How I Built My Small Business

David Pope - Buying a Business in Your 40s: Would You Move Your Family? The KAYTECH, INC. Story

• Season 2 • Episode 21

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Today’s guest is Dave Pope, a friend of mine from college who spent 14 years in sales in the Northeast before making a bold move and buying Kaytech, Inc., a surface preparation company based in Greenville, South Carolina. 

At the time, he had no prior experience as a business owner.

In this episode, Dave shares what it’s really like before, during and after acquiring a small business with stories from his first year as an owner-operator.

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Speaker 1:

Don't be scared of taking the next step. Just take small steps. Go to those networking events. Talk to people about doing these things. Talk to a banker. It's not that difficult to pick up the phone and speak to a business broker as a screening. Just pick up and talk to them about the local liquor store that's for sale for half a million dollars and it's got $100,000 in cash flow. Just learn about it. Learn about the acquisition process. Talk to a few owners of businesses just to see how the conversation goes and dip your toe in the water. Don't think that you need to commit. The commitment doesn't even come when you've made the offer. The commitment comes when you're starting to enter the financing phase and you're putting down payments down. There are many months of going through that acquisition process when you can just pull the plug and say you know what? I spent a thousand dollars on networking events, you know, and drinking beers with some interesting people and then I decided it wasn't a good fit. You can always turn around.

Speaker 2:

Welcome to how I Built my Small Business. I'm Anne McIntee, your host. Today's guest is Dave Pope, a friend of mine from college who spent 14 years in sales in the Northeast before making a bold move in buying KTEC Inc, a surface preparation company based in Greenville, south Carolina. At the time, he had no prior experience as a business owner. In this episode, dave shares what it's really like before, during and after acquiring a small business, with stories from his first year as an owner-operator. If how I built my small business has brought you any insight, inspiration or even just a spark of curiosity, there are a few simple ways you can support the journey Follow the show, share your favorite episode with a friend or leave a quick review. Each one truly helps me grow this show. Thank you, let's get started. Hey, dave, it is so good to see you. Thanks for coming to chat with me today.

Speaker 1:

You got it. It's great to see you after all these years.

Speaker 2:

So I remember seeing the news on LinkedIn I think it was about a year ago and it was a post that you put that just said that you bought a business. And I checked your LinkedIn profile and I was like, yeah, no, I think this is a big leap. So can you take us back to the beginning? How did this all transpire?

Speaker 1:

Sure, and you're absolutely right, it wasn't a big leap. It was a huge leap for our family, not just me professionally, but I think I was like a lot of folks our age or even younger. I was 43 years old. I had been in the same job for 15 years, which was a very good company, a very stable company. It provided for my family and I got to live in a very nice town in Connecticut.

Speaker 1:

But at some point I thought that I was capable of more and I have always been a fairly ambitious person. And so I was just actually venting to one of our mutual friends, joe, and he said you know what? I read a few books in business school about acquiring small businesses that you might want to read, and so that thought hadn't crossed my mind. I actually started to actively look at different companies and started to you know, what other job can I do with my existing skill set? And I realized very quickly that I was never going to work for anybody else Going through that interview process. I said that I was never going to work for anybody else Going through that interview process. I said, nope, not going to work for somebody else ever again, and I realized that I needed a different out and I knew that starting a business was not something that we could do. I've got a great wife and four beautiful children, so the idea of no-transcript I really want to spread the gospel about and I talked to everybody I can about it. That's in there.

Speaker 1:

You know, maybe not necessarily in your 20s, because I had to learn a lot just about business in general and being in a small business, but I would say, even in your 20s or 30s it's definitely possible to find a small business that is enduringly profitable, that has an owner, that is too small for private equity to be interested in.

Speaker 1:

It's large enough that it employs a number of employees and the owner might not have a succession plan. Their kids are doing other things and they're not interested in continuing on in dad or mom's legacy, and these people need someone to sell to, otherwise they're going to shut down at some point and they don't want to sell to their competition because they hate their competition and they don't want to sell out to large conglomerates that are just going to chop up the business and turn it into something that's not so. I started to realize that in this country you've got a demographic curve right. You've got your baby boomers who are either dying or retiring right now, and that's where a lot of the wealth in this country is concentrated. So there's a real huge opportunity for younger people. If you can find investors or you have some cash that you can pull together, you can absolutely make it work. If you find a healthy business, give it a shot. It's definitely possible.

