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Will Smith: Today's interview has two key themes. The first is the vision of friends Sarah Chiles and Matthew Ferguson, natives of Aspen, Colorado, who wanted to partner on something entrepreneurial. When they saw the opportunity, both financial and to preserve the fabric of their hometown, they decided to buy a local Aspen business and it probably wouldn't be a one off. They could grow their impact in the rapidly gentrifying town by acquiring other local institutions over time, assembling something of a hometown Holdco. We spend the first part of the interview exploring this vision, its strengths, its potential in other geographies.

Theme two is the acquisition itself an auto repair shop, the only one for an hour in any direction. There's a lot to learn from Sarah and Matthew's first months in the business, including how to recover from the loss of their key man, the shop manager, how to earn the trust of mechanics, putting in best practices to grow revenue, the value of industry, peer groups, decentralizing power in an organization to strengthen it, and much more. I love this tackle shop style business and hearing how Sarah and Matthew have navigated becoming owners of it, But I especially love the larger vision here, a hometown Holdco and the flywheel and purpose that such a model embodies. Maybe that's how you should approach your search. Here they are, Sarah Chiles and Matthew Ferguson, owners of Aspen Total Automotive.

You've no doubt heard about all the changes happening with the SBA program. Well, don't miss this week's office hours with Heather Anderson, one of the industry's leading SBA loan brokers. Heather is going to explain all these changes that affect searchers and acquisition entrepreneurs who intend to use an SBA loan to buy a business. These changes are critical to understand, and you'll do just that by attending this session. Not to be missed, it is today.

Thursday, June 12th noon Eastern. Register at the link in today's show notes or on the Acquiring Minds homepage. Acquiringminds Co. See you there.

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. You know that one of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper. But tech is complicated with tons of solutions out there, so choosing the right cloud platform, CRM, telephony, compliance and cybersecurity, not to mention implementing all that, is a job in itself.

Acquiring Minds Guest Nick Akers knows this firsthand. As a former searcher who now owns ENSO Technologies, Nick has seen the tech challenges searchers face when acquiring businesses. His team at Inzo regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients, drawing from his own experience in the search phase. Enzo dates back to 1989, so this is a company that has managed the tech for hundreds of small businesses over decades.

And one last thing, no long term contracts with Enzo, a big differentiator. Check out enzotechnologies.com I N Z O or email Nick directly@nicknzotechnologies.com and don't forget to tell him you're a searcher. Sarah Chiles, Matthew Ferguson, welcome to Acquiring Minds. Thanks so much for having us. Will thank you.

Sarah and Matthew, you bought an auto repair shop in your native Aspen, Colorado, which is a great story in its own right, but there is a lot to your vision that goes beyond this one acquisition. So we're going to hear about both acquisition and vision. Sarah, let's go to you first. A quick background on you, please. And then Matthew, we'll go to you.

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Sarah Chiles: Yeah, absolutely. Like I said, thanks so much for having us. This is a very cool full circle moment. We learned so much from the podcast. We've interrogated many of the guests, so it's very cool to actually be on here.

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Will Smith: Thank you, sir. So, yeah, as you alluded to, born and raised in Aspen, my family's been here for three generations. This has really been home for a long time. And I fled and went to Southern California. I went to USC for my engineering degrees.

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Sarah Chiles: I studied aerospace and mechanical engineering for both my bachelor's and masters, which is a kind of funny thing personality wise. I did a little stint at Boeing and realized very quickly I'm not an engineer necessarily. I love hard problems. I love tech, but was not an engineer by personality. So ended up jumping more to the venture side of things and found an aerospace and defense venture fund in Southern California, which is where I really started to, you know, find what I was passionate about.

Really loved venture, loved investing in new ideas. But obviously I think Covid was like a reorienting time for a lot of people. I actually moved back to Aspen. Living in Los Angeles during a global pandemic was not necessarily my favorite thing. Having, you know, been born and raised in the mountains and moved back and really got to, yeah, reorient myself and what I was passionate about.

And Matthew and I actually worked together at the venture Fund, which hills start to talk about. But putting pen to paper on a venture career, whether it's starting a startup or working within venture, became less exciting to me. We had many friends and heard the tales of many people having these, you know, tens of millions, if not hundreds of million dollar exits and walking away with just a few million dollars and not much to show for it. So, you know, if you amortize that over the lifespan of a career, of a startup, you're only making a couple hundred grand a year, which is what you could make doing a tech job. So at the same time this ETA kind of vision came into our field and organically I was in my hometown where I was reconnecting with a lot of family friends, small business owners, and they were retiring and we knew their kids didn't want to take over the business.

So it was kind of one of those like, you know, come to Jesus moments where you're like, wow, I've, I've, I'm questioning the career I already have. This opportunity seems interesting and I've like refound my love for my hometown. And like Sarah, Sarah, when you say this opportunity seems interesting. There was a gap there between you being home and recognizing that buying some of these businesses where the owner's kids didn't want them. What was that, that epiphany?

The epiphany was a Cody Sanchez podcast, actually. Thank you, Cody, for filling my funnel. I know, exactly. It's really interesting. Once we heard it, I was on vacation action.

I sent it to Matthew and our brains just didn't turn off after that. Once we realized like that opened up our aperture and then the funnel started to come in of. Okay, how do we backflow this deal Flow. Yeah, so yeah, that was what kind of kicked it off. Amazing.

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Matthew Ferguson: I don't think we even knew that ETA was, was an option until that podcast. It kind of, yeah, it opened up a floodgate of ideas and then your podcast really filled in the gaps we knew as a possibility by that one, you know, rogue podcast listen to. But then listening to you, it kind of like Sarah said, everything was gibberish and now it's, it's art. We're fluent in uta. I've been listening to you for two years.

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Will Smith: Wonderful. Thank you, Matthew. And let's hear a little bit about your background. Yeah, totally. So I born and raised in Aspen.

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Matthew Ferguson: I actually wasn't born here, I was born in New York, but I moved here when I was 10 days old, but absolutely loved growing up in the valley. You know, as a kid, our Parents would just on the weekends say, you know, we'll see, we'll see you on Monday. And we go out and camp and raft and fish. Fish. And so I absolutely loved it here.

It also. One of the beautiful things about Aspen is, you know, it's very rural, but you have a very, like a big urban influence. You have big musicians, you've got the Aspen Ideas Festival. Big, you know, the food, the food festival. So there's a, there's influence from, from the city coming here, but you also kind of have the beauty of the outdoors.

So always really loved Aspen. Went to school at Dartmouth to be an engineer. I realized just like Sarah very quickly that I was never going to be the best engineer. So I kind of pivoted my to taking a lot of different engineering classes. Instead of focusing on mechanical, I took electrical, I took aerospace, I took biomedical just to learn the language of engineering.

And then I also majored in studio art. I really kind of decided my goal was to learn how things worked and how to build things, but not just build anything. Build things that people really want to interact with. So beautiful things. I was going to go and work as a product manager at Google, Facebook or Uber.

And I had a pretty traumatic leg injury, hockey, and had to graduate six months late. So I was kind of came into the workforce six months before the next round of product managers started at these big tech companies, which I was pretty bummed about, but ended up being the best thing possible for my career. I ran into Sarah actually over Christmas and she was working at this aerospace accelerator, venture firm, consulting firm. And I thought it sounded really cool. I was a little bit bored.

I had six months to kill and I ended up actually working as her intern after being friends in second grade. So worked as air intern for three months and then we both were working at this aerospace accelerator for about a year and a half. I then I had my eyes set on doing venture. I loved Inventure. You got to talk to interesting founders all the time.

You're solving all these different problems. But I realized somewhat quickly that I didn't want to just go directly into that. I wanted to get some operational, you know, experience. So I bounced around a bunch. I worked go to market and sales at a German restaurant tech company.

I worked strategy and growth for an augmented reality company. And then I most recently worked in the finance department at a long haul trucking software company. I also did some advising for a deep tech venture firm. But yeah, when we were working that first job, when we were, you know, 22, 23 Sarah and I had always been friends, but we kind of realized we're both extremely curious people and ambitious people. And we built a Apple Note with just a ton of different ideas, startups, properties to buy weird ventures and everything.

And that list actually was called ptsdm. Our plans to steal the moon. We were working in aerospace. It was kind of a tongue in cheek reference to a movie. And now, you know, five, six years later, because we were always ideating together, we kind of came together and made it a reality with this holding company in Aspen.

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Will Smith: How old are the two of you currently? We're both 29. Great. Okay. And I think also in our pre call and whatnot, we are not a couple.

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Sarah Chiles: We're very good childhood friends. And yeah. So it's been fun to navigate this as friends that have known each other our whole lives. You, you met in second grade. Did you go all the way through high school together?

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Will Smith: Same class? Yep. Yep. Wow, that's so great. Yep.

And the Apple Note plan to steal the moon, I didn't catch. I didn't know the reference. It's a reference to what exactly? Despicable Me, actually. Despicable Me.

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Matthew Ferguson: We're not huge Despicable Me fans. It just kind of ended up we were working in aerospace. It was a fun little space. Space. Yeah.

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Will Smith: Space vibes. Coming. Coming back, you know, to a. Now our STM holdings, we typically keep this secret, but it's, it's. It's still the moon holdings and a little bit of that is kind of coming back to Aspen.

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Matthew Ferguson: And it's gone through so much change. Especially after Covid, you know, the people who are, when we were growing up were living here, they were the, you know, the business owners. Both Sarah and I were. Our parents own small businesses here. And then when Covid hit, instead of the big CEOs, the big wealth, you know, private equity people will come out for vacation now they're living here because they can.

With zoom and a lot of the soul. The town is kind of degraded a little bit. They're all wonderful people, but just the, the. It's pushing a lot of the working class, the small business owners out of town. So it's kind of like, you know, we're stealing back Aspen.

This, this beautiful place. That, that is very aspirational for a lot of people. Well, it's interesting guys. You. So you were bound to be partner.

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Will Smith: You were going to partner in something. So point number one and then point number two, you had this plan to steal the moon. Apple Note, ptsdm, in case the audience missed that, because it sounds like ptsd, which is maybe there's an irony there, PTSDM that you considered all sorts of possible things. So I think it's just a testament to the draw of eta. But also ETA and the, in the, in the vision that you have for what you're going to build that we're going to spend a lot of time on that.

