Host: Ryan Doyle had been searching for two years and he was finally this close to closing on a business. Thing was he was seeing a red flag, one that would almost certainly result in post transaction litigation. But walking away from this deal meant entering his third year of searching or quitting the search altogether and returning to a W2. Well, happily, Ryan mustered the self discipline to walk away from that business and he agreed with his wife that he'd take one last run at this search thing. It worked. Ryan sourced and bought a high end pool maintenance business in a tony coastal enclave off the Georgia coast. Not to say that it was smooth sailing after he closed this business. Imagine during your transition the de facto GM who is also the bookkeeper, ghosts you without leaving so much as the login information to your books only in SMB. Some other topics covered in this interview Ryan's recognition of the value of $1 million in SDE, something he knew well but only really felt once he became an owner serving high end versus low end customers, the pool servicing business overall and Ryan's plans for the future. Please enjoy my conversation with Ryan Doyle, owner of Jeff's Pool and Spa Service in Brunswick, Georgia. Quick Announcement the webinar we ran with Sam Rossotti week before last was fantastic. Recall Sam covered how to do a financial model for a self funded SBA search deal. We had a huge amount of you register and attend and now we've got webinar number two coming up next week. Again with Sam Rosati. This webinar, the Anatomy of an loi. Sam is going to deconstruct, paragraph by paragraph, the actual LOI used for the same deal that we modeled in the previous webinar. You'll receive the LOI template for use in your own deal. I find that composing and sending your first LOI is a bit of a mental hurdle for searchers. So come get perfectly comfortable with this document, what the language looks like, what its implications are, how your model should feed into it, and more. You'll learn this LOI template with us and then have it and be able to confidently use it in your own deal. The webinar is next Friday, February 2, 11am Eastern. The registration link is in the show notes. Look for where it says Register for the webinar right at the top of the notes. If you can't make it next Friday for the live webinar, you can register anyway to get emailed a link later to the recording. And if you don't know Sam Rosati, he runs a boot camp for self funded searchers. He's an investor in search deals. He has his own Holdco. He's a founder of SMBash, and he's not only a practitioner of all things SMB acquisition, he's also a phenomenal teacher of it. So come learn from Sam how to compose an LOI for your deal next Friday, February 2nd at 11am Eastern. Link to register at the top of the show Notes. 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 Oberle 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 oberly-risk.com O B E R L E Risk link in the show. Notes Ryan Doyle welcome back to Acquiring Minds.

[4:36] Guest: Thanks Will. Thanks for having me.

Host: Ryan, you came on the podcast for an episode last June 2022. So about a year and a half ago you were a searcher at the time and we discussed eight bad signs or eight signs of a bad business that you had kind of compiled and identified over the course of your search, which was ongoing. But since then you found a business to buy and have graduated from searcher to owner operator. And we're going to hear that story today. But Ryan, please start us off with some background on you.

Guest: Sure, thanks. Well, thanks for having me on. By the way. This is it was great being on before and excited to see you grow and but yeah, in terms of background for me a little bit of a finance journeyman bouncing around in a few different roles on kind of the typical Wall street finance track, but I think within common vein is a focus on banks. And then essentially when I ultimately got to my dream job I after about three years I decided to blow it up for search.

Host: And why did you. Why did you just give us a little bit more? That phrasing is interesting. Why did you blow it up? Why were you so drawn to search, especially given as you quickly learned that it was damn hard?

Guest: I think ultimately it was really the desire to control My own destiny. So, you know, I think when you're in the corporate world, career track, you're always expecting the best in the next opportunity that comes along. And then, you know, I'd kind of been fortunate enough to reach what was, you know, beyond what I thought I could do in the space. And then I realized that, you know, you're still ultimately going to be a cog in a much larger machine. Great.

[6:20] Host: And had you had any entrepreneurial dalliances or interests before, feeling before this recognition that doing W2 for the rest of your days might not be the way out?

Guest: Nothing meaningful. I mean, I had some friends in business school, we bounced ideas off each other and you know, even trying to start some things here and there, but nothing that ever really. Nothing serious.

Host: All right, and so what year is it that you start your search?

Guest: It's 2021.

Host: So when you decide to search, are you. What does that look like? How much, how much knowledge do you already have, if any? Do you hit the books, listen to the pods sort of program? What's that look like?

Guest: Yeah, so I think it, the initial idea had come across my mind when I was, I was traveling back in New York to and from New York, still working pretty regularly in the office during COVID and you know, stumbled upon, you know, the buy then build everyone talks about. And it just a little bit of a bell went off in my head and then I realized that I knew some more people in my background that actually had done this before. I just didn't know what it was. It was still kind of early stages. Self funded search was very early. Not many people were talking about it back then. And so I just started doing a lot of research on that, talking to a lot of people that have done it, spending time basically just absorbing as much information out there. And since then it's actually, there's a lot more out there, but. And then, you know, going through year end and my wife and I making like larger decisions of where we're going to live and ultimately decided that it was really, you know, the best time for me to go and try to try to do something like this.

Host: Okay, and where does that leave you in terms of this decision to, to of where you're going to live? Where were you living? Do you now live or did you move? How did, what did that look like?

Guest: Yeah, so we were down in Savannah, Georgia. We escaped New York during COVID on a part time basis down here renting houses. You know, started as two weeks relative months and then we mentioned at least one up In New York, we put our stuff in storage. And then we were pretty open minded. Like, my search was actually focused. Coastal, Southeast. It was really anywhere we would be happy living. And then after spending some time in Savannah, we really fell in love with it, started planning routes and you know, about more than halfway through my search, like really for the last deal last year, I looked at the one I executed on. We really focused on Savannah because we wanted to make that happen.

Host: Wow. So that's a geographically constrained search, not so uncommon. But Savannah is not an enormous metropolitan area. So that really meant that you were going to have to probably loosen some of your other criteria if you were determined to buy in Savannah.

[9:07] Guest: Right? Yeah. Well, actually, that's what brought me down to where I'm actually, my headquarters is in Brunswick. We have another location down in St. Mary's but, you know, I basically exhausted the market in Savannah in a short period of time. You know, I'd reach out to everybody. And then I just was starting to look for the next, you know, biggest city by demographics, and Brunswick popped up and started reaching out down there. And then I learned about this whole other market, which is incredible, which is our primary market, the Golden Isles, which is kind of incredible, but not as well known up in the Northeast as it is down here. But, you know, I kind of stumbled into that. But so I'm splitting time between Savannah, Brunswick, and then, you know, also going down to St. Mary's which is the southern border of Georgia.

Host: And so the Golden Isles, for, for people ignorant, what is that?

Guest: There's these three barrier islands off the coast of Georgia. Sea Island, Jekyll island and St. Simon's Island. And they're known for. For golf. A lot of the professional golfers live there. And it's just a. It's a beautiful place to live, but very attractive demographics, very affluent and well

Host: known in the state of Georgia and throughout the probably larger Southeast.

Guest: Oh, yeah, yeah. But I mean, it was. It was unknown to me when I started, when I engaged my conversations with the company that I'm now running.

Host: Ah. Even though you were. You had settled in Savannah.

Guest: Yeah, I didn't even know about it when I was living in Savannah. Yeah, I mean, I'd heard occasionally, but I just didn't. I didn't totally appreciate, you know, the market here.

Host: As I teased at the top, you came on and we did eight signs of a bad business. So you were in a search and you were learning what. That. What you didn't want and probably going down, following a lot of threads, only to to come up short on a business that you were considering because you uncovered a red flag. So I know that you have one broken deal experience where you came really close and I think that there's a story there. So why don't you tell that one before we get into the story that ended up being the acquisition you did close.

Guest: Yeah. So I think I was certainly challenged during my search process. I had budgeted originally a year drug onto two years large in part because of this deal which just could never die. And and essentially was a nine month process. And in terms of red flags there were multiple. And you know, just when you seem to have resolved one then another would come up. And then you know, as we approached the end it became clear that you know we were, we were just not going to get to. It was basically the day before closing and ultimately walked, walked away. And that was at year end of

Host: 2020 to what kind of business was this? And tell us more about why you were able to get so far was an appealing enough business that you came this close to closing and then what killed it.

