wildly successful product. And so that might, you know, that might otherwise give an entrepreneur the confidence to go and do that same path again, you know, seeking out a different widget, a, you know. Yeah. So. So were you not at all tempted by another zero to one adventure?

Guest: Yes and no. There's two, there's Two thoughts behind why I didn't do that. The first one is I, I didn't get enough money. I think that gave me enough Runway for me to really go out and, and try and fail a couple of times. And then two, I really felt like it was lightning in a bottle. That's probably a, like an internal frame that I need to let go. You know, I feel like the, the in all likelihood to come up with a product, you know, and then catching COVID at the right time, at the right, all of those circumstances to me felt so, so random that I don't really want to take 100 credit for the fact that that happened, you know, and then, so in the back of my mind, I think, you know, if I go through the, the, the, the work to come up with an idea and try to launch it and build it, I'm gonna be let down because I, you know, there, there was so much fire behind the other one that it's going to be hard to compete with that. And so I thought, you know what, I, I'm going to be better off trying to find something that's, that's already, already got some momentum and try to inject what I, what I do into that space.

[22:04] Host: Okay, so let's, let's pick up at your search then. So you all have moved westward across the state to the west, cross Puget Sound from Seattle. What is that area called on the other side of the sound from Seattle? Is that, does have a name, that kind of peninsula?

Guest: Yeah, the Olympic Peninsula is kind of what, it's, what it's referred to. You know, it's right, you know, the Olympic Mountains are right in the middle of the peninsula, and there's small communities wrapped all the way around. So.

Host: Okay, so tell us, you started talking about some of the kind of traditional businesses that we hear about a lot. Landscaping, H Vac. Take us into your search.

Guest: So I'd listen to, you know, many, many of the other searchers and the criteria, you know, that they, that they work from. Right. So I, geography, I kind of threw out the window I wasn't going to move again. My wife wasn't going to let us move again. So I knew I was geographically limited and numbers wise. So I, for whatever reason, I was under the impression that I was limited in my acquisition power by home equity, like how much I could back end the loan with. In hindsight, that was a very, I don't know how, where I got that idea, because if you, if you run that idea out, it doesn't make any sense at all. But, yeah, I just felt like I was limited in what I could buy by the amount of equity. Equity I had, you know, to. To. To back up the loan.

Host: So I. Russell, let's dwell on this for a minute just in case listeners in the audience are making the same mistake you have. But you just recently bought the house, so you must not have had. Do you just do a 20% mortgage? Typical. Like, you must not have had that much equity in the house anyway.

Guest: Well, you know, so we had sold our home, and then I had, you know, you know, money from the sale, and I, like, I put a bunch of stuff in it, so I knew that this. That that was my biggest, you know, my biggest asset, right, was the home. So I had. I had a fair amount of equity, you know, which I felt like was allowing me to buy, you know, up the chain a little bit. And I felt like, too, I was also. I was also. And maybe some of it was subconscious in the fact that I felt like if it all went down, I could sell the house and clear the loan. Like, I'd still have a. I could still have a business that was cash flowing with no loan. If I absolutely had to. We'd be homeless, but, you know, I would have a business that could, you know, could at least wipe the loan clean. But anyway, that I, you know, I. Again, I don't know why I had that, like, mindset, but that's, you know, part of what I. I had forced myself, you know, into a business that sort of fit in that mold. And then I was a little bit, you know, spooked, I think, by some of the bigger ones. Like, I've done a ton of creative deals, you know, from buildings and homes to, you know, the business stuff is I'm not afraid to be really, really creative in deal making. And so I felt like if I. If I needed to buy bigger, I could have. I could have made the deal, the deal happen. But the fear started to kind of come in over the top of me. Like, I didn't want to buy a business that was, you know, bigger than what I felt like I was capable of running.

[25:18] Host: And so the. The theory that the bigger you buy, in fact, the less risky it is. Intellectually you could understand that, but, like, emotionally you weren't there, which I understand.

Guest: Yeah, yeah, yeah. In hindsight, that was. That was probably, you know, a very, very big mistake. Like, I just didn't, you know, I just didn't peel all the layers of the onion back and really. And really think about it. And I think um, some of that too is that I, like I was alone in the search. You know, I think some of the search fund groups, there's a huge advantage in that. There's a lot of, I mean, from the outside looking in, there's a lot of dialogue that happens back and forth. And when you're, and everybody talks about being alone on a search and you kind of are. Because the criteria is different. You know, even if I found somebody else that was searching, they're going to be every. All of the variables are going to be different for that searcher than they are for me. So even if we could have some dialogue, I don't know that I would have uncovered some of my hang ups because, you know, we're both going through, you know, the end result is the same, but everything else is different.

Host: Yeah.

Guest: You know, the, you know, the dollars that you're willing to spend, how the sba, you know, brokerage is dealing with you previous experience, the business that you're looking at, none of those things are, are going to be the same. The, the bank motions of the bank are probably similar, but that's the only part.

Host: Yeah. Well, this point about now, in retrospect, you wished you had pushed through whatever anxiety you had about buying a larger business. I just want to make sure that I heard that correctly because if, if there are other. I mean, I understand your feeling too. Like, I mean, I think it's, it's natural for most people that like, the smaller it is, the less risky it is. And even when you hear no, no, no $1 million business is going to be more stable and therefore less risky, it's still, it's still very hard to feel that as opposed to just intellectually understand it. So I just want to, I just want to highlight you now into your. A year and four months into this, looking back on that and just now, you really do feel the truth of that. The truth that bigger is better.

[27:33] Guest: Yeah. Oh, absolutely. I, I've. And I felt like the, that I had carved up the STE in my, in my projections in such a way that I had a little bit of breathing room. I felt like it was big enough, but it can go. That ste can get consumed so fast, you know, like a third, A third, A third. So a third debt, you know, third extra or you know, owner salary and a third for, for slop is kind of what I, at what I had

Host: calculated for, for slot, for reinvesting or whatever. For.

Guest: Yeah.

Host: Margin reinvesting. Anything hiring.

Guest: Yeah, yeah. I knew that I wasn't going to Run the company nearly as well as the old owner. Right. Like, he'd grown up in it and ran it for 25 years. I knew operationally he was really had it dialed in. Right. I knew I'm gonna. I'm gonna, like, my cost of goods are gonna go up 2% or 3%, because I'm not. I'm not buying as sharp. You know, I'm gonna make some mistakes, and I kind of accounted for for a lot of that. I'm gonna have to hire people to backend him, you know, and so I put. I tried to put all those numbers in the equation, but, you know, it probably should have been, you know, I'd have to look at it from a real number. It's too important to just bucket it into a percentage. Like, I needed to look at real numbers and say, okay, can, you know, will this number XYZ pay for, you know, an employee? 2% cost of good increase. You know, there were some expenses that increased that I didn't account for. That sort of eroded, you know, my guesstimates. That was probably the biggest miss as I just didn't know some stuff was going to go up, and I didn't know it.

Host: Well, let's put a pin in that because we're going to get into the. The nitty gritty there. But. But at this point, is it fair to say that you kind of napkin mathed the search? It was kind of like I'll have, like you said, divided the. The ste that you would have into thirds, and kind of that was what you. The. The kind of assumption you were operating under.

Guest: Right, Right. So I, Yeah, I knew, you know, size wise, like, I looked at some, you know, a couple of businesses that were smaller, and I looked at a couple of businesses that were a little bit bigger. And then you start to, you know, do the. Do the equation. Here's the debt load, and you start. And I started from the debt load, and I was like, here, you know, here are all the pieces. And

[30:01] Host: Russ, let's actually do this math with the business you bought. So. So let's kind of quickly go through. You looked at a few businesses that you didn't tell us. Is there anything to say about the businesses you didn't buy?

