[00:00:00 - 00:04:25]

Will Smith: Today's interview covers the painful seven year journey from self funded SBA business acquisition to going to zero and shutting down. Scott Duncan bought a tool and die business that seemed to offer good business buyer fit for his mechanical engineering background. It also seemed to be a good searchy business. Revenue was highly reoccurring in the service it provided was critical to its customers manufacturing operations. Unhappily, a number of factors conspired to undermine the business and Scott's efforts.

Key person departures, poor culture, Covid inflation, Customer concentration was yet another culprit. Scott knew that 10 to 15% revenue concentration in a single customer was the tolerable limit. But it turned out there was a customer whose revenue was in that range but whose EBITDA contribution was closer to 50%. So when that customer stopped buying, they took half of Scott's earnings with them. Huge learning there.

Watch for concentration not just of revenue, but EBITDA as well. That and much more in Scott's heroic but ultimately doomed efforts to save his company. We thank Scott for coming on stage like this. If you find his story helpful, please consider shooting him a quick note saying so. You'll find his LinkedIn in the show notes.

And here he is, Scott Duncan, former owner of F&M Tool and Die. Last month Tim Erickson of Shareholder Ventures and Acquisition Lab presented a primer on the financial anatomy of a self funded SBA search deal with investor equity. Lots of definitions in theory was covered including pref rate, step up waterfall and much more. Well, today, Thursday, December 11th, Tim returns for part two of this popular series to walk through a financial model. Row by row.

You'll learn how pref rate, interest rate, step up debt and equity all work together. How to import your own deal into the model, how to create a base case, bear case and bull case, and how to do a sensitivity analysis so you know what happens to your acquisition if revenue declines 20%. The webinar is how to model an Investor backed Search acquisition and it's today, Thursday, December 11th noon Eastern. Link to register is right at the top of this episode's show notes or on the Acquiring Minds homepage. Acquiringminds co.

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. What do the following Acquiring Minds guests.

All have in common?

Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator in community for people serious.

About buying a business.

But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value.

The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The Lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions, and in an active community of serious searchers. Check out acquisition lab.com link in the notes or email the Lab's co founder, Chelsea Wood. Chelsea buy then build.com.

Scott Duncan, welcome to Acquiring Minds.

[00:04:26 - 00:04:27]

Scott Duncan: Thanks for having me, Scott.

[00:04:27 - 00:04:45]

Will Smith: Yours is a story of a self funded search that goes to zero. It is a harrowing tale and we thank you for being willing to share it so that others might benefit from it. Where does all of this begin? Please, Scott.

[00:04:46 - 00:05:11]

Scott Duncan: So for me this starts in between my two years at hbs. I had kind of on a whim, decided to take the Rick and Royce ETA route through your final year. There's. And I went through the two courses. They were amazing.

I feel like they taught 100% of the 10% you can learn in a classroom. And then I took it from there.

[00:05:13 - 00:05:18]

Will Smith: And what drew you? What was so inspiring about what they were teaching and what this path offered?

[00:05:19 - 00:06:08]

Scott Duncan: Well, I knew there was going to be some sort of entrepreneurial route for me out of hbs.

You know, I was a medical device engineer beforehand. I had always worked at startups and I liked that. But my internship in between the two years was for really small biopharma startup. And I was just sitting there and I realized that all these companies that I worked for that were venture backed had never really materialized into anything. So all of the stuff that I had worked on as a professional never actually benefited anyone, never had been sold, none of that stuff.

So I kind of saw an opportunity in search to sell shovels instead of dig for gold. And as soon as I, I read the book, right? Everybody reads the hbr. Yeah. HBR Guide to Buying a Small Business.

And it like changed my life. Right. So I was hooked after that.

[00:06:09 - 00:06:18]

Will Smith: Okay, great. And so say a little bit more about your background because there was at least perceived business buyer fit here.

So let us understand you a little better.

[00:06:18 - 00:06:51]

Scott Duncan: Yeah, that definitely perceived business buyer fit here. So I was a mechanical engineer by education and I wasn't the math kind of mechanical engineer. I was the hands on type of mechanical engineer. And even in undergrad I had some experience running CNC machines and doing prototype machining, which was very relevant to the business.

I ended up buying. So basically just doing design engineering and manufacturing engineering at these hardware startups. And I thought that was really going to lend itself pretty well to this business. Great.

[00:06:52 - 00:07:03]

Will Smith: Okay, so you.

Sounds like you decide that you're definitely going to go down this path after taking those Rick and Royce courses. So you graduate and immediately kick off your search.

[00:07:04 - 00:07:31]

Scott Duncan: Yeah, I did. I started. I think now people.

People end up searching while they're in business school, which I think is crazy. But I think probably around March, April, I really started to commit to it. I deliberately didn't do any sort of recruiting at hbs just so I wouldn't have the option and be tempted to do it. I originally started off with the intent of being a traditional, a funded searcher and then changed my mind in, I think, May, June, something like that.

[00:07:31 - 00:07:33]

Will Smith: Why did you change your mind?

[00:07:34 - 00:08:20]

Scott Duncan: Well, I got a soft commitment on one unit of what I was trying to raise. And, you know, I don't want to say it came too easily, but I'm like, wow, this is. It just really made me consider the economics of it. And I was also thinking it just made me reflect on what it was that I was doing this for. I didn't want to be, you know, a hired gun.

I didn't want to just be. Be a CEO for seven years. I thought this was going to be something that I was going to do for 20 years, 25 years. And I. I'm from Central Massachusetts. My family was here.

I knew my wife's family was probably going to end up here, and. And that was really not compatible with a traditional search. So it just took a little bit of reflection on my part to realize that this is more of a, I think a lifestyle play for me than a career play.

[00:08:22 - 00:09:04]

Will Smith: Great.

Yeah.

So the geographic focus that your search was going to take meant that sort of precluded doing a traditional search where your investors will expect you to be willing to move anywhere. There is some nuance to that, but that's at least the stated expectation. But also this point, I've. I've actually never heard, if I. If I understood you correctly, that because so you raised only a single unit for the traditional search fund, but it came.

Your sense was that it came very easily. Is that right? And therefore that meant if these investors were so willing to throw money at this, that actually it's because the economics were too good for them. Is that what you were saying?

[00:09:05 - 00:09:09]

Scott Duncan: I realize that's a pretty cynical take, but in a way it's fine.

[00:09:09 - 00:09:12]

Will Smith: But. No, but give us your cynicism and please.

[00:09:12 - 00:10:13]

Scott Duncan: Well, it wasn't like I didn't exactly crush the pitch. Okay. I didn't go in.

I was still like, very much all the, like, owning the business just took all of the HBS polish off of me, but at the same time took all of the bad parts. I think about being like an engineer mindset out too. So I, I, I look back on this, be like, wow, I would have done so much better at this now, but it was just like, here are the economics. And, and I did go in with the idea of I really only want to look within New England. And the guy was like, yeah, all right, I'm interested.

And he didn't stroke a check, obviously, but it's just, I'm like, wow, this is, I thought this was going to be the hard part. And then after that I'm like, wait a second, I can do this on my own if I continue to, you know, live like a grad student and, and then like living with my, my now wife in an apartment in Watertown, like, man, I just realistically don't want to move to Omaha or like California or something. I want to stay right here. I'm a New Englander.

[00:10:16 - 00:10:19]

Will Smith: But this point about it being easy.

[00:10:19 - 00:10:20]

Scott Duncan: To raise.

[00:10:22 - 00:10:31]

Will Smith: And that being a reflection of how good the economics are for the investors, was that, was I over reading into what you said? Or is in fact, is that in fact what you were sensing?

[00:10:32 - 00:11:11]

Scott Duncan: It was part of what I was sensing, yeah.

So I'm not, I'm not disagreeing with you. It was not the entirety of my decision. But also I'm like, wow, he didn't even need to think about this. This is crazy. Like, what are the economics for him versus what they are for me?

And yeah, I mean, Jim Sharp is always one to point out that let's say you're a searcher ten years down the road, like your investors at that point have. You're the person adding all of the value. And I understand that now in a much bigger way than I did even then. So it was really just a point that made me look back and consider what I was doing it for. In addition to being like, wow, what am I actually giving up if I can collect money that easily from people.

[00:11:11 - 00:11:32]

Will Smith: Yeah, well, and let's also call out the obvious that if you are at hbs, from the investor's perspective, there's a lot of kind of pre screening that's been done. So it's not so easy if for you listener, if you. It didn't come with don't have the same Harvard pedigree, it might not be so easy.

[00:11:33 - 00:11:49]

Scott Duncan: But that played, that clearly played a role here. Yeah, for sure.

And I realized that I'm, I'm wearing my Patagonia right now, but I don't think I was like the traditional entrant or graduate from hbs and it was still really weird for me to even now think about, well, maybe that played a part in all of this.

[00:11:49 - 00:11:50]

Will Smith: Yeah.

[00:11:50 - 00:11:51]

Scott Duncan: Yeah, good.

[00:11:51 - 00:12:06]

Will Smith: Well, appreciate your honest feelings on all of this, Scott. Okay, so you decide to do a self funded search focused on New England.

Maybe once you decided to go self purchase self funded, you tighten that geographical constraint even more.

[00:12:07 - 00:13:01]

Scott Duncan: Yeah, and there's another reason why I didn't like the funded path just for me and I don't think this is wrong. I just didn't believe in the idea of going in with an industry thesis because I knew that the stats were that, you know, people write their PPM for a raise and they're like I'm going to focus on this industry and industry B and industry C. And I don't know if that's changed but a lot of folks don't actually end up acquiring within the industries that their PPM said were targets. So I thought, well, I definitely don't want to over constrain my search and if I'm optimizing to be close to my parents and my wife's parents, then yeah, okay, I probably can't just look within central Massachusetts, but I can look within, I know Vermont and Maine and New Hampshire and, and all of that. So it did.