Speaker 2:

Yeah, so I want to touch back on when you mentioned the books that you read, that Joe had read in business school. Do you remember what the titles were?

Speaker 1:

Sure. So the first one was, I believe, buying a Small Business Harvard Business Review. That was essentially a blueprint of how we went about this acquisition and there are some things about that book that I would, through the process of going through this acquisition, I would say there's some things in that book that I learned from and used very well, but some things I would definitely say avoid this or avoid that or don't do that at all. And then there was another book called Buy Then Build, which was written by a guy, I think, probably younger than us, that's bought and sold a number of businesses.

Speaker 1:

Those books really put into perspective that if you're someone who works hard and you're not afraid of some risk and you're not afraid of the responsibility of being a small business owner, that's the big one. I think it's definitely possible and I'm sure you have stories of being a small business owner. That's the big one. I think it's definitely possible and I'm sure you could. You've had stories of being a small business owner. I mean, if the wifi goes out, if you have a hurricane which happened last year and you don't have power for a week, what do you do? Energy company isn't there.

Speaker 2:

It kind of keeps it spicy, though right, Like it keeps it new every day as a new challenge. And you mentioned the right business with the right cash flow right. So how did you analyze the businesses that you were able to find and decide that it was the right decision?

Speaker 1:

So when I started looking at businesses, you know if you go to business broker websites you're going to see a lot of hospitality. Go to business broker websites, you're going to see a lot of hospitality. You're going to see a lot of liquor stores. You're going to see some manufacturing. You'll see all kinds of mom and pop businesses that probably do very well for themselves. And then you find a few diamonds in the rough.

Speaker 1:

I knew I didn't want a few things. I didn't want hospitality, Hot hotels. I didn't want to work weekends. I've got kids. I didn't want to work nights and weekends, so that eliminated hospitality. I didn't want to work in anything with retail that depended on foot traffic. I didn't want to do anything in tech, because that's not my background. I know nothing about building an app or finding customers virtually it's not my background. But I was interested in some type of manufacturing. So I looked at co-packing businesses. I looked at a chemical manufacturer. I looked at, actually, a wedding tent rental company. I mean that can be good, but that means you've got to supervise people in the field. You know that very well. You've got to work nights and weekends. Potentially You've got a lot of logistical challenges there. So I knew the type of business that was going to fit us as a family, where I wanted to keep some regular-ish hours in terms of business operations, and that narrowed it down pretty well. I also started to work backwards in terms of well, what kind of cash flow did the business need to have in order to support the debt and also to pay and keep a roof over our heads? So that also narrowed down the size of the business. And then I also needed to understand if it was a scalable business. So it's much more difficult to scale their businesses, and that was part of the recipe of narrowing the field down.

Speaker 1:

And then, once I got an idea of what I was looking for, it was very rough around the edges, but I realized okay, now who do I speak to? I mean, how do you find the business right? That's difficult. I even looked at a marina on the coast of Connecticut. There was a family that has owned this marina for years and years and years and I started speaking to people.

Speaker 1:

So I started speaking to owner of a business and you're thinking about selling. Who do you speak to first? Your accountants, your attorney, all the people in your circle that handle your money and things of that nature, and so I started networking with and just started cold calling accountants and attorneys and I started to attend a regular merger and acquisition events in New York and Connecticut because that's a big hub of where that's happening and started to introduce myself to everyone and essentially saying I know that you're lower mid-market, that's where your firm is centered, but I'm interested in the businesses that are off your radar, that are too small for you to be interested in. That's who I want to talk to, and through that process I really met a lot of interesting people people who evaluate businesses, people who advise on acquisitions.

Speaker 1:

You speak to all these people over months and months and months and you start to build a network of folks that are very helpful, because the more questions you ask, people want to give you knowledge, they want to help. Sometimes you have to pay them for that help. That was great to get their perspective. Actually, I looked at a medical device manufacturer out of New Jersey and that was only like a two-person business but he was doing like 1.5 in sales and it was very profitable, but it wasn't scalable and I didn't want to live in Jersey, let's be honest. But you know. So it took a lot of research and just asking a lot of questions of these owners and eventually you start to speak to the owners of these businesses and learn more about what's going on. You know, it's just there's all these interesting businesses out there.