Guest: I, you know, I would say one. Like, I was really close. I sent an loi and I was preparing to make an offer on a landscaping company in Seattle, and it looked. It was smaller. It was probably, you know, 60% of what this one is. So this, to give the audience some clarity, this business does 2.3 to 2.5 million a year in gross revenue. The landscaping company, I think was like, you know, 1.5 or something like that, you know, 1.7. And the problem with the landscaping one is I, I realized when you look at the map, you're like, oh, it's just a ferry ride, you know, across the Seattle. But the ferry system is kind of a nightmare to deal with. The people in our part of the world understand that. But I felt like if there was an emergency because it was on the other side of the water, if there's an emergency, I couldn't address it fast enough.

Host: Yeah.

Guest: And then I didn't want to commute back and forth on a ferry every day. So that, that business wasn't. Wasn't going to work out. So that's, you know, one that I walked away from. And it was, it was smaller yet, I mean, it was probably a really good move. It had those two. It wasn't big enough. And I had a geography problem.

Host: So. So at this point, even though you're technically in the, the greater Seattle metropolitan area and there are probably a lot of people in your neighborhood who commute daily over to Seattle to go to work, you really don't even feel at. You've learned that at this point your search is going to have to be geographically limited to the peninsula, the Olympic Peninsula, not even Greater Seattle. Okay.

Guest: Right. Right. Yeah. I mean, if it was the right business in the Seattle area, I probably could have, you know, I thought about, you know, more E Commerce. You know, maybe that in hindsight maybe that would have been a good, a good idea. But I felt like it was risky. I was trying to stay safe. You know, I wanted a services business, but, you know, I could have done E Commerce or whatever that gives me some remote capability from the other side. And I looked at that like I dug around, I went through Empire Flippers and you know, some of the ecom sites looking. I just didn't find one that, that grabbed me. You know, I knew that I, like, I was afraid of what was going to happen with the economy and I really wanted to stability. You know, I have a blue collar kind of, you know, inner core and you know, sweat equity. And I think the humans that make up the blue collar space I can relate to, you know. So, you know, some of that was my, my draw to, to, to go the direction I did.

Host: Great.

Guest: And the business, you know, the, the, of the. To go back to your numbers question. So of the 2.5 million in revenue, it spits off about 600k in SDE, you know, multiple.

Host: Well, tell us about the business and then, and then we're going to get into the numbers.

[33:02] Guest: What.

Host: What did you. How did you find it? What is it?

Guest: So a friend of mine sent me the listing. This one was on BizQuest only. It was the only place it was listed. And if it had said. When I was scrolling through the list, if it said automotive in it, I didn't even. I didn't even open it. I had no interest in automotive. None. I'm not a. I'm not much of a, you know, car guy, per se. And there was just nothing about the automotive space that interested me. But when he sent me the listing and I looked at it, I'll tell you, the. The criteria that got my attention is that there's more than one location and there's more than one discipline. So this particular company, the Auto Glass Clinic and mobile radio, has a 12 volt component. So auto accessories, from, you know, car stereos and lighting to vehicle outfitting and stuff, to all the way to auto glass. And so when I was looking at it again, I'm looking at it from a safe perspective. I'm like, okay, so you've got the. When the economy's hopping and people are putting money in their cars, I've got the 12 volt side that, that will, that will breathe with that side of the economy. Right. And then I have the auto glass side that is safe and stable. And, you know, again, recession doesn't really care about, like, if your windshield's broken, you got to get it fixed.

Host: Yep.

Guest: And there's also a huge insurance component which you and I have talked about. We'll come back to that. But there's an insurance component to that too. So I'm looking at all of the things that can kill this business. And I'm like, man, this looks really, really solid. And there's two locations. So location one and location two are about 40 minutes apart geographically. So there's two population densities, two, you know, income. I would say that the core income that the. The company attacks varies greatly between those two locations. So again, more stability. I'm like, okay, I'm diversifying my income. I'm diversifying my geography. I'm diversifying the discipline. All of those things were attractive to me.

Host: And in the 25 year a you mentioned, 25 years that the previous owner had been in it for that long, was he the founder also?

Guest: No, his. His dad was the founder. So it started as mobile radio in 1982, I think. In a garage, you know, and then very attractive.

Host: I mean, it had weathered any number of storms.

Guest: Correct? Correct. Yeah. Very, very well run, well built. The. The company has changed. Like, I could. I could probably do a whole hour on how this little tiny company had, like, evolved, you know, under the two different owners and how drastically different they've been. They've been run. You know, the, the original owner, the founder, had multi, you know, I think half a dozen or eight locations at one point. And then, you know, when the next generation took it over, completely redesigned the company, you know, brought it back to two. Two companies, changed the operational. It's just further proof at how eclectic the business space is. Right. Like, it can be done. You can make money a million ways. There's no right way. There's no black and white to it. You can be successful in the way that you run a business in a multitude of ways. Yeah. So. So that's, you know, how we. Part of the reason that made this company so appealing to me. And then I met the. I shopped him. My wife needed a new windshield, and so I scheduled here, and I brought the car in. He didn't know at the time who I was. Like, I, I was communicating with a broker. I had signed the NDA, gotten some documents. He didn't know who I was, but I came in and shopped it. And so I got a chance to see the owner in action and kind of see the company in action and feel the atmosphere and the culture. And then I, you know, had my windows tended at the other location. So I shopped both locations, you know, to kind of get a feel on both. Doing my own personal due diligence. Yeah.

[36:57] Host: And you liked it. What did you find when you shopped it?

Guest: Yeah, like, it felt really, really solid. It felt like a, Like a company that had been around for a long time. It was the, the culture felt good. The interaction. You don't get to interact with everybody, but I got to interact with enough of the people where I could sort of put. There was no underlying sensation of, you know, discomfort or any. Nobody was uneasy or, you know, like, I just. There were just no red flags popping out of the, you know, internal culture that I could, That I could perceive, anyway. So, yeah, I, I, I kind of felt like this, this is the one, you know, and I, and, and then I got a chance to. I went a little bit further and then scheduled a meeting with the owner. So the broker. At that point, once the owner and I started to communicate, the broker stepped back, and then he was just Waiting for the deal to close, which I, From a broker standpoint, that I feel like he failed the situation to some extent, but, I mean, it was fine. And so the owner and I got, you know, we went and had a beer and got to spend some time together, and I got to know him, and he got to know me. And I think it was at that point that they. That, you know, we. We bonded and realized that we clicked. We were very complimentary. I think if he and I could build a business together, it would be great. Much like my previous partner. Like, I'm. I. I think there's two types of entrepreneurs. You know, obviously, there's tons of shades, but some is most people can be carved up into two buckets. You're either. You either lead sales and marketing, or you lean, you know, operation aptitude, right? And those two things make a really good partnership. In my previous partner was very much operationally, you know, oriented, right. And I knew that I'm sales and marketing, you know, big idea, quick to act, you know, like, I get all of these things that I think are both a blessing and a curse for what. For what I do. And so I knew. I was like, okay, this. This company. If this company needed an operational rebuild, I'm not the guy. Like, I just. I just don't have that capacity. I can hire for it, and I can see it, but I just don't have the ability to fix that. And so I knew that he was. That the bones of the company were good, right? And that where he was lacking, I was strong. So I thought I could come in and then start to grow that top end. Like, let me inject my skill set. If I could just keep the wheels on, operationally inject my skill set, and then grow that top line. So that was the idea.