This was the winner of, of that long apple note. Pretty, pretty. Exactly. Once it was in our minds, we couldn't get it out. And also I think we recognize in each other like we have very ambitious friends from college, high school, whatever, but they don't have the same risk tolerance that we do.

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Sarah Chiles: And so once we recognize that in each other and we realize how much we can push each other, we're like, okay, this is what we're going to do. Yeah, I mean we, we, we had, we've made so over the years so many decks. We, we made a deck for flipping houses in Denver. We made a deck for raising a venture fund to invest in deep tech. We invested.

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Matthew Ferguson: We have so many ideas. And then this one finally was like kind of the culmination of all of those. It had that, that venture style to it where you can come in and bring in new ideas and grow something, but also had that, you know, hometown feel. It felt really mission driven. And then also just the finance, the, the, the finance, the financials.

Right. Really healthy businesses here. And the downside is pretty capped or pretty limited. But the upside is, is, is huge for us here. Yeah.

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Will Smith: Well, let's have a little bit more on Aspen, not the gentrification of Aspen, which, which we'll also want to hear a little bit more about. Although I think you mostly said it, Matthew, but I've never been to Aspen, but it looms kind of largest as those among the west coast ski resort towns. The Jacksons, the Breckenridges, the Park Cities. But I feel like Aspen was the, the original. I could be wrong there.

But anyway, so, so what's the quick, just the very quick story of Aspen? Why does it kind of loom larger than all the rest? And am I right about that even? I think so. I think we have, we're a little bit biased being from here, but at the end of the day, Aspen's a town of 7,000 year round people.

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Sarah Chiles: It does get up to around 50 to 75,000 at high season. So obviously tourism, you know, is a huge thing here. Aspen is a little bit unique, you know, from the other resorts that you mentioned in that it was actually founded as a silver mining town and it produced the most silver in the country for a while in the late 1800s. So. So Aspen has real history to it that I think a lot of other ski towns are trying to chase and whatnot.

Like our buildings that look historical actually are historical. They're not necessarily facades. It can look a little bit Disneyland esque, but that's because there is like real history here. And so Aspen went through a major depression for a while and then the ski industry started. The population of Aspen was much larger when it was a mining town than it is now, actually.

So it's really interesting, I think, that it has that real history which is what attracts people to Aspen. It's beautiful, it's idyllic. It's all the things too that you. Could imagine what do the following acquiring minds guests all have in common. Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam.

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Will Smith: They all went through the Acquisition Lab, the accelerator in community for people serious about buying a business. But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions, and an active community of serious searchers.

Check out acquisitionlab.com, link in the notes or email the Lab's co founder, Chelsea. Wood Chelseie, then build.com so since we're just on the topic of Aspen, say maybe a little bit more around the gentrification and what you're seeing and the like the dynamic today that you're kind of injecting yourselves into. Yeah, I think like Matthew was alluding to Covid was really the thing that opened Aspen up. I moved from LA back to Aspen and a lot of people did as well and started to actually like put down roots here. And I think if you haven't lived year round in Aspen before, you're in for an awakening.

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Sarah Chiles: Like there are very hard mud seasons and down seasons and it can get, it's a small town at the end of the day. So what happened is a lot of people tried to export their lifestyles of New York, Miami, Los Angeles, San Francisco to Aspen. So a lot of the restaurants started to change hands. I know that people were trying to adjust the school systems and whatnot and make it, you know, all the benefits, have all the benefits of the city in a very small town. And that was when just pricing became unbelievable.

You had people that were actually, you know, somewhat private equity backed or larger restaurant groups come in with real capital that could afford to lose in the short term for longer term gains. So we've seen a lot of that happen and I think that's what ultimately pushed out a lot of small business and what made a lot of, like we said, our friends, parents who owned the small businesses just like throw their hands up and be like, I can't do this anymore. I can't pay what these restaurant groups can pay. I mean for a while that Dishwashers were making $50 an hour here. So you can imagine what that does to a community to, and the trickle down effects of that.

And you know, what cost of living, you know what happens to cost of living. And a lot of people working remotely can pay a lot more for rent and just every, everything has kind of started to grow. Yeah, I think. And on that, you know, one thing is, you know, as locals there's always this kind of local versus tourist, you know, stigma. But, but we absolutely love the, the tourists.

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Matthew Ferguson: We love people coming in and, and change is, is, is inevitable in these towns. It's, it's always going to change. We're not trying to fight change per se, but you know, kind of going back to that history there, there's a lot of other ski resorts that were built as ski resorts and they were built as a place as a, a vacation destination. Whereas Aspen was a town far before skiing really came here. And so part of the charm was it was, it was, you know, you come to Aspen, you don't want to go to the same stores you're going to in LA and New York.

You want to come and experience, you know, this, this local culture. It was, there's all these bars where it was half billionaires, half total ski bones. And that was, it was really fun for both sides. And we've kind of lost that a little bit in this. Yeah.

Trying to export the lifestyle and copy paste things, you know, things from New York and LA to, to Aspen, it's pushed a lot of the blue collar, not even blue collar, but you know, the working class, you know, 30, 40, 50 minutes down the road. So there's a lot less mixing going on. But, but there's still hope there, there's people still want to be here. That's the reason we're buying businesses Here we're, we're trying to buy businesses and give our friends who want to move back to, to Colorado a platform to come and build a career here. You know, we can, we'll go into this, I think next.

But for small businesses, it's a very unique ecosystem in that there's basically one of everything. There's one auto shop, there's one roofing company, there's one this and that. So there are many monopolies with wonderful buyers, you know, wealthy people who at the auto shop, they're going to get their cars fixed up because they want to be. They have the money to prioritize safety and also because it's so small. And Sarah and I have been here for so long, we know every investor, every customer, every business owner.

So when we're down there, when we're down in work in the front desk of the shop, we're hugging 75% of the people that walk in. So it's a very, it's a great place to run a business for a lot of reasons financially and just, you know, word travels fast here. But for a long time, nobody was coming in with, with a local first mindset. Yeah. You know, I would have thought that Aspen, a lot of the dynamics that you're talking about would have long since happened in Aspen.

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Will Smith: But I guess, I guess the linchpin was, or the pivot point in this story was Covid, where the billionaires decided to actually live year round there as opposed to before. They would just be in and out and so. Right. So changing the school systems, permanently pushing up rents. Got.

Yes.

And I also assume everything that you just described afflicts to varying degrees other similar towns in the, in. In the mountain west, but probably around, probably beach towns and so on. Places that were. Yeah. So this is really a microcosm of a larger trend.

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Matthew Ferguson: I'm sure you're seeing it in Hawaii or seeing it. Yeah, yeah, exactly. Exactly. And those billionaires didn't go home because of course, Covid, we heard everybody migrating out of the cities. But then there's also been the follow on story that.

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Will Smith: Well, actually, no, I want to live in the city. I, I has that not. So there's not. Hasn't been somewhat of a retreat from the billionaires. They.

They've stayed put. They've stayed put. I mean I'm sure there, there's some attrition, but they especially here. I mean if they have kids that are going to the schools here, ours, we went to a public high school with a ski lift from the cafeteria to the mountain. Like it's pretty hard to.

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Matthew Ferguson: To step away from that and move back to a suburb. We also do have an airport that has fl, you know, San Francisco, Chicago, Denver all the time. So it's pretty, it's pretty easy place to get it out of. Yeah.

So yeah, they've stayed. I'm. I'm sure there's some people who have moved out but the population has grown for sure. Fascinating. Okay, so you decide to do this thing.

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Will Smith: It's now number one on your, on your PTS team list. How does the search or the thesis or the vision take more well defined shape? Yeah, it started pretty organically like we said, kind of networking with a lot of those family friends that owned businesses that we knew were already actually looking for an exit. Whether that was a super formalized process or not, I'm not sure. It was more of a discovery process.

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Sarah Chiles: And in that discovery process we did connect with a broker here. There's only a couple in this town. We actually connected with both of them. One we were never going to do a deal with that was absolutely clear. And then the second was a very serious, well seasoned broker who had a great, you know, number of listings and of high quality too.

And it was clear that he had done this many times. So we truly looked at every one of his listings. Went down the electrical contractor route for a little bit. Ended up being too small for us. And actually this, the auto shop was the second one we looked at with him originally.

The owner would not sell the real estate separate from the business and with interest rates where they were, we just couldn't make the math work. So we actually started the diligence of the auto shop in March of 2024 and we didn't close until November 8th of last year too. So it was a long process. I think we had two kind of headwinds against us. One was yes, that he wouldn't sell the real estate separate from the.

The business. And we were going down the 7A versus 504 route and just, you know, with interest rates being at 8.5% on the low end of a 504 loan and we can talk about, we ended up going the 7A route for just the business. We just couldn't make it work for a long time. And the other head when we had was our age and like being taken seriously and whatnot. And I think just having owned one business now, it's.

It's actually kind of a non issue now. And like Matthew was alluding to earlier too, like people see what we've done with this business. It's like a very good public display and marketing engine of not just Aspen Total Automotive, the business here, but also what he and I are capable of and how we are as business owners. So, yeah, that's how we, we found the business. We put a lot of diligence into it and a lot of kind of negotiation.

I don't know if there's anything you want to add, Matthew. No, we've, yeah, we negotiated a lot. We negotiated the price down from basically 2.1 million to, to 1.5 well before. Before we get into the business itself and the terms, because we want to spend time there. I heard you say, Sarah, that the electrical contracting business you entertained initially was too small.

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Will Smith: So what were some of the criteria, the financial criteria here? And in fact, there were, there were actually a couple other well defined criteria that you had. So if you'd share those with us. Yeah, so we, we had a checklist of, of six items that we, that we went through. And actually, we'll talk about this in a little bit.

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Matthew Ferguson: I'm really glad that it was six items long because if we had just chosen one pillar to go to, to go for, for instance, our number one was is there a second in charge or one of our friends that we can bring into that that's an expert in, in the field to run the business? The auto shop definitely had that. Had we pivoted everything on that, we would have, you know, been dead in the water because our operator we had pinned to run loose, run the shop for the next 15 years, ended up leaving after two months. Foreshadowing there. Foreshadowing.

But yeah, we were looking for some fetal foreshadowing. Yes. Yeah, but we were looking for companies primarily between 502 million in SDE. I think we kind of realized. We, and we.

It's, it's definitely been reinforced as we bought a business that buying a little bit bigger is a lot better. If you buy a company that has two $200,000 of SD, it's going to be the same amount of work as something with a million of SD. And if you have three employees versus 15 if one leaves, that's a third of your company disappearing. Whereas if you have 15, that's 1 15th percent or 1, 1 15. And it doesn't affect the business as much you have, you have backup.