Speaker 2:

I mean, you were clearly ambitious and you set your criteria up front. When you say that you spoke to these businesses, what was your evaluation process like? I mean, is this a Zoom call where you are peppering them with questions, or were you just looking at their profit and loss statements? What was that initial part of the eval process like?

Speaker 1:

Yeah. So I was really trying to find a business that didn't have a broker involved with it already, because once they get a business broker involved then they start to evaluate the business differently with a high price tag, or position the business in a different way. I was trying to do that and I would say, if anybody's looking to buy a small business, that's what you want to do is just walk right in the front door and introduce yourself to people. If you can find them, that's the way to do it, because once you get a third party involved it complicates things. But ultimately what I was doing is calling business brokers quite a bit on the East Coast, and that's the other thing.

Speaker 1:

I had a fairly open idea of where I wanted to live if I moved and if the opportunity was good enough, I could justify moving. But I was looking a lot in the Northeast at the time and I was in Connecticut. Now we're in South Carolina. But to your point, that's a lot of what we were doing is signing a bunch of NDAs and taking a look at P&Ls and balance sheets just to understand the ins and outs of the business and then if that looked compelling, then we might talk to the owner in a phone call with the business broker just to ask some screening questions.

Speaker 2:

But with KTAC, did you find it through one of these brokers or are you saying that you found it off market?

Speaker 1:

Right, I found it through a broker and what ended up happening is I was speaking to somebody and my background is the last 15 years. I was in the industrial coatings business and somebody said hey, dave, you're in the paint or metal finishing business, right, that's kind of what you do right now. I'm like, yeah, yeah, yeah, that's kind of what I do. And he said you know, you might want to talk to this guy. I heard about a little business down in one of the Carolinas that you know might have something going on.

Speaker 1:

So I ended up picking up the phone with a broker and at the time the owner really didn't want to let anybody know that the business was for sale and it was actually advertised in a totally different city. So you know business for sale and it was very vague about what they did. But it gave just enough information for me, as somebody who was experienced in this industry, to kind of say I think I know what he's doing, I think. So I picked up the phone, spoke to the business broker and he said well, why don't you send me your resume over and we'll make a determination to see if you're legit, right, unless you're fishing for information? So we ended up getting on a call with the owner and he said oh, by the way, it's actually not in Columbia or Charleston, it's actually in Greenville, south Carolina.

Speaker 1:

I said oh well, that's great because I like Greenville, and so that conversation, there was probably a few phone calls that we had which led to actually coming down to the company itself and meeting the owner and his wife, looking at the facility, learning more of the ins and outs of the business, and then that was the I don't want to say the most difficult part, but finding the opportunity that could be a good fit. So at that stage now you've actually committed your own time and money to flying in and visiting the company, then figuring out how do I afford it, how do I get financing and is this the right fit for us? Because that's a big leap, you know, especially when you're in a job that was serving you. Well, it was a good company that I worked for and actually it was actually family that I was working for. So during this whole process I couldn't consult with family about the transaction until it was actually done.

Speaker 1:

That was another layer of complexity that I really didn't enjoy. But yeah, that was decision time, right, because you got four kids in school and you don't want to disrupt their lives too much. That was quite a thing.

Speaker 2:

Well, what I love, though, about your story, from what you've said so far, is just that you made a decision, and then you took all of the steps that you needed to in order to make it happen. Like you weren't sitting waiting for the opportunity to land on you. You were going to networking events, you're reaching out to brokers, lawyers, accountants, and you were really looking for the right fit for you, and I just think it's an inspiration to anybody that's out there who dreams of maybe following in your footsteps in that kind of a way. So, when you mentioned financing, I wondered what did you do? So how did you get the financing to make the transaction close?

Speaker 1:

Yeah.

Speaker 1:

So through both of these books that I mentioned earlier, they talk about that a bit and every deal is going to be a little bit different.

Speaker 1:

Looking back on it, I would say that you really want to find a way to make the financing work with the owner, because you're going to save quite a bit on interest rather than going through a bank that's going to be charging you SBA fees that are quite expensive.