[12:09] Guest: Yeah, so it was also in the residential services pools. Pools and you know I liked everything about it. Long operating history, you know, obviously very bullish on the pool space and these. This company was a know had a pretty strong market share and they were very good at what they did. They've been doing it for a long time. You know we initially hit it off pretty, pretty well with the sellers and as we progressed along, you know, the more I learned about I was very excited, you know obviously for me to continue on that path. But you know they were of the good size, perfect size. I'd say the business mix was not exactly what I'd wanted. A little bit heavier in construction. I'm really highly focused in more recurring based maintenance and service repair and then that decent sized retail. But it really fit the mold of what I thought was interesting. We were able to get to a fair price after a long negotiation period. I mean it took us. I'm just looking back to my notes. It took us like four months to get an executed loi. And then I thought that since we had spent so much time on that the deal process would have. Would have been quicker. But you know, we just encountered issue after issue I guess first, you know it was one of the first mistakes I'd made was I went with a bank that didn't really do this type of thing. And you know I based it on a. Just a good relationship with the loan salesperson came down, you know, met with the credit team felt like they understood what I was trying to do. Supportive. And that process, like, the whole approval, everything like that was. Was pretty smooth. But they, I think, you know, not to speculate, but, you know, it was also during the period where rates had kind of really shifted and I had locked in a pretty good rate, so maybe had something to do with it, but they started introducing all these little, like, challenges which would take weeks to solve. So. So, for example, you know, I think initially one of them was, you know, and I've learned this now as I've gone through the. My deal that I've closed on. But, you know, SBA requires, I believe it's vehicles that are over. There's like a threshold, like $10,000 of value before you have to get titled. So this. This company had, you know, 20 plus vehicles. And so this bank wanted to have titles on all of them, and none of them were over that value. They were all, you know, beaters, which is very common in the space. And, you know, these titles for whatever, you know, basically everything, all the names on them had one minor issue with it, you know, that, you know, and instead of. And s and, you know, when there shouldn't have been an S there for plural. And so we had spent, like, days and literally two days in the DMV retitling all these titles. This was when we're supposed to close the first time, and then. Then they had to get shipped to Georgia and come back, and that took another two weeks. We delayed the close the first time because of that. And then meanwhile, another issue sprung up where, you know, they had an exclusive agreement with their primary supplier, which the bank and bank's council had thought that that kind of fell into the franchise category, which we immediately kind of debunked. But we had gone through that whole process. Everything we had said, you know, they took basically three weeks to agree to, but again, that delayed the close. And then meanwhile, you know, this is really the. The underlying issue that really started to come to the surface, which was the financials kept on getting better and better almost to, like, a scary, unreasonable level where gross margins were just, like, exploding out. And, you know, it just. I couldn't. I wasn't getting. I was getting less and less comfortable with it, ironically.

[16:15] Host: Well, it's funny that, because from our first episode, one of the eight red flags that you identify as stupid margins or stupid good margins or something like it should be, if small businesses margins are too good, that's not a positive. In fact, it's a negative sign. And so you were seeing, you were saying actually this, this play out what was going on.

Guest: Yeah, so. And it's funny now because during the time I was very frustrated and I was like, how can they not understand this? Like, they must be obscuring it. And now like, as being a small business owner, I could kind of see how this could happen. But essentially what was going on is their gross margins were growing pretty rapidly. And you know, initially it was a little bit of red herring that my son. Another thing that we kind of ran aground with the bank and something I wanted to get comfortable with, but, you know, part of that construction division had, you know, the way that they took their deposits, you know, that was obviously they were, you know, recognizing a cash revenue. So it's inflating the revenue side of things. But we ultimately got comfortable with that given that the growth had kind of stabilized over the last couple of years. And you know, we ran some numbers on that haircut, the margin, it's. We got comfortable with that part of it. Then on the cost of goods sold side, what they were doing, again, I don't think is that uncommon is essentially it was a formula of total purchases minus changes in inventory. So inventory was growing, which is also not, you know, it was reasonable that inventory was going because a lot of pool companies were stocking up, you know, post shortage. And there's, you know, retail was exploding all over the industry. And so inventory was growing. So there was a negative adjustment to cost of goods sold. And then what had happened was, you know, I had hired somebody to help with the diligence side of things. And you know, one of the things which I definitely would suggest all the searchers to do, this is a big lesson learned for me was, was just get a good Q of the. I know I'm sure you guys have, I know you've covered this well on your show. But essentially like I had felt confident, I had high level confidence in what I could do on the finance side of things and accounting and whatnot. But having an objective third party there, that's like, you know, I was able to do that my next deal and it just saves you so much stress and time. But in this case, instead of hiring a QOV provider, I hired somebody that was more focused on inventory audit because there was a big portion of inventory here. And so part of that was, and this is a simple thing that all searchers should do, but you'd send, ask the seller to send a email to your suppliers, basically saying you're reconciling your accounts Payable and want to know what their AR is our accounts receivable. And so you know, they'll respond back. And the response we got back from that big supplier was exactly what they had on their balance sheet. But I'd remembered from a meeting weeks before that at the very bottom of the sheet there was a small dollar amount, but it was basically labeled unbilled inventory. And so I was like what's unbilled inventory? And how come that's not reflected in what the supplier says you owe them? And then it just, it was like pulling a thread because ultimately we found out that the supplier had some serious issues with invoicing. And then the company's policy terms of accounting was they weren't going to book the expense or the payable until they received the invoice. So they were booking the inventory. And so you're, you had that negative adjustment on cost of goods sold, but there was really no associated expense with it or even attracting or understanding of what the debt was outstanding. And then the other fatal flaw I made, I think with you know, a few exceptions is it was, it was structured as a stock deal for you know, that was part of that three month negotiation for the sellers. They were basically doing a qsps. So it was highly tax advantageous for them to do a stock deal and to get to the value that they wanted. And you know, for a lot of other negotiation points basically conceded on doing a stock deal structured as an asset deal in terms of like indemnification claims and whatnot. So anyway, the point was that I was assuming those, those liabilities unknown and they didn't even know what it was. And then also there's a big component of working capital. Another big lesson learned here.

[20:38] Host: Listeners of Acquiring Minds know that for almost any business you acquire, its success comes down to the people and how you develop and manage them as their new leader. Thing is, in addition to management there is also a lot of process and bureaucratic work when it comes to your new employees. Payroll, compliance, HR, technology, hiring, to name but a few. These processes are crucial to get right, but at the same time distract from where you want to be putting your energy in leadership. So Aspen HR is an HR firm and PEO that takes this work off your plate and handles it with the care it demands. Aspen is owned and run by Mark Sinatra himself a successful former searcher. So Aspen's own leadership understands the HR challenges that searchers have. Post acquisition, the firm is offering Acquiring Minds listeners a complimentary pre acquisition HR and PEO review for your target business. Check out aspenhr.com or contact Mark directly@markspenhr.com you felt pretty confident that you could scrutinize the books yourself, but in fact you're advocating that the audience use get a Q of A professionally done. So do you feel like a Q of E would have caught this earlier than you then did then catch it? I can't tell if you're blaming yourself in a way that in a Q of a provider would have caught this sooner or what? What's the takeaway?

[22:11] Guest: I would. It's more from the perspective of I definitely spent way too much time and stress on it. I don't even know if like a your run of the mill QV provider would have found it. But you know, having that objective third party to bounce ideas off of would save, would have saved me so much time trying to run this down because, you know, you can raise it and they will give you kind of a clear answer on it. Whereas like, you know, you can go to your very smart friends or investors family and you know, it's very hard to get an objective answer. Certainly one that would like, you know, make you feel either, you know, more comfortable with the situation. So going in, it was almost like having, you know, a therapist for me on the financials where, you know, I think it's because, you know, my ability to go in deep into financial, you know, numbers and spend hours in it. You know, it was better to have someone where I was like, okay, I'll just focus on really some of the other important issues on the second deal.

Host: Okay, and did you choose not to do it on your first deal just because you were trying to save the money or you just wanted to own it because you thought you could do it? So you kind of wanted to own it. You wanted to have your hands in that particular.

Guest: I know, better to cut corners on professional. I think it was also, I think it was also a function of like, I couldn't find one that I really thought I was going to get the value out of it. I was like, okay, it's just a proof of cash and you know, quality of earnings. Like I could do that in a weekend. But. And then I just wasn't impressed with the people I'd met at that point. So yeah, I just decided to go on my own. And then my other thought too, rationalizing was like, I'll spend it elsewhere. Like I'll spend the money on, you know, making sure we get the right attorney, get the right inventory audit going and all that sort of stuff.