So at first we were looking really small. We were looking at things that would make us each $30,000 a year. We're looking at a couple small businesses before the Electrical company, but realized, you know, we were going to commit a lot of time, a lot of effort to this. We might as well go a little bit bigger. And I think we'll even go bigger in the future.

But yeah, so our pillars were essentially, is there a good operator financially? Has it cash flowed for a long time? Is it a cornerstone business that if the community lost, it would be really missed? And the kind of. On that is it.

Does it have somewhat of a monopoly? We also had, you know, does it have good employees with long tenure? It's somewhat hard to hire here. So that was a big one for us. And then also is there a lot of modernization we can do?

Can we add CRMs? Can we add marketing? Can we, can we modernize the place? And is there, you know, maybe we're buying something at a 3x multiple, but it's. We really view it as a 1.5x multiple because we can double revenues pretty quickly.

But just a few lovers. Yeah, great. Let's double click a little bit on those. Whatever it was 4 and 5 the. Or 3 and 4.

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Will Smith: The local monopoly or if it, if it went out of business, would the community miss it? Expand on that, please. Yeah. So we're for instance, the auto shop. We're the only auto shop within 35 miles of town.

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Matthew Ferguson: There is a. There is technically an auto shop across the street, but they just do detailing. They do tires and breaks. Whereas we have a full. We've got six mechanics, three B techs, three A tech.

So we can, We've got mechanics, some of the best mechanics almost in the country. They can build cars from scratch. They can fix anything. We, we. We see cars.

You know, we see a bunch of. We do 90% of the enterprises in town. So we do a lot of trucks for property manager stuff, but we also do Bentley and Modificate modified Land Rover Defenders, vintage cars. So we're the only people that can do that. We can.

The only people who can work on those vintage cars for about an hour and a half drive. So. Or an hour drive. It's also Aspen's very small and we're ready for as from the. The airport, which is called the airport business center.

It's the only space that's zoned as light industrial. So and it's fully developed. So if anybody wanted to buy to build a. Another auto shop, they'd have to buy something that already exists. A building, knock it down, build an auto shop.

It was just. The prices would be astronomical. So we're really the only game in town and only game in town for the foreseeable future. And there's a lot of other companies like that.

It's not a huge market so there's not much incentive to come in and start up a new roofing company, new framing company or steel company. So there's kind of one of each and. Well, especially when these, these zoning barriers to entry are so high. Exactly. It's also just, it's, it's such a tight knit community.

You know, word travels like wildfire here. You know, we say something to somebody downstairs and then all of a sudden they talk about on a pickleball court and the entire town knows about it. So with that also, I mean you kind of get these customers who are going to be your customers, business customers for life. So it's pretty hard town to break into if you don't have a history. Yeah, I think, I think Matthew's like getting to a good core part of our thesis in general too and like why we chose Aspen, why we chose our hometown.

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Sarah Chiles: It's because we're trying to start this flywheel of invested in by locals, run by locals, you know, whether that's us running but also like having operators that are local, keeping local business locally owned. And it's really like, I think Naval Ravikant was like a big, you know, motivator for us, invention, whatnot. But playing long term gains with long term people because you know this is like we're long on Aspen for sure and we know that there are the right people to continue this flywheel. And like Matthew said, it happens organically by just seeing customers down here and whatnot. But that's like the vision that's kind of allowing us to continue to persevere because yeah, there's definitely challenges that we.

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Matthew Ferguson: And speaking with that. Go ahead, Matthew. I was going to say speaking of laundering games, you know there's that one part where we've started work. You know, we have this shop. Our biggest customers are the property managers for any, any company, any business we work with.

We're going to be going through the property managers. So we've built really great relationships. But we've also have been in the part of the community for 29 years. So we already have a pretty good head start on those long term games. Well, your kind of Aspen or bust North Star may kind of neutralize unpacking this but let's, let's unpack a few things there.

[00:32:29 - 00:33:29]

Will Smith: Just on the, on the monopoly thing, we like this word pricing power. On the other hand, when I hear one business in a market I also hear maybe not a great market, small market. I mean, you guys are former venture investors. You know, it's all about TAM in Ventureland. You're not playing adventure games.

So, so it's, it's a bit of a, a non analogy, but still it's like, are there not other. You've given barriers to entry reasons why there aren't other roofing businesses or, or auto body shops. But perhaps also it's just. Well, I guess you did just say it, Matthew. It's, it's too small a market and therefore organic growth is capped.

And you might say, well, that's why we're buying multiple businesses. But I think it should be acknowledged that some monopoly can be good. Monopoly is good pricing power. But it also might, it might indicate a very small market respond to that. Yeah, so I, I'd say kind of two things.

[00:33:29 - 00:35:37]

Matthew Ferguson: I think saying there's just one of everything is a little bit hyperbolic. There's, there's, there's a couple, you know, a couple framing companies, a couple here and there, but there's typically kind of one main player. I think that our, these, we do see a lot of growth, right? We're, we're in a small market, but we're in a very powerful market. Our, our.

Without changing. We haven't upped the prices, really, we haven't. We're not trying to price gouge or anything, but because of our customer here and their willingness to spend on safety on their vehicles, we probably by square foot have one of the highest grossing auto shops in the country. We also are part of a, of a, of a valley that takes about 45 minutes to an hour to drive down with I think like five, five towns. So we're kind of spacing our businesses in Aspen and then either maybe acquiring Down Valley or expanding Down Valley.

I think one thing that I, you know, this is obviously longer term, but one thing, one idea that I really like is a lot of people are expanding into Aspen. They're coming from York, Denver and you know, opening up in Aspen. I'd like to expand out of Aspen, build our centers here, build incredible brands here, then maybe open up in Vail, maybe open up, up in Denver Breckenridge and expand out where that, you know, the financial upside right now is being exported out. People can't live here or build careers here because all the money is going to HQ in Chicago. Whereas if we have HQ here, we can kind of pool money together and allow people to, to live in a, in a, in a beautiful place.

But yeah, it's definitely a smaller market. I will say though, even though it's a tiny town, we're the only auto shop. It's kind of shocking the amount of times I'm on the gondola and people don't know that there's an auto shop here. There's no marketing done for 49 years. So they're driving an hour away to get their cars fixed when they could for $20 an hour more.

Do it, do it in Aspen. Yeah, I have a couple of thoughts out on that too. I don't know how to quantify the GDP of Aspen. I'm sure it's a googleable thing, but to give some sort of analogy here, the annual operating budget of the city of Aspen is $230 million a year, like through taxpayer revenue on mostly real estate. Obviously there is real commerce happening here.

[00:35:37 - 00:36:36]

Sarah Chiles: I don't know what the per capita is. I think that's about $40,000 a person here. So, you know, that I think is reflective of just the general commerce that happens in this town as well. And then like Matthew was saying too about, you know, a lot of people just not knowing that we exist. The same traits of most boomer businesses where it's low tech or it's, you know, there's not much marketing effort put into it exist as a theme in Aspen is in general too.

It's a very kind of traditional small town thing. So to come back and bring a lot of these tools, I think that that's what Matthew was referring to in the beginning of like the uncapped potential that we have too. The reach is really incredible and I think unique to potentially most resort towns, to be honest. Yeah, I think, I mean, you know, because there was somewhat monopolistic, there's not much incentive to change and to update businesses, which is one of the reasons there's my business falling behind. They're great, necessary businesses, but other people are importing much more modern versions of them.

[00:36:37 - 00:37:05]

Matthew Ferguson: So it's actually kind of alpha for us where we, we can go to these businesses that everybody knows, everybody loves, but just with a few tweaks, we can. We've already seen it in six months. We've, we've absolutely blown past our revenue goals just by adding a couple small tweaks that seem like common sense. But when you're running a business for 49 years. It was actually.

It was 40. This business was run for, I think 43 years by one owner, transitioned for five years and then we bought it. But you kind of get into your. Into Your rhythm and don't, don't update things. Sure.

[00:37:06 - 00:38:42]

Will Smith: Well, we're going to sink our teeth into what these levers pulled have been. I'll also just say and we talked about this on the pre call the Chenmark idea of a tackle shop. And for the audience that is a. Imagine a fishing hole somewhere and at the end of a dirt road and there's a tackle shop there that serves all the people who go down there to fish and very small market but a total monopoly and an annuity business. The, the, the people keep coming and they keep using, have to, have to and keep using that one tackle shop year in, year out.

And so it's just as steady and reliable and protected its market position protected as can be. It's not going to be a growth story, but it's going to be a forever story. And I love that framing and that's of course one that that often gets lost which is why Chad Mark talks about it because so often we, yours truly are just growth, growth, growth, growth, growth. It's a fixation on growth. And not all businesses have to be grow like super growthy stories.

And in fact, yeah, I feel like a lot of your targets here could be tackle shopping type stories. I think we're operating very similarly to chenmark in that we have such a long term vision and time horizon here that we don't really care about the short term, you know, gains and whatnot. And so everything we're doing here, whether it's investing in more capex or more personnel or whatnot is because we see a larger vision and our time horizon is much more extended. Yeah, I think, I mean even like you said, permanent. I think we see ourselves as permanent capital.

[00:38:42 - 00:40:05]

Matthew Ferguson: We're not coming in here for two, three years pulling all these levers and selling it for some crazy multiple. I think we see our on a business by business exit as starting to sell back some equity to our key employees. We want our guys at our front desk, our presence, our shop managers to have equity and, and I the idea of them putting their kids through college through the auto shop is the most exciting thing for me. I mean that's kind of how we were, how we were raised. So we are permanent capital.

And yeah, we're excited about the growth right now. Not because we want a hockey stick growth it we're capped by square footage here but we are excited to get it to its highest potential, grow it to where it should be operating at, at max efficiency and then just putting it on autopilot and letting it do that for the next 20, 30 years. And then our kind of personal growth comes from doing that a bunch of times. Putting it together in a holding company, allocating up capital back to certain places and yeah. Using the holding company engine as, you know, along a long road trip.

Right. Instead of just a quick sprint race. Such a cool vision. I love it. Anybody else that from this, this ecosystem that you were inspirations or that you followed?

[00:40:05 - 00:40:11]

Will Smith: We've talked about chenmark. Yeah. I mean I think all the classics. Like Brent B. Sure was a really good model for us.

