Host: Sajima Mitta found what I like to call a searcher Special Recurring Contracted Revenue super nichi Fragmented Industry CDMS, which Sajima has owned for over two years now, is a B2B services business. It provides environmental and safety compliance services. Sajama and I hit on lots of topics, including how to buy what is essentially a consulting business, how she's improved the quality of revenue, what itch she was scratching by acquiring a business, and of course, the industry of environmental and safety compliance itself. My favorite part of Sajima's story is how her motivations as business owner have shifted somewhat, or better said, expanded. Her industry attracts people passionate about the work environmental science grads, engineers. By working with these folks, she now finds herself really motivated by empowering them so that they can learn, grow and prosper and happily successfully. Doing that nicely aligns with building a great company. As Sajima says, if I can empower my team in the right way, everything else should fall into place. Please enjoy this interview with Sajima Mitta, owner of Chemical Data Management Systems. 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. I want to share an update on the Acquisition Lab. As you know, the Lab is a highly vetted cohort based accelerator and community for people serious about buying a business. After going through the Lab's month long intensive, you have ongoing access to almost daily Q and A sessions with advisors, regular live deal reviews with Walker Deibel, author of Buy, Then Build Potential Deal Team introductions, and a very active Slack group with other searchers on the path. Well, the update is that the Lab recently passed 60 businesses acquired and for well over $100 million in aggregate transaction value. Also, all members now enjoy lifetime access to the Lab because when you buy a business, it's often just the first of many and the Lab wants to support you in every deal, not just your first. Lastly, check out my recent interview with Shane Ursum. Episode 105 Shane acquired a business with over $1 million in EBITDA in just six months and he attributes a lot of his deal success to what he learned in the lab. Check out acquisitionlab.com or email the lab's director, Chelsea Wood chelseieve.com Saja Bamhita welcome to Acquiring Minds.

Guest: Nice to be here man.

Host: Sajima, you acquired and are now the CEO of an environmental compliance services business. But it wasn't inevitable that you'd end up as an entrepreneur. In fact, you started your career by getting a PhD in data science. So today we're going to hear about your journey from that to acquisition entrepreneur. So start us off please. Sajama, with some background on you.

[3:22] Guest: I'm an engineer by training and as you noted at one point I wanted to be a professor in a university. So that's why the PhD. So at the end of that I was trying to decide what I want to do. You know, one of the things I guess about me, you know, I find many different things interesting. I enjoy most of all learning and so many different things. So I did, after my PhD, I did investing for about 15 years and I worked in many small and big companies. And the general theme was that we would, you know, we would invest on behalf of pension funds like CalPERS, CalSTRS, CPPIB, other Norwegian pension fund, et cetera. And it was perfect because, you know, people always, people sometimes ask me when I was in that part of my career, how is it, you know, you are an engineer, you are a researcher, what are you doing here? And I found that actually it was not any different because there were interesting problems to solve, new things to learn and apply and improve systems. And so I found almost, I found that they were both equally interesting and then the same thing here. Now as I'm doing this, I find it's a different set of problems. I'm not writing code all day long, I'm not reading papers by economists, but it's more the practical side of economics, I guess. So.

Host: Well, we're going to, we are going to return to that and have you kind of talk about what the problems are, what your day to day looks like and how that stimulates you, but just to, just to understand a little bit more of your background.

Guest: Yes, you.

Host: So 15 years at investing, but you just mentioned writing code. So, so dealing with, so you were writing code as, as part of this career in investing, to be clear.

Guest: Yes. So there are this whole set of quantitative investors where people who write code are the people who are doing the investing because it's the code that does the trading, that does the investing. Yeah. So a person who's a quantitative investor needs to know about the markets code and about, you know, the stocks and you know, all of the, all the different aspects of things. Yeah.

Host: And I heard you mention the Norwegian sovereign fund or Norwegian pension fund, CalPERS. I feel like these are some of the big pension funds that I, I've heard of. I'm not fluent in that world. But are those, are some of the, some, some of the biggest pots of money around, aren't they?

[6:15] Guest: Yes, they are.

Host: I realize I'm going further back rather than in the right direction here, Sajima. But I think it's interesting. So I'm also just looking at your LinkedIn and seeing Indian Institute of Technology. That's IIT that those are. That's of the, the very prestigious family of universities in India, correct? Is that.

Guest: That's right. I went to IIT Bombay. It's a great school.

Host: So you came to the States to get a master's degree or to continue your education and to.

Guest: Yeah, for a PhD.

Host: Yeah, for your PhD.

Guest: Okay, great.