Host: Okay. And then you mentioned that they wanted to do a stock deal. It was going to be tax advantageous for the sellers to do a stock deal, which is not uncommon. But, and that even though this deal didn't come, didn't close, you were able to structure something where it was a stock deal, formerly a stock deal, giving them the advantage that they wanted, but actually protected you. Because of course, the reason that buyers don't like stock deals is because then you're buying the whole entity and all the liabilities typically follow that entity, stick to that entity when you become the owner of it. But you put understandings or legal clauses in place to protect you from those liabilities. And if so, tell us more. And, and if you were able to just do that, why isn't that what, what we all do, what everybody does?

[24:48] Guest: Yeah. And I think it's one of those things where people could be quick to tweet or make a thread about and how it's, you know, a great workaround. But I think the reality is when you're about to get down, sit down at the closing table and you know that you're going to have to make an indemnity claim or, you know, some type of offset to an escrow or, you know, a seller note, because escrows are not really SBA friendly, you know, there's going to be litigation, right. Like, there, it's just. And so, you know, I, I, I, I, I felt confident with the, you know, the r, know, our draft, you know, our purchase agreement draft. I felt like we were well protected. It's just, you know, whether or not you want to go into a small business acquisition when the businesses are so small, fragile, and then have to deal with, you know, litigation and, you know, it's just a huge distraction. And so I think it, like, in theory it works, but I think in practice, when you get to that point, you know, you have to be kind of real with what, how, that, the mechanics of how you're, Are you truly protected from, you know, being pulled away from your business in the first three months for, you know, days, you know, days of every, you know, weeks at a time. Right. It's, it's the one that things are the most fragile. So that's ultimately why I walked away. It wasn't that I didn't think that we had the structure in place and the valuation still worked, the bank was still on board. It just was like I knew that the, you know, a new inventory was off. I knew the liability wasn't fully defined. So I knew there was going to be some dispute down the road. And to me, I just didn't want to take that risk.

Host: And so when you talk about having protections in place with respect to buying, buying a stock sale versus an asset sale, it still means that the protections are in place, but you're going to have to litigate them versus if it's a pure asset sale, like most of my guests, it's cleaner and you're protected without having to be litigious.

Guest: Right.

Host: You're kind of protected by default.

Guest: Yeah, Like, I mean, I've already. So, for example, like, I mean, I already had a, you know, like very, like a minor, you know, the business that I bought currently, I mean, and I couldn't imagine in construction, but I've already had like a claim tried to be made on me for, you know, like a minor, relatively minor construction project that was done. And it's just as simple as, like, look, this is not even my entity. Like, you're barking up the wrong tree. Whereas in a stock sale, you know, you'd have to potentially art, you know, fight it and then, you know, take it out of the seller note, and then the seller would have to sue you for that if they don't believe it. And then you would have to, you know, you're paying a lot of lawyers at that point.

[27:30] Host: Gotcha. Okay, great clarification. Thank you. Okay, all right, well then, so, so yeah, despite, despite putting these limitations in place, you, you, you game it out like you just kind of just did with, with us right now, and you conclude that I'm not going to buy a business where I basically know I'm going to have to, I'm going to have to litigate in three to six months after I, after I buy it. And so you walk.

Guest: Yeah. Essentially made. It was a very tough decision. But yeah.

Host: Yeah. Is there anything there to be said in terms of this tough decision about kind of the discipline or the like the emotional wherewithal to do that because sunk cost fallacy sort of thing. Like, the closer you get to, to, to closing day, the harder it is to extract yourself from the deal. Anything kind of emotional, psychological, you can share with the audience about that, about finding the discipline, self discipline to walk.

Guest: Yeah, I wish I could. Could give some concise advice on that. I know, like, essentially you go through all these different mental gymnastics of, okay, well, if I just get the deal closed, I have confidence in myself to make it work. You know, there's the, you know, come. The fact that it's coming up on two years, you Know, there's you know, self doubt on the whole search process at that point. You know, you're beginning to think whether or not you're going to and then the, the concept of going back to search is also daunting because search is miserable. And so you know, you're really at this point where there's all these other, you know, just unpleasant, you know, things that you know are, you're gonna have to face once you kill a deal. And so part of that is, you know, you have to try to think objectively about it. But you know, that said like I did have the discipline to walk away but at the same time, you know, it probably should have died when I first discovered it like in September versus year end when it did.

Host: And in retrospect, do you basically feel like you made the right decision and any, any, anything else that you've learned or anything since then that you reflect back on and is yet another lens to see that whole experience through?

Guest: 100% it was and I think I've mentioned it. Yeah, I mean there were tremendous amount of deal broken deal costs on it, probably higher than anyone would expect it. And you know, you see I've seen, I've talked to searchers that have, you know, had that, you know, disappointment and I think it's the best money that was ever spent. So I walked away from that. I was able to close basically get my, from reach out point to when I first did a cold outreach to my seller to close. It was you know, four months and you know, we, I know had all my lessons learned. I, I knowing what I know now as an operator in my current job business, I know that that deal would have put us in a really bad spot financially. You know, it would have been financially disastrous for me I think. And, and so without having walked away from that, obviously, you know, I wouldn't have been able to go back out, dust myself off. And then you know, I, I, I love the market we're in. I love, I love the business we're running, the people there. It, it, everything, almost every single characteristic about the business I have right now is better than the one I was looking at before. And you know, it's a little bit of luck but you know, had I not if I tried to force that then you know, I would have never found what I'm, what I'm at right now.

[30:58] Host: Well, great Ryan, I'm happy for you. So you do kill the deal. You find that self discipline and you park yourself back in front of your computer, computer to start back up your engine of search. What do you tell us how you found the business that you did? Bye.

Guest: Yeah, so I mentioned I was basically running out of real leads in Savannah, and so I just thought I would check the next city. Going north was a little bit picked over private equities, all in kind of that South Carolina coast area. And so I was just like, well, let's go south. And. And so I. This was actually. And I. And I made my promise to myself and to my wife. I was like, this will be the last batch. And so I sent down. I sent out a batch of letters and then I did like an email campaign. And then this one, this seller hit. So, um, it was really in and around that area, probably all the way down to Jacksonville, if I remember correctly. But, you know, it's just. There was a little bit of a fishing expedition, but numbers get looked out.

Host: And. And how many months into your search were you at this point?

Guest: Full. Full two years. So essentially full two years. Yeah.

Host: And so you were going to call it a day, stop your search, go get a W2. If this last batch didn't work out, you'd agreed as much with yourself and with your wife.

Guest: Yes. And I meanwhile, too, I mentioned that, you know, I'd focused on this, you know, the bank space, financial institutions. And then there was a little bit, I don't know if you remember, but there's a little bit of a banking crisis going on there. So there was some opportunity there for me to, you know, and I. And I was passionate. I'm passionate about that space. So I was like, well, maybe I do go back like this, you know, and so it was pulling, following me there and. And, you know, if, again, if this deal didn't. If this deal didn't happen or if that batch of emails didn't yield this one lead, then, yeah, I'd probably be back where I was.

Host: And to be clear, the banking crisis that you're referring to meant good work for you, meant perspective, good, potentially good work for you because it's your area of expertise. So what, you receive a. You send out letters and you get a call. What does it look like when you got the fish on the hook?

[33:16] Guest: We started immediately, you know, in person, meetings, term sheet. You know, he wanted to close May 1, which our interests were aligned there. And so, you know, fortunately I had, you know, the playbook and was able to really just progress things pretty quickly. So we went pretty quickly under Loi, you know, had already lined up relationships with lenders and started that whole process and, and then yeah. So May 1st, close May 1st of this year.

Host: So you're seven months in at this point.

Guest: Yep.

Host: And what can you tell us about the business? You've already said that it's in the pool space, but tell us more please, about what this business does, where it services. You've teased that also size, etc.

Guest: Yeah, so I'm, I'm a little biased, but I think we're the best at what we do in our markets which are, I mentioned they're, they're pretty, pretty high affluent, high demand or you know, demanding customers in that market. But we, you know, it's kind of similar to the Goldman thesis. We, we price at a premium because we provide premium service and because of that, you know, we're able to pay our people better. And but yeah, we're, we're focused mostly in maintenance and service and we do do retail and it's, I'd say on the retail side it is primarily focused or mixes towards commercial. So we're, we're pretty big in, in bulk chlorine sales and delivery for a lot of the resorts and, and some of the, you know, local power washers, things of that. So for me, like what I found,

Host: when you say retail, what does that mean? Just selling chlorine, but literally from a brick and mortar location?