[00:40:11 - 00:40:28]

Sarah Chiles: We loved like Tiny as well. I think just the Holdco model became really compelling to us. And then, you know, I know there's a gentleman in Park City too. And so they like bring that local aspect back is important. Having some element of altruism in it as well.

[00:40:28 - 00:41:02]

Matthew Ferguson: Yeah. There's also. This is just one kind of random thing to touch on. But when you're talking about the Tactical Shop, I think that. And kind of going back to also this phenomenon of gentrification happening in a lot of other places.

Our primary focus by far is Aspen and then kind of growing out slowly from Aspen. But I think we're also open and we've thought about the idea of if we know somebody who's lived in Jackson Hole forever, who's really ambitious, there's somebody who's lived in Kauai for their entire lives and wants to do this. Like we would love to kind of help support that and build this kind of protecting these local jewels all around the, all around the country. So. Yeah.

[00:41:03 - 00:41:55]

Will Smith: Yeah. Well, you, you mentioned Jackson, you mentioned Hawaii or Kauai, but. And those are resort towns. So you're thinking in, in kind of a resort town framework. But this probably the, the, the core, the core dynamics here probably relate to almost anywhere that for whatever reason is, is kind of turning over small town and local businesses are going away which of course is, you know, it's a story as old as Walmart.

Right. But maybe there are, maybe there's a new generation, there's an interest in eta, there are Covid dynamics. And so this is a moment in time where, where young people can come in and build something from that, from that churn or from that threat. But point is it doesn't necessarily have to be a resort town, but maybe that's where the dynamics are most acute. Exactly.

[00:41:55 - 00:42:29]

Matthew Ferguson: And I think that we just kind of default to going to resort towns because that's what we know best. There's a lot of weird nuances in resort towns and seasonal turnover and Everything that we've learned to deal with and are well accustomed to from growing up in one. But yeah, we're open to going anywhere. If you ask owners in the ETA and search community which insurance broker provides highest quality work, great outcomes, and has a practice dedicated to searchers and acquisition entrepreneurs, one name comes up again and again. Oberly.

[00:42:30 - 00:44:34]

Will Smith: Oberly Risk Strategies has worked with hundreds of searchers over nearly a decade and is in fact led by a two time successful searcher, August Felker, which makes Oberle a specialty insurance brokerage for searchers by a former searcher. And if you've got a business under Loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. An easy, no risk way to get to know August and the team at Oberle to take advantage. Check out oberle-risk.com that's o b e r l e-risk.com link in the notes. You gotta like living in a small town.

You've made it very clear that you like living in Aspen. But this thing about you, I mean, you guys are on a stage. There is now a spotlight on you. You say something, I mean, probably, you know, the guy who runs the general store already knows that you're sitting in a podcast interview right now. Yeah, no, but, but it's kind of like you're, you are putting yourselves out there and the louder you talk about how this is kind of a pro Aspen thing and I, and I don't doubt your intentions, but the more you're going to be held to that and the community is going to be invested in your success.

I'm kind of, I'm reminded a little bit of I did an interview last week with Christine Traylor, who bought Swan House, a gorgeous bed and breakfast right in the Dupont circle neighborhood, Washington, D.C. and, and the neighborhood really knows this property and cares about this property and expresses opinions about what she does with this property. And so there, and so there's a little bit in these business when, when we all like getting away from the impersonalness of big business to, to the real personalness of small business. But it also does come with the community sometimes not recognizing boundaries, not not respecting boundaries and feeling like they have a vote in what you do. Is that just the cost, the price of admission to, to playing this game?

[00:44:35 - 00:45:18]

Sarah Chiles: Oh yeah. If you don't think we hear something every day about how Aspen's changing and all prices and it's just, it's going to be a constant here. And so that's just A pill we had to swallow from the beginning, knowing that there will always be criticism. The only thing constant in Aspen is change and locals complaining about it. And I think that it's interesting.

I mean, we are the first of our generation doing this. And I think we have, you know, real reason to be doing it because we earned our chops. We were born and raised here. Our family's been here forever. And so I think it's at the end of the day, we're trying to create the Aspen of our generation or of our kids generation and just building what we think that ought to be, but with like a real local flavor to it.

[00:45:18 - 00:46:23]

Matthew Ferguson: Yeah. And I think that, you know, it's not like we're peacocking, saying, oh, we care about this community, we genuinely love, love it here, we love the people. And, and yeah, it's every dinner party, somebody's saying, oh, you should do this, you should do this. So what about this? And you just kind of, it just kind of comes with the territory, I think.

Also put. But on that also right before we were doing this, we were talking a big game and everybody was joking like, oh, you should buy my business someday. And now those jokes are not jokes after. You know, we get so much feedback about how well the shop is running right now and the team we've established here and we've gained local trust. So I think it just, it goes a long way.

You know, we were living in LA before this for about 5, 6 years and thinking about doing it there, but we could absolutely do it there. But just, you know, the upside of if this first auto shop went really poorly, then it would be really, really, really hard for us to do a second job. But we just kind of backed ourselves and hoping that at domino effects. Back yourselves into a, Into a corner. Corner of performance.

[00:46:23 - 00:46:32]

Will Smith: Is that what you were going to say? You know, I'm actually reminded of, of Naval Ravikant again, one of his little aphorisms is about.

[00:46:34 - 00:46:43]

Matthew Ferguson: What is it? It's something about like being the personal brand. So often I'm not getting it right, but it's. It's a good one. It's really travel or it's really.

[00:46:44 - 00:47:33]

Will Smith: It really impacted me where so often business people are trying to create businesses that are. And we talk about it here, that can run on their own, that aren't tied to the personal brand of the, of the protagonist, of the founder. And he's like, no, be. Lean into your own. The, the strongest brands, the Oprah's, the Donald Trumps, the whomever, they have completely leaned in to their brand and their, their brand is the business that's not something to run away from, that's something to embrace.

And so it's a little bit like what you're doing. Yeah. The question, our challenge now is how do we do that at scale and multiply ourselves across every business and still feel like, you know, we don't necessarily want our faces on it, but at the end of the day like we are kind of what's selling too in this. So. Right.

[00:47:33 - 00:48:56]

Matthew Ferguson: We'll see. I think the dream is, you know, if, if we buy, eventually if news breaks that we buy another company, the town's excited and they're expecting this kind of step up in customer experience and branding and everything. But I think that you also tie it where we have somebody at the auto shop where there is a face or two at the auto shop where people just absolutely love and trust that person and they think that they're really the owners and hopefully they are, but we give them equity and each place going to have one operator that's really a, a face of the business. But then everybody knows it's associated with us so they're kind of twofold. But it is, you know, it goes back to branding.

Nobody was really caring about branding in Aspen before. I think one other, while we're just talking about quotes, there's a long term game playing long term games with long term people. There's a personal brand and this isn't neval, but kind of in the same thing. And going back to our mission is. I, I honestly don't know if it was Josh Wolf, the VC who said this or Abraham Lincoln.

I don't know. It's all over the place. There's all these different variants of it, but it's the best way to predict the future is to build it. And we really have this vision for our friends who are successful, ambitious, eventually having kids and moving out here. And so we're trying to build this place that we see being a beautiful place to live and raise kids.

And yeah, we have a vision for Aspen and we want to be really proactive about that.

[00:48:59 - 00:50:19]

Will Smith: Fantastic, guys. How exciting. All right, let's get to the business. Without further ado, let's, let's hear about it. So tell us all about the business, please.

Including numbers, if you would. Yeah, absolutely. So like I said, I mean it's, it's not worth going into the real estate separate from the business. Eventually we wore him down enough to the point where he would sell us just the business. Well, but, no but Actually, Sarah, please.

Why, why was that so important to you? Why did you not want the real estate? Because it's been an education for me that, that people will say you're not in the real estate business, you're in the, whatever it is, you're in your case, the auto repair business. So if you own valuable real estate in your business, you're acting as if that's the optimal use of your resources because if not, you should sell it and divert and deploy that capital into things that can the business that you know. On the other hand, first of all, that alone is a debate, but, but particularly in your case where there's so little real estate to go around, it's even more strategic in your case to own real estate where it's set, which it, where it's so, so scarce.

So. So say more about this decision to just really, really, really not want to. Buy the real estate. I mean, don't get me wrong, we definitely wanted to. It was a factor of interest rates, you know, down payment and all of those things.

[00:50:20 - 00:50:57]

Sarah Chiles: Bearing in mind, yes, we are in Aspen, we are paying Aspen real estate prices. So it's a 5,000 square foot auto shop and he wanted at least $5 million for it. And since we bought the business, it is now listed at 5.8. So yeah, it's a huge number. It's a huge thing to tackle in general.

And we just couldn't make the math work with what we wanted to raise the amount of equity we wanted to retain in all of those things. So yeah, ultimately we just, we just couldn't make it work. At the end of the day, it's a true matter of math. Yeah, yeah, yeah, we do have a. I mean we would have absolutely had to try to buy the real estate.

[00:50:57 - 00:51:26]

Matthew Ferguson: We have a really great 20 year lease here and eventually we would, if we can kind of get to the right, right price, we'd absolutely buy the real estate. I think there's, there's a lot of advantages to it. But then at the same time, if we don't, like you said, that capital instead of putting into an asset that'll pay you back every, you know, 10, 15 years, we're making our money back in, in one to three years on the businesses we're buying. So yeah, just going to. We had an advisor who kind of, we serendipitously met and he ended up being an investor in the shop.

[00:51:26 - 00:52:08]

Sarah Chiles: But he very objectively put it, would you rather make 500k on a $1.5 million asset or 300k on a $5 million asset. It's not, when you put it that objectively, obviously there's some work into business ownership. But if, if you, we can really do what we say we're going to do and implement these systems and make the business relatively hands off, then yeah, we take that all day. I think also this is kind of alludes to the next point of how we actually ended up doing the deal, the finances and everything. But we also, I've been working in for tech companies for the past, since, since college and you know, kind of somewhat break even salary and all my, all of my, all of my net worth is in, is in kind of long term equity there.

[00:52:08 - 00:52:42]

Matthew Ferguson: So. And same thing with Sarah. So we didn't have the capital just to put down a down payment because we wanted to. We also, you know, didn't have money from, from our families really. They helped, they might give me 10k to help with some lawyer fees at the beginning that was, that was really it as an investor.