Host: So you have what I perceive by looking at your LinkedIn and hearing you speak, a very successful career as a quantitative investor, deploying capital or making capital allocation decisions for some of the biggest funds in the world. And you do that for a decade and a half and it's stimulating. And then what starts to happen that causes, you know, that starts pointing you in the direction where you now are,

Guest: you know, so a couple of different things. One is, you know, I was at, I happened to be at a turning point. You know, I worked for a small investment company that used to focus on Asian in the Asian markets. And Covid happened and we had a lot of volatility in our books and, and it was time to move on. The company closed down. We were one of the largest investors in Asia and we closed down soon after Covid. And so I spoke to other companies which do quantitative investment. I had a few offers and I was trying to decide, okay, what do I want to do long term? And I had heard of, you know, ETA before that, a few years before that. And, and over the years, as you work in a company, regardless of, you know, what kind of company it is, you, you see decisions being made and the future of employees and the company depending on the decisions. Right. And, and then you start to think, sometimes you may start think, look, I think maybe we should be doing it in this other way. Maybe this decision should have been this personnel decision or this direction or things like that. And ETA gives me an opportunity to actually do that and see, we can see whether I was right or not. I've had these thoughts for a while. And so, so it, so it's a, it was great. It's a great breaking point in my career. So. And I said, okay, let's. Let me do it now.

[9:10] Host: You know what I'm kind of hearing there is, you know, in, in,

Guest: at

Host: least in developers, which is a world I'm familiar with. Software developers.

Guest: Yes.

Host: There's kind of the two types of software developer, those that want to just be software developers and remain technical for the duration of their careers and then those that want to become managers and move into managers and there's a, there's a pretty strict bifurcation there because a lot of the kind of technical folks really just, they don't want to deal with management and, or being managers. And what I'm hearing from you is that in fact after 15 years of being a pretty quantitative person, I don't know if you had, if you were managing people or not, but you actually felt yourself drawn to making management decisions and trying your hand at management and making decisions that could really impact an organization versus just kind of being in the code and in the numbers for the next stage of your career.

Guest: I think it's not just management. So when you're a middle manager somewhere, let's say you really don't get to, you manage people, but you're not managing the direction of the whole thing in a way. Also, even if you're a technical person, at least in the space where I was, it's very different from software programming. The person who founded the fund I used to work for used to write code all day long. So it's not that when you write code you're not making decisions. What I mean is it's not just managing people, but also, you know, basically determining the direction of how things, you know, evolve.

Host: It's strategic decisions.

Guest: That's right.

Host: You were drawn to seeing if you could, if you could try your hand at. Yeah, and you'd have heard about eta. Just do you recall, did you have friends who had, had done it? Do you recall where you first went, how it first came on your radar?

Guest: I think it might have been a podcast or a blog. You know, I read a lot about topics that are not my profession, not related to my profession in any way. So it was one of the things that I discovered at that time, you know, so that there is the cta. I remember many, many years ago looking at the Stanford search page but not paying that much attention to it and thinking, oh, that's, you know, because they have a paper and they show data. So I'm always reading papers that have some data and some conclusions, you know, and one of my favorite things is about how data can be used to say anything. Right. So data. And there is a lot of replication failure in the industry and statistics industry. But anyway, so I was just reading that paper from that perspective of, you know, oh, this is another interesting business related paper. And things like that. But yeah, I think so. I remember in one of your podcasts you had talked about buying a porta Potty business. And I remember a long time ago hearing about that and then mentioning it to a colleague and the colleague was laughing at me and saying, oh yeah, and then you could do that and then you could go to porta Potty conferences and meet other people and discuss the technique. And I thought, oh, that's, that's an interesting thing. You know, interesting perspective.

[12:41] Host: There should be a Porta Potty business filter. Those of us, there are two types of people in the world. Those of us who love the idea of a porta Pota. Porta Pota business and those of us who don't. And, and, and the, the probably everybody listening to this is in the, is in the first camp. Okay, well, Sajima, so, so you, you've said, you know, you kind of recognize that now is the moment in your career to, to, to, you know, put yourself in a position where you could make strategic decisions and doing so by buying a business.

Guest: Yeah.

Host: Did you get any, did you get any pushback or did you get any, you know, head scratching responses from your network when you told them you were going to embark on this path? Because if you don't have people in your network who have bought businesses, this is classically kind of a like a decision that people respond with. What are you talking about, buy a business?

Guest: Oh, no, Well, I just, I just did it. And then one day when I bought the business, I told my friends and family that I bought a small company in California. Okay. Yeah.

Host: So people, probably people in your network, something tells me they respect your judgment, Sajima. So you probably didn't. Whatever you do, they probably like, she knows what she's doing.

Guest: You know, honestly, I didn't ask for advice from people on whether I should do it. Of course my family, my husband, you know, he's on board and fully supportive. But I did do all the usual. You know, I spoke to, in the first few months, I wrote to 100, you know, literally, I spoke to a hundred, close to 100 people, either searchers or business owners who were running businesses, small businesses throughout the U.S. i just did cold calling, cold emailing. You know, there are those statistics in the search literature about, you know, things. What percentage fail? There is some contour, there's some uncertainty about whether the percentages reflected there are correct or not. You know, because there is survivorship bias and especially on the self funded side. Right. And so a lot of people, yeah, So I met spoke to lots of people and learned a lot.

[15:17] 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 well, in these conversations, other than enjoying yourself, were you trying to decide or learn what if, how, what your chances of success were or if, if you were to embark on this path, what the day to day would look like? And was that a professional lifestyle you wanted? What were you trying to learn or just kind of as much as you could absorb and then you were going to distill that into your own conclusions?