[39:37] Host: And so, Russ, one more time on the numbers. It was 2.3 to 2.5 in top line revenue. And what was the take home? What was the SDE?

Guest: Just shy of 6.

Host: Just shy of 6. So this isn't super small. It's. It's maybe out, you know, it's not a million dollars of ste. That, you know, are 750 to a million, but it's also not crazy small, actually.

Guest: Right? Well, yeah, which is what I thought. I thought that, you know, this is. This is big enough to handle. Handle the debt load, you know, throw 100 or 150 out for.

Host: Take us through that math. Take us exactly that math. Now that we know what the SDE is, call the SDE 555050 to 600.

Guest: Yeah. So I, I knew that so the debt load was going to be a couple hundred grand a year to kind of no matter what, you know, so that left me with somewhere between 4 and 500 to then, you know, carve up into me or additional employees or company growth or a combination of all of those things. And so I knew that I wanted to, yeah, I didn't intend to take any money out of the company for the first year and a half to two years. So I, I thought, okay, that's, that's 500, you know, the four to 500 that's left in the bucket, you know, three to 400 after debt service that is left to hire for employees. So I knew there was going to be a gap for the, the exit of the owner and then there's going to be some growth initiatives. There's going to be a lot of stuff that I, I'm going to do the, a ton of money I was going to dump in early on to upgrade, you know, all of the marketing, the whole marketing side of it, like website rebuild, signage, branding, you know, all of that stuff. And so I figured, I figured I could touch half of that. So 150 to 200 and the other 150 to 200 needs to stay in the, in the system. Right. For operational, you know, cash flow,

Host: you weren't going to take any money out. You mean, you weren't even going to pay yourself a salary, right?

Guest: Yep.

Host: So you were going to work for, your plan was to work for free for, for whatever, a couple first couple years.

Guest: Right, Right. Yeah. That was the intent is like I could, I mean, I felt like if it was generating enough money, you know, then you take a quarterly dividend or if you're starting to see regular cash flow, then I can put, I could throw myself in payroll, but I was prepared to not, not pay myself. And I had put a smaller down, you know, I, we did the typical 10 and 10 breakup. So the owner carried 10, I put 10 down in the acquisition and I didn't, I intentionally did not put a larger down payment down so I could hoard some cash to, for my own survival. And so yeah, that was the intent. Like if I didn't need it, great. If I did need it, you know, I had, I had a cushion. Like if the company wasn't generating enough, I had my own, my own cash to keep me, to keep me going. So that was, that was the plan, like, which I felt like. I, you know, I had it all mapped out really well.

[42:36] Host: I thought Yeah, I mean it, it sounds like you're being actually quite conservative. And so you said 10, 10, 10 seller. No 10 equity 80% SBA loan. Great. And, and fully anticipating to invest. Fully anticipating a J curve and, and prepared to not take any money for yourself if the, if the business needed that and keeping powder your own powder dry in, in the form of putting in less equity, 10% so that if you needed to have cash on hand to infuse in the business or what have you, it was there too. So you, you really are, you really are trying to foresee choppy waters and, and, and, and be able to, to navigate them. Okay. All right, so, so we've got the transaction. You are before you just finished saying that you were, you're the sales marketing guy and the OR type and the previous owner is more operational. He's not going to stay in the business. So you, you perceive this gap. What are you going to do to fill it?

Guest: So he, he actually did stay for about six months on payroll to try to train me. Like the relationship that he and I had, like I said, was, was very, very good. We developed a very much a friendship and, and I knew he would be there. I would say he was, he was. I agreed to pay him. Like his request to stay the salary or the hourly rate was, was really high. But to me that seemed like tuition like to keep his knowledge, to get, to keep that 25 year knowledge of the business in the system while I try to learn, you know, from the fire hose seem like money well spent. So again, to, to go back to your previous point, like I had a bunch of, you know, powder left to, to deploy. That was almost a hindrance in a sense. Like every time something came up, I'm like, I, you know, I, I prepared for this, I got it, I'll take care of it. And, and so I think that gave me a false sense of security which you know, later haunts me, but we'll address that later. But to go back to, to, to him. So he stayed at a higher rate. We also hired backfilled an employee that was supposed to be as capable as he was. That was a huge miss the salary. I wasn't a part of the hiring in that. Again, I'm not, I'm not faulting him because everything in the rear view mirror always looks better. It's at the, at the moment I think we all thought it was the right, the right maneuver, but the guy wasn't capable of, you know, doing what he did. And he was provided a salary that that threw the numbers off. And this was all at the 11th hour. So we closed in November. That employee was hired in September.

[45:28] Host: So this employee was basically another kind of operations person with a lot of industry knowledge and experience who you saw as the person who was going to replace the owner after the owner's six months came and went sort of thing.

Guest: Correct? Correct. Yep. He would get hired and get. That was part of my contingency, too, in the acquisition. As I told the owner, like, I can't sit behind the desk and do everything that you do every day. There's enough. I felt like there was enough, you know, ste, to hire a good guy to put in that seat and do that job. And so that was part of my criteria, and I accounted for that in that sd. You know, I had a certain salary in mind. He was hired at, you know, 50% more than I thought. So that's one of the. One of the drops in the bucket that started to eat away at that sd. That was unexpected. And again, this was happening between. Between September and the close date of November. That was one of the things that change that. And I. Because I didn't get a chance to. To interview, I didn't have any say in the salary. He was doing what he. The seller was doing what he felt like he needed to do to get the deal across the finish line. And in reality, it was throwing a stone in my backpack, you know, that. That would haunt me later. And I. I don't know, like, I could have done a bunch of different things, you know, in hindsight, to. To, I think, blunt that. And I just didn't speak up enough because of deal fatigue. Like, we had started the process in June, and I think deal fatigue was a big problem for me because I'm. I'm inherently a sales guy. I wanted to close the sale at that point. Like, in June, I started it, and I'm like, I'm looking for an investment. I'm looking for my future and all those things. And then by November, after months and months of due diligence and back and forth and working all these things, I just wanted to get over the finish line.

Host: Yeah.

Guest: And really, I should have walked away. There were. There were probably three. Three things, you know, in that last 60 days that should have made me walk away, But I didn't want to walk away with, you know, five months worth of work, you know, and just throw it away. But you need to be willing to do that. That's a huge lesson.

Host: Anybody that calls that sunk cost fallacy. Yeah, really hard to really hard to walk away from a sunk cost in anything in life. But the disciplined business person pushes through that. But I hear I, I hear you, Russ. Don't get me wrong. What were these three things that now are obvious red flags in retrospect.

Guest: So that that was one the to, to hire for the owner, you know the cost to replace him was much higher than I, than was anticipated. I mean the right guy is probably still out there somewhere as plausible but he just at the moment that wasn't the right guy for that spot. So that's one the. Because we did an asset sale versus a stock sale, the leases had to be rewritten and the lease in the primary location doubled. The landlord, you know, was able to take advantage of that. Like he kind of knew that the whole deal hinged on, on these leases and the bank wants, it wants a 10 year promise. You know, the bank wants to see a 10 year lease. Well if you know. So he took advantage of that and doubled the, doubled it. You know. So there's, there's, there's two things now that heavy basically those two things alone almost amount to 30 of my, of my equation. And so and then I think the, the complexity of the job. I think right at, right the tail end I got to see how complex the business is. And, and I, I think I knew at that at that moment it was, it wasn't as easy to backfill for that complexity than I thought it might have been.

[49:15] Host: And by complexity you mean the technical know how that's required of your team or do you mean.