But we didn't have just the money in our bank to take a shot on the real estate. We had to be really targeted with where we were deploying our capital and then also where we were lever, you know, leveraging ourselves. Yeah. Did you guys entertain a sale leaseback? I'm curious.

[00:52:43 - 00:53:42]

Sarah Chiles: We did. I think it was important for us. I mean really the vision was like, okay, we'll buy the business, we'll stack, you know, our, stack some cash in the next two to three years and buy the real estate. And we're hoping that plays out. We didn't think that the former business owner would list the property, you know, publicly, which it is now we have photographers coming today, unfortunately for them to list it.

But I think that at the end of the day he's asking too much and we're going to stick to our guns and say this is what we think it's worth and give us a call when inevitably you don't sell it. So you considered a sale leaseback and then didn't pursue that very far because ultimately you do want to own the real estate. The numbers of the business, please. Yeah, so it was originally we got the purchase price down from 2.1 to about 1.5, which was a 3x multiple, is making about 500,000 in SDE pretty consistently. It was actually like 475,000 but roughly 500.

[00:53:43 - 00:54:04]

Matthew Ferguson: And since then we've only had it for six months. But we're definitely on track to, to, you know, substantially increase those SD and revenue numbers. Oh, it does. It does 2.6 in top line revenue. I think we're, we're well on track to go a few hundred thousand past three million this year.

[00:54:05 - 00:54:30]

Will Smith: Fantastic. Yeah, we, we, we bought it at 1.5 but then we raised money at a 1.72 million project cost. You know, that include working capital, closing costs, etc. How much working capital did you put? I think, I actually think this is important to double click on because I know that like we were trying to, you know, we listened to Acquiring Minds episodes to get as much out of it and maybe there's a gap here.

[00:54:30 - 00:56:08]

Sarah Chiles: We didn't know how to structure. We did a very self funded search. So we raised 20% at a 1.5x step up. So we ended up selling, you know, $450,000 worth of equity which I think is pretty favorable for us actually. We had a, you know, a pretty tight investor pool.

I know that a lot of funds and whatnot are expecting the 2x equity step up. So for those who don't know a multiplier on the equity that's put in by investors. We worked with Kristen from Exos now Port 51 and they, you know, were great at helping us structure things and the amount of working capital we should put in. We ended up getting 135k worth of working capital on it which you know, in hindsight, thank God we bought the business when we did, which was at a super high season. But we went straight after that into three months of, of true like money losing months.

So we're learning the seasonality. We got super lucky. We haven't touched our working capital. But if that was mistimed, it's very important to like have some real reserves there for sure and to be able to ride out, you know, that seasonality that we're talking about in resort towns. And also shout out to Matthias too.

We used him as the loan broker who introduced us to Kristen which was an awesome experience. Yeah, we loved our team so much. We had one call with Matthias. We talked to so many banks that we didn't have the net worth at all. Everybody, nobody locally understood it us now I think they do now that we've done this once but talked to Matthias and he kind of gave us a few pointers on how to structure everything and then introduce us to Kristen who has a daughter who snowboards and they compete in Aspen.

[00:56:08 - 00:56:19]

Matthew Ferguson: So there's an immediate connection there and they were just wonderful. We also, you know, we work with, with Apple Tree for our county. They're wonderful. SMB. Love the Acquisition.

[00:56:19 - 00:58:06]

Sarah Chiles: So we kind of did the, the cookie cutter one, but it ended up working out great for us. Great, super guys. And that's Matthias Smith, the loan broker who introduced you to the ultimate lender that you used. Yeah. So let's hear how did, how did it go once you got into the business?

Yeah. Let's hear about the transition. It was obviously younger people stepping into a blue collar workforce. We were pretty scared to death on day one, to be honest. We spent a lot of time over preparing and how are we going to, you know, show our personalities and show that we care and whatnot.

And I think that you can't prepare for that, to be honest. It was intimidating. And the way that I think we ultimately, you know, we're able to make it through that is just showing up every day, being the first ones there, the last ones to leave, getting to know the guys. Everybody has their own personalities and what's important to them. And it's not necessarily, you know, making the most money.

It might be getting acknowledged for the work they put in. This is a very like skilled trade, obviously. And so if you're not getting the recognition for your skill level, I think that can start to wear on guys as well as well. Yeah. And I remember distinctly, I think I was driving to work, listening to an Acquiring Minds episode.

And I think this was probably in December, maybe early January, and just being like, you know what? I don't think we're going to have a fetal position moment. I think we're, I think we're good. And I think maybe one thing we didn't touch on was that there was a strong operator who had been here for six years. He was really the face of the business.

And that was one of the main motivating factors for buying the business. We're like, no problem. Matthew will keep his tech job, which we didn't talk about all kind of work part time, but really we've got this guy. And so we. So.

[00:58:06 - 00:58:22]

Will Smith: So your plan was to do this as a side thing? Yeah, it was going to be, you know, our main thing, but so we could keep as much money in the business as possible, reinvested. I was going to keep a tech job that was partially remote in San Diego. Was going to be back and forth. Sarah was going to take the sal.

[00:58:22 - 00:59:38]

Matthew Ferguson: The full salary because she was living here full time. And the, the, the goal was to do that so we could keep as much money in the bank so we could do acquisition number two as quickly as possible. A lot of things happen now we're Both full time here and honestly could not be happier with that. I think, I think doing it part time just. It didn't feel right.

I think we both wanted to back ourselves and there was a lot of kind of not miscommunication but Sarah was here every single day. I was in and out and we're equal partners and I wasn't showing up equally. And so I guess we'll kind of go into the field position a little bit. But we had. Everything seemed perfect and then we had this oh, shoot.

And it was really scary. But it allowed us to really reshape the business kind of in the image we wanted it to be reshaped. It was kind of. Eventually we were going to kind of creep towards this goal of how we wanted the shop to look like, but we were forced to just kind of do it ourselves. We went from having an operator and not really knowing much about the business to running it purely by ourselves for a few months.

And now we have an absolutely incredible team. We've changed some positions around. We're both here full time. Yeah, a lot has changed. So maybe continue with the.

[00:59:39 - 00:59:50]

Will Smith: The nitty gritty of the story of what happened here. Yeah. So things were great for a while. Obviously guys, as they hit the end of the year, have some accumulated vacation and so our operator asked to have two weeks off. He's.

[00:59:50 - 01:02:21]

Sarah Chiles: He's a service advisor mainly kind of front of house face of the business guy. And he had run the business for six years and had allowed the former owner to be mostly hands off. And it was great. And he. We thought he had an employment contract and he wanted to stay and all of those things.

He took two weeks off during Christmas at which point Matthew and I had to. We're the only ones and we had to jump in and kind of attempt to field people's questions about their cars and whatnot. And you know, we did the best we could at a pretty busy time. Still, when he came back from the holidays, it. Something had completely flipped and who knows what it actually was.

I think a personality of a business will always change when there's ownership change. But he, at the end of the day, he had two young ones, two and six, and he didn't. He commuted over an hour every day. He didn't see them throughout the week. That was the reason we were told.

And he ended up leaving. So that was incredibly. Yeah, that was when I didn't sleep for 48 hours. We stepped into an industry that while it has a simple business model of, you know, we're a Factory of parts and labor and that's it. And you know, this is what's wrong with your car.

We'll fix it and it'll go. There is a lot of nuance to knowing and interacting with customers and explaining what's wrong and being the middleman between the mechanics and the customer at the end of the day. So steep learning curve for us. You know, this is a, also a complex system that we run with the lifts and the amount of inventory and all of those things. And so it was, it was quite a transition.

He did give us three weeks, which was nice, and we ended up hiring some great guys and we made it through. But I think that we spoke with Adam Markley who, you know, obviously is a guest of the show and whatnot. And I think that this is not an uncommon thing in businesses. And I think that like Matthew said, you can't hang your hat on one trait of a business. Those six things that we outlined have to be present going forward too.

Um, and potentially it was meant to be. I think that, you know, it, we have enough distance from it now to be like, okay, we made it through and you know, it's, it's probably for the better. Yeah. I think one thing also is, you know, it's, it's a very common theme and this is maybe a hot take, but everybody says, you know, for the first six to 12 months you shouldn't do anything with the business, let it run. And we heard that and we wanted to make a couple small tweaks because there was just some low hanging fruit that wasn't going to change much.

[01:02:22 - 01:04:19]

Matthew Ferguson: We have changed just about everything now and it has been, but we've just communicated with the team. We're extremely transparent about everything. Ask them about the pros and cons of switching and if they have any ideas, they come to us or we re implement them. I think having that previous operator, he was the spoke, everything went through him. Without him, the business couldn't run.

And we've, you know, you tear that out, everything kind of crumbles. So we were able to kind of give everybody a little bit more, you know, ownership over their particular role and build a system where if anybody's sick, anybody's out, this business is still going. It's all system based. Everything can be picked up, everything's tracked, everything. Yeah.

And I think the guys feel really good about it. We've had some internal feedback that people just feel better here than they ever have. It's really like, it's, it's, you know, we're intimidated coming in working with these mechanics and they are family now. Like, we absolutely love these guys. They're the most interesting and smartest people in the world.

They, they're, they're total geniuses and just good guys. But we also, yeah, basically the whole thing was kicked out for me underneath us. And because we're able to build it back up, we feel really good about it. We have. We found two guys.

The way that the hiring had worked is there was two people up front. We had the main operator who knew everything and then they just kind of hire somebody who wanted work. They didn't know anything about cars, but they were kind of a warm body to pick up phones and stuff. And we've gone back and hired two people who have extensive auto experience. They went to school to run auto shops, they worked at the local racetrack.

They're really good friends. They're young, they're hungry. They, you know, one just got married out here and wants to be in the valley for a long time. So we hired two people. It's a little bit more expensive than the old model, but they're two people that really know what they're doing and want to take ownership of the shop and they're, you know, really great people.

[01:04:20 - 01:04:40]

Will Smith: Well, going back to small town culture, that, that is probably a feature of small town culture that there's this. Because everybody knows everybody else, there's this trust fabric in the community, um, that whereas in an impersonal big city you don't have that. So. So there's sort of self policing that goes on of, of trial, of, of good behavior. Exactly.

[01:04:40 - 01:05:44]

Matthew Ferguson: And that also goes back to how we run our business. Right. I mean, before owning an auto shop, I avoided, you know, auto shops like the plague. I, I didn't know what I was being charged for. I didn't know how much they're marking anything up.