Speaker 1:

So I would say, looking back on it, you really want to start to begin having a working relationship with the owner or owners, making them realize that you are a good candidate to buy this business, because, as you know, if you are the founder of a business, you've built it from nothing to what it is now. It is a marketable asset that somebody is willing to spend millions of dollars on, and so it's their baby, it's their child, and they don't have to sell it to you. They might be interested in selling it to you, but they don't have to. So you really need to demonstrate that you're capable of taking on this responsibility and growing it, and that's many times. I think what, in speaking with these owners that's what they're looking for is someone to take what they've built and grow, because by the time they're selling, they've made some money. They're tired.

Speaker 2:

Yeah.

Speaker 1:

You know they're not done, but they're saying I'm ready, I'm tired and I need to hand this off to somebody else. So you need to be that person that can sell the owner on the idea that you can grow this business. And part of that conversation is I'm just not going to buy this business and give you a check and you walk away. Because if you have an owner that says I want all my money as soon as you sign the dotted line and I'm out, that's not a good thing for you. You need to know that this is a viable business that's going to continue year after year, because that's too much risk and you want to work with that owner for many months after the sale, because there's relationships, there's perspective, there's a lot you need to learn in that first three months.

Speaker 1:

I would say after three or four months I was standing on my own two feet, but I'll tell you what. That first week I didn't know which way it was up, and so I would say work with an owner that is going to offer owner financing as much as possible. Now that's going to be tricky and that's not what we did 100%. There was owner financing associated with it. There is skin in the game here, but I would have pushed harder for more of that and I think if you read Dave Ramsey or listen to his podcasts, he'll say something like you know sharing in the profits and then, if it's an extremely profitable, five years and you'll own it like that. But if the business proved to be not very profitable, then it might take you 12 years to buy the business. I think he's got a very good formula for financing an acquisition that, frankly, doesn't have a bank involved.

Speaker 2:

Okay, so you got partially seller financed and then you for the other remainder. Was it SBA or just a traditional bank? Right, sba, yeah?

Speaker 1:

And that's where you have to work with a banker and find a banker that can close that deal, because closing an SBA acquisition and getting that financing is a laborious process. It's just like getting a mortgage. They're going to ask for a lot of documentation. They're going to ask for the same documentation three times, four times. Then you've got to go through this whole due diligence process with the existing owner that the SBA is going to be involved with. It takes a lot of energy.

Speaker 1:

I was working a full-time job at the time but it's a lot of hours and it's a lot of emails. And now you're getting an attorney involved. You're getting an accountant involved to do due diligence on this business to make sure they're paying taxes. You might have a merger and acquisition advisor that is consulting you on an ongoing basis. Your accountant is just looking at a tax liability. That's what I learned. He just is looking at the taxes. He doesn't know anything about valuation, doesn't know anything about strategy of acquiring a business. And you do need someone to.

Speaker 1:

And fortunately in my network I did have people that I went to college with or people I knew that I could pick up the phone and I trusted and said, hey, what do you think about this? Somebody that I knew that had acquired businesses, or one guy was an attorney working for a big white shoe firm in New York and then, through that networking that I did locally, there are all kinds of merger and acquisition people who evaluate businesses and then act as consultants on this. You can find somebody like that for a very reasonable price. That's just going to help you through that process and mitigate risk. That's what it's really about is mitigating risk.

Speaker 2:

I like, too, that you acknowledged what you knew and what you needed help with in the process.

Speaker 1:

I knew yeah.

Speaker 2:

You know, tapping the expertise of somebody in mergers and acquisitions is such a good play, but you had to acknowledge that you needed it.

Speaker 1:

Yeah, and I think maybe that is actually part of getting a little older, right? I would say, if you asked me when I was 35 years old, I'm too headstrong to ask for help, and now I think I'm getting much better at acknowledging that I'm not good at certain things and I need people who know what they're doing to help. And it was a process, right, it was a process. And once you start to get in over your head, then you start to realize I need someone that can help me with this. And then you start asking questions. Right, you start to say, well, can you help with this? And like hey, I met you at a networking event.

Speaker 1:

You said you consult on acquisitions, can you help? Well, that's a deal is too small for me. But here's a guy and that's just what networking is all about. And it took a long time. The whole acquisition process, from just initially looking at the business to putting a letter of intent together to the due diligence. I mean that was 10 months. It's a long time. It's a big investment in time, not so much the front end cost of accountants or attorneys or consultants, it's a time investment. And it's about the team of people that you pull together too.