Guest: Yeah, so we have two brick and mortar locations that we, that we sell. It's mostly chemicals. Like so, you know, it's a little bit different than most of your pool supply stores where there's a little bit more of a mix with spa and other recreational grills and things like that. We're, you know, heavily weighted towards what, which I like is like the non discretionary goods of, of chemicals that, you know, the pool requires no matter what.

Host: And, and so you said that you're servicing commercial clients from those brick and mortar, but also consumers.

Guest: Yes. Yeah, it's. But you know, the, in terms of mix, it's. And also because of the volume, but yeah, it's heavily weighted towards more commercial, you know, again, power washers coming and buying liquid chlorine. We're probably one of the biggest chlorine sailors in the area. And then the resorts, they can't really store chemicals on premise. So we, we do delivery, bulk delivery and. Yeah, and then a lot of them will come in, you know, in a pinch in emergency and then they'll buy from the store on account with us.

[36:09] Host: Well, you may have just answered my next question, but seems a little unusual that you would service commercial clients through a retail operation. I would Just imagine there's kind of a more of a distribution or delivery. You did just say that you do some delivery relationship there or they just pick up the phone and call you wherever you might be and say we need this and swing by the warehouse or something. I'm just, I'm not imagining commercial clients walking into a retail establishment to buy stuff. Maybe I'm just wrong about that. But I think of retail as targeting end consumers, homeowners in your case.

Guest: Yeah, I mean I, I understand your, yeah. Your confusion on me because it was a little bit surprising to me as well. But essentially it's, it's. I think it kind of stems from the history there where you know, we were at one point, you know, big on, on making sure we have all the right parts. So we have a lot of like a lot of pool contractors, a lot of our smaller, which I think is going to be an interesting acquisition funnel for me. But a lot of the smaller like single pole, single pole operations, single truck operations come and buy liquid chlorine from us. And since we deal in so much volume, you know we're able to pretty much offer the best pricing on that. So yeah, you'd be surprised. It's, it's, it's a lot of the smaller operations mom and pop and then yeah the resorts is more deliveries but they do come in, you know again when there's an emergency and then it's usually when there's people, you know, when they have a facilities manager that actually knows their way around equipment, then they'll come in and buy parts. They'll actually will buy like equipment that they can install. But generally speaking, yeah, that is all mostly done on site, including the delivery.

Host: And I guess an analogy might be like a paint store. There's one in my family and like a lot of paint stores often serve not just homeowners who want to paint their living room, but actual professional painters and paint crews. So a lot of their business is actually just commercial as in your case. Okay, I sidetracked us a little bit. Was there more to say about the business? Could you give us a sense of size and history?

Guest: Sure. So I'd say it is, it was call it low single digit million revenue. We had pretty attractive EBITDA margins, so. But still kind of sub 1 million EBITDA. 20 employees, 20 trucks, 2 locations. So yeah, I can do a little

Host: bit of size and so did you consider that kind of right in the sweet spot of what you were looking for size wise or a little low, a little high? Like how did this. How close to the bullseye was this?

Guest: Actually, it was a little bit on the low side for me, but it kind of met the bottom band, bottom range, band of the bottom range. Part of my size threshold. But yeah, everyone that, you know, after searching for two years, I mean you, there's just everyone. And I agree with it. It's, you know, you want to be really above a million ebitda. It's just there's a lot of advantages to that in terms of, you know, stability, ability to offset cost, scale. You're, you know, it's a little bit subscale and that's, you know, where I'm at right now, which I think is really what I'm most excited about.

[39:32] Host: I definitely want to return to that. The question of size, of course, is always an interesting one. And you're, as you said, you're living. It was there. Before we get into your ownership and your operations and scale versus subscale, is there anything more to say about the transaction? Any takeaways from that experience? You were making it sound pretty easy, pretty smooth, I should say.

Guest: Yeah. I'm trying to even think if there were any issues that had come up. I'd say it was. Of all the deals that I'd looked at or have gotten close on, I think it was also benefited by. The seller was just very pro, you know, he was very, he expedited everything along. Every request I'd gotten was flipped right back to me. I think there's two different types of sellers where you send diligence requests in batches. It may overwhelm them, so you might break it up into bite sized chunks. He was on the other end of the spectrum where he wanted everything right away and he would turn it quickly so that, that kind of really helped facilitate the process.

Host: Yeah. And so this, that sounds great. To be clear, this was a proprietarily sourced deal.

Guest: Yep. Yeah.

Host: So interesting, interesting that he was so, he was so responsive and because part of the lack of responsiveness that owners, sellers are often known for is that they're busy operating their businesses. And so if you do get a seller who's pretty responsive, often that can be. Because they've already done a lot of preparation in advance. They prepared their business for sale, basically. Maybe a broker, their brokers leaned on them to do that. Maybe they've just had the foresight to do it themselves. So interesting that you were able to proprietarily source a deal and that the person was organized enough and responsive enough to just be flipping you back information. It's an observation.

Guest: Yeah, no, on that point and actually this is a little bit of a unique advantage I had on this. He, he had done, he'd run a process in the past so he didn't know what to expect. And because he was still under some type of draconian agreement with the broker, he did not want to re engage with that buyer. And so he'd rather, you know, basically came in a competitive price. But then, you know, not having to pay whatever the ridiculous broker fees are nowadays, like double digit percentage fees, you know, I decided to move forward with May.

Host: Ah, okay. All right. So this his. He had his own broken deal but for which he had prepared for and was pretty organized and that had been sounds like relatively recent as a about

[42:11] Guest: two years prior I believe.

Host: And anything to say about the terms of the deal? Was it pretty much in line with market? Anything to to say about that? It sounds like a really attractive business. Maintenance, recurring high end clients. So I would imagine and sizable like you said, not maybe not at the million dollar SDE level that everybody wants, but maybe approaching that. So I would imagine that it could command a slightly higher multiple than what we typically hear.

Guest: I'd say it was like right down the fairway of what you would, you know, what you hear. Like our reasonable multiples for this size. I mean it was and it was pretty vanilla in terms of passive purchase agreement really. No unique circumstances. There were like a few assets that were clearly kind of personal that you know, we carved out. But other than that it was pretty straightforward.

Host: Well, as you said, the fact that the seller was not going to use a broker this time meant that he maybe didn't feel like he needed to squeeze the multiple as high as he could get it.

Guest: Well, great.

Host: So let's shift into your ownership of the business and what that's been like. I know there have been a couple of challenges. Why don't you tell us about one or two of them?

Guest: Okay. Yeah, well I guess the biggest one is so about so post close. So part of the seller's ability to turn these, this, this information so quickly was he had a very diligent bookkeeper who you know would be employee of the business going forward and you know, which I was excited about. And then post close quickly discovered, you know, day one that effectively she was really the general manager. And not only that but like everything went through her. So the seller actually was more taking more of a strategic, you know, he'd step away from the business. That was another, you know, consideration for his sale. He for health Reasons, you know, over a year ago. And so she was running everything. And so initially I was like, this is fantastic. Like, I'm going to go in here and get to, you know, just get to know the employees, get to know the customers, redesign the logo. You know, it was just like, okay, look, this is great. Like, I'm gonna actually have a. A GM day one. And then trying to align her interests and just really blow this thing up and look for acquisitions immediately. And then I guess when did things really start to get a little. I guess so what happened was about three, four weeks in. So another thing too is they were very good initially at they. They had started the whole transition process about, like a week leading into close, so transferring all the books, all the accounts. She was opening all these accounts, you know, for me, during, you know, leading into close, while we were finalizing all the, you know, the documents and closing the loan, etc. And so, you know, that was. Seems like it was too good to be true. And then so about three weeks in, you know, I started pressing for some, you know, data, some information. I was. I wanted to see some financials, you know, rough cuts, like, trying to see where we were tracking post close. And, you know, I was kind of always getting the run around. It was like, okay, you know, you know, we're on QuickBooks Desktop, which was disaster. And that, you know, I couldn't even get into my books. And then, you know, then I finally got that first cut of financials, and I was like this. That was like, my heart dropped because we basically showed that we were down like 70%, which I was like, you know, the banker in me was like, this is wrong. So I didn't panic too much, but I was like, this is wrong. I just need to understand why. And so I started pressing her for the login event, you know, and basically she was going on vacation for a couple days. And I said, okay, like, before you leave, I just need all the blogging information. And then. So she left and then never came back. And.

[46:03] Host: Wow.