So we especially being in a small town and not being up being in an independent auto shop, we tell the guys up front to be extremely transparent about what a car really needs. What would be a nice to have would be maintenance and what, you know, would almost be a novelty just to get it back to, you know, mint condition. So we have to operate all of our businesses, this one and everything in the future with pure transparency. I think that's going to go a long way. You know, maybe we're not.

We, we probably could price gouge a lot more than we are, but we'd rather just have a business that the community feels safe walking into every day. So. What did Adam Markley say when you called him in this crisis, when the operator quit on you? We actually had met Adam after the fact and he, he was like, oh yeah, like it happens to all of us. And we're like, oh my God, that was the most terrifying thing that had ever happened in my life.

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

Sarah Chiles: And he's like, yeah, yeah. So surrounding yourself with, you know, people that have that kind of wisdom, I think is, is very helpful. But yeah, on that note too, I think something unique to auto repair and potentially other industries I haven't done my research is that there is, there are these coaching groups too. We, we're part of one called Shop Fix Academy. And I think that if we.

[01:06:06 - 01:06:24]

Will Smith: Shop Fix Academy. Yeah, exact, exactly. I think if we didn't have that, the reaction would have been a lot different because we had a coach to call immediately same night and be like, oh my God, this is terrifying. And they were like, it's okay. That's a large salary off the balance sheet.

[01:06:24 - 01:06:57]

Sarah Chiles: You'll find someone new. And obviously we had to let that advice kind of sink in. But having, you know, a part of this coaching group is standardized kind of P and L structures and structuring front of house, you know, the weight in front of house versus back of house. And I think we've learned so much and that the way the business is run was so dependent on that one person and to replace him would be nearly impossible. So we have to, like Matthew said, build a system and a weighted system here that just allows the shop to run and everybody feels like they're kind of contributing equally.

[01:06:57 - 01:08:01]

Matthew Ferguson: Yeah. And Shop Fix is incredible. I think, I mean in the same way that as business buyers we can listen to acquiring minds and find people talking about the problems that we're facing. You know, you know, when we first joined, we went out to Tennessee for, for a week to train with a bunch of the, the best auto, you know, auto auto operators in the, in the country. It was, it was awesome.

And now basically the way it works is we have a coaching call every week. We have a coach who runs a couple auto shops in Kansas and that's really helpful. But then we also have a tribe where we. Every week, it's optional, but it's, you know, between five and 20 shop owners that join a zoom call and just talk about their day to day and things they're going through. And it's.

That community has saved us so many times. And also people tell us stories and like there's no way that'll ever happen to us. And then it does and we're, we're, we're. We're equipped to, to deal with, with it and we go back and it's. So I think that no matter what industry you're working in, investing in the community and really immersing yourself in, in, in that world area is, is important.

[01:08:01 - 01:08:55]

Sarah Chiles: Yeah, I'm not sure if that's an exportable lesson, but I hope that it would be in the next industry we buy in like to have local community but then also other owners of similar business types where it's kind of rinse and repeat of the same issues that come up. Well I think it is a great point and I think searchers can ask themselves does my industry or this industry where this target exists have some sort of training or industry association training thing that is really established and you know that I can get plugged into like just by you know, signing up H Vac Plumbing Electrical has Nextar is, is a big one that I, that I've heard of and I hear people cite. So I think it's more the exception than the rule. Yeah, but, but of course this also is essentially what we're talking about here is. Well, I guess it's, I was gonna say peer groups.

[01:08:55 - 01:10:02]

Will Smith: It's much more formal than that. Peer groups aren't formalized, generally don't have training but, but peer groups can also be very helpful in the same way. And there's a lot of efforts in search land do it to do peer groups. Often it's searchers across different industries having a peer group. And so you don't get the, the benefit of like industry specific knowledge which is an enormous benefit.

Um, but one thing that an early guest, Cassie Nikamp did who bought a small fencing business is she basically created her own peer group of other fencing owners. So she went to like an industry conference and she just invited them all to get on a regular zoom call. So not local to her who would have been competition but, but other folks that, that she met at a conference and that was immensely value. So you can jerry rig the kind of the benefit here if it doesn't already exist. But what a, what a hack.

What a. What a shortcut. Oh my gosh. It expedited our timeline so much and to be honest, like the respect that it allowed us to kind of tip the scales where we were the ones in charge for so long. We were like please give us your respect and we'll show that we're working so hard and whatnot.

[01:10:02 - 01:10:22]

Sarah Chiles: But once we had formalized knowledge too on how to run a shop the authority that it gave us pretty quickly was unbelievable. And the guys also respected that we were doing that and we were going to Tennessee, and we really cared about the, you know, business and what we were learning. And, you know, bringing those lessons back. It went a long way. And, you know, a lot of them have come from, you know, one of our mechanics was a.

[01:10:22 - 01:12:28]

Matthew Ferguson: Was a professor at a technical school for a long time. He's worked at all these different shops. All of. All of our guys worked at dealerships, worked at, you know, some of the best auto shops in Texas and around the world. And once we kind of came back with that language, it really unlocked so much.

It was so much more collaborative, whereas we were just kind of reacting to everything. And now we were. Now we're very proactive, you know, on the offensive how to make this place a better business. Yeah, we were saying things that, you know, we were giving them permission to do things that our industry standards that they just were never verbally told they could do. I mean, small things that, you know, before we ran the shop, it was almost entirely reactive.

If something was broken, a car would come in, they'd fix the broken thing and send it back out. Whereas now we do inspections on everything with a car is in here. We're going to look at its brakes, it's oil, it's power steering, it's everything. And not just upsell the customer, but so that the customer knows exactly the state of their vehicle and they don't have questions, and we're preventing them from coming in. And instead of, you know, maybe they spend $500 doing some maintenance, but it's going to save them from a $4,000 expense when the whole thing blows up.

And that's something that most shops do. But this shop started with a local mechanic who just built a shop over 40 years and was just a mechanic and. And had other people who were mechanically sadly come in and out. And then it was bought by a really awesome guy who had retired from Wall street, really liked cars, and kind of bought this as a fun side project. And he did a lot of great things for the actual financials of the business and standardizing some of that.

But in terms of getting customer experience or the. Or how the mechanics work and the systems that they're. That they're going through, there wasn't much change there. So.

Leaning into the education is important for us, and I think it's something we've learned a lot going forward. If we buy into a new industry, I think, you know, if we buy another Company. We always want to have our. We always want to spend time here. We're going to want to spend time there.

But it's. I think we are really going to invest heavily in the beginning of understanding the nuances of that specific industry so that we can speak the language to our operators, to our employees. We still got a ways to go, guys. And we're. And we're deep in.

[01:12:28 - 01:13:40]

Will Smith: But just before we leave this fetal moment with the exit of your operator and so come to find out that all roads pass through this operator, which was a fragile. A fragile design of the business anyway. And so why this. That's part. Big part of why this has been a blessing.

And that was a blessing in disguise because not only did culture improve later, but so too did the. Did the structure. So it's now not all. There's not as much key man risk. And so I guess.

I guess the lesson there is over reliance on a single operator is a weakness. Yeah. And by the way, I loved the first few months of business ownership and I was so invigorated whatnot. But I would go home at the end of the day and be like, if he leaves, what will we do? And I like, at the end.

And then he did. Yes. At the end of the day, I still had a pit in my stomach always. And so, you know, I think that it. It was again, a blessing, this guy, but, like, it was kind of meant to be that it would happen because I needed to just alleviate that fear of him.

[01:13:41 - 01:13:51]

Sarah Chiles: Right. And just wipe it clean. Clean slate, build the systems that we want. Because I wouldn't be able to get that bug out of my head otherwise. Yeah.

[01:13:51 - 01:14:38]

Matthew Ferguson: Yeah. It was. I felt like before that, it was almost like, you know, we had. We had caught a fish or like, lasso. The cattle were holding on for dear life.

We had it. We were like, how do we keep it? Keep them. You know, we were talking all the time like, oh, should we give them equity today once we do this? Like, let's.

Let's get. Let's. Let's figure out how to really lock them down. And then when he left, I feel like now we, you know, we're. We're riding the horse.

We've got control, and no matter what happens, it's under our. We will mess up and things will go wrong, but at least we kind of understand why they went wrong and we have a deep understanding of business. Yeah. And that call, we always talked about it. What if he left and we're so lucky we have him?

And then she called Me, I was actually out of town for the weekend and I will never forget hers being. So he left.

[01:14:41 - 01:15:18]

Will Smith: This is the call that we dreaded, came in this morning. Wow. Yeah. Any other improvements to the business that we, we, we, we've heard of course, what we just talked about that now the, the management layer and how that's, that is, is better. The, that kind of best practice of doing in an, doing kind of a spot check of every vehicle that comes through and offering to, offering to solve problems that the customer didn't necessarily ask for.

What else? Modernization. We haven't talked about that at all. And that was one of your key criterion. Yeah, I think, I mean there, there's so many, I think like you said.

[01:15:18 - 01:18:55]

Matthew Ferguson: Yeah. So inspections were huge. There's kind of two ways we can, we can improve the business. It's either, you know, customer facing or internal. On the customer side, I mean, small things like marketing.

We started doing text blasts when we were um, having slow weeks and it has, you know, hundred, you know, one text blast that cost us a hundred dollars will yield over a hundred thousand dollars of, of sales for us. Um, and it's just, it's small things like hey, doing a little, a little thing or hey, we're doing a, you know, usually it's 200 bucks. We'll give you $75 to look at 44 point inspection with pictures and everything of your vehicle and people like, wow, that's a great deal. Now we have a list of 44 things that we can go back and say, hey, you need to get this done. So marketing, we're about to, you know, there's a lot of people who say don't spend all your money on branding right away.

We haven't launched a new website yet or branding, but we've done a, it's in the next like three weeks we're going to launch a huge branding overhaul, new website where you can book online, you know, Instagram. We're going to have really great branded loaner cars. Right now we have a 2001 Jeep Grand Cherokee with a check engine light on that people are giving us an Aston Martin. We're giving this like janky vehicle. So you know, improving just the, you know, you come to a world class auto shop, you want to have a good experience.

We also, you know, we send the inspections, we take pictures of everything so people don't think we're just back there, you know, saying, oh, this person's got a nice car. Let's ask them to spend a lot of money on us. Actually we kind of celebrate if they, if their car is great and we don't have to do anything. So really in improving that customer experience. And then internally, like we said, we're fully staffed, we're not working or depending on one person up front.