The geographic focus was the driver behind I think the majority of my search. Great.

[00:13:01 - 00:13:04]

Will Smith: And anything else to say then about the parameters of your search?

[00:13:06 - 00:13:44]

Scott Duncan: I don't know the strategy. I think probably everybody does this.

It does it this way. I just canvassed the broker network first because I figured, you know, if somebody has gone to a broker as somebody interested in selling their business, they're interested in selling their business and it was prob. Just lower hanging fruit and you don't need to convince somebody or, or find a seller and convince them that you're a credible buyer. So that was really just the beginning of it was looking within New England and calling brokers. And then once I had saturated New England brokers, I started reaching out more and more until I got diminishing returns and then switched over to probably the laziest proprietary search in the history of eti.

[00:13:46 - 00:13:52]

Will Smith: Okay. And, and by the way, what size were you looking for? The kind of traditional upper six figures of sde.

[00:13:52 - 00:14:10]

Scott Duncan: Yeah, yeah, I think that would be, that would be representative. Yeah, I looked even then though.

It was looking at like the half million dollars worth of sde. I did see some competition from private equity for bolt ons. I can't imagine what that's like these days. So this is eight years ago, right? I can't imagine it's gotten better.

[00:14:13 - 00:14:22]

Will Smith: And if you were to find a business doing 850of SDE, were you going to be able to buy the thing yourself or were you actually going to need to have some investor capital help you out?

[00:14:23 - 00:14:34]

Scott Duncan: Investor capital all the way. I had, I probably had an irresponsibly low amount of money to start a self funded search with, let alone like try and fund it entirely myself.

[00:14:34 - 00:14:37]

Will Smith: Why? Why?

Irresponsible? And how much was that?

[00:14:38 - 00:15:15]

Scott Duncan: I think it was like 60 grand. And I mean, I don't know how people start with now, but that was enough to get me through a year, maybe 18 months if I got really creative with my burn rate. But I think about it now and maybe it's just that my perspective has changed being a father and a husband now.

But I had no plan, I had no plan for what I was going to do when I entirely ran out of money. Like my wife was a grad student. I'm like, oh, I guess I'll just find a job, right? Like, no, I got rent to pay. But I guess the benefit of being younger and optimistic.

[00:15:18 - 00:15:23]

Will Smith: Why did you call your proprietary search lazy? What did you mean the world's laziest?

[00:15:23 - 00:16:26]

Scott Duncan: Actually, I don't know, I think that when everybody is zigging, you should be zagging. So it was very, I don't know. Again, I've been out of the, I think the proprietary search world for a while anyway and I don't know what the techniques are now, but I just didn't see bulk email and hiring 40 interns as a viable strategy when I was looking for, you know, just one thing in a very small region.

So what I would do, I went the, I tried to go the, the high quality, low volume route and I would just be sending out semi customized letters every day with a signature and like on nice paper and big envelopes with an official looking logo on it in hopes that that would make it to an owner's desk. But it wasn't very, there was not very high volume and it didn't yield very much in the way of results. And when I really got into that. I was under LOI on F and M tool anyway and you know, only have so much time in the day. I think that's something I would do differently now though is I'd spend much more time on proprietary than just waiting for brokers to get back to me.

[00:16:26 - 00:16:29]

Will Smith: Oh really? Why? Just not enough deal flow from the brokers.

[00:16:30 - 00:17:00]

Scott Duncan: Not enough deal flow, no.

But also it's nice to have something going on autopilot, you know, even if there's, even if it's just getting you a lot of junk leads. I think it's. There's something to be said about the optionality of having a lead generation machine working for you versus, you know, hoping that a broker calls you back. And I don't know what brokers think of searchers now anyway, but even eight years ago I was like, oh, are you one of these search fund guys? I would always say, well, what's a search fund?

I don't know what that is.

[00:17:02 - 00:17:06]

Will Smith: As you like covered your Patagonia logo on a zoom call. Yeah.

[00:17:06 - 00:17:09]

Scott Duncan: They could hear it through the phone. Like this guy. Sounds like a business school guy.

[00:17:10 - 00:17:10]

Will Smith: Yeah.

[00:17:11 - 00:17:11]

Scott Duncan: All right.

[00:17:12 - 00:17:14]

Will Smith: F&M was the name of the business.

[00:17:14 - 00:17:16]

Scott Duncan: F&M Tool and Die F and.

[00:17:16 - 00:17:20]

Will Smith: M Tool and Die.

How did you find this business?

[00:17:22 - 00:17:54]

Scott Duncan: Through broker? It was actually one of the very first deals I found. It was through an industry specific broker. I sent over an ioi.

There was some interest. I walked in. This is crazy. But I didn't like it. And I thought, well, I'm only, you know, a month or two months into my search.

It doesn't make sense to take this any further. I'm going to back out. And. And so I did and I continued to go down the path of searching and it came back a few months later.

[00:17:56 - 00:18:05]

Will Smith: Before we unpack that statement, what does it mean? Tool and die, That's a type of business that I've heard but didn't really know what it is.

[00:18:06 - 00:18:56]

Scott Duncan: Yeah, it can mean a lot of different things. So specifically what we did was building and servicing injection molds more. When I bought it, it was much more servicing than building, which is one of the reasons why I liked it.

But tool and die is think of it as very high end machining for very specific tools that go into manufacturing. So that could be sheet metal stamping tools, it could be punch tools, it could be what I did, injection molding. It's just when I think of tool and die, it's machining, but it's got a specialty and usually the machining is very difficult materials higher end Processes and much lower volumes than when you think of traditional CNC machine shop.

[00:18:56 - 00:19:06]

Will Smith: Okay, so it's servicing the large complex machines that a manufacturer is using.

[00:19:07 - 00:19:42]

Scott Duncan: In a way, yes and no.

So you're making stuff, you're making stuff out of metal and it could be for tools for a variety of manufacturing processes. But it's, it's kind of hard to explain. I always struggle to do this, especially when I tried to break it down between, wait, so you build the thing and you service the thing and then you also do the thing, the injection molding that you're selling into your customers. So it was just, it was a constant pain. I buy a simpler business next time around just to save myself the headache of explaining what it is that I do.

[00:19:44 - 00:21:00]

Will Smith: Okay, well, maybe we'll get more clarity as we, as we hear about this particular business.

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So I also heard you say injection molding. I know that has something to do with plastic.

Say what? Define injection molding for us and specifically what your business did.

[00:21:01 - 00:22:09]

Scott Duncan: Okay, so injection molding is a manufacturing process. You take liquid plastic and it's basically in what in effect is a, a huge hot glue gun. And then you shoot that molten plastic into a mold.

The mold is made out of metal. It sounds very simple, but it's actually very complex because it's like a, it's a machine. And each one of them is highly custom and highly engineered. And so you shoot the liquid plastic into the mold, the mold cools down and then you get a hardened plastic part off of the mold. And the great thing about injection molding is that it's very high volume.

So you think about, I don't know, every plastic car part. A lot of it is injection molded. I'm looking at all the stuff on my desk right now, it's injection molded. So each one of these parts requires a tool or a mold. All molds or tools, not all tools or molds.

It's kind of maybe helpful for explaining tool and die. And it's like this big investment when you're developing a new product is when you tool it up. You have to get this big expensive block of metal so that you can make things for pennies per piece.

[00:22:10 - 00:22:20]

Will Smith: You were basically looking around and saying almost everything that I see came from an injection mold. But there is plastic manufacturing that, that is manufactured in other ways.

[00:22:21 - 00:22:36]

Scott Duncan: Yeah, you can, you can, things can be blow molded, things can be machined. But when I think of high volume plastic manufacturing, it's injection molding. So I was a service provider into the injection mold, injection molding industry.

[00:22:36 - 00:22:37]

Will Smith: Okay.

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

Scott Duncan: And my customers, they might have pre existing injection molds that they needed to be serviced.

So we did that. That was the majority of the business when I bought it. Or on the flip side, they might have a new product, they might have, may be taking in a new product from somebody else and they might need a new mold designed and built for that. So we did that as well.

[00:22:59 - 00:23:02]

Will Smith: Okay.

So injection mold servicing.

[00:23:03 - 00:23:03]

Scott Duncan: Yeah.

[00:23:03 - 00:23:04]

Will Smith: Fair. Fair to say.

[00:23:04 - 00:23:05]

Scott Duncan: Fair to say.

[00:23:05 - 00:23:21]

Will Smith: Okay. And what, what did you like about the business? And then let's of course hear what you didn't like about the business because you rejected it the first time around. And this whole story is going to be about the weaknesses of the business. So, so go with the good stuff first.

[00:23:21 - 00:24:34]

Scott Duncan: We'll start with the good stuff. I liked it because it just resonated with me. I always had a weird fascination with machining to the point where even when I was in college as a mechanical engineer, I thought about dropping out to become a machinist. Like in my co ops where I was working during college, I was running bridge ports. I was doing prototype machining, and I loved it.

So it, it did check a box for something that I was at least marginally passionate about. The size was right, the price was right, the location was right. And at, at that point anyway, I think the revenue dynamics were right because the average ticket for us was I think like 2,500 bucks. So it was just these really little emergency repair jobs on an injection mold that was keeping somebody's production line from, from running. So they'd show up and we'd fix it and it would go out the door within a week or two, maybe a month, and, and we'd get paid.

So it's Like a great, great fit for what you'd think of as a traditional, like, ETA business where low, not really recurring revenue at all, but very highly repeating revenue.

[00:24:36 - 00:24:45]

Will Smith: And as we've already said and you've reiterated just in what we heard, that the business buyer fit here felt really good. There was a. An X factor this business had for you.

[00:24:46 - 00:24:48]

Scott Duncan: Liked it? Yeah, yeah.

[00:24:48 - 00:24:52]

Will Smith: Great size of the business or numbers you can share.