Guest: So about two days, you know, after a day, you know, things had. She. Things had gotten a little bit, you know, tense. But I thought that might have just been like, you know, fatigue from the deal. And, you know, I think it was kind of chunks up to her, a little bit of personality. But so when she had left, I was like, you know, after a day, I was like, I don't think she's coming back. And she wasn't answering calls or answering texts. And then, you know, after three days, our policy Is like effectively resignation. And so I was like, okay, I got to figure all this out. And so I walk in her office, which is now my office and it's just stacks of papers everywhere. You know, I'm logging into all these accounts for the first time and I have no idea how like all because they like they have, they had a very, they have a very, you know, well defined machine, you know, of, of processes. But they're all, they've been developed over 20 years and they're all like paper driven. You know, there's a reason why they do everything but there it's not as, as you'd expect. And so like simple things like you think like a business like invoicing, right? The way that we price, we do for example stock flat rate, you know, we charge our maintenance, maintenance, customers visits, plus chems it. So the invoices are complex also since we changed over a lot of the systems, they weren't talking to each other. And so a lot of the, in this, you know, specifically invoices were getting like stuck and, and I knew she was getting frustrated with it, but I didn't even know where it was or what the extent was. And so that was kind of my first attention was like okay, I gotta get these invoices out. Because we basically had a month of invoices piled up and they weren't even sinking to our QuickBooks to send out those invoices. And then meanwhile I didn't have any real terms with my suppliers. It was all like practically cash on delivery because you know, I just, just had closed. And now we've developed a little better terms. But at the time it was like this is really running towards a liquidity crunch. And then just as I thought I was starting to get the hang of invoicing and QuickBooks. This is like, you know, a few days in a week in of me sitting in that chair, I get locked out. It was like a two step verification that goes to a phone that is hers that was not answering. And so basically that was at that point it was a little bit of a panic mode because I hadn't gotten any invoices out. Like I said, there's hundreds and hundreds of thousands of dollars that are just stuck. And then meanwhile too, you know, as you know, like the longer you wait on getting invoices out, it's harder to collect. And so I really had this like moment of pan. And the meanwhile I still had no idea how any of the systems are working. I was just like my only goal was getting out invoices at this point. So.

[48:55] Host: And Ryan, the people at the business at this point. So she was kind of a de facto GM under her or aside from her, is everybody just crew?

Guest: Are you.

Host: Is it just basically you in the office and remaining you in the office and just cruise? Do you have any support is what I'm asking now.

Guest: I have, you know, I'd call like three key employees that are fantastic and they, they were, they. Well, two of them were there during that time, but it was so early and, you know, they were very anxious about the deal. You know, they didn't, you know, they didn't know me or, you know, they, they didn't know that they didn't have the like, level of confidence in me. And, you know, and so I couldn't go to them necessarily. And by the way, they were so shielded because again, everything was going through her that they didn't even know how to do these things. So no one knew how to do it regardless. She was like, yeah. So in the meanwhile too, I wanted, certainly wanted to kind of keep a, you know, confident face on every. All this throughout this process. So, yeah, it was at that point I was like, okay, this, this is the, the nightmare that all the, you know, you hear the horror stories, you hear of the searchers and so, yeah,

Host: so how do you hack into your own accounts?

Guest: I didn't hack. I basically, I had to file like all these forms with everyone from, you know, the QuickBooks Intuit to, you know, our point of sale, QuickBooks point of sale to our 401k. So I basically had to file these like, ownership proof of ownership paperwork. I mean, I probably spent like four days on just the, like in the perpetual, like, support hotline of Intuit. It got to a point where I was like, I was ready to like, I was going to call like a, like an old boss to try to get an intro to like senior management into it to try to get this thing unlocked because they would just send you in an endless loop. And then even though when you submit

Host: all your work, I can only imagine.

Guest: Oh man, it was. And then, even then when you submit all your paperwork, it's like, oh, yeah, they default to. They think you're like trying to commit fraud. And so I understand a little bit of, you know, the security around it, but at the same time, you know, I had everything that I needed to prove that it was my business. And, you know, you still got to go through like all the red tape to get it done. So it probably took probably like seven to 10 days to get that open. And then meanwhile I had immediately hired, yeah, I immediately hired an external bookkeeper to help. And this didn't really help the situation, this particular situation. I do like, like working with them but you know, they were like, okay, you got to get off QuickBooks Desktop. We can't help you until you get off online. So we had to, we were trying to basically migrate from desktop which had just been migrated over into online. And then meanwhile, like, you know, that was this whole migration process and you know, we were having that issue with those invoices not syncing well that got like multiplied because when we went to online, you know, our, our CRM system effectively didn't connect with that. And so, you know, there was a basically like, you know, I was kind of dual tracking like getting access to QuickBooks at the same time. Like, you know, I knew it wasn't even going to work when I finally started when I was able to get into the online version. So basically like a online version that had like nothing populated in it that I started invoicing out of and just trying to get some cash flow. But you know, it was, it was a, it was scary.

[52:19] Host: Well, and seven to ten days of lost basically income, not lost income, but deferred income. When you're, the whole reason the whole know, precipitation of, of you looking into it was because you're, you're starting to notice your working capital dwindle anyway and then it kind of, the dwindling accelerates. Right. As you try to fix it. That must have just been terrifying. And, and so this kind of just stop gap of, of just trying to issue some invoices out of your new QuickBooks instance, did that bring in a little money?

Guest: Yeah, so yeah. So actually when I, I think my saving grace. Well, two things. One, I would also say like the only, only way I was able to sleep at night was that I had a decent sized line the credit. So I knew and the business was still going strong. And we're in the busy season too. You know, maybe if it was during the slow season it would also been scary. But you know, the business was booming. It was heated summer and I had the line to fall back on, which fortunately I never had to tap. But you know, what was saving grace was I, I, I was calling all my friends, anyone that was in between jobs or you know, just come down to help me. Like, help me because again, I didn't know any of the processes. He was like, help me figure out what this stack of papers mean. What this stack of paper means. And you know, everyone's got their own lives and my age, like, you know, kids and everything like that. So actually call. I had hired an intern when I first started searching. Yeah, this is summer 2021. And I, and I didn't even know what I was doing at that point. Searching because it's so fresh. And that evolved into me just coaching him on his career. We kept in touch and so I reached out to him. I was like a total flyer. I was like, what are you doing this summer? And he's like, I'm working in the kitchen. I was like, you gotta help me. And he was like, he drove down that, that weekend a little choked up about it because it was. Drove down that weekend only expecting to stay there the weekend. And then he got like so invested in it that he like stayed for the whole summer and we just, we just like war roomed wormed it out.

[54:29] Host: That's amazing, man.

Guest: Yeah.

Host: Well, also probably a testament to how much he appreciated the kind of, the kind of intern evolving into internship, evolving into career counseling that you had, you know, given him two years earlier.

Guest: Yeah, it was awesome because then. And yeah. And he's still, he's still in payroll, he's helping out remotely. But yeah, it was a lifesaver because we, and then also just having someone there that you could kind of again, sounding board therapist, like objective third party to, to help you think through like. Yeah. As you're staring in the abyss, how we're going to get through this.

Host: By the way, if he was the reason you guys met is because you had hired him as an intern for your search. He must have had an interest in search. He sees into, into your acquisition two years later and he probably never will want to search again.

Guest: Well, the reason why I hired him too, like he was, he actually read all, you know, all the search books like as a sophomore, which is really impressive. He's really genuinely curious in it. But you know, I'd always been, I've been mentoring him to get into his investment banking path and I've been supportive of him making that next jump. So, you know, now that he's got a full time offer there, you know, we'll see. Like he's gonna probably help me out this summer and maybe it comes back in a couple years after, after, you know, two years of pain and misery. The banking is.

Host: What's his name?

Guest: Carter. Gossip.

Host: Cool. Well, thank you, Carter. And so you and Carter spend weeks and longer basically piece of paper by piece of paper working down these stacks in the office and, and Kind of reverse engineering the whole back office of this business. And do you succeed by the end of it? Do you feel like you got your arms around the thing?

Guest: Yeah, yeah, we, we, we got things kind of under control, I'd say by like end of July. End of July. By mid July, we had like basically full access. We were still learning like processes, but you know, we, we basically had unlocked everything, had gotten all those invoices caught up and you know, we're beginning to start like, okay, thinking about where we can improve some of the processes.

Host: And what of the bookkeeper? Just any, any closing of the, the loop there or did she just truly ghost and remains a ghost?

Guest: Truly ghost? I mean, I haven't been following up.