We have two people who really know cars and can explain to people in layman's terms what's going on with their vehicle. We have a whole new kind of red, yellow, green light system where red light, you need to do this to get it safe. Yellow light, this is what I do. If this is my wife's car, green light, you know, this is okay. If you really want to fix it, we'll fix it for you.

But we still have a lot of stuff to change. We're actually changing our CRM in two weeks after it took forever to implement our first one. Just because there's going to be some huge unlocks where right now the tech space, they do tons of work. They give a piece of paper up to the guys up front who are in charge of doing sales, talking to customers, picking up phones, scheduling, but then also looking at these, at these estimate or at these write ups and spending an hour or two building an estimate of what work needs to be done, the labor hours, the parts they need to order, where they're going to order them from, how they get them cheapest. And it's a huge, it's a huge task.

So we're kind of splitting that work going forward with the mechanics who know the part number because they were just holding it in their hands and allowing the guys up front to really, you know, polish it and then spend most of their time making sure that we're being efficient, getting people in and out as fast as possible, you know, educating people as to why they're, you know, why they're doing what they're doing. And then also, I mean, just really small things like we have one phone system where everything goes to every phone. If we just add a simple press one to schedule, press two to talk about an ongoing job. They go to our service writers. We're hiring a parts assistant that can help with scheduling.

And it just, it, it instead of people code switching all the time, we've given people very specific tasks to do. And it's just increased efficiency a lot. There's the engineers talking. Finally, we were using our engineering degrees for systems. Yeah, I think that what is important is that we have been here every day and we can make these changes.

[01:18:55 - 01:19:52]

Sarah Chiles: And like Matthew said, like switching phone systems might be a minor thing, but we realize, like how much that's going to pay off. And there's. These are small tweaks, but it's, it's part of creating that well oiled machine, no pun intended, because we're at an auto shop at. Yeah, really, really just small things. Whether it's customer facing or internal, it's just small little tweaks that, you know, really do end up paying off at the end of the day.

Yeah, we're six months into it and now we're just being able to go do these improvements that we thought we would do, you know, from day one. But we had to work to get to the point where the team feels comfortable with their workload, to be able to know, be the business owners and do business development and a lot more of those things. There's also, I mean, even internally something as small as, you know, week one, we sat down with every single person individually and said, you know, what's your goal? What do you know? You'd think that everybody wants to maybe make more money, have more free time, but everybody has something different.

[01:19:52 - 01:22:04]

Matthew Ferguson: And we really try to cater their work style and workload to that. You know, you've got some of the master mechanics who want more responsibility. They want to be able to, if they see something wrong in the back of the shop, have a system to come to us and say, hey, we need this tool. Tool or we need to change this or can I train the btechs to do this so I don't have to do it? It's not the best use of my time.

And so we've. There's one mechanic in particular who really stepped up the plate coming into it. We were kind of warned that there was this one kind of grumpy old mechanic who was going to be a problem. And we kind of went in there and we're really just listen to him and we're curious about what he was doing. And he has totally, totally shifted.

He's an absolute joy to be around. He's. We've promoted him to shop manager. He helps us with ordering stuff for the back, new systems, everything. But you know, so there's guys like that who want more responsibility.

They want to, they, they're, they've trained for this their entire life. They want to be recognized for that. We, he went and got his certification again. We're going to frame it and put it in the front office. Like this is an accomplishment.

We have a master mechanic. We had three master mechanics, but. And then there's other guys that we have three, three guys who are be Mechanics who do brakes, oil shocks and stuff. And we sat down with them and they said, more work. Can we stay open late?

Can we, can we work Saturdays for extra money? Can we. Can we do weekends? I mean, there, there's, you know, which, you know, making the guys work more and increasing their workload wasn't something we were expecting to hear have. And they're so excited about it.

They're always like, thank you so much. Like, we love the extra work. They want to. Weekends, they don't lay around, they want to work. So just.

That is a small. It's a small change, like Sarah said. But people are excited to come here because they know that they're coming here to work for them, for their goals. And it just increases tech efficiency, it increases overall vibes, it increases how hard they're working, how thorough they're doing their inspections because they feel bought in. Now, were there any goals that you heard that you couldn't deliver?

Not really. We. We've offered a 401k thing. Figuring out healthcare has been a little tough. It's really expensive in the Valley, so that's something we're still going for at the end of the day.

[01:22:04 - 01:22:12]

Will Smith: So a couple, a couple employees said, I'd like health insurance. Yeah. And you're. And you're finding that that's going to be difficult to deliver on. Yeah, we'll absolutely do it.

[01:22:12 - 01:22:39]

Matthew Ferguson: I think it's just prioritizing on, you know, what, what to do first. We have a list of all the improvements we'd like to make in a dollar figure next to all of them. And so it's just a matter of rank ordering and prioritizing. One of the mechanics this morning was just making a joke about health, like they don't expect it because it hasn't been here for 48 years. So it doesn't necessarily, you know, they're not expecting it to happen tomorrow.

[01:22:39 - 01:23:06]

Sarah Chiles: But there's a very clear, open communication line of like, we are working hard and it's up to us as a team to improve the business together in order to, you know, pay you guys more, offer more benefits, give more time off to some people or work more. Like, this is very much a team problem. Let's, you know, disorganized little things. We, we changed a lot. And then, you know, a massive change was everybody has more responsibility now and their roles have changed a bit.

[01:23:06 - 01:24:14]

Matthew Ferguson: So. So there's a lot of kind of big changes that weren't that big that kind of got us to. To the operational standard. We wanted to. I Think the changes we're talking about are those kind of bigger growth changes.

And, you know, how do we take this from a really, you know, great business that's just doing, you know, flatlining at max efficiency and then adding, you know, revenue streams to it. How do we really free up time for our guys? So they aren't leaving at 6, 7 at night every night because they have to catch up on writing estimates. So there's a lot of big changes that we need to be up in the office to kind of do and shepherd. But when we're down there, we love being down there because we know how people who walk in, we're helping the guys are really involved.

But I think I alluded to it, but we just hired somebody who's starting in two weeks. He was kind of going to fill that extra role, that extra body down there and give us a lot more freedom. Yeah. What we're going through in two weeks is a step, function change to the way that the business operates, the way, you know, a key flows or a car flows through the system. So this is the first, like, real change that's not just like little tweaks that add up and whatnot that we've spoken about.

[01:24:14 - 01:24:25]

Sarah Chiles: This is like, all right, we're doing an overhaul of the system. Yeah, I think I'm, you know. You know, so far it's only been six months, and I think it's. It's. This percentage has gone up quite a lot.

[01:24:25 - 01:26:19]

Matthew Ferguson: I mean, we're already almost 14% ahead of. Ahead of our revenue target and much higher on the EBITDA SDE target. But, you know, that's, you know, going from 14%. I think we can. We can bring that number up to 40, 50% by implementing these big changes.

So we've done a lot of small things, and now it's kind of time to really work on the business rather than in the business. I think one thing that we were really going to not do at the beginning, one of the reasons we didn't. I was going to keep my job, was we didn't want to bake ourselves into being essential for the business. We saw the old operator, you know, he couldn't leave the business if he was sick. The business would fall apart.

We didn't want that to be what happened to us. It's kind of what happened to us a little bit. But now we've gotten to a point where we could step away and this place will run really great without us, which will then allow us to go off and buy other companies. One Thing we're a little nervous about is we're the first ones here, the last ones to leave every day. And if that starts to happen, less are we going to lose respect.

But I think that by really putting in the work for six months the guys have realized that we are going to care about them no matter what. And the way we're going to kind of frame it is if we step away and buy another business, it allows us to take more money from that business or split that, that burden for, for our own living and allow us to keep more money in this, in each individual business and it kind of gives them a bit more responsibility, more upward mobility. Somebody's eventually going to be the president of the shop. Right now we're co presidents. So I think we're both really, really glad that we baked ourselves fully into the business for the first six months.

But now we're kind of starting that unwinding process. We'll never be fully hands off but we need to have a bit of flexibility to get back to the holding company focus, get back to working on the business and maximizing each of our assets. Some rapid fire questions for you guys. So does everybody know already that you plan on building a Holdco? Yeah.

[01:26:20 - 01:26:40]

Will Smith: And was that something that you told them later or was that something you were always forward with? We treaded it lightly. Yeah. You know, of we really wanted to buy this business because we're locals and we knew that we wanted to preserve local business. And so the reason that we are here is to preserve local business.

[01:26:41 - 01:27:00]

Sarah Chiles: And to the extent of which like, and we intend to build a holding company of this many companies and whatnot, we, that was what we treaded lightly. But everyone knew our motivations for buying the business from day one. Yeah. And the three people we've hired in the, during the interview process, we've talked about it not as a hey, by the way, we're going to go off and do this. It's a hey, we're going to go do this and you're going to be part of it.

[01:27:00 - 01:27:54]

Matthew Ferguson: You know, we have somebody who's a wonderful operator here. Eventually they might be a GM for three, four businesses around town. So going forward we're much more open. But we didn't come in and say hey, this is number one of many of our holding company because it really wasn't, it was of one and we really are here to make this business wonderful before we move and grow. What are you paying yourselves?

We each pay ourselves. We're actually the lowest paid of the shop. We each pay ourselves 80k in. In salary. We own 70% of the business.

So once we start giving distributions, that upside will be much, much higher. You know, we're looking at getting closer to 750, 850 in STE after the first year. Most of that year one is going back into the business buying a loaner car fleet and stuff. But yeah, right now we're 80k. But then distributions is where we're hoping to really make the upside.

[01:27:56 - 01:28:27]

Will Smith: And so can you say again where the business is now in terms of revenue and SDE and where you think you'll get it by the end of the year just to net us out? Yeah, I think we're, we're still figuring that out because of the seasonality of Aspen. Like I said, we experienced, you know, the normal winter slump, but now that we're in April, May are some of the busiest months of the year and we're just blasting through revenue goals. We're kind of readjusting what are our expectations and whatnot. I think we're on track to do closer to 3.1 million in this first year.

[01:28:27 - 01:28:59]

Sarah Chiles: So increase in revenue by 500k.ish. And yeah, our debt service, you know, is. We definitely took on some debt at a high interest rate period. We're already seeing it. It has gone down since we bought the business because we're on a variable quarterly SBA 7 loan.