Speaker 2:

And once the deal was done, signed, delivered, money transferred. How did your family respond when you told them that you were moving states, and what has that impact been like for them?

Speaker 1:

Yeah. So in my case, that was actually, I would say, the most difficult part, because I worked for family, not my parents, but I couldn't tell my parents what I was doing and that really broke my heart, because I have a very, very tight relationship with my parents and I couldn't tell them hey, I'm going to quit, you know, a family business to do something else. I knew that. I couldn't ask them to keep that secret and that was very difficult. I still regret that and they understand why I had to do that and everything was fine after a little while.

Speaker 1:

But I would say, my immediate family, you know, bonnie and I were talking about this for 10 months to get it done. And then, once we finally actually sold our house in Connecticut is when we told our kids so we have 14, 12, 10 and eight year old kids, four kids. Yeah, now, keep in mind, we had to sell our house. We do acquire the business. We had to move schools for the kids, you have to get housing in another state. I mean that there was a lot of logistics in that last five months. That was brutal. Don't suggest that everybody do that, but just know what you're getting into. It's a lot of stress and so when we told our kids, I think they didn't really know what that meant, but I would say that they have been very resilient and very flexible.

Speaker 1:

I was very, very concerned with my 12 year old son and my 10 year old daughter because they still have very tight relationships with some of their friends up in Connecticut who, you know, they're going to go to summer camp with this summer and uprooting them. We were really concerned about that and they have done exceptionally well. They adjusted very well. So that was difficult and that was part of this whole risk analysis. Right Is okay. What are the all the good things about this transition and things that could happen? Where are the risks? What are the downsides? What are the things that we could really miss out on and potentially affect our family negatively and that was certainly part of it is how are the kids going to respond?

Speaker 2:

Yeah, but what an important lesson they get to not just learn from you but to watch you and your wife grow together. This business, I mean I think you can tell stories and then your children can watch you, and when they watch you I think that the learning may get a bit deeper. So amazing opportunity for them to be a part of this. Tell us just really, you know frankly, like what has the learning curve been like, going from being an employee to now an owner operator?

Speaker 1:

Yeah, now you're signing the checks, right? Yeah, exactly. Yeah, that was quite a transition, right? Is you know? You sign the paperwork and then the next day you own this business and then you show up to work and you meet the employees for the first time. That was a transition because the employees you know owners don't want to tell their employees, hey, the business is for sale and you know something's going to happen. They don't want to do that. So we were introduced to all the employees more than anything else. It was guys, nothing's going to change at this company. Like, we don't want to make any big changes, Nobody's getting laid off.

Speaker 1:

And right off the bat, we made some changes that were very positively received by the employees because we wanted to acknowledge that they're valuable. I mean, realistically, when you buy a company, yeah, you might be buying a building and you might be buying equipment, you might be buying a machinery, but the company is the people and without the people you can't get any work done. And I would say that someone could get ahead of themselves and say, okay, we're going to slash expenses and we're going to put new compensation plans in place to be more lucrative for ownership and squeeze every ounce of labor and profit out of the business. There's a temptation to do that, to be very headstrong and come in and make changes rapidly, and I would not recommend you do that.

Speaker 1:

The owner of the business that you just bought that business off of. There's a reason why they were successful and you need to acknowledge that and you need to make sure that you're treating the employees well, especially the ones that have been there for a long time. And if you've gotten that far, you're smart enough to know how you're going to grow. You're a smart person. That means you've already gotten the bank on board. You've already got that letter of intent signed. You've demonstrated your competence. Now you're across the finish line. Don't make any big changes. Small, incremental changes over time to grow the business and whether that be in sales, whether that be maybe moving into a different industry, take it slow, no big changes.

Speaker 2:

Yeah, for the sake of the company and the existing team, but also for yourself, so that you can learn the ropes of the business.

Speaker 1:

Oh, yeah, yeah. And to get back to you know learning curve, it was a big learning curve. I've always actually thought of myself as a small business person. I worked for a couple of large companies right out of college and very quickly realized that that's not who I am. When I was younger, I worked for either family or other small businesses. That that's not who I am.

Speaker 1:

When I was younger, I worked for either family or other small businesses. I mean, my first job was scooping ice cream at 14 or 15 for $4.25 an hour. I can remember that really well. And then I was working in construction with family, and then I was doing all kinds of stuff that young people do for work just to make a buck. And that's how I grew up.