[00:24:52 - 00:25:51]

Scott Duncan: Yeah, I think if you average it out, it was probably somewhere between, call it 3.6 and 4 million in revenue and then roughly 25% EBITDA on that. When I bought it, I think it was. I think 2017 ended up being like a phenomenal year. So it was 1.2 million on 4.2 in sales.

So I thought I was getting a sweetheart deal because it ended up being like 2.9x EBITDA.

And, you know, that was another reason where I'm like, well, let's just keep going with this thing because I'm not going to find something for much cheaper. And there's a lot of EBITDA there. I thought there was a big safety factor. And I also thought that this was the result of some of the decisions that the seller made to professionalize it when he decided to sell. I thought we were just getting some leverage on those decisions.

[00:25:52 - 00:26:14]

Will Smith: So you saw what seemed like momentum coming out of the business, and in fact, momentum that you attributed to professionalization. You know, value having been added to the business by the seller in anticipation of selling it. But what were. What had been the things that you didn't like about it and maybe still saw?

[00:26:16 - 00:27:24]

Scott Duncan: The first thing that I saw when I went inside the building was just chaos.

So it was an old building, old machines, old guys, you know, and nothing was maintained. Everything was dirty and everything was in disarray. And so I. My background was medical device manufacturing, so I had worked with vendors like F and M. But it was not like if I were to start an organization from scratch, I would want my systems and processes to be in place, and I'd also want the facility to represent the skill set of the folks inside the building. And I just wasn't getting that.

I walked in, I'm like, wow, this is going to be a knot to untangle to professionalize this place. So there was that. And then maybe this is just the hindsight talking, but I just didn't get a good vibe. Like, I didn't get a good vibe from walking around and, and seeing employees and all of that. I just, I. I don't know.

I can't put myself back into that frame of mind right now, but I just didn't. I. I don't know. I'm much more of a vibes guy now, now that I went through this instead of a spreadsheets guy.

[00:27:27 - 00:27:29]

Will Smith: And what about the industry, Scott?

[00:27:30 - 00:27:30]

Scott Duncan: I.

[00:27:30 - 00:27:43]

Will Smith: The. A lot of the injection molding industry has had been long since offshored. Right.

So how did that play? Where did this business sit in that broader, you know, dynamic?

[00:27:44 - 00:29:20]

Scott Duncan: Yeah, so that's a really good point. And I had actually seen the tail end of that as a design engineer because I had purchased tooling from US Manufacturers before. I had a little window into the industry.

But yeah, it was. The manufacturing of injection molds had become commoditized and sent to China in the early 2000s. So that was one of the questions I tried. The diligence is why is this company still here? So the benefit was on the service and repair side.

That's not something that can be done in China. You still need a very skilled mold maker, is like the top tier technical person on the floor. You need a mold maker to do that and to diagnose what's wrong. And typically there was an emergency dynamic too. So it would come in.

There would be a pretty high willingness to pay if you could turn something around quickly. And there was a need to do that in the States. There was also a need to do stuff in the States on the new mold. The new project builds that we were doing for a couple of reasons. One was just intellectual property concerns.

The other was the size of the molds we were building. They're generally pretty big, so you can't. I mean, it's very expensive to put that on a boat and ship it over from either Portugal, which is another mold making hub, or China. So I think, I think between those two things, I just got more comfort around the fact that there was an enduring business here. But I mean, that turned out to not be true later on down the road.

Bit of foreshadowing there, but for a while, that thesis maintained that was true for a while.

[00:29:20 - 00:29:33]

Will Smith: Okay, well, things go not well very quickly into the acquisition. So this, this story picks up quickly. But before we get to the, the drama here, Scott, what were the terms of the acquisition, please?

[00:29:36 - 00:30:18]

Scott Duncan: Oh, rough numbers. I think the purchase price was 3.6 million and roughly 10% of that was a seller. Note, roughly 10% of that was investor equity and the remainder came from an SBA 7A loan. So this happened right when the minimum equity injection for a 7A loan, it went from 20% to 10%. So I took advantage of it.

I don't think that had any sort of material effect on my outcome. I don't know if it would have changed my decision making throughout. But my logic was I ought to swing for the fences here. I don't have any assets to lose and if this opportunity is put in front of me, I might as well take it.

[00:30:19 - 00:30:45]

Will Smith: And the.

So you said 3.6 million in the preceding year was at 2017. You said yeah, 2017 it was at 1.2. So based on that year it would have been a 3x. But based on prior, but that was its peaking year. So prior years would have been lower.

But let's call it in between. If you blend the previous three years, somewhere between 3 and 4x is what you paid.

[00:30:45 - 00:30:49]

Scott Duncan: Yeah, yeah, probably 3.5. It was less than 4. I know that.

[00:30:51 - 00:31:05]

Will Smith: And you said you had $60,000 to your name. That was for everything from living expenses to search costs to your own equity into the business. So how much equity did you put into the business?

[00:31:06 - 00:31:35]

Scott Duncan: None. In fact, the day we closed I had like $2,000 to my name.

I had to immediately. As soon as I had a checking account and we collected some receivables in that first week, I had to stroke a reimbursement check from the business to myself for some of the deal fees that I incurred just to remain above water. So I finished with zero and I put none of my own money in. And then so there it was. All of the equity came from investors.

[00:31:35 - 00:31:50]

Will Smith: And I'm surprised that they let you get away with that. Not. By the way, this has nothing to do with how the story plays out. But in general, in general, investors, myself included, like to see skin in the game. Were those conversations that came up with your investors?

[00:31:51 - 00:32:10]

Scott Duncan: I don't know. I think maybe it was different times. Maybe self funded searches hadn't been as professionalized as they are now. But I had already burned down a lot of the savings and I think that was the logic there was that I already had a lot of skin in the game in the form of pre sweat equity, but I don't know.

[00:32:10 - 00:32:14]

Will Smith: Sure.

And how much did you retain of the business?

[00:32:14 - 00:32:15]

Scott Duncan: 80% of the common.

[00:32:16 - 00:32:41]

Will Smith: Wow, great. Thank you for sharing that, Scott. You know, it's just hearing that though, it's.

It's heartbreaking because this had this gone well. The economics were really strong in your favor and in the description that you've given us of the business. Sounds like a very searchy, friendly business.

[00:32:42 - 00:33:04]

Scott Duncan: It was a searchy business. For sure.

And I remember trying to explain the model to people who weren't familiar with it. And yeah, the economics would have been great. And they'd be like, oh, well, what's your plan to grow the business? Like, that would be a nice side effect of stuff I do, but I actually don't have to. I don't need to change anything.

And this is going to work out really well for everybody. And that was kind of the plan.

[00:33:04 - 00:33:06]

Will Smith: But what happened? So you get into the business.

[00:33:07 - 00:33:44]

Scott Duncan: Take us through.

Okay. My biggest surprise was that no one was happy to see me. Like, no one. And again, I. I don't know what my expectation was, but I remember my first day and everyone's reaction was like, wait, this is the guy. Like, this is the guy who's buying F and M. And it was just really weird.

I. It was awkward. I don't know, it's probably a very common search thing, but I was not received with open arms by employees or customers. Perhaps that's just my perception, but I just. I don't know.

I don't know what I was sold as when the seller let everybody know that he had sold the business.

[00:33:45 - 00:34:16]

Will Smith: So it is interesting.

At the risk of making you feel self conscious, you come across as a guy. I feel like, first of all, you had real manufacturing chops. You know, you got a big beard.

You know, I feel like you kind of, you, you kind of look the part. I'm surprised that they're. You're young. There's that you're a Harvard guy, there's that those probably didn't work in your favor, and maybe that's the answer. But personality wise, I feel like you.

You don't seem like somebody who, you know, has lived behind a spreadsheet their whole life. And you don't talk like that either.

[00:34:17 - 00:35:44]

Scott Duncan: Thank you. I take that as a compliment. As you should.

Yeah, the big beard and the red flannel. Right. But, you know, I think the youth had something to do with it because I was 31 at the time. And then it was just an obvious mismatch between my personality and the seller's personality. He had a much bigger, more forceful, more prone to anger personality than I do.

Like, and this is something that in the first few weeks I was going around and I was trying to meet everybody, and there were a lot of complaints. There are a lot of complaints about him.

And I'm like, great. I am right on the money here. I'm going to be a more egalitarian, caring, like, millennial style leader. And everyone's going to respond well to that. And it was not true.

And that's something that I tell searchers now is that, first of all, if you think you're going to come in and step into somebody's role and just do the technical aspects of their job, like, that's a big, big assumption. And the. The personality match matters just as much because the end of the day, despite all of these guys saying that they didn't like working there, most of them had worked there for decades, and they were working there, and every day they showed up, they were continuing to, like, double down on the fact that somehow this management style was working out for them.

[00:35:46 - 00:35:56]

Will Smith: That's fascinating. Okay, all right. So you get a vibe on day one that nobody's happy to see you. Then what?

[00:35:56 - 00:36:52]

Scott Duncan: Usual search stuff, like, I had a couple of employees quit.

The big issue was that a key employee quit who was doing one key manufacturing process for one key customer, who at the time was only 10 to 15% of revenue, but ended up that. I mean, it was just amazing how this flowed through the P and L. They were probably about half of Ebitda. And I didn't know beforehand how to diligence that. You know, in retrospect, I wish I had further, but. So he walked and essentially took that business with him.

And this was a few weeks prior when I met with the customer. That was a handshake deal across the table. And the owner, one of the owners said, scott, we're going to give you $1 million worth of work next year. And they gave me 200 grand. So, like, all half of EBITDA gone in the first six months.

[00:36:53 - 00:36:59]

Will Smith: Wow, Scott, hold on a sec here. First of all, how many employees at that point?

[00:36:59 - 00:37:01]

Scott Duncan: I think it was 22 or 24.

[00:37:01 - 00:37:03]

Will Smith: 22 or 24 is what you bought it with?

[00:37:03 - 00:37:04]

Scott Duncan: Yeah.