Guest: Okay, yeah, yeah. And the, the business as a whole. Like I so from everything I did retail for, for years and then I went into B2B sales, you know, commercial sales and then, and then I pretty much was in B2B space, you know, continuously after that and then I went into manufacturing, E commerce. Well all of those. The transaction pace is very patterned. You know it's 30 day terms and most of the buys are happening in bulk on rhythm. This business, the daily transaction volume there's. I probably do more transactions in a day than I saw in two weeks in the e comm business because Amazon takes all of that. Like what you're seeing on the, as an Amazon seller on the back end is you get paid every two weeks and know you're uploading, you know you're, you're, you're sending in your inventory on this, on this timed rhythm. In my B2B sales it was the same thing. It might have been daily transactions but the volume just Isn't there? You know, I'm, I've got to buy a part from O'Reilly's and I got to buy a part from Honda and then I got to build that to the insurance company that I got to turn around and, and return this part that was bad part like that. The velocity of all that creates a ton of complexity in cash flow. And I, I got just a little glimpse of that in the, in the waning hours prior to closing. And it, and it spooked me in that the operational demand was going to

Host: be, you know, extreme and interesting. And so this is really about the complexity of a high volume transaction business versus what you've been used to, where even though the volume might have been higher, high volume, it wasn't. You weren't having kind of direct contact with that high volume. You were thinking, thinking in weekly terms to bi weekly terms. And you know, one of the ways that you'd characterize this business or your perception of this business rust to me on the pre call was dumb and safe, which is, and you meant that affectionately. You meant that positively. And I guess the dumb piece meant you met. By that you meant like we're doing windshields, we're doing car radios. Like it should be pretty straightforward. Is that what you meant by dumb? And is that now what you, you know, subsequently found out was not as dumb as it looked?

[51:41] Guest: Oh, yeah, yeah, for sure. I, I would say I try to keep this thought out of my mind because it can take me down with it, but there are, there are so many ways to make, to make money that are easier than this. Like we as a, as a collective team, and hats off to the guys in this, it both in the industry and within my team, because the amount of work and effort it takes to spit a dollar out is insane to me. You know, say more. The, the, the sweat equity that goes into like removing a windshield is not easy. There's a ton of parts to it. The customer doesn't give a crap really who you are. So to create a positive customer experience is difficult. And, and you, you could work really hard and put a team, you know, in there for like I said, you know, maybe 100 bucks. Well, by the time you put all the other operational costs on top of that, like Indian, it's just very, you got to do a ton of them. Like everybody's got to sweat really, really hard to get that income. And, and I, I would say this isn't the only service business that's like that. I've studied enough to know that There are other places like that, too, but at some point, like volume and scale, you. You start to reach different tiers where the money that's brought back to. To hq, for lack of a better term, starts to accelerate, right? You get to a threshold where you sort of. You pass all your fixed operational expenses, and then after that, it's just. It's either cost of goods or. Or payroll. And so you're generating the amount of profit you get for every dollar after a certain level starts to increase, right? Like, it's. There's this. There's hierarchy or tier. In this instance, I don't know. That threshold's out there somewhere, but I can't see it. I can't figure it out because the payroll has to go up so fast to get. To get the. The work through the system. It's. It's hard to explain without, like, bringing up Excel spreadsheets and kind of walking you through each transaction, but it's just not there. Like, there's no huge windfall at a certain level because you can't. I can't run production. Every car is different. You know, every customer is different. Every transaction is different. And so really, you're trying to make money off of every single one. And it's hard to stay efficient because you, you know, there are so many potholes you can fall into throughout the. Throughout the workload. And that's all stuff I got to work, you know, I got to work through. And the previous owner didn't have much perspective on that stuff. He doesn't understand the world that I came from, and I don't understand his world. And so there was a little bit of, you know, transitional loss there. Like, he, you know, I would ask him questions from my perspective, like, why do we do this this way? You know, even. Even the. The transaction at the counter to me seems really laborious. I was like, this doesn't make any sense. You know, I'm from soft. Like, I understand Shopify, you know, and Stripe, and those are all made to make the transaction easy and fast, and it's evolving all the time, and there are apps to go in the system, make it better. And I look at this system, I'm like, man, this is. This is awful. You know, in. In how long it takes to get through a transaction. Like, I get sweaty because I feel like the customer realizes, is this over yet? You know, and just waiting to check them out and in. So not having him understand my perspective and me not understanding his perspective, that creates a loss in my ability to upgrade the company. Right. Some. Some old business owners, I'd say old lightly, but some guys that have been. Know they're old fashioned, know that they do things the old way and they're okay with that and they know that there's efficiency to be gained. I would say that the old owner doesn't even, isn't even conceptually realizing that there's a loss in that system. He just doesn't know any different because he's, he grew up in the business. He doesn't.

[55:41] Host: Is that to say that he resisted then your efforts to, to wring some efficiency out of these, these processes?

Guest: A little bit resistant, I would say, but not, not for any other reason other than it was just lack of perspective. He just straight. Just didn't know. Like, it just doesn't understand the perspective. Like what I'm trying to ex. I might as well be speaking a different language. Like it just, it just goes, it just gets lost, you know.

Host: And what perspective of his do you lack that you think is an impairment to your, your being more effective?

Guest: He's like, he'll look, he looks down every, everything operationally. Like he, to me, he'll spend an hour chasing a dollar. And I just cannot wrap my head around that. Part of the reason that this company is so good is because of those things. Like, like he was anal about everything. And that's hard for me to wrap my head around. I'm a, I'm a speed guy that's part of sales and marketing. Right. Like I, you know, I lost 10 bucks in the back end. I better go make 20 on the front. Dangerous perspective from a business owner. I recognize that. I know it's a weakness and I don't let that like cloud my judgment or you know, what, how I'm trying to maneuver, you know, so I don't know, somewhere in the middle there's. There this business should be, you know, can be run properly. Right. I'm probably too sloppy, too, too risky in, in some of my behavior where I felt like he was too conservative. So he's choking out the top end. Right. And I'm killing it from the top end. Like I'm, you know, neither side lets the business really, really breathe and perform where it should. Which is why I think we would make a good partnership.

[57:25] Host: Well, that's what I was going to say, Russ. On the other hand, it's like maybe you need that tension between the back of the house guy and the front of the house guy to come to a happy medium where the, where the business thrives.

Guest: Right? Right. And That's. That's what happened in the previous business. Like, I'd have some crazy hairbrain idea, and then I go talk to my partner. I'm like, hey, you know, like, I think this is great. Let's go do this. And he was like, come on, man. That's like, that's stupid. I was like, what do you mean it's stupid? You know, and we get to have some. Some dialogue and we get to argue about it a little bit. And, And. And then we come to a realization, like, you know what? Maybe. Maybe the concept is. Is good, but the execution would have created xyz, you know, down the line, I'm like, all right, you know what? You're right. Like, we missed that one.

Host: Yeah.

Guest: You know, at the same token, I can. I could. I would drag him out of his comfort zone, like, hey, we gotta. We gotta swing on this. And it would, you know, and we'd hit a winner and. And it'd be good. And so that push, pull created this. This great, you know, progression. And I think that that's what I missed. And I. And I knew that. I knew that, like, I didn't have that, and I thought I could create a system for that and actually grabbed a couple of different firms to try to help me with, you know, CFO type role bookkeeping, you know, to sort of account for my weakness in that space. But it's just not the same as somebody, you know, sitting over your shoulder saying, hey, you know, should we do that? You know, or. Or, you know, like, we got to. Let's watch the books a little bit tighter. We're losing some money over here. And. Yeah, all. All hard lessons.