So yeah, after debt service, I think we're hoping to distribute at least 350 to 400k. But again, that's all speculative. It honestly could be more than that. But I don't want to over promise, especially if an investor is listening.

[01:29:02 - 01:29:19]

Matthew Ferguson: Any. We have shared the success. We have shared with our investors that it's doing well and we'd like to. Obviously we had to go to our shareholders to vote that we could increase our salaries and bring Matthew on full time and whatnot. We said it's doing very well and we know that it's doing very well.

[01:29:19 - 01:29:41]

Sarah Chiles: We just haven't put numbers to it, mostly because it's so variable monthly right now. Yeah. And I think, you know, we're only six months in. We have a model that basically points to at the end of the year where we expect our bank account to be and it is much higher than we were expecting, especially after we pay about $220 of debt service per year. 220,000.

[01:29:41 - 01:30:26]

Matthew Ferguson: 220,000, yeah, exactly. We, we figured. Yeah, yeah, yeah. So it's going to be much higher. We don't want to over.

Over Promise. But you know, if we're adding 500, 600,000 of revenue, we're not adding that many big costs. Obviously becoming a full time is another ADK salary. But, but if it's allowing us to do an extra 600k, it's gonna, it really bumps up that SDE. I also think year one SD is gonna be a bit lower because we have put so much back into the business.

Renovating, making the place look better. You know, we're, we're, we're, we've invested in extra parking. We've, we've done, we've done a lot putting it back into the business. But I think steady state will be much, much higher than the $500k we initially planned for going forward. Fantastic guys.

[01:30:26 - 01:30:48]

Will Smith: And in circling way back up now to the, the terms of the deal. So it was a 90. What, what was the breakdown of the acquisition price again, please? Yeah, so it was a 20% down payment but on a 1.5x step up. So 20% down payment, 80% levered, but we own 70% because of that step.

[01:30:48 - 01:33:04]

Matthew Ferguson: Up and for the investors is great. You know, you give us $100,000, you immediately have $150,000 of, of equity. And we're promising, I don't want to actually promise anything, but we're tracking, we originally promised 12, 13% year over year returns and we're tracking to almost 3.4x that obviously we don't promise anything especially year one because we want to buy back into the business.

But from the investor standpoint, it was kind of a no brainer. They got a local business that's been profitable for 49 years. They're immediately getting a 50% increase on their equity and cash flowing year one. So yeah, that's, yeah, excellent. And we also had 10% seller financing.

No, we, we needed that especially per Matthias.

We didn't have background in, in auto shops so having the owner bought in really helped us with the banks going to pay him off pretty quick, but just having him on, you know, holding paper from him really accelerated. So, so the SBA loan was 70%, he was 10%. And you guys were, you and your investors were 20. Yeah. Okay.

I'd say just one really quick thing that, that was huge unlock for us. We had a big chicken and egg situation where we couldn't really get the loan or the seller to agree to us buy because we didn't have the money in the bank. But we needed to have the, needed to have the deal on the hook to get the money in the bank and that really went back and forth for like three, four months. He didn't really believe that we had the capability of raising $350,000. So what we did is we kind of almost chatgpt we found some non binding investment agreement and we sent that out and we raised $350,000 in like 24 hours on paper to show that we could.

And once we have that, then both the bank and the sellers allowed us to sign the purchase agreement and move forward. So one thing, if people don't have their own capital to really put in right away, coming up with some sort of non binding investment agreement just to show that you, you, you, you can back yourself is really was an unlock for us. What a great tip. I have never heard that, that I should have teased that out of you much earlier in the interview. That's a great, great tip.

[01:33:04 - 01:33:33]

Will Smith: Certainty to close is how every broker and savvy seller will perceive you on the other side of the table. And of course searchers generally are seen as less likely to be able to close than competing buyers. So to the extent that you can really, really fortify your own image is very powerful and as you just said in your case was necessary to get the deal done. Great tip. ChatGPT to the rescue.

[01:33:35 - 01:34:11]

Matthew Ferguson: Let's close. Just hearing about the partnership doing this, the two of you together versus not. I mean it may be, there may not be much to say because you basically decided on being partners before you decided on anything else. But what might you say for researchers out there listening about your relationship? Yeah, I mean business ownership is a marriage and you go through hard things in marriages and all of the things and, and yeah, like when we had that fetal position moment, it was, it was so real and visceral and we had personal guarantees on this and it was kind of like what did we do?

[01:34:11 - 01:34:52]

Sarah Chiles: And we had super frank conversations. I mean like we said Matthew was still had another job and so it was, you know, I was the one that was here like and it was by design and maybe in hindsight that's not. We definitely underestimated the workload and whatnot. But just the ability to have frank conversations, I think in life is really important and especially in business ownership because there's no way to skirt around it. Right.

And it becomes obvious. Intentions grow and all of those things, especially in challenging times. Yeah, 100%. I mean I give huge props to Sarah. She really one things were tough, she'd bring it up and be very blunt with me.

[01:34:52 - 01:36:51]

Matthew Ferguson: I think, you know, knowing each other our whole lives. I think we know we're going to care about each other no matter what, but the business is the business and we have to be blunt with what we're feeling. And yeah, I always wanted to give 100% to what we're doing here, but you can't really give 100% to two things. And even if I wasn't going full blast at the other job, it was taking a lot of time away from what I was doing here. And she came to me after that and said I could be doing this on my own.

Probably didn't want to do it on our own, but, but, but absolutely could. And it made me look at what I wanted to do, what made me happy. And yeah, I could, I could work from 7am until 12 here. And it still energized me because we're kind of building towards something, whereas if I was working after hours elsewhere, working weekends, it was draining. So I just kind of started to, to make that, that change.

And I think, I think having a business partner is. It's incredible if you find the right person. There's a lot of scary moments. There's a lot of happy moments to celebrate. It's great to celebrate with someone or go through the trenches with someone rather than by yourself.

I think we also, part of the reason we became business partners is because of that list. We kind of realized our inherent curiosity. I mean, Sarah is always listening to podcasts, always listening to books, always coming to the table with new ideas. And I just kind of know if something goes wrong, she's. And she's going to figure it out, you know, and I think, and I hope, and likewise, both ways, I think we just kind of know we've got to try his backs.

And we're also, we're very like minded in a lot of ways, but there's also some, you know, I think Sarah's very good at being rational and looking at things and looking at models and understanding the reality of situations. Sometimes I get a little carried away and I come with these big ideas and then she makes it work. She also has huge ideas too. But I think that we just compliment each other really well and feel and. We didn't necessarily, you know, we had overlapping backgrounds and work experience and whatnot.

[01:36:51 - 01:37:10]

Sarah Chiles: And so we, going into it, we didn't know what each other's strengths were. And you find out very quickly in business ownership what each other's strengths are. Or like a Jobs Wozniak or one was clearly the salesperson, Woznia engineer. We, we were kind of Both the same. I didn't have over time differentiate differentiated.

[01:37:11 - 01:37:30]

Will Smith: Anything that we didn't get to Sarah and Matthew that you want to make sure to mention? I don't think so. This is such a wild ride to revisit, relive everything and go through it and yeah, I think our conviction on ETA is just as high. I mean it's definitely been challenging. It's definitely been more than we expected.

[01:37:30 - 01:37:43]

Sarah Chiles: But you come out on the other side like all right, let's do it again. And we're actually about to submit another LOI in another hour. We have a deadline so round two, here we come. Oh, how fun. I'd say also, I mean it is.

[01:37:44 - 01:39:22]

Matthew Ferguson: Buying a business has been 7,000 times harder and more exhausting and more involved than I was expecting. But it was twofold that more rewarding.

Went to Dartmouth and everybody thinks that you have to have this crazy high job at Morgan Stanley or Google or something. Something. And when you separate out like I would so much rather work at a small business where I know I'm helping people in my community every day. The people are that we love that work for us are taking their paychecks and feeding their families with it. It feels it has been so rewarding and truly feel like it's the right path and, and if anybody even has an inkling of, of wanting to do it, just know it's going to be hard but know it's.

It's worth every minute. I'd say the other, the other one or two things real quick. Are we because of this kind of talking about that community? We have just with some friends, we have a bunch of friends who have kind of seen what we've done and want to do it too. We started a Slack community where we all share deals, we ask each other questions.

It's filled with operators, investors. A lot of people are just curious active searchers. So I guess we can send you a link to put in your bio. We have a little form on our website to join it. We have about 60 people in it right now active Slack chat.

And then we're trying to start up bi weekly meetings eventually in person meetings too. But we've gotten a lot of. We've learned so much from other people who've done this that we want to kind of centralize that. And then the last thing is just thanking you again. I mean whether it was the buying process, the purchase process, the ideation process, the field position process really helped a lot in.

[01:39:23 - 01:39:38]

Sarah Chiles: Yeah, I don't know what we would have done without it. Right. Like if you face a fetal position moment and you don't know that others go through this too, it can be awfully daunting. So yeah, literally, like when he first bought it, like the first week we're like, I wonder what our aquatic minds will be as a joke they gave me in a few years.

[01:39:41 - 01:40:38]

Will Smith: How fun. Well, congratulations to you guys. I love the vision I got. It really got my gears turning after we had our pre call. As I told you.

I just think that there's something to what you're building in the kind of the next iteration of a Chen Mark or Chase Murdoch is who you mentioned in Utah, Sarah of Dakata. There's all these, there's this interesting, there's this interesting hold co vision taking shape around permanent equity and deep, deep local small businesses. And so. And you guys left very promising careers to pursue. Go home and pursue that.

So there's just so much to enjoy about your story. And then of course, the performance of, of business acquisition number one is always. That alone is really exciting. So thank you guys for sharing. Thank you for being so transparent.

And we'll put links to everything. Send me that Slack link. We'll put that. But we'll also put your LinkedIn and. What'S the name of the auto shop?

[01:40:39 - 01:40:48]

Sarah Chiles: Aspen Total Automotive we're about to release. So if you want to hat check back in like three weeks. Okay. So this will be airing on the other side of three weeks. So make sure I get the link.

[01:40:48 - 01:41:55]

Will Smith: Well, I'll, we'll get the link to that, I think. And then last thing, I mean, we got so much value out of reaching out to people on this podcast. If anybody wants to, you can email us, LinkedIn us, Instagram us, but really, whatever we're, we're open to chat. Great, beautiful offer. Thank you for that.

Sarah Childs, Matthew Ferguson. Congratulations and thank you guys. Thank you. Thanks so much, Phil. Appreciate it.

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