Guest: Yeah, it's a little bit like, you know, let's say you're going on a new backpacking trip, right? So you don't know. So you get a map of the place, right? You obtain a map and you kind of read it beforehand. And so you know that you're so you're not going to take a tangent and end up in the middle of nowhere or you're not going to reach. You want to make sure that you reach the trailhead by sunset, et cetera, those kinds of things. So it was not so much to make a decision about whether to do it because surely having worked in the industry for a long time, I was pretty sure that there is a role out there, there is a company out there that would fit my background where I would be useful. So most important thing is that am I useful to that organization? And if I am, then I will enjoy it and the organization will benefit from it. And I know that there are organizations out there where I would be useful. It was just that I wanted to know common mistakes. I want to know what it is that I don't know. Basically, you know, what is it that I might change something and then. Things may go bad or Something like, you know, so I just wanted to know what is it that I don't know, what are the things that people found that they made, the mistakes they made, or the things that they found really, really valuable? You know, sometimes you hear people say simple things that they just leaned in on that one thing and it, it took them very, very far, you know. So yeah, just wanted to hear from people about their learning so I don't have to do it myself basically through my own experience.

[18:38] Host: Sure, sure. Well, it sounds like you had a clear understanding that business buyer fit was an important criterion that you were going to look for a business where you could really lean on your expertise and that, that would, that, that would be a, the puzzle piece that fits the, the puzzle, the other puzzle piece being the business and that together there would be really a lot of value created. What were some of your other criteria that you landed on in, in your search?

Guest: It had to be somewhere close to where I am. So geographic industry. I was agnostic size, you know, I wanted it to be in the standard self funded range because so under 2 million EBITDA. And the reason for that was that in the first step. So I'm pretty agnostic about whether you should raise, you know, whether you should take invested capital or not. I think at the right point in time, invested capital is the right ingredient to add to whatever it is that you're trying to achieve. But right at the beginning, I wanted space and time for me to really understand the industry well and figure out some of the things that I don't know about because I'm new to operating a small business. Like operating a small company is very different from working for the kind of companies that I've worked for before. So it was important for me to be independent right in the beginning, even though that's not how I'm thinking about it in the long term. Right in the beginning I wanted to just do it myself and make the mistakes, learn and then, you know, prepare the right plan for the long term.

Host: Yeah, so, so, so, so initially you didn't want to take investor capital you wanted, you didn't want to have to basically be responsible for other people's capital and have them kind of breathing down your neck for certain performance expectations. You wanted to have the space and the time to really learn at your own pace or, you know, as you felt comfortable and then. But you were open to investor capital longer term, but you recognized that how you'd use that capital would be much better informed once you actually acquired and had been operating a Business for some time.

[21:13] Guest: That's right.

Host: So you're self funded and you were gonna, you, you were gonna bring all of your own capital to the equity for. And I assume it was kind of an sba. You're expecting to do it in sba?

Guest: Yeah.

Host: Deal finance.

Guest: You. Yeah.

Host: And you said you wanted to be, it was geographically constrained, so you wanted to be in your, your area. You're in the Bay area. So tell us about the actual search. Once you had this criteria, these criteria, how did you go out and conduct your search?

Guest: I, I mainly did broker. Brokered search and I spoke to lots of people. I, I didn't have any interns. I had interns for a little bit. Didn't work out as well as I had expected. Hopefully I'll do a better iteration of it sometime in the future. I just looked at a lot of deals that came through and so I had, like I told you, I spoke to a lot of people who were my mentor. You know, I consider them peer mentors. And I got an advice from someone I respect a lot who said, write an loi. The very first thing he said after the first two months, he's like, write an loi. I think that was very, very useful to just get started. If you see a dean, what are the terms at which you will take this. What are the terms at which you are willing to take over this responsibility for the next five years? Think through that and write up a structure that works for you and see if it works for the person who's looking to sell or retire. There are these. So I mainly did a brokered search. I went and spoke to lots of people, did phone calls, you know, whenever I looked at a particular industry and I went deep into it and I was in the LOI stage and things like that. Then I would write cold emails to other people in the industry across the country and I would talk to them, things like that, basically to learn more about the industry and see if it's the right fit. So ultimately, like I said, you know about the trail map analogy, right? So yeah, you see the map, but when you are there, it feels different. When you're actually there, it feels different. And I found. So one of the surprising things, so people say, oh, you should look for recurring revenue or blah, blah, you know, like the seller who cares about the company for the long term and these kinds of things. And I found it interesting how they actually show up in real life compared to when I heard about them from other people or in the papers, things like that.

[24:17] Host: Sajam but can you elaborate on that? What was different based compared to what you had been expecting or had read?

Guest: I think so. The strength of an going concern. Right? So when you read about, when you value companies like I did before I was doing this, there is going concern value and then the liquidation value. There are two values for a business, right? So then the going concern value is based on current financials. So the momentum, the ongoing momentum of a company that has been running for a while, that was quite surprising to me, you know, and so it's very real. So when a company is moving in one direction, it does keep moving in that direction. So it's good and bad. So everything is, I guess sometimes you might be, when you're talking about doing the transaction, maybe there is some discussion about, oh, this is what the historicals have been and this is what it'll be in the future. I gained a lot of respect for how, you know, what has been in the history will continue for the long term. So, you know, any changes to it will be hard won and take a long time. If you have a company with a certain culture and you are looking to change the culture, it's going to take a long time for you to change that culture. You can say the word change the culture, but actually to actually change the culture takes a long time. At the same time, if customers like that company, they're going to continue to like that company for a long while. So you have plenty of time. So there's no need for as a searcher, when you're taking over the business, there's nothing, you don't have to worry that much it will continue, you know what I'm saying? So.