Host: Well, Russ, let's. Let's catch up on the plot. Let's kind of bang through 2023, your first year of ownership. Just because I'm watching the clock. And we. There's a. There's a lot still to talk about in terms of your lessons learned and how you're thinking about the future. So you get into the business and what. What is your. What does the first year look like?

Guest: So coming out of the. Coming out of the winter time, I'm still, like. I'm swimming in. In like, trying to. Trying to figure out what the heck is going on. Very, very long days, you know, weekends too. Just trying to. Just trying to understand the ins and outs of the business, you know, and granted, the owner is still there, you know, for the first six months. And so I lean on him a lot. I'm trying to watch him and how he's operating and trying to take on those at the same token, I'm looking at the back end and I'm like, the gross dollars are there, they're climbing, they look good. But payroll is way higher than for me, than it was for him. And I can't hunt, you know, his cost is in there. So if I back that out, then the guy that he hired to replace him, I got to back that out. And my costs are still kind of high, you know, And I'm like, okay, my only. At that point, my only choice. Cost of goods looks good, operational expenses overall all look all kind of fall in line to where they were expected to close. So if we back up the clock a little bit after close, so the rent on the primary location doubled. My insurance, like garage liability insurance, you know, van insurance, all that stuff went up 20 or 30% because I was a new entity. The insurance company didn't recognize me, even though the company had been around a long time. I was a, I was a new risk, right? So that went up 20 or 30%. That was a cost I didn't account for. I accounted for interest rates to go up, went up more than we expected, right. So there's another. Basically all my extra income was erased between owner, payroll, new guy, and then rent, insurance, interest, all of my disposable income was gone at that point. So I knew at that, at that moment, like I wasn't going to make any money. So.

[1:01:14] Host: Russ, can I stop you on an important point? Because it's funny that this hasn't come up. I don't think in any of my interviews, I must be mistaken on that. The fact that you did this asset purchase, which is the standard way of doing these small business acquisitions. Not always, but the standard meant that your landlord used it as opportunity to write you a new lease, double your rent. And you just said about the insurance company, you know, you didn't. Grandfather, you didn't get, you didn't get any of the previous owners pricing because they are all seeing you, all your vendors or not all, but some of these important vendors are seeing you as essentially a new customer, a new client of theirs. And they then give you market pricing, which is a lot higher that what than what your owner had been paying. Anything more to say about. And if you had, but clearly, I mean to be clear, if you had bought this as a stock purchase, you would have, you would have inherited the old pricing, we presume. So anything more to say about that? Because it's such a, it's such a powerful Point and a powerful weakness to an asset purchase.

Guest: Yeah, I, I like I could really get on the soapbox about this one because it hurt me so bad. The, the, the health insurance changed too. Even though like I don't, I don't, I learned more later than made it seem like it shouldn't have changed, but it changed. My LNI rates were different. Like my overall payroll expense changed. I don't know how the state does that, but the LNI rate for that classification changed for me versus what it was for him and I don't know why because all that stuff had to be rebuilt under my new legal entity. Yeah, all those costs were unseen until the end My, all the insurance. So the national insurance like group, I guess this is a whole thing too. So my number one competitor I have to communicate with every day because they own the glass servicing side of it. So Safelight Solutions is you know, own Safelight auto glass and they handle all the glass claims for all the insurance companies. Anyway when our legal entity changed they dropped us out of the network. So this company had been part of that, that network for 20 years and I didn't get paid for 60 days or so. Once once they realized that the transaction had taken place, I had to re register and re sign up for them. So they would tell every customer that they're we're not a preferred, you know, vendor of theirs. There's no warranty. So customers would, would then opt to not do business with us that didn't know any different. We had to fight for the customers we did get. And then we were in this huge pay delay where I didn't get any money. So February to like March. Yeah, the end of January, February, all of March. Basically I was receiving no insurance income.

[1:04:03] Host: And what percentage of the revenue does that represent roughly?

Guest: It's probably half.

Host: Wow.

Guest: Yeah.

Host: So your revenue drops by half.

Guest: Yeah, yeah. The cash flow while I was still doing the work. So I'm still getting, I'm still getting insurance work, still doing it. But they're not paying because they're like it's, it's, this is a little bit of a conspiracy theory but I think that they do it on purpose to try to choke you out because I'm a small time competitor, the whole state. Light Solutions doesn't want us to exist. They do everything that they can within legal boundaries or sub legal boundaries to try to make sure that the little glass shop suffers. And so they were in no hurry to rebuild my profile. Even though we met all of the criteria to be certified and all of the technicians, met all of the criteria to be part of that. Like, I had submitted it over and over and over and you get no response back. You get no response back or you. We're working on it. Send us this. We're working on it. Send us on this. And they just drug it out like no other system on the planet takes that amount of time. Like, literally, if, if, if I didn't have my own cash at that point to keep the company going, we would have died. They would have killed me before we even really got off the. Get off the ground. And I think it, like, because they just don't care. Sorry. I'm gonna get really, like, passionate heated about that because I think the system is really, really messed up.

Host: And. And do you think that if you had done a stock purchase, all of that would have been avoided?

Guest: Correct? Yeah. I would have slipped in the back door and they wouldn't have known any different. And the business would have stayed right where it was.

Host: And as you are, as you are funding basically the. This lost revenue out of pocket, are you expecting that the work that you're still delivering is just gonna. Is eventually gonna be compensated and you're gonna get kind of get a big lump. Lump payment as it's released sort of thing? So you are banking on it eventually coming?

[1:06:09] Guest: Yeah, I knew eventually the money would catch up to me. Like, it just sats. It sits out there as long term, you know, ar. And so I, I was kind of okay with it, but part of it too distorted my vision on the company. Like, I couldn't really get a good perspective on cash flow because I wasn't like, I was having to supplement it with my own cash in the beginning. And so for the first, you know, that first quarter in the company, you know, everything is sort of insane at that. Anybody that's gone through an acquisition understands that, like, you don't know which way is up, right? And then I have this, like, emergencies that I'm trying to try to handle, and then I'm not triaging some of the things I should have been like, I should have recognized that payroll was an issue. But I'm worried about cash getting cash in. Like, just. I just want to keep the lights on. I'm not worried about anything other than trying to keep the wheel. Like, I'm 90 days into this thing and I'm gonna. And I'm gonna go, you know, I'm gonna lose it all. Like, this is crazy. And so the furthest thing from my mind was, am I operationally sound at that moment, because I'm just trying to stop the bleeding.

Host: Yep.