[00:37:04 - 00:37:10]

Will Smith: Okay, so this customer. So you actually were able to meet with customers before closing?

[00:37:11 - 00:38:04]

Scott Duncan: I wish, yeah. And I told the seller, I do not want to do that at all. But he didn't listen to me.

I would rather lay low for a few months and then introduce myself and have a little bit of a track record underneath me and. And have it in the back of their minds, like, well, if Scott bought it three months ago and things have continued to run smoothly, then things are going to continue to run smoothly. But it was like two weeks before close when I knew just from talking to other searchers that tons of stuff can go wrong. I was meeting the number one and number two biggest customer. And it was just.

I don't think it was good. I don't think it was good. But anyway, this number two customer said, not only are we going to give you the same amount of business that we gave the seller, we are going to give you more. Let's shake hands and have a beer. And I thought, great, there's one more diligence risk that is is not an issue.

And less than a month in, I mean, that account was basically gone now.

[00:38:04 - 00:38:14]

Will Smith: But it wasn't because the. They just kind of reneged on that. It was because their guy at F and M left and they followed him.

[00:38:16 - 00:39:19]

Scott Duncan: Yeah, they followed him right into the garage bay adjacent to theirs in their facility because he had already had a few hundred thousand dollars worth of machines already set up.

So that was premeditated. Now, to be fair, the. I was aware of that going in. I was aware that this guy was going to leave and go on his own. I was unaware that it was next door to the second biggest customer.

And I mean, if I had known differently, I think that probably would have made my decision to go forward change maybe. And I also, obviously, like I mentioned before, I didn't understand how that work flowed through the P and L and just how significant it was because it was, it had been drilled into me. 10% of sales, 10% or 15% of sales for customer concentration is the acceptable limit. And they were right there. I was told that this account was super unprofitable.

And then when I went back and I looked at the data in the ERP system, like, wow, this is the most profitable stuff we have in the shop.

[00:39:19 - 00:39:21]

Will Smith: Wow. Wow.

[00:39:23 - 00:39:23]

Scott Duncan: Okay.

[00:39:24 - 00:39:33]

Will Smith: All right.

So you lose the key guy in. In 10, 15% of revenue, which represents half of Ebitda in the first six months.

[00:39:33 - 00:39:35]

Scott Duncan: Yes. Well, in the first month.

[00:39:35 - 00:39:37]

Will Smith: Oh, that was the first month.

[00:39:37 - 00:39:38]

Scott Duncan: First month, yeah.

[00:39:39 - 00:40:29]

Will Smith: The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human Resources. It lays out the key items you should be thinking about as you transition into CEO and owner of the business you bought. The link to download it is in the show notes. Aspen is a professional employer organization or peo, run by a searcher for searchers.

Search fund veteran Mark Sinatra runs the company which provides HR compliance, flawless payroll, Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for.

A fraction of the cost.

Go to aspenhr.com or contact Mark directly@markspenhr.com.

[00:40:31 - 00:41:52]

Scott Duncan: And then there's the the office manager story. The office manager who was at the business when I acquired it had Been there for, I don't know, 40 years, something like that.

She was going to retire. And so before I even closed, I helped out the seller in hiring a new office manager, who, within the first two weeks of her employment, had stolen his credit card and went on a shopping spree at Walmart and TGI Fridays and racked up, like, $5,000 worth of charges that he came to me with. I was like, did you spend a hundred dollars on my credit card, like, going out to dinner? I'm like, what are you talking about? So it was pretty easy to put two and two together and figure out that she was the culprit for that.

But that was within the first two months. So I'd lost the revenue. And then I had also called. I fired her, obviously, and called the police and called the bank and called all of my investors. Like, anybody whose phone number I had and thought should know about this, I was in touch with BE like, well, here's the second big issue that happened.

Ended up like, that was great. It was a great thing that happened because I. I found Cindy. Cindy was great. This never would. I never would have found Cindy had that not happened.

But, like, man, that was. I. I just didn't sleep. I just didn't sleep for, like, the first three months.

[00:41:54 - 00:42:01]

Will Smith: Because of the office manager thing or because of the lost ebitda? One seems significantly bigger than the other.

Okay, all right.

[00:42:01 - 00:42:07]

Scott Duncan: Both. I mean, I was so stressed out, I think it was hard to discern what was more important, the nature of.

[00:42:07 - 00:42:17]

Will Smith: The employees or this. This trade, if you will.

There's a reputation among these tradesmen and trades women.

[00:42:17 - 00:42:17]

Scott Duncan: Right?

[00:42:17 - 00:42:18]

Will Smith: What is that reputation?

[00:42:19 - 00:42:30]

Scott Duncan: Prima donna's difficult to manage. Rough around the edges, insanely technically skilled.

That about sums it up.

[00:42:31 - 00:42:36]

Will Smith: And so why say more specifically why that is hard to manage?

[00:42:37 - 00:43:29]

Scott Duncan: Because they don't want to be managed. Well, yeah, there's. There's that.

And they know they're good. Like. And they know that there's very limited supply of mold makers around, let alone mold makers in the Northeast. And there's this saying that mold makers have wheels on their toolbox so that they can wheel their toolbox to the next shop and get a 25 cent per hour raise. So I was aware of that dynamic going in, but it just takes a special kind of person to do the job.

Like, you have to be really, really, really conscientious. And the attention to detail it requires is. Is pretty high because you're talking about tolerances that are ten thousandth of an inch. So 0.0001 inches. And to think at that level and to have that level of perfectionism, it just attracts people who I think are difficult to manage.

And I found that out pretty early on.

[00:43:29 - 00:43:43]

Will Smith: And maybe that is part of also the culture clash that we started with here. That they're just that it's just a. It's a. What do you call it in the.

In comedy where. Tough crowd. It's just a tough crowd by nature.

[00:43:44 - 00:44:21]

Scott Duncan: It was a tough crowd for sure. And I felt a huge amount of imposter syndrome despite having a reasonable amount of machining experience.

Like for a Harvard MBA for sure. But even for a mechanical engineer, I understood what it was they were doing and they knew that I would still never understand the complexity and the technical skill that they had. And I think that kind of rubbed them. And I'm speaking. It didn't rub everybody the wrong way.

Right. But there were some guys there who just did not like that I didn't come from the industry and that I would never know as much as the former owner did.

[00:44:22 - 00:44:51]

Will Smith: And despite the fact that I will. Well, I'm making an assumption I shouldn't. But did you do the.

I'll never be as smart as you guys. You know, the reason I bought this business is because of your talent and service that you deliver to our customers. So I'm here to enable you. What I do bring is the ability to run this business and grow this business and. And be your enabler and.

And kind of. Etc.

[00:44:51 - 00:44:51]

Scott Duncan: Where.

[00:44:52 - 00:44:57]

Will Smith: Where my value is is at the business level. Did you try that tech?

[00:44:58 - 00:45:55]

Scott Duncan: Yeah. I don't think it really made a difference for them. I. I did that too with the customers because this was kind of big, big assumption. Number two after can I do the seller's job and can I be the seller? Was that they needed somebody to solve technical problems for them.

And that's what the former owner was. He was an extension of their team and he was the chief technical solutions architect. So I had that conversation with employees and with customers. Employees definitely didn't care because I think it was the E myth mentality where if you can do technical work, you understand the work of like or the business of doing technical work. And when they extrapolated out their expertise on the shop floor, they thought, well, I could run this business and therefore you need to have this technical expertise in order to be an effective operator.

Which certainly would have helped earlier on, but I think as I built systems that ended up not being necessarily true.

[00:45:56 - 00:46:12]

Will Smith: Well, but say more though about this, this dynamic where the seller had all this technical expertise. You didn't. This I think plays into the observation that you made to me in our pre call that this actually wasn't a manufacturing business.

[00:46:13 - 00:47:54]

Scott Duncan: Yes.

Yeah. So that two things, the way this was positioned to me by the broker and by the seller was that the seller really wasn't involved. He played golf for six hours per day and then would fly off to Myrtle beach on Thursday every. Every weekend. Right.

So which is, which is true. He did that. But then when a customer called and they had a very specific injection mold problem, he would pick up his cell phone on the golf course and say, all right, we'll just bring it to the shop, we'll do this. I think the not cynical take on this and I warned searchers about this is that his dad started the business and he had been doing it for so long that he actually had no idea how much he knew and how critical his knowledge was to the operation. So back to the point about this not being a manufacturing business.

I actually think this was professional services business because just like a law firm or an accounting firm, the talent leaves the building every day when it's closing time. Like the machines continue to run sometimes, but it was the people who made the machines run. And the second thing about that was that it was a relationship business. It was not a transactional. We're going to buy this service or product from FNM Tool.

They were buying from Mike who enabled it all. And Mike was obviously the seller. And that's why everyone was uncomfortable. Because everyone knew that except for me. The employees knew that and the customers knew that.

And I thought this was something where they were buying from a collection of systems and processes that were FNM Tool but there were not systems and processes. It was Mike and team. And I totally miss that.

[00:47:55 - 00:48:00]

Will Smith: And how could you have diligence that better or how might you tell listeners to diligence that?

[00:48:02 - 00:48:06]

Scott Duncan: Get lunch with the seller and see how often their phone rings would that.

[00:48:06 - 00:48:09]

Will Smith: Would have uncovered it in this case?

[00:48:09 - 00:48:18]

Scott Duncan: I think so, yeah. I mean I remember the first couple of lunches and it was. We couldn't get through 10 minutes of conversation without something coming up.

[00:48:18 - 00:48:51]

Will Smith: Well, I've heard that tip multiple times before so it's actually reassuring to know that it would have in fact worked in this case. That, that, that would have told you what you needed to to know. The number one cause anecdotally that we see for self funded searches going sideways, going south is seller misrepresentation all the way to seller fraud. What was do you Think that there was some of that here.