Host: Yeah, well that's actually. So as you pointed out, this insight that you had that there's a stickiness to an ongoing concern works, there's both a pro and a con to that.

Guest: Yes.

Host: The pro meaning that it's probably not going to go to zero, at least not immediately. I mean, it's got some staying power, which is part of the reason that we're attracted to this category, this opportunity. But then the con is that any change you want to do is probably going to be slower, grow slower going than you might hope or you might expect. So how can, did you, can you net that out? Was it, was it net positive news or net negative news? Like did you, did it make you like the opportunity more perhaps?

[27:06] Guest: Yeah, I think you like the opportunity more because. Because then you get to choose what it is that you want to get into and when you get into that, that thing that you've chosen continues and then you get to choose the things that you are able to make a change in the directions that you are the things that you are able to bring to the table. So in fact it is good news. It's good news whenever you understand the behavior of a system that you're working in, regardless of what it is,

Host: says the data scientist. Now speaking, speaking of your data scientist background, I'm hearing you refer back to your years of, of valuing businesses and you just breaking out, you know what did you put it? The, the ongoing concern value, going concern and selling for parts value. Are they? Yes, liquidation. Right. The liquidation value, which you know is, is actually not a framework I've even heard after 150 interviews. So that's news to me. But, but are you, how much were you leaning on all of this deep expertise that you spent 15 years building in your search? Are, is it really helping you kind of understand the, the valuations that you're looking at or not so much? Because it's just so different sometimes it's

Guest: difficult to say whether. So I was not explicitly using any of those things, but things like quality, things like when you are an investor in a company, in companies and stocks, you're valuing them based on quality valuation, the quality of the business and the trend. So that's. If you look those are the three main categories and then how do you come to the numbers around that is a different. There are many hundred different inputs that go into each of those buckets typically as a quantitative investor. So I think the same framework pretty much is used in search from what I can see. People look at the trend, people look at the quality of the business, which is recurring revenue, things like that. People talk, look at the valuation. A simple crude way to do that is multiples like the standard multiple. So I think pretty much the same broad framework is used, maybe not the same language and not as. And the inputs are different. You assess the quality by actually meeting the owner and also by looking at the financials. So you can see, you know, so when people talk about lifetime value or the churn rate, for example, those are quality metrics, they talk about the quality of the business. Yeah. So because they don't talk about. So you could have the same recurring revenue, but you can have a different churn rate, for example. So the same amount of recurring revenue will imply, if you just did based on going concern value, you would have some multiple that you would come up with. But then based on the churn rate that will modify the multiple that you should apply because the quality is different. I'm just saying an example.

[30:33] Host: Absolutely.

Guest: For illustration. Yeah, but I didn't explicitly use that and I find that it's not explicit. So for example, right now I do some sales. I do customer relationship and sales for my company right now. And when I go and talk to people, I find that even though I have never done sales before, I find that having a couple decades of experience working in different places is useful, informs my behavior in an underlying way. And in the same way I would guess maybe evaluation. It's not that I explicitly used any

Host: of that, but it's sort of foundational experience and knowledge that you have that you're. You're standing upon to do your now job. Sajima so tell us about the. How you found the business that you did and tell us about said business, please.

Guest: Yeah, I found it the. There were two owners of the business, two primary owners, the father and daughter. The father had been one of the original founders and the daughter had joined pretty soon after the company was founded. This was almost 35 years ago and they had been running it ever since. There were other founders and people involved intermittently, but these two were the common thread from the beginning to now. They had been looking to retire for a couple of years and finally they had tried to do something on their own and finally reached out to a broker and had listed their business and I just found it online and then I was introduced to them through the broker and then I went and met them, had lots of discussions, all of the standard stuff.

Host: Well, 35 year old business, that's great age. So tell us about the business.