Guest: And. And yeah. And so what. I finally start to catch up. Like, I'm starting to get the checks in, starting to get some money. They finally let us back into the system, you know, Now. Now the customers call to make the, you know, to make the claim, and they say, oh, this is one of our preferred shops, and we'll stand behind the warranty. So we start to get some customer reinforcement through the. That. Don't get me wrong, Safelight Solutions still wants to kill me, but they have some legal verbiage that they use to make the transaction for the customer sound better. And so I'm starting to get some cash flow, but I think at that point, I'm starting to recognize now we're headed into the summer, which is the busy season, and I'm like, man, payroll is really, really high. You know, I saw a payroll outbound payroll in the heat of the month, you know, during the busy season, you know, 55 to 60K in payroll. And I'm. I'm way over a hundred, you know, 100 plus. And I'm like, you know, where is this going? You know, and I'm trying to. I'm trying to dissect it because I have. I have one extra person. I have the owner, you know, and I'm picking up some overtime and. And there's just some stuff I'm not. I'm not seeing in. In payroll. And so even though the gross dollars are going up again, there's no. There's no additional profit. Like, I'm basically, you know, just. Just surviving. Dollar in, dollar out, dollar and dollar out. Like, God, this isn't. This isn't good, you know, and that's what leads us to. To the crisis that we're in now. I can't. I. I knew it in June. I knew I was in trouble. I was like. But I. I have two options. I can either start to. And tamp down what I'm trying to do internally and rewrite the payroll structure, which I was deeply concerned with what that would do with the culture. Like, you're the new guy. You come in, you're here for six months, and now you're starting to either lay people off or change what the money I'm making, you know, And I felt like that could be insurmountable in a company with 10 to 12, 13 people. Yeah, I didn't want to lose them. I didn't know the business either. Right. Like, there's. I. I can't go out there and change a windshield like I, like I could now. I could, but I couldn't then. And so I'm at the mercy of, you know, of the, the people that, that work with me. Like I, I true. It's like servant leadership. We're all aware about that is 100 me because I can't do any of it. You know, my job is to make sure that you're, you're happy and that you stay here and you do your job. So I was, I was deathly afraid of that. So my only option at that point was try to grow. So I found a small. There was a small guy that had a small book of business just north of me. So I acquired his book of business. I get a scream a good deal on that. I'm dollar cost averaging through acquisition. So write that one down. So I acquired his book of business and I was able to drop that into our bucket and that started to give us some additional lift. So 10, 15% growth. I'm like, okay, I'm starting to cover that. But you know, the payroll is still, still too high. And then, and you're, and you're not

[1:10:22] Host: able, and you're not able to, to crack this, crack the code on why. Because that is so dramatic. What did you say? It should be around 5060 and it's at 100. So it's almost doubled.

Guest: Yeah, yeah, it's almost doubled. So the, so the owner is gone by June. I think that helps. And, but I'm still, still hurting and in payroll and I'm not taking a payroll. And so I know it's not me. And I'm just. Yeah, I'm still trying to, trying to figure this out. Like I'm looking at past payroll. Like who are the employees that were here before? There's been some turnover, so it's not all the same. There were a couple of other deals that were done outside of me, you know, prior to me that, that I learned about later. I was like, oh, this guy's making way more. But why? You know, I just assumed that that obligation and I don't know what transpired to that anyway. Like, we, we could go down a whole rabbit hole in that.

Host: Okay.

Guest: But needless to say, that led me, you know, all the way through the summer. And then so the owner's gone. I kind of figure out what I'm doing now. You know, I, I still work a lot. I still open and close dark to dark, but I'm not, you know, I'm not needed on the weekends. I'm not on my laptop at home, you know, digging through Excel and, and QuickBooks to figure out what's going on. I have some transparency in numbers now. And then the summer starts to end and we hit October, and then there's this huge fall off in revenue. I'm like, oh, that's. That's painful. So overnight, the, the business starts to really hemorrhage because my costs, as, you know, with typical cash flow, ebb and flow. Right? Like as. As your. As your revenue goes up, the cost lag behind it, and as the revenue goes down, the cost for the high cost from the previous month is still hitting you. Right. It takes some time for those two things to. To converge. So we just overnight, all of a sudden, ran into this huge crackdown. Now I've already deployed it, you know, a fair amount of my own capital to kind of keep the wheels on and buy myself some time. I'm trying to buy myself time.

[1:12:24] Host: How much did you put in at this point, Russ?

Guest: I'm, I'm. Yeah, I would say if you count the October deployment, I'm, you know, 100 ish.

Host: 100 as of now or back then?

Guest: Like 100 as a, you know, as of. Yeah, through October. So I think I'd probably deployed 60 plus going into. Into Q4. And then October, I had to do an emergency dump into it to keep it going. And then at that point, like, my own personal Runway is really scaring me a little bit. And I don't see, I look on the horizon. I'm like, I don't see a way where this company can pay me and stay alive. And so now I'm kind of at this, like, this crisis threshold. I. I finally, like, went back to the team. You know, I laid. I laid a guy off. I didn't replace some that I'd lost through attrition. And I redid the payroll structure, so I have a sales team that's on commission. That's the way it's always been. You know, I believe in commission and, you know, some of that, but that the commission structure was hurting the company. So I finally went back and I told everybody. I was like, listen, I, like, I have to, I have to fix this. Which was brutal. Like, the one of the guys that I sent home is a beautiful man, like just a beautiful human. And it was gut wrenching to send him home, but I, you know, I had to do it right? And then I had to have the conversation with, you know, somebody who, who had become accustomed. He left his previous employer to come work for Us for a salary that he thought he was going to get. And I have to re. Like, I have to cut his pay by 40%. And I was like, I just don't have a choice. The company can't support it. Right. Like, all. None of those things are discussed when you go through the acquisition. Right. This is the, this is the drama in this interview. Like, nobody. Nobody tells you about that pain. Like you. You can. You can go through a termination, you know, at a big corporation, as a manager, you're. You're anointed the guy that gets to send somebody home. It's painful, but I'm. I'm doing it from a. From a perspective that I acquired this company and I made you a promise that I was going to take care of you, and I'm not upholding my end of the bargain. I just. From. From my. It's painful.

Host: Yeah. It's so much more personal. You're not. You're not acting on behalf of the corporation. You are. It's. It's kind of on your shoulders, as you put it. I mean, you've made it kind of an agreement with each of the employees and feel like you're not upholding your end.

[1:15:00] Guest: Right. Right. Yeah. It's a. It's a machine in order to let people pay for their families. Like, I. I get the luxury to lead the machine so that these people can work here and pay for their families. Right. Like, it's not. It's not about me, ultimately.

Host: Yeah.

Guest: Anyway, so, you know, needless to say, we, you know, we got past that and we. We sort of righted the ship from. From a payroll perspective, you know, in a cost perspective. But the company is still very, very dire in the sense that our revenue is continuing to. To be, you know, 30% or better below what it was a year ago in.

Host: So even. Even. So even though this is now off season, you're lower than historical off seasons.

Guest: Yeah. Yeah. I'm seeing numbers that this company hasn't seen since 2019. In. In the. The, you know, the first few weeks of that, I felt like it was me. Like, am I. Am I choking the business now? Right. Like, am I. Have I. Have I eliminated our capacity to generate revenue and the maneuvers that I'm making? Right. Reducing the. The technician count, reducing the payroll, like, is everybody's, you know, wherewithal to push through and create more revenue? Am I shrinking that which is my ultimate fear? Right. Like, from a sales and marketing perspective, that's the last thing I want to do. Like, I want to have this you know, I want to have this funnel with tons of capacity in it, and I don't have the capacity that I used to. So I'm like, you know, where's the math? And what, what's the maximum number of dollars I can run through the system? And that's what, that's what I'm looking at is did I choke it? And that I need. Let's say these are round numbers. This is not factual. Let's say that I need 200,000 to take care of everything, everybody and spit off some cash. Right.

Host: 200,000amonth in revenue.

Guest: Right. Totally a hypothetical number, but let's say that I need 200 to pay for everything. And I've made maneuvers that only allow me to run 175. Like I all out best operational capability, and I can only get 175 through the system. Right. I've essentially put a cliff that we're going to dive off of. So,

Host: so that's where the things stand right now. That's where things stand right now, Russ?

Guest: Yeah, I don't, I don't know what that threshold, I mean, I, I have an idea what that threshold is, but I don't know what if, if I've limited what we're capable of. I don't know. The volume's not there, the inbound volume's not there. In my opinion, I'm speculating.

Host: What does the previous owner say about, about this? Has he ever seen anything like this? Or are you even communicating to him about what's going on?