Speaker 1:

Small businesses and then moving to New York working in finance for a little bit and then getting laid off in August of 2008, three months before I was going to get married made me realize that maybe I'm not the big company guy after all. And so, getting back to that learning curve, it wasn't that drastic because I've been with small businesses, but now you're stepping into a management role and now you're managing people. Now you are the person saying yes or no, and making big decisions and when I say big decisions like whether to hire and fire people, pricing your product, you know these are all things that you're second guessing yourself on all the time. And it's you, it's all on you. Now. You can't go and consult the boss, you can't go and consult other people. It's like you're the one and I enjoy that. That's what I signed up for. That's a lot of pressure that you can't necessarily explain to somebody unless they're actually experiencing that, because that's where the rubber meets the road.

Speaker 2:

You need some critical thinking skills and the ability to problem solve and make decisions.

Speaker 1:

Oh yeah, oh yeah, like we had Hurricane Helen came through here and we were all up and running full steam and all of a sudden lost power because the transformer on one of the telephone poles went out and the power company looked at their grid and said no, you know, mr Polk, you have power according to our system. And I'm saying my electrician is telling me that I'm not getting three phase power to run our compressors. And I need, mark, our compressors to be running, because it's a big part of our business and it's not any of our equipment. It's Duke Energy. And what do you do? It's Hurricane Helen.

Speaker 1:

Every major manufacturer has on-call generators on contract and you're a small business and I needed what was it? 40 kilowatts of energy. I it was a tractor trailer, or I needed a generator as big as a tractor trailer, and I couldn't find that, and every all they were all taken up. So if we didn't have power, we're not putting out product, and so that's on you, like, how do you solve that? And so it was. That's on you, like, how do you solve that? And so it was a lot of phone calls.

Speaker 2:

Yeah, that's. That's a big one and that actually makes me think of a little side tangent Maybe you and I can talk about it after the show mainly about the demands for power needs increasing within the United States because of all the database centers and AI growing and let's talk about that later. But so what skills from your corporate career, which skills do you think really prepared you for this transition?

Speaker 1:

I think that goes to narrowing down the skills you have right now versus what the company you're thinking of acquiring needs. So in this case it was a very stable business that hadn't had any really any sales effort put into it in many years and actually that's pretty common with businesses that are established right. The owners built it, they're making good money, they don't need to get out of bed and knock on doors, which is typical. But my skillset was very much in sales and, more importantly, technical sales, where I was dealing with engineers all the time and dealing with a technical subject matter and I like building things. So I knew that that skill set just in my interests and just what I like to do and also what I have been doing on the last 15 years was a good fit in terms of where I fit in the company. Because you have to understand when you step in, are you going to be stepping on the toes of other people there where the business really might need more, somebody like a president, ceo that's really hitting the street trying to expand the business and leading the engineering to people in house.

Speaker 1:

So in terms of preparing, I would say my weak spot is things like just the day-to-day running of things, all the POs and the invoicing and things like that. We hired a business manager to do that. That is something I'm not good at. That's where you hire people. That's a plug in the dam that you need to figure out, because the previous owner and his wife were doing that when we acquired the business. My wife is still at home with kids, so we couldn't have her do it. That's a full-time job.

Speaker 1:

So, understanding your strengths and weaknesses, as soon as you come in, saying all right, where do I fit into the company? And I knew my skill set was more sales and my weakness is just that day-to-day back office stuff that I don't have any experience with. And actually hiring somebody for that was actually kind of scary, right? Because you're the new owner of a business, two months in now you're interviewing someone to run the books. Do you hire somebody that's young and a spitfire that might leave in two years, or do you hire somebody that's going to be more expensive and got a lot of experience and is more likely to stick around because of a variety of factors? Important decisions, right.

Speaker 2:

Yeah, big decisions. Have you hit any points where you've just thought my gosh, I'm in over my head?

Speaker 1:

I will say it's a different level of stress Because now it's on you and it's all on you, and I've always responded well to stress. I'm still a competitive athlete, so if you're the kind of person that deals well with stress, you'll be fine. But it's a different level of stress altogether because you're in charge.