Guest: Sachem yeah, it's a professional services business. It's an environmental health and safety consulting company and it's slightly different from. So typically when you think of a consulting company, it doesn't have much going concern value because all the value is in the principals who are primarily providing the services. But in this particular case, it had been aged. It had aged for a long time and it was the right niche. So CDMS provides ongoing. So when there is an industrial facility of any kind, let's say manufacturing or distribution, there are federal, state and local regulations that apply on the environmental side and the safety side of things. So typically if you are a business, that is, if you're a manufacturing company, which makes anywhere say from revenue from Even, let's say two, $3 million, all the way up to $100 million or more, you know, or even, or even $500 million. So in that Range. You're not. You don't have a large EHNS staff, You don't have a large environmental health and safety staff. You don't definitely. Even if you have one person, say, working for you who's dedicated to environmental health and safety, they are not experts in all the regulations that could apply to your facility. What the company does is it does several different things. So initially, if you wanted us to come in and do an audit and tell you, go through all possible regulations that could apply to your facility, what documentation you have on site and how your site is laid out and things like that, we would review everything and give you like a 300 page document that would tell you what you do have and what you're missing, things like that. So we could do an audit or we could, if you wanted any one vertical, let's say air quality, you know, the air quality district is, you're having some communication there, quality district, and they want you to do something. We would evaluate that for you. Sometimes we, you know, speak with the regulators on behalf of our clients and tell them, no, this regulation does not apply to this facility. They don't need to do that. For example, we do things like that for our clients. But a large part of our business is taking off the ongoing maintenance from their shoulders. Our clients have their core business to deal with. It's not easy to run a business these days. They are trying to manufacture hard stents or do plating for cases that go into cars or whatever it is. And if they have to also be experts in all these different regulations that apply to them, that would be too much of a burden for them. So we take that over. We do ongoing subscription service for them. So we would visit their site every month or every two months. We conduct audits when we visit their site and we gather data, conduct interviews. But most of the work we do for our clients, we do from our office where we write reports and talk to all these agencies and take care of all their reporting and compliance burden.

[36:21] Host: And so what you're doing is auditing and assessing their compliance with regulation. But you are not implementing, let's say a tank.

Guest: They're doing a hazardous waste treatment and their tank is leaking. We don't the leak, but we do implement their compliance. In California, there are air quality districts that regulate what chemicals you use and how they escape into the air and affect air quality. Then there is sanitation district. And each sanitation district has its own regulations, although they have something common. So there is wastewater. When you run a manufacturing facility, you wash some parts and that water has to go somewhere. It goes into the sewer line and the sanitation district wants to make sure you're not sending something down the sewer line. Then there is rainwater. You know, let's say you are dragging pollutants out into the road outside your facility and that could go into and harm fish. So there is rainwater regulation, stormwater regulation. Then there is the fire department regulation which says, you know, when our firefighters come into your facility, we want to know if there is some hazardous chemical there, you know, and then there's other regulations associated with toxic substances, how hazardous waste is disposed often. So each facility has a lot of regulations so that even just to prepare a plan, keep it updated on how you're going to make sure that you are doing things properly in each of these aspects of your business. And preparing the inspection logs, maybe the client side does the inspections, but preparing the right inspection logs and maintaining them, what they should check for when they go and do their inspections and what should be reported. We do the reporting to all the different government agencies ourselves. The client doesn't do that. We gather information from them. But we are kind of like tax preparers. We gather information from them, we do the analysis and then we do the submittals for them.

Host: So the nature of this is of course ongoing, as you, as you've said, recurring. So you're. There's obviously an ongoing need to comply with regulations. And so, so, you know, X Factory is going to need you to come back year after year or depending on how. However, whatever the kind of. The frequency of demonstration of compliance is, maybe it's every two years, every five years, I don't know. And they'll just keep coming back to you for that. So do you have like established contracts with your customers or do they just call you every time, you know, every 23 months and say, hey, can you guys come back in?

[39:03] Guest: No. For most of our clients we have established contracts and we. So we visit them every. Periodically and we gather information. We do things for them periodically, whenever they're needed.

Host: Sajima, you'd said, you'd said about how many consulting businesses like there's not a lot of inherent value to them because the, you know, it's all in the principles, you know, brains and deeds. How is this business? Not that why wasn't in this founder who. Founder and his daughter who'd been involved for. For so long. How is this business not just all about the principles?

Guest: I think that. So I think it happened because one of the, one of the founders was an electrical engineer who had worked in GE for a long time and he had this engineering mindset which was like, oh, complying with this regulation takes this. These are the things you need to gather from the client, this is the information you need to gather and these are the steps you need to take in order to comply. So he had thought through for each regulation, the process to follow and also how to change the process over time. So there was an infrastructure to do both the first layer and also the overseeing layer. And I think it happened because the company had been around for a long time. So I bet you initially when they started off, they were just doing these things and all the value. And over time they evolved to have these things broken down. And that's very useful to have to be able to. How do we deliver a service level to our clients, a high level of service to our clients? And the only way we can do that is if all of us follow in the same process.

Host: Over time there had been process that had been put into place SOPs the practice had grown large enough that there was also just other people doing the work. It wasn't, it wasn't just the founders or the principals out in the field doing the work. And so it had just reached a level of maturation that it wasn't all about the principles.

Guest: That's right.

Host: Okay.

Guest: Yeah.

Host: I want to get to what your life has been like now that you are the one making strategic decisions and what your life has been like as an operator. But a couple more questions just on the business opportunity in this business itself. What does this industry look like of, of environmental health and safety compliance? Is this a fragmented industry? Are there a lot of such businesses? Is the TAM big? Like, give us a picture of, of what it looks like and you know what you would, you saw as growth opportunities if you were to put yourself into this industry.