[1:18:00] Guest: Yeah, we're still communicating. He, he lives, he moved away and has a, has a regular job now. And so he and I communicate far, far less. And I've, I've posed this question to him, but he doesn't really have an answer. Like, again, it just sort of like it falls on deaf ears. I'm not faulting him for that, but I would like some, you know, some input. Like, oh, everybody tells me it's seasonal. Like, I know that there's a low season, but I'm 20 or 30% below. I'm actually getting most of my, most of my intel from other local business owners in my space. So I know there's another, you know, auto glass company that's for sale that's fairly close to me. I, I, I was able to get his documentation, look at numbers, real time numbers, just from a, from our perspective. I mean, he's close enough geographically that we, that I, I can, the economy is the same, but far enough away that he's not, you Know, in my back pocket. Anyway, I was able to get his numbers and look at his real time numbers and see that he's down. I know that Car Toys, which is a big, you know, a larger competitor in our space, they're, they're down, there's another audio shop, they're down 30. I'm like, okay, so for whatever reason there's an economic retraction that's hurting me. I didn't think Auto Glass would suffer from that. I'm seeing in the electronics for sure, but I'm also seeing it in Auto Glass. And I, my, my theory as of late again, I, I roll through a bunch of different, you know, this, this could change tomorrow. But I think that because nationwide there's a big company that laid off, closed a bunch of shops and laid off a bunch of technicians, 300 and some technicians back east somewhere. And I think what's happening is that the, the people are just holding up, right? Like they're holding onto the cash. And so what happens is that the Auto glass industry, the demand starts to shrink a little bit. And then Safelight Solutions, this is like conspiracy that you might have to cut all this out. But I think that Save Light Solutions can turn up the steering in that they start to scoop more work. Like they get to talk to my customer way before I do. And so if they're, if they have open capacity, they get to communicate just a little bit more with a customer to try to bring that customer into their facility, keeping that customer from me. In the summertime when it's busy, they're full, they don't really have the capacity. They don't want the call center to suck in as much work. And so I think they, the dialogue or the script that those call centers use changes depending on seasonality. So I think that's what's happening is that Safelight is soaking up more work because the whole market is shrunk a little bit.

Host: Interesting. So your, your kind of survival is predicated on overflow business from Safelight. But when the whole industry gets a little, this is your theory. But when the whole industry gets tight, Safe Flight has less overflow and they keep it all for, they keep more of it for themselves. And so there's less coming to you at the margins. But the final revenue numbers for 2023 were they, how did they compare to previous revenue numbers? If you look at the entire year,

[1:21:09] Guest: we ended up about flat. So up 20%, 20 plus percent. June, you know, probably started the tail end of May. So June, July, August, September was even you know, maybe 10% better. And then October, we started to see a fall in such a. And it was so severe that we erased all the gains that we had in the summer. So I ended up finishing the year about flat to what it was the year before. So I had seen, you know, 20 growth over the whole busy season and then lost it all in Q4, ended up flat. And so now, and my expenses through that whole summertime are huge. You know, I'm, I, my end P and L for the year is going to be negative 6 digits easy. I don't have final numbers yet, but.

Host: Yeah, and even. And that's after you've put in about six digits, correct.

Guest: Yeah.

Host: Russ, going back to the owner and his ability to help you. The, I mean, one thing, just going way back to this general manager sort of person that he was going to hire as his rep, did hire as his replacement and paid generously. And then now maybe his inability to really help you. Do you think a lot of that stems from the fact that he, his experience of the business was without a big hefty loan payment. So he just feels like there's more. His experience of the business is one with much more oxygen than you have. I just, I just think that, you know, when we talk about owners and sellers, they don't have their reality, their day to day reality is so different than ours because they don't have this big SBA payment that all of us have. Do you think that that plays a role in, in, in your kind of talking past each other?

Guest: Yeah, I, I mean, I showed him before we closed the deal. In the months heading into it, there was a couple of times where I had, I was, you know, I had this, like my projection tool, you know, my Excel projection tool. And he could see in that projection tool. Here's, here's the SBA deadline. Like, I was giving him full transparency on everything that I was taking over.

Host: Yeah.

Guest: And again, like, it's just, I don't know if it, if he, if he chooses not to say anything and has a thought or if he just doesn't have a thought. You know, I don't, I just don't know because I, I, you know, I had some questions and I exposed that to him and we've had questions later. I was like, listen, I, you know, the salary that used to pay yourself basically is now SBA debt. You know, those two things were interchanged. That's part of it. What made me comfortable is like, he's been paying himself this salary for a couple of years. I was like, so the company can support it comfortably, you know, the SBA debt. SBA debt. And, and so I, you know, I. But not once did he acknowledge, you know, and, you know, in September of whatever, I took this in, dude. In financial due diligence, I may have uncovered it, like, where he changed that. I didn't see it, but where he took less to keep the company going, I just couldn't find it. But it's hypothetical. But yeah, to answer your question, I don't know why I didn't get any. Like, why he doesn't, like, maybe you could do this or what about trying this or what about that?

[1:24:27] Host: Speaking of trying things and things that he wouldn't relate to again on the SBA loan, talk to us about this, what you've done with your loan.

Guest: So I, I knew that there's a risk, there's a financial risk. I'm, I'm at a point where, you know, I could, you know, not have enough cash to keep the company alive or the company could shrink fast enough where I can't make the obligations. And so I thought it might be prudent for me to reach out to my SBA lender and say, hey, I'm, you know, I haven't missed any payments, I haven't been late, but maybe we need to have some dialogue and God bless them. The SBA lender was immediately sent me to his team and they were like, let's see if we can, you know, you know, do a modification or do, you know, interest only payments or whatever. Like, he gave a list of things that were or were plausible. And I was like, why? You know, that was, that was a huge relief to me. I don't, I don't want to marry myself to an SBA loan for two decades.

Host: Tell us what the restructuring was, if you can.

Guest: Well, so it's not, it's not complete yet. So I went through the paperwork gauntlet, you know, two weeks ago, and so it's under, it's within underwriting review. I just got an email this morning actually, asking for some additional information. They need some more to, to clarify the final 20, 23 numbers. So I don't know what they're going to do, you know, but if they, it looked to me like their initial thought was a modification, extend the term, you know, 20 years versus 10 years, which would take a huge load off of, you know, off of the company and could, you know, conceivably create the breathing room I need. I mean, we're still, we're still, you know, in dire straits. But I feel like the decline is leveled out, you know, so if I play the decline out, I'm going to be 20 to 30% down for the, for the rest of the year. But I'm still gonna, I'm still gonna have a busy summer. It'll just be 20% less than last summer. And those are numbers that I can, I can just rebuild my, you know, my projections and, and work back off of what I think that will be. And so I put in the new SBA payment and I'm making a bunch of other shifts too, to, to try, to, to try to help and, and get through it.

Host: And so you, so let's, let's pick apart some of that. So you, the SBA lender offered to re. Amortize the loan over a 20 year term rather than the 10, which is what it was. And that, of course, reduces the payment a lot. Can you say how much or. I'm not sure that'll be helpful to the audience, but maybe just give us a number anyway.

[1:27:09] Guest: Yeah, so it could be, it's going to be around 80 grand a year.

Host: 80 grand a year, that, that frees up. Okay. Of course it does. Then make, as you said, the loan a 20 year loan. So you'll be paying it off for 20 years if you don't refinance at some point, point in the future. Is there any other negative to it? Because that does seem like a pretty good deal for just raising your hand.