Speaker 2:

And you're, you're writing those checks. You're writing those checks every month, absolutely and every you know you gotta make payroll, you've gotta pay the rent, pay the bank, all these things, so yeah, and beyond the stress, do you think there's anything that nobody prepared you for when it came to becoming a business owner that you kind of wish somebody had?

Speaker 1:

I think there are things that I could have done differently during the acquisition. Things like shoot, who knows, maybe should have low-balled them instead of giving them the price that I did. It's not that I feel like I overpaid, but I feel like maybe you know what, maybe I could have paid a little bit less if I played my cards right and strategy, having a more strategic approach to that acquisition, having gone through it now. Now there are other steps that I would do if I were acquiring a different business to help this business grow, which I've been thinking about, I would approach that much differently, just strategically.

Speaker 2:

It's always easier in retrospect to see how we could have done things better or differently. So this is such a bold and again inspiring move that you've made in midlife. And if somebody is listening in who is in their early 40s or maybe they're in their late 30s or any age really, but I'm thinking of early 40s just because that's when you made this decision, in this big move If they're in a corporate job and it's pretty mundane they kind of just feel too like they have more that they can do. They like what you've done, but they're scared. They're scared of that leap. What would you say to them?

Speaker 1:

I would say I'll leave you with this. I didn't want to regret anything in my life. I know myself well enough where I'm ambitious, I'm capable and I'm a smart enough guy to get this stuff done. And if I didn't do this then I didn't want to be 55 years old, too old to do it, because now my kids are in college, now my kids are in high school and I can't move and I've got college bills. It's too late in life at that point and I had this conversation with my wife, bonnie, very frequently is, you know, I just don't want to live with regret. And that's really what started to put me over the edge. It wasn't the fear of taking the next step, it was you know what. I just came to this realization that I never want to live with regret because you've got one life to live and 10 years down the road you might not be able to take the same amount of risk or it might be totally out of the cards. So that was really for me what was the most important thing. So I would say don't be scared of taking the next step, just take small steps.

Speaker 1:

Go to those networking events, talk to people about doing these things. Talk to a banker. It's not that difficult to pick up the phone and speak to a business broker. As a screening, just pick up and talk to them about the local liquor store that's for sale for half a million dollars and it's got $100,000 in cash flow. Just learn about it. Learn about the acquisition process. Talk to a few owners of businesses it. Learn about the acquisition process. Talk to a few owners of businesses just to see how the conversation goes and dip your toe in the water. Don't think that you need to commit until you actually are now. The commitment doesn't even come when you've made the offer. The commitment comes when you're starting to enter the financing phase and you're putting down payments down. There are many months of going through that acquisition process when you can just pull the plug and say you know what? I spent $1,000 on networking events and drinking beers with some interesting people and then I decided it wasn't a good fit. You can always turn around.

Speaker 2:

Yeah, I really love too that perspective that you had, which was not a decision made out of fear, but one out of excitement for the potential it had for your family. Cause I think that when we approach our decisions in life from a fear place, then it just feels like the momentum is like cut off at the knees, you know, whereas if we are approaching it from like the what, if, like what, if it's better for our family, then it's just so much more motivating and inspiring. So you're in now, after one year. How are you feeling and what excites you the most, and also what keeps you up at night?

Speaker 1:

The first year was good. We knew it was going to be a lot of learning. What I'm excited about is that we're talking to a variety of different potential new customers that could really launch us into, let's say, that it could be very exciting, and there's a lot of new technology out there. There are a lot of people who we haven't been speaking to and there's a lot of work out there that needs to be done. We're in a fairly unique niche and I love talking to people, because once you start to talk to somebody and you ask them a lot of questions, then they say you need to talk to this guy over here and this girl over here. They have something to do with that. You never know where those conversations are going to go, and I think that we're in a great position where all we just needed to do was the business to chug along as it always has, and then our job is to find a new business and take it in different directions.

Speaker 1:

But there's a lack of people out there who want to get work done, who actually want to work. But if you're a worker, I would say this is probably the best time in the last 80 years to be a hard worker because everybody else is looking for a shortcut. Everybody else wants to be a middleman. Everybody else wants to do something. That's oh yeah, you know, make $100,000 a month for you know, sitting on your couch doing something online. It's like I've got news for you. That's not going to happen. And if you hustle, there's probably not a better time to be a hard worker. And if, if you're not, if you're not afraid of that, then I think you should definitely take advantage and do some reading and talk to a lot of people.