[42:05] Guest: Yeah, so I saw, you know, I saw. And it's definitely fragmented. Right. And it came into being in the 80s when there were a lot of regulations that were passed. 80s in California and at the federal level. And it is highly fragmented. There are people who are single person consultants. There are large companies which do hundreds of millions of dollars of revenue. And the reason it's fragmented, there is a lot of fragment small companies, small companies with five employees, let's say, and there is several with just one employee and there's several with 15 employees and so on. And the reason it's like that is because like every other professional services business industry, even at a small scale, the principals make plenty of money. You know, so it's financially comfortable at a pretty small scale. You don't have to have a large scale for you to have a good life. And the problems are interesting. Think about a person. I really relate to many of the founders because coming from a scientific engineering background. So these are people, The people who ran this business before I took over, they really enjoy the technical details of the things. And it had grown to a size that was comfortable for them. And day in and day out they would talk about, oh, this tank, there is this customer that does this hazardous waste treatment system, they are trying to set it up and are they going to use a flocculant or whatever it is? Those are the kind of discussions they would have. And I didn't even know what a flocculate was. I had to look it up online. So. So for that reason it stays fragmented.

Host: And so did you see therefore that there was an opportunity to. That spelled opportunity to grow nicely? Because for an owner to have an appetite to get bigger than that, there was a lot of opportunity to do so. Is that the kind of conclusion to that?

Guest: So actually, when I was, a long time ago, when I was growing in my career, people, I remember reading something that when you're a woman, you go and negotiate. So there's all this literature about negotiation and do men do it better, women do it better and things like that. And they found that when a woman is negotiating, if she thinks about it as doing on behalf of some other people who are her family, it could be her family or her team or something like that, then she would do better at that negotiation. There are some studies that show that and I find that's the lens that I'm most comfortable with. I find it very useful. So if I think about growing the company now that I've been here a year and a half, I may have had different thoughts a couple years ago before I started running this business. But I find what really motivates me, what I find most comfortable is to think about my team and to think about all these small teams all over California and an employee who joins any environmental health and safety consulting company, what are their long term goals and prospects? And if we can build a company where all of these employees have a bright future, they have several years of growth, career growth, lots of learning, increase in compensation, and interesting problems to solve, then if a company is able to provide that, then all the other pieces will fall into place. So the compensation for shareholders, taking care of clients, making sure that the vendors are doing well, all of those things will take. Will be taken care of. And so that's my analysis of the industry once I've been there for a while is that. There is a lot of good talent both at the managerial level and at the entry level in these companies throughout California, highly fragmented and if we could and there is an opportunity to build a company that would provide a much a really good experience for these employees who are, you know, many of the employees who come and many of the people who want to join the team they are looking for meaning, you know, they are attracted the environmental science people with environmental science background or chemical engineering background they took. So you know, when they are looking to join a company such as ours or any of our competitors, they are looking for they took the engineering degree or environmental science degree in college for a reason. Right. They are looking to have a career where they make an impact and also have a career where they are solving interesting problems. These are people who have a certain ambition and yeah, so and I've worked in lots of big companies where there are lots of career opportunities, you know, growth opportunities and things like that. And it's really motivating for me to think that the kind of mindset that I have seen in academia and in the industry that I've been in that can be translated to form a company culture that really, really empowers the team members who join basically these professional team members who join us.

[48:40] Host: SAJIMA all of that plus some of our conversation on our pre call about your team and about how how really motivating that's become for you and how a big part of your story is is empowering your team in the ways that you just described. Reminds me of a theme now that seems to come up a lot where many folks who buy businesses I guess often in blue collar they acquired blue collar businesses which is not the case here. But maybe it doesn't have to be blue collar specific that acquiring. They set out to acquire business for a number of reasons, but top of the list was not necessarily benefiting their employees in a positive way. I'm sure they wanted to be good bosses and good and good leaders, but it wasn't like I'm setting out to have a positive impact on a group of employees and buying a business is the way to do that. But they learn after a year or two in the seat that that actually has been the most gratifying part of their journey. Sajima we're still got a ways to go, still got a bunch of questions for you. So just returning to the business that you bought by the way, CDMs if, if people missed. That is what is. Is what it goes by. Which stands for what?

Guest: Chemical Data Management Systems.

Host: Give us a picture of the business. 35 year old business. But if any numbers around how big it is, any dollar numbers if you can or can't employee numbers just so people have a sense number of locations.

Guest: Yeah, there are 15 employees and two locations and we serve hundreds of clients throughout California.

Host: And that state keeps coming up over and over again. My one time home and still beloved California. Of course California is famous or infamous depending on where you fall in the political spectrum for its regulation. Is this type of business one that California is particularly fertile for? It must be. But do you see an opportunity to expand into different states or is this somehow like a California particular industry or business?

[51:02] Guest: No, I think. Well, believe it or not, I found out a few months into running CDMS that there are many areas in which say the state of Washington is more stringent than California, for example. But yes, California, it's possible that California. So there is this aspect of. When you're talking about environmental regulation or safety regulation, we do safety as well. So when you do there is the aspect of the Congress or state or federal Congress passing a law and then there is the aspect of enforcement. So I don't have a good read for what enforcement is like in other states. I have a very good read for what enforcement like is in California. So any regulation or any law has only as much teeth as enforce as the enforcement, you know, causes it to do so. And so I think it's not. In fact there are, there are many regulations that we help that are at the federal level, you know, and we help with. There's something called toxic report, inventory tax toxic. You know, there are many regulations that are at the federal level that we deal with and there are some regulations that are California specific. But I've researched other states and they have something similar if not identical. So I, yeah, there is, I think but from a business perspective, you know, again thinking about it from that holistic thing that I was saying, you know, CDMS needs to grow in California for a long time before it expands out outside California.