Guest: Yeah, I, I don't know that there are any other, like, gotchas in that. I don't know. Like, what happens if it gets worse? I, you know, what if next October comes around? I'm still, I'm still in a predicament. Do they get to, Do I have any more lifelines? Like, it's, this is the one lifeline I get, you know, do I use it now? You know, I would say that those are questions that I have in the back of my mind, but there's no other, there's nothing else that has come out of the woodwork that looks negative. I, I mean, I think we all recognize that the bank doesn't want to go, doesn't want to repossess a home. Like, you know, like, they're not out to do that. There's nobody wins in that. I guess in my instance, where I've got enough equity to cover it, they might be okay with it, you know, but then they make me homeless. And then, you know, having an owner, like from a bank's, I'm just Trying to put myself in their position. From a bank's perspective, if the owner, you know, has lost everything, like, how can you ensure that your debt is going to continue to get paid?

Host: Right.

Guest: Like, if you take everything from me and I have nothing to live for, I just. From a bank's perspective, it just doesn't make sense to me. Right, right. You know, maybe they're, maybe they're bloodthirsty, I don't know.

Host: But no, no, it's definitely an important insight into their psychology that they, they don't want to repossess anything. They want to see their, their, their borrowers be successful, and so they give themselves wiggle room on the back end that they might not be so transparent about up front. I'm getting a little above my pay grade and talking too much about that because I don't know what, what quivers there are in the, in the, what arrows there are in the quiver. But when you talk to your lender, did you get the feeling that you could have an even more open conversation than you had where it's like, okay, thank you, Mr. Mrs. Lender, for changing the amortization, the term here. What happens if things keep going the wrong way? What, what are step two, three and four? Do you have any visibility into that?

Guest: Nothing was exposed. But the fact that I, I was immediately sent to a team that's built around dealing with this makes me feel like there's a, there's a triage system in place. Yeah. And, and I imagine that there's probably a tiered, you know, a tiered, you know, perspective. I don't know, like, with, like had a, had a SBA payment bounce. Like, I, I assume there's some sort of deployment. Like they, they have a. Probably an SOP for when that happens. Right. Like, this team probably comes converging in on you and then you start to, you start this dialogue process. I'm just, I think I'm ahead of it. So I'm not seeing all of the, I'm not seeing everything. Those are all assumptions.

[1:30:11] Host: Yeah. And so, Russ, with this, some debt relief, as it were, it's not, I guess it's not relief, but this debt extension which relieves the monthly payment. You, you. And let's say that your numbers are now down 20 ish percent. Your sales are now down 20 ish percent. If you. Did you, I hear you say that, you know, playing that forward for the remainder of this year, if they remain down 20% all the way for all 12 months, that with this relief of the debt payment, you can, you can make the numbers work. You can. The business can be sustainable.

Guest: Yeah, I believe so. You know, back, you know, when I restructured the payroll, I, I also went back to my insurance company and changed deductibles and changed coverages and stuff. The bank has some say in that. I have limits in which I can, I can maneuver stuff. But yeah, I, I changed, I changed that. I changed the health insurance plan, which really, I'm too small for health insurance. I mean, it was a cool perk by the previous owner. I shouldn't have it at all, to be honest. But it's. I. So I changed the percent in which the company pays and, and I changed the sick time policy. Like, I'm, I've made a ton of like, lever pulls. I now charge a customer 3% if they're going to use their credit card, you know, all these little things to change the revenue perspective, you know, and the net profit perspective. Like, I'm changing all of that currently. In addition to the debt, I'm also, you know, I'm trying to consolidate locations. Like, I, I need to get everybody under one roof. So I have the, I can't retract anymore right now because I'm so spread out. So I need to get into a central location. Like, this is a whole, a whole nother story here, but this is actively happening right now is if I can get everybody into one roof, if I need to retract and lay additional employees off, I can, I can still be efficient in one building with two buildings, trying to keep coverage in two buildings, technicians in two buildings. I met at a retraction limit unless they start to limit hours. And then from a customer perspective, that looks, I think that that looks bad. Like you're only open, you know, nine to four, or you're only open Tuesday, Wednesday, Thursday. I just. The impression that that gives to the customer, I don't think is very good. It's just too hard to control, you know, operationally, you know, the number of locations that I have when I need to retract.

Host: And if you consolidate, will this. Do you think that this will set a new foundation from which you can survive comfortably, or is it also kind of a Hail Mary?

Guest: It's a little bit of a Hail Mary. I'm, I'm pushing my eggs into what. There's some, some stuff you and I can't talk about it right now, but at the next call we'll be able to have a discussion. There's another layer in this consolidation that I, I can't Speak to right now. But yeah, I. There's. There's a side of this where I'm. I'm making one final, like, push to try to keep everything alive. And here's. Here's the other side of that. If I can get everything into one unit, I have. I have a guy that's capable of being a general manager and two. Two sales members. Everybody's dispersed across the facilities right now. So it's basically everybody's like, I'm covering a facility. I've got another guy at another facility, and then I've got two guys at another facility. If I can put everybody in that one roof, I don't have to be there open to close, and I can go get a job. So that. Which I'm gonna have, like, I keep deploying my. My Runway. I. I gotta. I got bills to pay too, and I don't want to kill the company because I need to eat. Like, I need the. If the company can pay for itself, you know, and I can. I can run at 30, 000ft and just let it idle. I'm good with that. But I got to go out and find a job. I can't do that if I need to be here, open, close. So that's another advantage. If I can get into one seat, I can go out and seek, you know, outside employment to at least keep the lights on that from a. From a searcher perspective. So I looked. I looked at that business. Okay, can you jump into the system if. If all hell breaks loose, can you jump in and do everything right? And I thought, like, in landscape, I can go pick up a shovel. We talked to the gentleman that owns the cemetery. He was able to jump into the system and go do some of that and pick it up. I don't have the skill set now. I could be a salesperson, but a salesperson doesn't make enough to pay my bills. So for me to. To get rid of a salesperson and take that seat, yeah, it still creates a, you know, a net negative situation for me. So, you know, there's the. The. The one position that could pay me enough. I don't bring enough value to the company to. To have that person leave the company. Right. Like, his contribution is so high and so good for the company that it would be, again, a net negative in, you know, for the company. So I need to, you know, potentially go out and seek outside employment. But I can't do that until I get into one building.

[1:35:13] Host: Russ, you just teased the fact that. That we have already planned to reconvene to hear how all of this has played out, because we're talking now and it is so in flux. And a lot of the, a lot of your prescriptions for how to solve this dilemma, you're, you're literally putting in place. Like, as we, as we just heard, you had a request from your sba, SBA lender in your inbox this very morning. So we are going to talk again and hear how things have shaped up here. For now, is there anything more that the audience should hear, should know? Anything? I failed to ask.

Guest: I. Not that, not that I can think of, but yeah, the next six weeks will be telling. There'll be a lot of, a lot of developments both from the SBA side. Do we survive the winter? So the busy season starts, you know, starts to ramp up in March. So we're in January right now. I'm going to get through January. I got to get through February. And then I should start seeing lift in March. I'll know in six weeks about the one facility idea, and I can kind of, I'll be able to map that out and explain what the other, the other, the other side of that. That I can't speak of yet. I could talk about that and the. Yeah. So it'll be, it'll be a good recap.

[1:36:36] Host: Okay, Russ. Well, of course, thank you so much for giving us a window into what this looks like real time. I. And I'm sure every single person listening to this is really rooting for you. Sounds like a very difficult situation, but that you are doing your damnedest to pull through. So we'll, we'll hold our breath in the meantime and talk to you again when you think it's appropriate.

Guest: Of course.

Host: You and I will be in touch.

Guest: I look forward to it. Will I look forward to it more than you know.

Host: Thank you, Russ.

Guest: Sa.