[00:48:51 - 00:49:22]

Scott Duncan: I'm thinking about the right way to put it.

I think fraud is probably too strong of a characterization. Was I set up for failure? I don't have any proof of that. I just don't know. It just, it makes me wish I bought a bigger business with a real management team.

And it made me realize that I, like I said, more of a vibes guy. Now I wish I trusted my gut when I was walking around and I interacted with the seller, because I think had I done that, I wouldn't have gone through with the deal.

[00:49:22 - 00:49:29]

Will Smith: Okay, so carry us through the story. We're only really six months in, although we're. We're starting to see the shape of how this is going.

[00:49:29 - 00:50:23]

Scott Duncan: Sure. So that, that was 2018. I bought the business in the middle of 2018, and that takes us to the end of 2018. And I'm thinking like, like the, the, the feeling of what have I done? Stayed with me for six months.

But 2019 actually turned up, I mean, a little bit. We. I started implementing EOS in Q1 of 2019. So that built some rapport with the managers within the business. We got a lot of work in 2019.

It replaced the work that we had lost in 2018, actually. So 2019 ended up in mid teens, EBITDA territory. So we were servicing debt and I was getting more comfortable pulling levers within the business and talking to customers and things like that. So it was still really difficult, but it was just so much different than 2018 was because we were doing well.

[00:50:25 - 00:50:37]

Will Smith: Great.

Okay, so 20 2019, you emerge toward the end of the year thinking that, like, okay, this has been painful, but maybe I've earned my stripes now. And that was my J Curve. And now we're moving.

[00:50:38 - 00:50:58]

Scott Duncan: Yeah. So it was, that was probably through the majority of 2019, but the workload got pretty soft at the end of the year and the business really depended on customer deposits.

So we hadn't booked any work. Cash flow was pretty bad. And that took us really right into Covid.

[00:51:00 - 00:51:01]

Will Smith: And what happens in Covid?

[00:51:02 - 00:52:26]

Scott Duncan: What happens in Covid?

I was watching the news, trying to figure out, like, what is it that I tell employees? Because the rumor mill was going crazy. This was like before, before anything had really shut down and there was no guidance. Like, I didn't know what to do, my investors didn't know what to do, and the workload was evaporating when there was all of this uncertainty. And eventually it was just.

The decision was made for me, really. We just we didn't have anything to do. There was no work. And so middle of March, I think I, I fired seven people. So I don't know, probably about a third of our capacity was gone.

And later on, maybe a week or two weeks later, it was shut down time. We got a letter from local government saying you need to shut down, you're a non essential business. And I told everybody else to go home and I had nothing to do. So I would just keep driving from my house to the shop and be the only car on the road. I had no idea how I was going to pay the bank note or the bank payment that was coming up in, in April.

And it was just really, really incredibly uncertain and, and also, you know, everybody else was going through the same thing, so saw the flip side of that was amazing support from my investors and the search community and the small business community as a whole.

[00:52:27 - 00:52:37]

Will Smith: How did you decide how many people to let go as opposed to just sending everybody home and you know, you know, furloughing everybody and you know, what's that decision look like?

[00:52:38 - 00:53:38]

Scott Duncan: I think at the end of the day it was Kentucky Windage, right? Because I had to figure out, I had a rough idea of what I thought our bookings were going to be for that year. So I thought we're probably going to be a $3 million a year business in terms of revenue.

And at the point where I was making that decision, I had already just, you know, I, I let seven people go because I thought that was the right thing to do. By the time April or May rolls around, it would have been appropriate for me to make another capacity decision. But I had reasonable certainty about we're coming in. I knew that the PPP loan was coming in. I knew that my senior debt was on deferment just because every, every SBA loan got that throughout Covid.

So I just figured out we'll be EBITDA break even for 2020 and lo and behold, that ended up happening. So it was the right decision to, to let seven people go. But in retrospect, I think that was sheer luck versus any sort of management prowess.

[00:53:39 - 00:54:07]

Will Smith: Okay, all right. So Covid is a time of deep uncertainty.

Revenue, the revenue spigot essentially shuts off. You let have to let some people go. There's some relief. But not to say that it's, it probably helped that the entire world was experiencing uncertainty in this, in this moment. Maybe it didn't, but at least you weren't totally alone in this.

2021 brings what?

[00:54:09 - 00:54:40]

Scott Duncan: More bookings and just incredibly Incredibly volatile business conditions as well. Like, we had started to pick up. We were booking a lot more work. Covid had fatigued a lot of employees, not just for me.

So I saw some Turnover. Like in 2021, both my. Both of my key employees left. One of them, I fired. One of them left to go to the same customer where the other employee that I lost in the beginning went to.

[00:54:40 - 00:54:52]

Will Smith: So that other employee must have been talking to them. They must have maintained that relationship. That sounds like a classic, Bob's gone. Or, you know, Bob was trying to pull me over to whatever, over to his new place.

[00:54:52 - 00:56:06]

Scott Duncan: And we were still working with that customer.

We were still doing, oh, a little bit of work for them. So, you know, they were. They were still involved with the business and they needed somebody to come in who had the expertise that my foreman did. So he left. I brought in a general manager who had experience with, obviously, the tooling side for us, but also the injection molding side of things.

So in 2021, we started doing injection molding, making the plastic parts as well. And we did that out of a. A renovated cow barn in Connecticut. So very scrappy. And a year later, that was like a half a million dollar a year business.

So, I mean, 2021 was a really formative year. But the crazy thing was we have. We saw the price of steel within the span of 12 months increase 240%. So the sales cycle on one of these things, especially a new mold build, it's big, which is what we did, was it could be 18 months. So you quote it.

We would quote stuff in. In 2020, in the beginning of the year, and then finish it in the middle of 2022. So we ended up on these massive jobs underwater from the price of steel. And we had.

[00:56:06 - 00:56:16]

Will Smith: Because your costs had gone up, like you'd already given.

You'd already given a quote to the customer at the old, old prices of steel. And so you were underwater on all these, all these quotes.

[00:56:16 - 00:56:17]

Scott Duncan: But had to.

[00:56:17 - 00:56:18]

Will Smith: But they were commitments.

[00:56:18 - 00:57:00]

Scott Duncan: Had to, had to serve.

Yeah, they were commitments. And if you, you know, put yourself in the seat of somebody who's an engineer at one of our customers, it's hard for them to go back to their management and say, oh, we need a 40% price increase on this. Right. And they just weren't. We did manage to get some extra dollars on those jobs, but not nearly enough.

And it just, it damaged a lot of those relationships, not irreparably, but it took a huge. It was a big ask for us to go back and get money on a lot of those projects. And in many cases it was, you can take this and have something to do, or we're just going to pull the plug and find somebody else to do it for us. It was really strange times.

[00:57:01 - 00:57:16]

Will Smith: And Scott, say more about the fact that this Connecticut barn that you started not just servicing injection molds, but actually making plastic parts yourself.

So being injection molders, if I'm using.

[00:57:16 - 00:58:39]

Scott Duncan: The vocabulary correctly, yeah, yep, that works. And this is what I thought the future of the business was too. I had seen this work out with other companies in the area where they started doing the molding. And together it was like a razor and blade type thing where the, the molding of the part was an annuity because there were switching costs.

If you helped a customer design a part and then you built the tooling for them, and then you started doing the injection molding for them too. It was very difficult for them to find another vendor who could do all of that, that entire chain. And we saw some really early success with it. So I thought, this is my way out of the J curve. This is my way out of dependence on tooling.

Because another thing that was going on in that market was that coming out of COVID everybody had a ton of capex dollars sloshing around in their budget. So the job mix for us shifted away from the service and repair that I loved and over to building new molds, which turned us into this crazy project based business. The exact opposite of what you want in a search business. So in a way, injection molding buttress the business because now we're making money pennies at a time. We're just doing it a million times over instead of booking projects that are half a million dollars in revenue and could be all of that year's projected ebitda.

[00:58:41 - 00:58:50]

Will Smith: So sorry, you. You like the new business model even though it's less. Even though on paper it's less search friendly. It's. I heard you use the word an annuity.

[00:58:51 - 00:59:27]

Scott Duncan: Yeah, well, the. I liked the. I like the injection molding side of things. I did not like the project based side of building new tooling only. So just to clarify, I liked the combo of the two because the annuity on the molding side could be so good that you could basically give the tooling away and still be pretty profitable.

But I needed to do something to get away from doing only the new mold builds and in a decreasing amount of repair. So in my mind that was the molding great.

[00:59:28 - 01:00:10]

Will Smith: And, and so just for the, the razor and blade Metaphor there that we of course, give away the. Give away the razor, sell the blades business model where if you. So you would do the molding for them or at cost or below cost, which is significant value, you know, some.

Some hefty lump sum. But then if you also then keep the business and do the injection moldings too, all the plastic that this mold is now producing for years and years, those are your razor blades. That's where you're making a little bit of revenue for you, but on a very regular basis for a long time.

[01:00:10 - 01:00:11]

Scott Duncan: Yeah, there's lock in.

[01:00:11 - 01:00:13]

Will Smith: There's kind of customer lock in there.

[01:00:14 - 01:01:33]

Scott Duncan: Exactly. So we could build the tooling for free or build it at cost for somebody. And if it was. Even if it was a complex plastic part, we could do it and make money on it. We could do it and send it entirely to China.

We could get certain components built in China and do a hybrid tooling build. So there are a bunch of different ways that we could do this, but it would lead to that almost contractual molding work. And like, to put it into perspective, it was like pulling teeth to get approval on a new mold build. So we would get. It would take us months, months, sometimes years to get somebody to sign off on spending 100 grand for a new mold.

But then after that, you're getting $80,000 purchase orders for molded parts. Like, it's no big deal because it's coming out of a different budget. Like there it's the same company, the same buyers. But this is not the tooling budget or the R and D budget or the capex budget. This is operating budget.