Host: And I figured, I mean it's not like there isn't regulation around the country, but I just, I couldn't resist calling it out because California and regulation in the same sentence, it has to be noted.

Guest: I think the enforcement is, I'm guessing that the enforcement is different.

Host: And Sajima, going back to your criteria and business buyer fit and you having a clear sense that like you wanted to acquire Business where you thought your skill set would plug in nicely and provide some unlock. What did you see here that played to your strengths and you thought was so was such a nice fit with you.

Guest: The infrastructure that we are currently working on, definitely we use databases and we collect data, we have scripts. And this existed before I joined cdms. And so I think for an environment, it's not common for an environmental consulting company to do that, but it exists in CDMS because one of the founders was an engineer and I think that so, but, but my ability to help that has not materialized yet. It will hopefully there. So when, when you buy a company that's 35 years old, there is a lot of tech, there's a lot of debt of various kinds. And you know, in software industry you'll hear this word called technology debt. And so CDMs had a few things that needed to be taken care of and I've been working on them systematically. And the database systems, the databases and scripts that we use were not the highest priority, but they have now become so possibly in the next six to 12 months we'll work on that. So I think there my background comes into place, but then also I think most importantly where my background. So I've worked, like I said, always worked in places where there were a group of technical people who worked collaboratively without much supervision and always delivering direct, practical results for our clients. And how do you build a culture like that? How do you build a team like that that's independent and yet accountable and empowered? So that's something that comes very naturally to me that I think would benefit CBMS very much. And other than that, I would say that the skill, like I said, there was no reason I should have done investing after doing a PhD in data science. So it's a whole new set of problems here. But I really enjoy looking at new problems and solving them. For example, figuring out what is the highest ROI investment in a, in a small company and thinking through that and you know, yeah, so. And the other thing is being able to think about many different things at the same time. I don't know if it's a skill or an opportunity, but I enjoy that. And hopefully, you know, in a few years we'll find out that I did a good job of it. You know, there are HR things to be taken care of. There are systems, there is marketing, there is sales, there is technical development for environmental specialists. There is a whole range of things that you think about every single day. So I think more than anything there is a skill of thinking big Picture and also delivering the small details. So that's what. One of the things I think unique about running a small company is that you have to do both at the same time. You can't be just a big picture vision person. You have to. But you can't be just a detailed person. You have to be able to do both. Yeah, I think so. Spending many years doing both very useful.

[57:08] Host: Are you scratching the itch to make strategic decisions that you had hoped you would by owning a small business?

Guest: Yes. So for example, some of the things we used to do a little bit of revenue on one off projects that would arise once in a while when a facility closed down or when a facility, things like that that were more related to remediation or hazardous material cleanup. There is a whole separate industry and I know in the search space there is a lot of interest in that industry as well. So that's something we used to do occasionally but that was not our strength. So we got out of that. We don't do that anymore. And what we've done is we've grown 15% since I took over. But also we have changed the quality of the work that we are doing. You know, so. So that's, that's a change that we've made.

Host: The quality of. Of work or the quality of. Of revenue.

Guest: The quality of revenue.

Host: You're doing more projects where you can add value and presumably they're kind of more recurring. Recurring in nature. Is that what you mean?

Guest: Yes, more recurring in nature and more value to the client for the same dollar that we take from them.

Host: Can you quantify that, how that shift has been the quality of revenue? Do you have any numbers off the top of your head?

Guest: So I think for the first year, you know, for the first year we didn't grow at all. But you know, so there was about 10% of revenue that was from this work. But it would. The amount of headache was more like 25%. So that has been removed and it was replaced with just the regular revenue. The things that we are good at. And then, and then this year we've made a big push to. To grow but grow very much for in the direction that we like. So you know, it's the subscription revenue basically.

Host: And Sajima, when you talk about growth and now that you've been in, in the seat, what type of growth are we talking about? Are you. Are you talking about organic sales based growth? I mean I imagine this is kind of a heavy sales very much a heavy to grow is very much kind of direct sales to grow Organically. But then of course, you mentioned the industry fragmentation. So. So what about inorganic growth? Talk to us about how you're planning your growth.