[57:01] Host: Yeah, but yeah, and I assume when you're, when it was really hitting the fan, you're calling your seller and saying, why is so and so not being responsive? Like, what did your seller at all give you any kind of throw you a line or anything, do anything helpful here? You'd think that they would be able to do something helpful.

Guest: Yeah, I mean, I think. Well, so from his perspective, he, he relied on her so much, he, again, he didn't really understand what she was doing in there. So like, from like her practical sense, like, you couldn't help me with some of the stuff we're trying to go through. Not very, you know, self described, not very tech, tech savvy. But you know, apparently she had ghosted him as well. So, you know, I.

Host: Okay.

Guest: Yeah. It's in the meanwhile too, you know, obviously as you're going through this, you can't help but speculate, like, is there like fraud going on? Right. Or whatever, you know, and so you're in the Mac, you like have to kind of fight that because there's, you know, immediate crisis that you're dealing with in terms of just getting access to your, your books and getting invoiced out. But you know, there's that always in the back of your mind and then, you know, how, how big is it? Yada, yada, yada. But yeah, I think it's safe to say that if there was anything, it wasn't material. I don't, you know, I'm still kind of digging into things, but going through that whole process too. Obviously. Like, I did get. Had to get in the weeds and haven't really discovered anything there.

Host: But yeah, that of course would be conclusion number one, that the second you asked to really look at the books, the person in charge of the book skips town. It's a bit of A tell.

Guest: Exactly.

Host: All right, well let, let's talk about the pool business a little bit here, Ryan. Well, actually let me ask a bigger picture home services question. So you have said now a couple of times you've made clear that your target market is basically higher end homes. You're in the Golden Isles area, which is this really fancy famous golfer area of Georgia off the coast of Georgia. And so that allows you to charge premium, premium prices, which allows you to pay your people more, which allows you to have higher quality people. It allows you to provide better service. There's just all these happy knock on effects when you have, when you, when you charge more premium prices. So that's kind of an example from the world of pools. Do you think that that's, it's fair to extrapolate that pattern to anything in home services? So for the searcher out there who might be considering any of the 10 home services that are that there, that exist, that they should think about that as kind of a strategic, strategically appealing to go higher end. I'm answering my own question. Of course. Higher end is always better in everything.

[1:00:01] Guest: Yeah, I mean, yeah, I think it's always helpful to have a strong and growing market. I think you're the customer base that we have. It's, it's, it's. I guess I could describe it like there's a high percentage of checks that we get that are just from like family trusts or you know, the third generation homes, you know, they all have like, you know, their own off everything. Like they almost have their own corporate function. So it's almost like a B2B in a way for a lot of these customers. And then, so that's great. And then you obviously don't have. And they care about the quality. Right. So they're not going to, they're not going to beat you up on a equipment install, you know, saying they bought it on Internet for whatever price. Like they just want it done right. They want it done before their grandkids are in for the holiday. And you know, that's why we're there. And so they're not, you know, you again, you don't have to deal with that. You don't have to deal with any sort of, you know, accounts receivable issues. Now that said, like we are B2C so there is, you know, we do deal with like what other residential services, businesses, challenges on that side of things, you know, difficult customers, difficult to please, difficult, difficult to collect. But I'd say I have that less than most and then I'd Say residential services are not all like created equal even within the same industry. It really boils down to you know, what level is recurring, reoccurring and project based. I don't recommend really any searcher that doesn't have like direct project based experience in that industry going too heavy into that. I've just seen it from other search and I've seen deals that have passed on fortunately that are having issues there. But yeah, I mean end of the day you really want like I love my maintenance, I love falling my departments but I love my maintenance division because I know exactly what it's going to be every month. Service, it's, it can be lumpy but it is non discretionary by nature. So on average it kind of is usually around the same place. And then retail, you know it can that retail in general and pool industry is struggling. But again since we focus mostly on non discretionary goods, you know it's probably a little bit more stable than, than most. But you know that's how I think about so like and then when you know there's no, no secret that private equity has been all over residential services space. I think they are starting to go into pools for that reason. I think it's the one place you know or one of the least focused areas for the last 15 years relative to like pest control, landscaping, etc. So like yeah, I think pest control is a great business if you can find a good one at a reasonable price. Problem is is a lot of them are picked over and then you might have to go subscale or you know, there's a reason why you know, they haven't sold to you know, the big, big players in the space or platform. Private equity backed platform.

Host: Couple things there. Just to be clear the way you broke down your business maintenance service and retail. So maintenance would be pool routes. So you want guys in your crew show up to houses on a regular basis, whatever once a week, once every two weeks. I don't know what it is to clean the pool and, and, and make sure the equipment, whatever pour the chlorine, just maintain. And that's pure, that's pure true recurring revenue. And then services, something breaks, you get a call, one of your crew goes out and fixes it. So that's less predictable lumpier. Although pools are breaking regularly so so it's not, maybe it's, it's not lumpy like project based. I mean there's kind of a steady stream of calls coming in and then retail is, is what we discussed already earlier. And so the pie Chart of, of those three buckets of your business, what does that look like?

[1:03:49] Guest: It's about revenue wise, 40, 40, 20 of maintenance, service and retail.

Host: And so you've already, you just said it. But let's, let's hear a little bit more on recurring versus project maintenance versus project. First of all, in the pool world, a project based business would be what? Building pools? Pool construction?

Guest: Yeah, exactly. That's how I would define it. I mean. Yeah, exactly.

Host: It's funny, I mean, isn't that, doesn't Brent be sure have a, a pool building business? Like there are cases of pool building businesses being wildly successful. But anyway,

Guest: for the record, I, I don't, I love the concept of pool construction. I just think from a business side things, there's a reason why, you know, maintenance businesses at scale trade high, single digit, double digit EBITDA and construction. You could have, you know, 20 million even a business trade like two to three times. It's because, you know, I could stop marketing, actually never even spent money in marketing yet. But I can stop marketing tomorrow and my maintenance business will continue. You stop marketing construction, you know, you work through your pipeline. That's it. Also, there's challenges, just huge amounts of headaches. It always looks great on paper. Projects always get delayed. There's always issues. There's all these like, you know, unperceived liabilities that come up, you know, three years later someone could try to sue you for a crack concrete. You know, it's, it's a headache. But yeah, I mean, I also believe I have a close friend whom I want to introduce you to, by the way, that owns a pool business that's you know, closer to 50% construction high end. And the thesis there is you build the pools and then you, you know, maintain them. So it's a little bit of a funnel into the maintenance business. And I did think about that for landscaping when I was focused on that space for a bit. But so there, there are merits too, don't get me wrong. But you know, I'm happy that I don't do any real construction. We do some renovation work which we sell. You know, we've been really focused on trying to dial in maintenance and service going into next season before we take any big projects like that on and

Host: going zooming out, regardless of just pool or whatever particular industry. But project versus project revenue, lumpy project revenue versus recurring revenue, maintenance revenue. Did you feel in your cash flow crunch terror when the bookkeeper ghosted you like that Must have been such a moment where you were like, oh, My God, I love recurring revenue because you. It was, I mean. Well, I guess I should ask like the recur the recurring revenue. Do you also have to invoice for that or is it on set on credit card?

[1:06:29] Guest: Yeah. So like one of the things that I'm working on right now is I think one of the reasons why our margins are so good. So it's a little bit of a double edged sword. But we're unique in how we price and offer our services. So we offer our customers the option of doing weekly service, bi weekly, twice a month or monthly. And. And then we do plus chemicals. So for example our weekly service, you know, might be, might change, don't quote me on this but $55 per visit plus chemicals. So if you allows us to you know, always protect our margins on the chemical side of things and then typically those do average to like what you would be a higher, higher all in cost for the consumer than like your flat rate where flat rate though argument against that is, you know, the quality is not always there. They're putting in just what's needed. And so but the challenge from the business side of things is we have more seasonality in our business. So whereas a flat rate provider will have their margins squeezed in the summer because they're putting more chems in the pool, you know, we're protected on that. But what happens is you know, our, both our consumable sales, the chemical sales and then also the frequency, you know, we people that will downgrade from weekly to biweekly in the winter. And so you know we have a little bit more seasonality and then also because of all those changes and really more of the processes that were in place when I took over, there was never really a focus on auto pay and getting payment information. And so you know like we had like a large percentage of our customers were still getting mailed invoices. So yes it was. I was comforted by the fact that I knew, you know, approximately what we're going to get in maintenance. But at the same time too like it made the invoicing side of things like that much more daunting because it was like all these different service offerings and all these different line items for chemicals and etc.