Like we need this to make products. So it was just an entirely different decision. And that was my logic. I wanted to tap into that and. And really mimic the same type of dynamic we had earlier on in the business where we had more service and repair stuff and smaller tickets and.

And less thought about should we spend this money or not.

[01:01:34 - 01:02:25]

Will Smith: In the pre call, you.

You described this moment in the business, this pit. It's not a pivot. It was more of an expansion of service to your customers as the moment where you felt like the business is mine now. Like, this is where you felt like, you know, this is. Your chapter of ownership really begins because it was such a strategic move and the business model changed quite a bit.

And I think that that. That's a reference maybe. Is it Jim Sharp, somebody, some ETA thinker, talks about there being this moment in a searcher's operational journey where they. It feels like they go from their, you know, Fill in shoes. Filling the previous owner shoes to the business is really mine now.

Say more about that.

[01:02:25 - 01:04:30]

Scott Duncan: Yeah. So this was that. Jim talks about how the business you have now is not going to be the business that you have in 10 years. And when I tell this story, it sounds like this was a decision I made sitting at my desk one day thinking, like, you know what we're going to do?

We're going to be an injection molder now. And it wasn't that way. This was something that unfolded over really years and something that was a necessity because the business, the industry that we had bought was just fundamentally changing. So this was something that we deliberately moved towards, but it wasn't a. A snap decision.

And it also, it satisfied a number of, I think, the personal issues that I had with the business because it just didn't feel like me. And it was starting to get really difficult to find employees who could do that core mold making work that we were doing. It started to feel more technical. It started to feel more engineering instead of like a blacksmith shop. And I was starting to sell to customers who I could really relate to.

Like, my conversations now were with engineers who were designing a product and wanted to purchase stuff to build that product. It wasn't me talking to injection molding or, sorry, injection mold experts, for that matter, about something that was going wrong with their tooling. And an interesting thing that happened during COVID was that a lot of those super technical older guys, they were all guys that we had been working with as our customers, they retired. So post Covid, like 2021, 2022, our points of contact at these customers were gone, or the company had been bought and moved someplace else, or the company just shut down because the owner was 65 and said, you know what, I don't want to deal with this Covid stuff. And they just closed the door.

So it was like, that felt like overnight was that our customer base was. It was the same, but we weren't dealing with these technical, knowledgeable people with an understanding of what it took to do the work and therefore willingness to pay for it.

[01:04:30 - 01:04:42]

Will Smith: Okay, Scott, So that's into 2022. So take us through 2023, which is really, I guess, when the, when it dips again and for good this time.

[01:04:43 - 01:06:08]

Scott Duncan: For good.

Yeah. So the end of 2022, I was, I was looking at what our bookings were, and we were booking four or five hundred thousand dollars a month worth of work. It actually became a problem. It was a good problem. But there's a such thing as with a Shop like this, having too much work.

My lease was coming due, and an opportunity came up seven minutes away for a bigger, much nicer facility that was set up to be an injection molding facility. And the building was actually owned by an entrepreneur who did exactly what I was trying to do that he. He bought a tooling company and then transformed it into a combo tooling molding company and sold it to private equity and did really well. So he kind of, in a way, ended up mentoring me and really made it so that we would get into that building. Um, so.

And again, this was like. This felt like it's finally happening. It's finally turning into my business. And the other thing was like, yeah, I think it was the same price. We were paying so much in rent that it wasn't like this irresponsible move that, well, we.

We went into this building that we couldn't afford. It was just like so negligible, and it made sense. So that was. I think that was the first half of 2023. We moved the entire shop into this new building, and that was really the beginning of the end for us.

[01:06:09 - 01:06:11]

Will Smith: Why was that the beginning of the end?

[01:06:12 - 01:07:15]

Scott Duncan: Because bookings started to soften again in 2023. 21 and 22 were this huge run up coming out of COVID driven by the fact that nobody could get their stuff. And then once people started to be able to get their stuff again, they ordered a ton of stuff. So my customers.

Customers literally ordered years worth of inventory as soon as they could. I remember personally, we had orders that were, you know, a $300,000 mold build that were being held up from shipping by a $3,000 part. So this was going on all over the supply chain. So what we saw, this huge. This run up in 21 and 22 is really just a temporary thing.

And then people started to get a little bit hesitant in 23. And as I said, the. The business had shifted over to this point where we were doing a lot more project work than service and repair work. So we ended up in this new building without much work to do. And it was like a month in that I had to do another layoff.

[01:07:16 - 01:07:25]

Will Smith: So to be clear, you 20 part of why 22 went so well was because of the post Covid surge that.

[01:07:25 - 01:07:26]

Scott Duncan: We were all.

[01:07:27 - 01:07:29]

Will Smith: Participating in. Really?

[01:07:29 - 01:07:29]

Scott Duncan: Yeah.

[01:07:30 - 01:07:44]

Will Smith: And then. And then it pulled back. It started pulling back hard at the top of 2023, right as you have made this move, right as, you know, as your. As your business model is only a few months old, correct?

[01:07:44 - 01:09:11]

Scott Duncan: Yeah.

And by the Way, it's not like 22 was going well. We were dealing with, with still we were not profitable because of how bad some of these jobs were going that we had drastically underquoted. So I was still like pulling up on the joystick in hopes that things are going to turn around. And by the way, it's really, it was a tough situation to manage with these massive projects because you're trying to communicate with your customer about when is this thing going to land, when are we going to do this project? Meaning, like when are we going to get the 50% upfront deposit for this?

And they're saying, oh yeah, it's going to happen, you know, next month. And then that month comes around and they don't know and it's somewhere else. The, the purchase order for this is somewhere else off in their organization and it lands on the desk of somebody who's responsible for approving it and they just wait because they're waiting to see what happens. So we had no idea what was coming when. And especially in 2023, it just changed to this point where it didn't, it didn't make sense to reduce capacity to the point where it would make sense to break even or at least just service debt because had we done that, we never would have been able to do these jobs in the first place, you know, because we were, we were just so understaffed at this point in time and so unsure about what was going to happen that it just, it created that weird incentive that made sense to hold on to some of our capacity in that way.

[01:09:12 - 01:09:32]

Will Smith: Okay, so let me make sure I understand. So you're in, it's 2023, you're in the new, the new building and you have more sales. You have too much in sales, right? The $500,000 in orders a month. But you're holding back some of your capacity because of the uncertainty.

[01:09:33 - 01:10:53]

Scott Duncan: Sorry, I didn't explain that well. So we ended 2022 at that rate. Things probably, and I'm just, I'm guessing at what the number was. We probably dipped down to three and a half million. We probably look like a three and a half million dollar a year revenue company by the end of 23.

So that's significant. And it wasn't, we weren't, we weren't modulating our capacity. Our customers were holding back on purchase orders because they didn't to want know if they were going to be buying this stuff because they still had tons of inventory. And then let's run a hypothetical, let's say that in with this uncertainty going on, I, as the manager was sitting in the seat, faced with the decision of do I reduce headcount again or do I hold on to these guys? Because my customers are telling me that it's only a matter of time before this order lands.

And if I reduced headcount, we wouldn't have been able to do those orders. So we're in a bad place if I hold on to the headcount. Like obviously we're in a bad place because you know, I'm just carrying, I'm carrying more labor than the PNL warranted. But we had to. If we wanted to respond to any of these orders that came in, we had to.

So every day became a bet on what was going to happen next month.

[01:10:53 - 01:10:57]

Will Smith: Yep. Yeah, yeah, okay. And so take us through 2023. Then.

[01:10:59 - 01:11:46]

Scott Duncan: Things somewhat stabilized. I did another, another layoff. Unfortunately, like I said, right after we moved, it materially affected our ability to do some of the jobs that we had going on. So we ended up late on a bunch of stuff, but we were surviving and, but at that time it was like a slow decline in work. I can't remember what the numbers were, but we probably ended the year looking like a three million dollar a year revenue business.

So we went from booking like a six million dollar a year business to shipping like a three million dollar a year business. Just I think as a result of, of people over buying in 21 and 22 coming out of COVID and then being really hesitant to place any sort of capex purchase order going into the future because they didn't know if they were going to need it.

[01:11:48 - 01:12:04]

Will Smith: And how is your, your headspace this whole time, Scott? And you've now been in the business for five years. Is your skin thick at this point?

Like what, what's the emotional journey like? I, I'm sure it had changed from month to month, but try to snapshot.

[01:12:04 - 01:12:50]

Scott Duncan: It for us, it wasn't as thick as it ended up being in 2025.

And, and in a weird way I was more emotionally involved. Like when I did that, that other layoff when right after we had moved, like these were people that I had hired. They were people that I cared about. Like, well, I cared, I legitimately cared about everybody. But these are people that, you know, I brought them in and I sold them on the vision and now I'm telling them that the vision wasn't working out.

So I was not in a good place. I had, I had gone on depression medication the, the week before or. Sorry, I think it was the week after I had done the COVID layoff. So I had been struggling for a while.

[01:12:50 - 01:12:51]

Will Smith: Oh.

[01:12:51 - 01:13:47]

Scott Duncan: And it just kept. Kept getting worse. That was. That's the thing my wife talks about. She's like, every time we review this, it's worse than it was before.

And I cannot believe that it can keep getting worse than it was before. Like, so that was her perspective.

We had our second kid around this time, so there was much more stress around the household. And I just. I became, quite honestly, I became a shell of a human being. Like, I would go in. I would go in when it was dark, and I would just deal with problems all day, and then I'd pick the kids up, and my wife would come home when it was dark, and we were strangers living in the same house.

Like, we were in marriage counseling. I was at that point on my second therapist and my second depression medication because it just wasn't working. It was a really, really, really low point for me.

[01:13:48 - 01:14:04]

Will Smith: And how long did. I guess you said depression meds starting after the COVID layoff.

So spring of 2020, this started. Was bad already. Your headspace, I mean. And then that lasted, I guess, for years.