Guest: Both, I'm thinking I want to do both, I think, you know, so one of the important things that people will talk about when you talk to searchers, you know, having a sense of urgency, right, to make a change. So I would like to grow significantly in the next three to five years. So the strategic decisions you were asking about, now I communicate directly with my team every month about what our goals are, 1, 3, 5 year goals and what are we doing to achieve them and how have we done so far, things like that. So that's a big change that has happened. And I think to hit our goals, we'll have to do both organic and inorganic growth. And I'm working on both. I'm speaking to other people who run businesses such as CDMs, and there are many who are looking to retire at this time. And I would love to provide an opportunity for them to do so. For example, and I always like to show, okay, what have we achieved at CDMS in the last two years? So all the employees who wanted to stay have stayed. They're all doing well, they're happy here and they're taken care of. They have better systems and we have improved benefits that we provide for our employees. And so, and all the clients are taken care of, you know, really well. They're all happy. And we recently received an email from a client which said, thank you. We have had six months of no accidents in our facility. And CDMs, you played a critical role in making that happen. Something like that. So, so I think if people are looking to retire and they want to see, okay, what is it that they're picturing for their company going forward? Keeping their brand alive, making sure that their employees are taken care of and making sure that their clients are taken care of. So I think that in the last two years we've delivered that and the services that we are not doing anymore, we are referring them out to other reliable people who will take care of the clients for that. So in that sense, I think that would be the value proposition for inorganic growth and for organic growth. We are dialing in our systems, improving the quality of service. I had a recent experience with a website. I wanted somebody to help me rebuild our website and happy to work with them. And they took two months, terrible service. And if they had worked out for me, I would have referred them to 10 of my friends and they would have had so much business. But, you know, they didn't deliver for me, so they're not going to grow. So I think CDMs, the CDMs, organic growth will happen in that way is that we improve our service and we grow organically through, through word of mouth. That's the best in this industry. That's the best way to do.

[1:03:12] Host: I don't think it's just your industry. An interview that aired a week ago, James Bloom, who acquired a very small mechanical H vac business and has 8x revenue over the last four years. And, and really the core thing that that has been the engine of growth is just delivering quite high, high quality service, higher than the, the competition. And that alone has just pulled, pulled revenue out of his business.

Guest: I heard, I heard that interview and it was so inspiring. So cool.

Host: Yeah, I thought so too. Sajima, I have just two more questions for you first. Oh, first is one a business question and then one a personal question. The business question is. So this is a very technical business. You are a technical person but you don't have technical expertise in environmental and health compliance.

Guest: Yes.

Host: How much did, did first of all, did you perceive that as a challenge, as a con, or did you, how did you approach that in your, in your own mind? And, and how, how well versed in the technical nature of this business have you become?

Guest: I love learning new things, so I didn't think of it as a challenge. And also the principals of the business who were exiting were not delivering the service themselves. So from that perspective I was comfortable. And yeah, I've learned a lot. I'm sure the environmental specialists who actually deliver the services, tdms will say I don't know that much, but I know I would say I have a good big picture sense for all the different regulations that apply at different facilities. When I walk through a client side, I can point out what they need to do and what they don't need to do. So I can figure out what they need, what they don't need. So I have plenty of depth in that way. And one of the things, I've been here for two years, I've been going to client sites all the time. And I've seen what is delivered to all of our clients. So I've had an ability to learn. I've had an opportunity to learn much more quickly than I would if I were servicing one client.

Host: For example, Sajama, last question for you. So we touched on at the beginning that you got your undergraduate at a very prestigious university in India. So you are Indian. And, and so this is also a story, you know Your story is one of being an immigrant and having a very successful career and then buying a business as an immigrant. Is there anything that you would tell others who are earlier on in their journey than you are, but might also be be similarly situated about the path of buying a business as somebody who is, who has come here from, from another country?

[1:06:16] Guest: Well, in my case, I've, I've lived in this country for 25 years, so most of my adult life has been spent in this country. So I don't, I don't know how to conduct business in India. I've never done so, never even worked in India. So I, so I don't know how I would say so. Except that, you know, one of the great things about, I would say maybe this is a common sentiment among immigrants, but the great thing about this country is the number of opportunities that you have. And yeah, I found. And the other thing is to address the matter of diversity in general. So more than 50% of small companies are run by women. I don't know if you know this fact. I remember reading something like that.

Host: I did not.

Guest: Correct me if I'm wrong like so in the US or maybe it was a California state, I should look it up. But anyway, I think that I found there is a right fit for you whatever your background is or ultimately people are, let's say you're a searcher and people are looking to retire. They want somebody to take care. They want to be fairly compensated for the value they've built. They want their employees and their vendors and their clients to be taken care of. And if you provide that to them and if you come across as competent enough and good natured enough to be able to do that, then they'll choose you to do the transition. It makes no difference, I believe, about whether you're an immigrant or any of the other factors.

Host: Sajama, how can people get in touch if they have a question? What's your preferred way? Is it LinkedIn email?

Guest: LinkedIn is great. Email is. Maybe I'll send you an email and you could put it in your show notes and sajumdms.com yeah, great. Would love to talk to people. In fact, I'd love to talk to people who are in professional services who are running professional services companies. And also I'd love to talk to people who are civil engineers in California. You know, that's, that's the. So if I'm targeting some people to talk to right now, it's those two people.

Host: Well, why don't we plug that Sajam I know. I believe that you're. I believe that. Are you hiring? I saw a post on Search Funder. Is that. Is that for a role within cdms?

Guest: Yeah. No, we are not directly hiring. But we want somebody who will work with us part time to develop one side of our business.

[1:09:04] Host: Okay. Civil Engineers in California.

Guest: Yeah.

Host: Reach out.

Guest: Yes, please.

Host: Sajam Amita, thank you so much for coming on Acquiring Minds. Great to talk to you.

Guest: So good to talk to you. Bye then.