Host: Great, Ryan, thank you for that. Well, I, we're going to start wrapping up here, but I want to give you a little bit more space to talk about the size of business that you bought. We've, we touched on it earlier and I feel like everything that we've heard about your ownership is kind of like prove the point, demonstrated the point. But you didn't buy a tiny business. You didn't buy small, let's say you did, but you also didn't buy quite at that million dollar ste number. That is really the ideal. So talk to me about how now being inside such a business you really appreciate like how, how in fact appealing it would have been to be able to find a business with a million dollars of sde. Was it basically just because like you just million dollars of SDE suggests more people, more management layer. There would have been somebody other than a lone bookkeeper who could completely sabotage your business, that sort of thing or are there other things?

[1:09:31] Guest: Yeah, I'd say that's one of the main factors of it. I mean, yeah, you have more of a management structure in place where you know, the roles are, you know, you lose somebody, it's not the entire department. And conversely, when you hire, you know, you could absorb those costs more easily, whereas, you know, it takes a bigger percentage of your, of your margin away when just making one or two hours. I mean, there's a, there's a great example too within the pool space where I'm sure you get this in other residential services. But you know, our crews, for example, like if we're running Just say 10 guys, right, and they're each doing about 10 pools a day, one calls out, you know those other, that those 10 pools get equally distributed amongst the remaining techs. And what happened, you know, this happened in the summer too, which is another reason, another thing that, you know, is a challenge, but we're going to try to correct it next year. But you know, as that, as that number of guys start to become less reliable or at risk or flight risk, you know, those pools that need to get distributed across the team gets more burdensome. And, and so like when you go from, you have seven guys all of a sudden and then one calls out, then all of a sudden two people are getting two more pools on top of, you know, busy season. So like, you know, my friend that has a much larger business, you know, they don't feel when people call out, you know, they have it just, you know, maybe one guy might pick up a pool or you know, maybe one pool here or there, you know, but it gets magnified by that.

Host: Yeah, going back a couple of steps here, but I wanted to call out something that I was reminded of about pool, the pool business in particular, because it does feel like, I mean, I guess you could say this about all home services, but it does feel like pool routes are something where margin would be competed away. The barriers to entry are very low. You don't. There's. There's a lot less training in this particular home service business that there would be required of plumbers or H Vac or electrical certainly. And they're appealing businesses to accumulate routes. So I heard you refer to a 1 polar, which was a term that Ben Borner had also talked about in his episode Ben Bought a Pool Maintenance business in Key West. And actually Ben talks about the fact that be in Key west, he had something of kind of a geographic moat there because it's Key west is, is so inaccessible, so hard to get to. And had he been on the mainland just three hours north in Miami, the business would have been totally unappealing. It would have been. The margins would have been razor thin. He would have been. The competition would have been very stiff. But on Key west, he was able to basically have some, some pricing power because it's, it's kind of just a much smaller market that's harder for anybody to just crowd into and spin up. A pool service business, yours is. Doesn't have that same geographic mode, but I feel like there's kind of a, a similar, a similar appeal to your business just because of the way you position, the way that your business is happily positioned, which is kind of the, the luxury option or the premium option. Do you feel like pool service businesses, yours and Ben's are both. Were. Are both seem to be exceptions to the rule. Do you think the category is appealing overall if you're not one of these exceptional businesses where you can, where you have some pricing power?

[1:13:03] Guest: Well, I, you know, me can unpack that a little bit. First thing I would say, well, and this is also what drew me to pools, away from landscaping into pools. I don't want to discount you. Don't underestimate the my guys or, you know, the. There is the science to pool chemistry. Yes. It's not, you know, the level of H Vac, maybe at least in terms of certifications and things like that, but on the. Our service guys, you know, their, their knowledge is very impressive relative to your typical H Vac professional. And then the maintenance side, you know, there is, you know, a level, a standard, you know, you can't just have, you know, people have to be genuinely curious of chemistry to be, you know, to be good at what they're doing. So that, you know, and that's also kind of what drew me a little bit away from landscaping where, you know, may have just been. Don't take this wrong way. Maybe More generalizing but a little bit more labor intensive focus and less, you know, expertise driven. But I would also say great clarification.

Host: Thank you.

Guest: Yeah. And then I'd also say, yeah, I do think we do have a pretty good moat in our market. But you know, to just dovetail to point on, you know, as it relates to the competition side of things. I mean we like I see it every day, you know, there are some single pullers that are, that are content with their, their book of business. They've been doing it for a long time and they're good at what they're doing. But the most part, and I can't give you any stats on this, a lot of single pollers, they come out of companies like mine where they're like, you know, they start, think about the revenue side of things and they think, okay, well you know, I service about 100 grand of pools, like I can go out and make six figures. And then they don't realize like all of the other costs and you know, operational headaches behind it. And they might go out and they might be able to get, you know, a full book of business for themselves but it's very difficult for them to retain, I mean, without having the back office support of dealing with customer complaints. Billing as we talked about extensively. And so I mean I've, I've had know unfortunately was during like very busy times this past summer. But like I've had single polaris just approach me like just you know, we buy my route, just you know, pay me my salary that, you know, I, I was expecting to get here and let me kind of, you know, get part of a bigger ship here. So. And then meanwhile too like, you know, it's also without those levels of support and operations in the back end, you know, especially in a market like mine, you know, customers don't have a lot of patience for that. So you know, we get a lot of customers that you know, may leave for a cheaper option but they're boomerang, you know, they come right back because. Yep. All those things I mentioned to close

[1:15:47] Host: out, let's just kind of talk, let's just kind of like reflect on your journey here because you were a searcher who was at the end of his search two years, you had one last, you know, kind of run at this and happily you found a business that, that met your criteria, you bought it and here you sit. How do you feel, how do you feel about where you've landed?

Guest: I feel, I mean, you've also caught me an interesting time. I mean I feel great about where we are right now. And it's exciting because, you know, we're. We're just so. We. You know, as I mentioned, the. We worked through that issue. Then we had to deal with, like, busy season, which we were basically over capacity, you know, at capacity turning, practically turning business away. So it was just hectic. Constant fires. I mean, we'd even talk about, like, you know, trucks being down, my roof's getting ripped off in a storm, like, all these issues. And now we're. Phones have finally settled down, made some key hires that have made things a little bit easier. And now we're kind of addressing all the things. All the things that we found were broken were the reasons why, like, the business. You know, I think that, you know, frankly, I think that's why the seller sold it. Like, he had basically maxed out the capacity of this business and had been really kind of getting by every summer by the skin of his teeth. And now we can kind of. The management team and me, we are just like, one by one trying to fix all the little things that had slowed us down, all the little bottlenecks, like upgrading our phone systems, you know, making sure we're tracking leads off of paper. Paper and, you know, have like a more CRM process, some targeted sales. It's. So I'm. And now that we have. We have now sta. So my first focus was really making sure the right people. That was another problem we had faced over the summer where, you know, we only get paid when we actually clean the pools. That's another. That's, you know, one of the downsides of going against a flat rate. But. So we didn't have enough people to. To beat the demand this summer. So we're staffing up. We also want to train them properly. We also wanted to make sure that people have the right attitudes. And now I feel like we're in a good spot there. Had a big key hire in the management role that's, you know, he's really, really geared up and excited for upcoming season. And then, yeah, we've been working on the tech side of things and. Yeah, so anyway, I'm just with. You know, we've had a little bit of a chance to lick our wounds from the summer, and now we're, you know, everything that we've laid out is starting to come together for what, you know, our busy season kicks off really the first warm day of March. And then, you know, I'm sure there'll be a whole host of other broken, you know, things that we'll discover issues that will solve next slow season. But yeah, so this is like the perfect like and I'm looking forward to next season. Like I'm looking. I, you know, during my search, you know, you know, searchers would say you want to shy away from seasonal businesses. And you know, I don't think we're that seasonal, but I do like this concept of having some time to reflect and, and to build because, you know, during the business season it's just, you know, non stop red line. Yeah.

[1:18:55] Host: Jesse Sunquist said the exact same thing. Jesse who bought a pest control business. Actually he was looking forward to the winter to, to be able to, to just have some downtime to reflect. I mean it's kind of like in these, in a seasonal business or seasonal ish business, like pools, like pest control maybe it's kind of like the, the, the framework is like you work in the business when it's busy season, you work on the business when it's slow season sort of thing.

Guest: Yeah.

Host: And. Oh yeah, great. Oh yeah, right. You guys are of course in the, the WhatsApp group together.