[01:14:05 - 01:14:06]

Scott Duncan: Oh, yeah.

Yep.

[01:14:09 - 01:14:19]

Will Smith: Wow. Okay. All right, so bring us to the final decision. Unless there's any plot point I'm missing between where we are in there.

[01:14:20 - 01:14:47]

Scott Duncan: No, I think the only plot point that you're.

We might not have gone over is that things just didn't get better. It was still the same narrative from customers. We were always tracking a number of big projects that would be transformative for us, and none of them were landing because someone in our customer's organization was unsure about the future, and they weren't communicating that to our direct point of contact because we were dealing with relatively big customers.

[01:14:47 - 01:14:47]

Will Smith: Right.

[01:14:47 - 01:15:19]

Scott Duncan: So if we were talking to somebody on the floor who was responsible for tooling or an engineer, they're like, oh, it's often finance in, like, Chicago.

We have no idea what's going to happen. So beginning at 24 rolls around, I start negotiating with my bank. I start telling them I need to go on a payment deferment because we're. This just isn't going to work for us. We've got a year of this going on.

I'm not optimistic about this year. It was an election year. I'm not getting the warm and fuzzy from any customers. We got to do something, or else there's going to be an issue.

[01:15:21 - 01:15:22]

Will Smith: And how did those conversations go?

[01:15:23 - 01:15:26]

Scott Duncan: Poorly. It was.

[01:15:26 - 01:15:30]

Will Smith: You'd been servicing your debt perfectly until then.

[01:15:30 - 01:17:06]

Scott Duncan: Yeah. Right.

So every. Every. Every month, I think it was like 32 grand or something coming out of my bank account. And it got to the point in January where I was actually on a little mini vacation. It was kind of a working vacation where I had some stuff going on, coincidentally where my in laws were.

So we went down and stayed with them while I worked. And I'm like, how am I going to make payroll in a couple weeks? And like, the only thing that we could do at that point was go to the senior lender and say, we need some relief. So that conversation took two months. We didn't end up getting any relief until.

Until March. And that's an experience that I talk about with other searchers with, because, like, your lender probably knows less about the SBA process than you do. And I was surprised that I had to lead them through the process of getting me on interest only. So March we won on interest only. April.

I think it was April. I started entertaining more serious options, be it a chapter 11. Chapter 7 was not on the list for me because I thought this would be unfair to my employees and unfair to our customers because I thought we would make it through at some point. So that's the middle of 24. And at that point I had stopped paying the bank.

It's amazing. The only way to get people to negotiate with you is to stop paying them because you can have all of these other conversations, but they really only take notice when the check doesn't show up. At that point, I was being really.

[01:17:06 - 01:17:35]

Will Smith: Which, by the way, sorry to interrupt, Scott, but I have to say that disappointing to hear because lenders always say your best course of action is to get in front of this with us. If you think it looks like you might slip, tell us before the fact, not after the fact, so that we can work with you, so that you've given us heads up.

So you were following the best practice and yet it seems to have not mattered. And really, they didn't care to talk to you until, as you just said, you miss a payment.

[01:17:36 - 01:18:14]

Scott Duncan: Yeah. Sample size of 1 on this. I don't know if this is a universal experience for sure, but yeah, it was.

There was not much movement on their end, and I don't think. I think it was because they didn't have any experience with it. It was a relatively small regional bank. It was pretty clear when we closed on the loan years beforehand that they didn't have a ton of experience with anything like that. They didn't even have an internal workout team.

So when I was Having this negotiation. I was talking to my relationship manager and I don't know where it was going in the bank after that, but it wasn't somebody who had deep expertise in SBA loans or turnarounds or restructurings. For sure.

[01:18:14 - 01:18:20]

Will Smith: Yeah. Yep, yep.

Okay, so you miss a payment and then what?

[01:18:21 - 01:19:01]

Scott Duncan: Nothing.

Nothing. If the bank wasn't my problem at that point in time, it was vendors. And my experience was that the more sophisticated my vendor was, the less they cared about my payables. It was the small shops like me that got like ridiculously aggressive. I had creditors calling my wife's cell phone number.

They were emailing my father in law. They were emailing her. Allegedly. My employees told me that they were. One vendor was sending pictures of my house that they hired a private investigator to take.

Like it was, it was crazy.

[01:19:02 - 01:19:05]

Will Smith: Oh my God. Was that, did that make you feel unsafe?

[01:19:07 - 01:20:16]

Scott Duncan: I think this says more about my state of mind at the time than the actual, I think, threat. But I, I was looking over my shoulder if there's a car park parked on my street and I didn't know who it was. I'm like, it was, I was paranoid. I was, I wasn't sleeping. I was on a sleeping medication.

I was barely talking to my wife. It was just wild, wild, wild, wild. And never in a million years did I think I was going to get to this point. But in a way, it was a requirement to go through the Article 9 sale because you don't get any of the legal protections of bankruptcy, so your creditors can do whatever they want. And they were taking full advantage of that.

I had, I had the county sheriff show up to the shop to serve me with lawsuits more times than I remember. I had a vendor file a police report from a different state saying that I had stolen from him, which, you know, obviously is bullshit, but just anything anybody could do, they were trying. Like this is, this is just such a case.

[01:20:16 - 01:20:23]

Will Smith: God. Of like the walls closing in.

You can just feel, feel the, the.

[01:20:23 - 01:21:56]

Scott Duncan: Claustrophobia of this big time. And so that's just the restructuring side of things. Like, let's talk about why we were in restructuring in the middle of 24 or maybe, maybe up until about September, we had gone from just a few years before starting to look and feel like a five to six million dollars a year revenue business to feeling and looking like a 600,000 to $1.2 million a year business. It was horrible.

And to talk about the incentives again, I mean, there was no point in trying to cut down to a size that made sense for that revenue. It just wasn't worth it. It only made sense to hold on for as long as possible and shoot for the moon and hope that one or two of these massive orders come in. And then as things got even worse, like, do I want to be running a $1.2 million a year business? Do I want to be running a two million dollar a year business?

Like, I had fired so many people that the only people that I had left were the extremely skilled older guys there and they were all headed for retirement in three to five years. So there, no matter what, at the, at the end of 24, there really wasn't a business there. And I just had to hold on for as long as I could for my employees first, my customers second, and then, you know, to the degree I could salvage anything for my vendors or I knew my investors were wiped out at that point. That's what I was holding on to. But I was hoping for a miracle.

[01:21:58 - 01:21:58]

Will Smith: Did you get it?

[01:21:59 - 01:22:20]

Scott Duncan: I got a minor miracle. I got a minor miracle in October. I got my biggest customer, placed a pretty substantial order. But I remember being, I remember being meeting with my EO Entrepreneurs Organization forum in October saying like, if we don't get anything else, I'm going to be exactly where I was a month ago in three months.

And that's what happened.

[01:22:21 - 01:22:47]

Will Smith: You work through that job and, and then back to, back to where you'd been. So, yep, it didn't save you. It just, it just bought you a little bit of time that you, okay, it's pretty clear you're not going to make it. Even if, even if you can get by, by your fingernails, is it even worth it at this point?

You don't do any of the bank bankruptcy protection options, which are chapter 11, chapter 7. You consider the article 9. You did not go through with the article 9.

[01:22:48 - 01:24:21]

Scott Duncan: No, we did go through with the article 9. It took, it took a really long time.

And in retrospect, I'm glad it did because had we negotiated with the bank and done a deal before I ended up closing the business, then I would have inherited this, like, just, like, just a completely unviable business. So because of their inexperience, what should have taken three to six months ended up dragging on for eight.

In early February, I had had a pretty decent sized order get cut in half and I was negotiating with my landlord to pay them weekly instead of monthly. They ended up using that as an excuse to terminate the lease. So in the middle of February, I had, I had quoted $600,000 worth of work in the quarter when we typically would have quoted 3 million at that point in time. We had booked $10,700 worth of work in the month of February. My lease had been terminated.

I was talking with the people who were going to buy the assets of the business from the bank about finding a new place to move the business to. Having just gone through that and understanding how difficult and expensive that is just in terms of opportunity cost and lost time, let alone moving everything over and, you know, no prospects of work coming in in the future, really, and no answers coming in from our customers.

[01:24:22 - 01:24:23]

Will Smith: And so you decide.

[01:24:26 - 01:25:02]

Scott Duncan: Decision was kind of made for me. If we had gone on or at least tried to go on, we would have required a capital infusion from the folks who were going to buy the assets. And it wasn't clear whether or not they were going to do that. And so I made the decision on a Friday. I called my office manager on a Monday to get everybody's final checks ready.

I fired everybody on a Wednesday. I helped everybody load up their toolboxes on the Friday. And then the following Tuesday, the bank took possession.

[01:25:07 - 01:25:08]

Will Smith: When was that?

[01:25:09 - 01:25:10]

Scott Duncan: That was first week of March.

[01:25:12 - 01:25:17]

Will Smith: And what are the personal implications for you financially at this point?

[01:25:19 - 01:26:10]

Scott Duncan: At this point, I mean, I had been missing mortgage payments, right? And I had.

I had a great credit score. I'd never carried credit card debt in my life, which is crazy because I had over $5 million worth of SBA debt at this point. And I just feel like a total dirtbag, right? And I have no. Nothing lined up after this.

And I have two kids and a wife and a house, and. And, like, I just. I just don't know what I'm gonna do. I'd always been told that it's pretty easy to find a job when you fail at searching. So I figured that that was going to be an option for me.

But it was March at this point in time, and I just gotten back in touch with the lawyers that I had spoken to a year before, saying, well, it happened. It's time to go Chapter seven. And it was, no matter what, it was going to be personal and then business as well.

[01:26:11 - 01:26:13]

Will Smith: And so what does that mean? They take the house?

[01:26:15 - 01:26:39]

Scott Duncan: Fortunately, in Massachusetts, there's the Homestead Protection Act. So I think. And this is another thing that we're, you know, just crazy timing that changed in October. I think of. Of 24, the amount that was covered under homestead protection.

So I was reasonably certain that our house was going to be okay, but I wasn't 100% sure.

[01:26:40 - 01:26:52]

Will Smith: So what does it look like? Then they come after whatever liquid assets you have, they take those and then. And then do you have a more payment hanging over your head for years and years?

[01:26:52 - 01:27:53]

Scott Duncan: Yeah, they take a look at what you've got for liquid assets, and then there are some that are exempt.

My house was exempt because of the Homestead Protection Act. And you can retain, like, a car that's worth 8,500 bucks or something like that. And it's. It's really. It's really degrading in a way.

I mean, if you're defaulting on a whole bunch of debt, I think to a degree, you might end up maybe deserving to go through a process like this. But they took, like, with my lawyer, I went through an inventory of everything I own, like, down to the watch that I bought with gift cards. And how many TVs do you have? Like, what's the value of your furniture? And, you know, just.

It doesn't make you feel good, that's for sure. Because you don't know if you're gonna get to keep any of this stuff. Like, you can. You can logically know that the SBA is not going to come after, like, the used sofa that I bought on Craigslist, but you're still having to list it all out. You just feel like garbage.

[01:27:53 - 01:28:00]

Will Smith: And after you've made this decision and you're really going through the worst case scenario at this point, how are things at home?

[01:28:02 - 01:29:33]

Scott Duncan: Great. Like, I had once, I had come to the conclusion that the business was going to shut down in a way. Like, the weight had lifted off my shoulders in that last week. I told everybody, like I told everybody on that Wednesday that we were shutting down. And they all saw it coming, right?

Like, they knew. They saw the level of work that we had on the shop floor. And in fact, we didn't book any more work throughout the remainder of the month. We ended February having booked less than $11,000 worth of work, having only a few years before been booking four or five hundred thousand dollars in a month. So it was quiet.

It was super, super quiet on the shop floor, and they were just waiting. So I brought everybody into the lobby. I had to pull out an office chair and sit down because I thought I was going to pass out. But I told everybody and I left the room getting a. A handshake or a hug from everybody in the business.

And I mean, that was it. So that was the end of the week. Coincidentally, I had a long weekend planned with my wife. I got super sick, and she said it's from a change in cortisol in my body. I don't know.

She's in the medical field, so she understands more about that than me. And then it was just relief after that. It was relief punctuated by, you know, proceedings, like issues with my customers, like, when are we going to get this stuff? And legal issues and threats and things like that. But very broadly, it was relief followed by grief.

[01:29:34 - 01:29:41]

Will Smith: And at what, exactly? There's a sense of loss here that's different than, say, personal failure.

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

Scott Duncan: Or is it.

[01:29:41 - 01:29:42]

Will Smith: Is that one of the same?

[01:29:43 - 01:30:16]

Scott Duncan: Well, it was important for me to go down swinging.

And I felt like I had. I felt like I had done the best I could for the employees and customers and my investors and all of that, because it was. There was no more. There was nothing left. There was nothing left in me.

So the. The feeling of failure rarely entered my head. But it was grief. It was grief for, you know, I cared about my employees. Like, I missed seeing everybody.

I missed going in and having something to do.

[01:30:16 - 01:30:16]

Will Smith: I.

[01:30:16 - 01:30:48]

Scott Duncan: Sitting in this office and I'm like, well, I guess I look for a job now. And I hadn't updated my. My Resume was from 2015, 2016.

I was updating my. The business school application resume that I had and just winging it. So it was just. And it. I don't want to get too, like, philosophical about it, but it was grief for what could have been.

And then for me, it wasn't like, oh, man, I wish I made a bunch of money. It was like, oh, wow, this is. This is a feeling of loss, loss of purpose, loss of identity.

[01:30:49 - 01:30:58]

Will Smith: You did leave it all in the field, though. There is.

There is a sense that you don't. There's not. Regret is not something you feel.

[01:30:59 - 01:32:14]

Scott Duncan: Regret is not something I feel. Not something that I feel in any sort of systemic way that.

I mean, I will. I'll wake up in the middle of the night and I. I will wish things had gone differently, but I don't, like, wallow in this all day long. There are decisions that I wish I had made differently, for sure.

But no, I'm not. I'm not sitting around, like, feeling sorry for myself. I own it fully. And I think because I own it so fully, then it's helped me not really feel super. I don't know, regretful about it.

I ran the business for almost seven years. I built some really good relationships. It didn't end up working out. I met, through, going through this process, an awful lot of searchers who went through bankruptcy or some other sort of business failure and not to be like, nonchalant about it, but there's a lot that can happen that's outside of your control. And talking to those folks made me realize that.

So, you know, it is what it is. It's the most like, basic thing I think somebody can say at the end of this. But I've come to embrace that it is what it is.

[01:32:16 - 01:32:25]

Will Smith: And you're actually, I don't know if you're actively searching now, but you remain enthusiastic about entrepreneurship through acquisition for yourself.

[01:32:26 - 01:32:54]

Scott Duncan: Believe it or not.

Yeah. I was actually under loi on another manufacturing business earlier with the same folks who were looking at buying the assets of fm. Didn't end up working out, but I don't have any. Yeah, I still love the model. I actually still love manufacturing with some caveats and I, I would be shocked if I do not end up searching again.

Just maybe. I think I'm taking a break for.

[01:32:54 - 01:33:24]

Will Smith: The time being and so reconcile that for us, Scott, Having kind of had the worst possible outcome and yet still be being enthusiastic about the model. We talk about search as this incredible opportunity, but an opportunity with serious teeth. And generally those who are feel the, you know, teeth penetrate their skin are gonna come away feeling like it wasn't worth it.

It's not worth it. You're one of the wounded and yet you're gonna go down the path again.

[01:33:24 - 01:35:14]

Scott Duncan: Yeah. And I have a whole assortment of thoughts on this. So the first is that this is why bankruptcy exists.

And I didn't ever stop to think about it before I went through it. But what is bankruptcy? It is a legal process by which you can get out of, out of all of this debt and you can start again. It takes a while. It's really hard.

I mean, that might be, that might be the rate limiting factor for me, searching again. But that's what it's here for. It's to, it's to remove the negative incentives of entrepreneurship so that people who are entrepreneurs can try again. So that was one thing. I didn't stop to think about that before.

It was real. The second thing is I think the attention that I got from the search community after was just unbelievable. Like, I thought that this was going to be some sort of mark of shame for me within the ETA community. And it's been the opposite. They're like, wow.

You're like, they, they just remark at my resilience. And this, like, this is a pretty unique skill set, like within, within search, let alone, you know, running a business as a whole is like managing a Business through distress is not easy, and the only way to learn how to do it is to do it. So I. I don't know, I just became a much better operator in that regard. So for that reason, search remains. It remains attractive.

And then the final reason is that I tried looking for a job, and I think I'm unemployable. I tried. I probably did like 120 jobs, and I don't know what the story was, but I didn't get much traction. I know it's a hard time to be looking for a job anyway, but I think, I think they looked at me as a little bit too much of a gunslinger for anything super professional and corporate and in my pay grade.

[01:35:15 - 01:36:07]

Will Smith: I'm sure, of course, there are people who went through what you went through and go on to get corporate jobs W2s.

But the thing that we often, that we so often hear about entrepreneurs, once the kind of taste of entrepreneurship, you become unemployable, you know, sort of constitutionally unemployable is probably more acute in your case because the level of responsibility that was on your shoulders as you carried a business through crisis, it is kind of like that much more autonomy than an entrepreneur who has it easy. It's just like, you know, you, You've, you know, you've been captain of a ship that's seen battle, sort of. It's like the level of autonomy that, you know, is even deeper than your average entrepreneur. I don't know, maybe I'm pushing it, but I could see that.

[01:36:07 - 01:36:08]

Scott Duncan: That.

[01:36:08 - 01:36:19]

Will Smith: I could see that if I'm considering hiring you, this is a guy that, that has just seen too much. He can't be, he can't be a cog at this point in my organization.

[01:36:19 - 01:37:08]

Scott Duncan: No, I think that's true. I. So I think that, you know, what might have been going on is that any sort of AI screening tool, sees president on a resume, is like, next.

But also there. There were some that were like, if they were startups or something like that, I would, I would interview. And one of them, they made me do a presentation and I'd get on the phone with the recruiter and like, well, tell me about a time you faced a challenge. Like, have I got a story for you. So I remember, like, I was in this interview and I had to do a presentation for the whole interview panel, and I talked about shutting down F and M. And they all looked at me like they were shocked.

Relatively junior role too. So I'm like, I don't. I guess I didn't illustrate the point there that I could do that job or maybe, maybe a bit too experienced, I don't know.

[01:37:08 - 01:37:51]

Will Smith: Well, Scott, you apparently have already heard it from a lot of people in the search ecosystem, so I won't belabor it. But we are so appreciative that you're willing to do this, come up here, put yourself on stage and go through this harrowing journey so that people, so that all these listeners and searchers behind you on the path can learn something from it.

These are the stories that are happen in the shadows. I always try to get people on here to tell them and I've had some success with that. But there are so many more stories like this that we never hear and we are always so appreciative when somebody's willing to. So thank you very much for doing it, Scott Duncan, and congratulations on your survival.

[01:37:51 - 01:38:23]

Scott Duncan: Thank you and it's really my pleasure.

The ETA community has been amazing for me. I feel like it's my duty to pay it forward at the very least and maybe expose that it's not this quick path to riches that everybody thinks it might be. And just warn people that if this is not something that you can foresee yourself going through, then maybe it's some not a really, really viable career path for you because somebody has to be on this side of the bell curve. And I think it ends up happening more than people realize.

[01:38:23 - 01:39:11]

Will Smith: That's well put, Scott Duncan.

Thank you, sir. Thank you. Hope you enjoyed that interview.

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