Guest: Yes. Yeah. Chad as well.

Host: And, and Chad, Chad Hildebrandt not knocking you down one by one. I think I got two or three more to go in this group.

Guest: Those guys are super, super helpful. Get me through that that summer.

Host: Oh, good, that's great. Well, by the way, why don't you just share a minute on being part of kind of a pod, kind of WhatsApp group. You've just said that it was really helpful getting you through that summer. Anything more to add to that, to the value of that? Do you recommend that to other people?

Guest: Oh, yeah, I can't recommend that enough. I think if you're really going to go all in on search full time and, and, and commit to it, like you need to have a support group of, of people that are in the boat with you because, you know, I'm fortunate enough to have a great network of friends that have a lot of great deal experience, private equity experience and they're all very smart people. But it's a different animal search and all the challenges you face. And we kind of stumbled into this group together and know we were fortunate enough to see everyone, you know, go from search to buying businesses to, you know, trying to scale them and you know, everyone's, everyone's. By sharing all these challenges you face, you realize, okay, well, I'm not alone. Like this is not a unique or crazy situation. And then everyone's, you know, then you can provide support for others. Objectively. And it's just been, I can't, I can't recommend. If you're going to go through search, make sure that you're trying to build that network. I would focus probably your first few months on that even before you start, start going out trying to find people that are. And we're complete, we're perfect strangers before we all met. So,

[1:21:10] Host: you know, it's, it's funny, I wonder, Ryan, if it should be like, you know, when somebody's organizing their search. I mean, it's what you just said. There's kind of the typical ways that one might organize their search. Get their CRM going, get their list of brokers that they want to reach out to, whatever kind of like, you know, get everything situated on the desk and then start. Well, maybe one of those, one of those things should really, that people should think about is pot. Like finding a pod, finding a group of people that are doing this that you can, that you can be in a WhatsApp group with or whatever. And that, that's a big box you need to check before, before you launch your search. Easier said than done, but it's a nice concept, Ryan. So last question for you here. So you use the expression scar tissue on our pre call, referring to pre and post, going through your summer and being locked out of your own books, as well as whatever other misadventures you had. How do you think about being an SMB owner and the ups and downs and surviving that and fetal position moments. Anything to say about, about that ever present theme?

Guest: Yes, yes. So I would say. And Chad said it better than I'll ever say it because he's way more eloquent than I am, articulate. But, you know, when you're early stages of small business, you have all these issues that come up and they're seemingly, and actually in probably reality, they're as, as extension, you know, not. I'd face that and you know, a few others, to be honest. But you know, as you start to get that feed under you, get the traction, understand how things are actually working and people start hopefully buying in on what you're trying to do. All those issues that come up down the road, it's, you know, it, it doesn't get your blood pressure nearly up, you know, you're, you know, you kind of just move through it. But yeah, those first few months especially, you know, every issue is as essential and sometimes when you do have as, as existential issues that are material, like, you know, you may not be as lucky as I was to get through it. But, you know, after that, like, I mean, nothing's going to faze me. I mean, we basically.

Host: Careful, careful. Ryan, you sound a little overconfident.

Guest: No, but I mean, and also, too, it was a great blessing in disguise, too. But my talk about this with my wife a lot because, you know, at the time, it was like, oh, no, like, I needed this person. That was the other big lesson learned. Like you, when you first buy a business, you need those people desperately, especially in a smaller business. And when you lose one, you think it's over. You're like, oh, no, this is going to be it. And this was such a blessing for me because I immediately had to dive in and learn everything like Grant, like, bottoms out, like, in the weeds and. And learn the business. Deep understanding of kind of how all the system worked. You know, meanwhile, like, making mental notes of all the things that need to be fixed and then also earning, I think, the respect of my employees that see this. And. Yeah, I mean, yeah. So. But point is, is when you go through. You have to go through a little bit of those trials for you now to be a little bit more confident going forward. And a lot of those issues that you face are, you know, a lot of blessings in disguise. I mean, had, for example, in this case, bookkeeper, you know, still working together, contentious, you know, and something happened like that now it could have been way more detrimental, whereas, like, we kind of ripped the band aid off.

[1:24:51] Host: You know, it's an interesting and good point that you just made about how blessing in disguise, or maybe one of the positive byproducts of going through that particular crisis was that, like it or not, when that happens, you have. Especially if you're just. Just transitioning in. You have an audience, and the audience is. Is the. The employees that you've inherited, and they're probably watching very closely. They. Maybe they're not as aware of how deep the crisis is or exactly, exactly what's going on. But point is, it's an opportunity. You handle it well and you survive. It's an opportunity to kind of earn your stripes and earn in an accelerated way of maybe earning the respect of your team that this guy is competent and can work through crises.

Guest: Yeah. And back to your other point on that support group, that's why that's so critical as well, because to your point, like, you have an audience and you. You can't. You is. You're. It's lonely, you know, it's very lonely when you're in that situation. And then that group being there to support you. It could be the difference.

Host: You know, here's a final question. What's the. What's the grand plan it to if. Or is there a grand plan? Are you going to be the private equity acquirer here in a few minutes rolling up this industry?

Guest: I. I'd be lying if I didn't say that was my intent going in. But I mean my near term goal is to, to own the Georgia coast. I think we have, you know, a little bit of a honeyhole in our market and we're already all the way down to Jacksonville, so. And then I already have some inroads in Savannah, so just moving north and yeah, basically I think we. We could Mac. We could do. There's a lot more meat on the bone that we left this past summer in market. So I kind of want to get through another busy season. But if something. Opportunity comes up on the acquisition side, you know, route here and there, I'll definitely, definitely pursue it. But yeah, the goal is. Is to grow. You know, if we're. I'd like to get it, you know, three or four times the size in the next three years, which I think is very achievable just on the, on the Georgia coast. So. And you know, the other thing about that too is, you know, as I mentioned earlier in the call, like what my, my motivation for going out on search was to control my own destiny. Now it's been a little bit of. I want to like change the lives of the guys that work for me that bought into me. And in order for us to do that, it's like we gotta take it to another level. And so I know.

[1:27:29] Host: To give them opportunity.

Guest: Yeah, exactly. I mean everyone opportunity. But yes, like it's, you know, I think there's. I definitely see the appeal of okay, just owning and operating a business steady state. Like. Yeah, like we, I could, we could make more than a great living doing what we're doing right now. And you know, I feel great about it, but now it's. I'm even more incentivized to grow just because, you know, the people that were. Yeah, that kind of had my back, you know.

Host: You know, Ryan, that reminds me in the 200th episode where I reflected on some things that I've observed patterns that I've observed from so many episodes. I think you're, I think you're hitting one squarely. Tell me if I'm wrong that you know, people don't. Many searchers don't get into this necessarily because they, because they're seeking to have an impact on a group of employees that's not, maybe they're aware that that could happen or whatever, but it's not goal number one or even goal number eight. And yet when they then to their surprise, they find that that actually is incredibly motivating once they've, once they've been in their business for a year, really doing right by not just doing right by their team, but having a really positive impact on, on, on their people. Is that an accurate, accurate characterization of your kind of trajectory?

Guest: Yeah, I'd say so too because I mean you start to, you know, you, the ups and downs of that. I'd say my biggest disappointments are people related. You know, it's predacious customers and then employees that kind of self sabotage. But you, you kind of wear those ups and downs. So you know, when employee gets stoked on a sale that they've done, you know, are truly bought in, really wants to kind of strategize on things. I don't know, that just gets you going and you want to feed off of it. You want, you want to kind of, I don't know, deliver all the promise that you think is like achievable. So I don't know,

Host: it's awesome.

Guest: Great.

Host: Ryan, how can people reach out? How do you prefer they do that if they have questions for you?

Guest: I guess we could just hit my, I guess use Damian Twitter, I guess the SMB Quest or. Yeah, have a, I guess I sell my search fund website up that I still use the email for and that's Turner Point Capital. So you love, love to talk to searchers or other people in the pool industry. I have been trying to call, I have a, a group of, you know, say it's very informal of pool experts. So anyone that's in the pool space that wants to try to compare notes on best practices, I'd love to talk.

[1:30:22] Host: Ryan Doyle, thank you very much for coming back on and congratulations on sticking through your search and getting something across the finish line and surviving being locked out of your own books and a sketchy bookkeeper and a very busy summer season and what looks like an optimistic 2024 ahead.

Guest: Thank you, Will. Yeah, I'm looking forward to it. Keep you posted.

Host: Sounds good.