Speaker 2:

Yeah, I am so excited. Well, I mean I guess I should temper what I say there, but I see so much opportunity right now because of the silver tsunami, because the people, the boomers who are retiring and they have these businesses they've cared for deeply for many years and nobody to hand the reins to. So I'm not really in a space where I necessarily am looking to purchase a business, but, my goodness, there is opportunity out there and I know there's also a lot of economic uncertainty. Are you having any worries or concerns about how tariffs might impact you and your business?

Speaker 1:

So we are in manufacturing and our customers will definitely see some of that, but specifically for what we do, I'm not anticipating tariffs is going to have an oversized impact on our sales or revenues. If I were buying things out of China on a regular basis, I would have some real concerns. I spoke to a gentleman when we were looking at different businesses. He was a tier one retailer for Walmart. He was doing a ton of business with Walmart selling bird feeders and bird baths out of China. He was killing it, absolutely killing it, and he had built this business in two or three years. But it was like, well, what happens when Walmart finds another supplier and just blows your business out of the water Like there's nothing there? And that's what I you just started making me think about how that's how tariffs might be affecting his business, right? I think he was doing like 1.5 in sales and you know healthy margins.

Speaker 2:

On bird feeders.

Speaker 1:

On bird feeders.

Speaker 2:

Goodness gracious.

Speaker 1:

But he had one or two major retailers as customers.

Speaker 2:

Oof, that's dangerous.

Speaker 1:

Yeah.

Speaker 2:

Yeah. Well, how are your numbers looking from the time that you purchased the business to now? Is it sustaining? Has it dipped? Is it growing? Can you give us any insights into the performance since you took over Sure?

Speaker 1:

Yeah, so sales have remained. I think for the first year. It's remained fairly consistent, which is really all we were looking for. You don't want sales to dip as a result of new ownership, right, so it's remained consistent. But the reason why we're here is to grow, so we're speaking to more and more customers all the time, and so that's why I'm very optimistic that in the next 24 months could be very busy, but you want to make sure that you're buying a business that's enduringly profitable.

Speaker 1:

They don't have to have the type of valuations that tech companies have to have, but they need to. It needs to be a profitable business that, year over year, has proven itself to be consistent, and that's really. It doesn't have to be a sexy business Like what we do is not sexy by any stretch of the imagination. There are a lot of very uninteresting businesses out there that do very well for themselves and the owner needs to sell, and so find a sleepy business that has limited competition. That's a niche player. It's not in a commodity kind of field where you're just getting undercut by the competition all the time. Find that sleepy little mom and pop. You know local marina that sells burgers and marina slips, and you know they're the only person in the area and they've got a monopoly on the business.

Speaker 2:

So niche players like that- yeah, I love it, it, it. It really is very inspiring. So I just have one more question for you. If you could go back and talk to yourself when you were in your early 20s or a recent graduate, what life wisdom would you give yourself?

Speaker 1:

Oh boy, you know I'm torn. I want to tell my 23-year-old self to work for yourself and find your own way and don't work for somebody else, because there's a lot more potential when you're the boss. I'm tempted to tell my kids look, I'll help you start a business, I will be the guard rails and you start your own business. I would love to be able to say that, on the same token, there is some value in learning on other people's dime and when you're in your twenties.

Speaker 1:

I still had a lot to learn and I think I actually worked for big companies right out of college and for me that was not a good decision. You learn a lot more with a small business, so you're going to learn a lot more just working for a small company small business, so you're going to learn a lot more just working for a small company. So if you're for me and my kids, I would encourage them to do the same. But hey, if you're like I said, if you're a hard worker, there's a lot of opportunity out there and you can't be afraid of waking up early and saying, well, got to keep on working because nobody else is, and so there's a lot of opportunity out there.

Speaker 2:

Yeah, you got to have the right mindset. Yeah, yeah, go and get it. Dave, thank you so much for just sitting and chatting with us. I think this episode is actually so inspiring because you're in the trenches and you made this big, bold leap that I don't know anybody else who's done anything, quite like how you have.

Speaker 1:

There might be a reason else.

Speaker 2:

who's done anything, quite like how you have, there might be a reason. It's so wonderful to hear, though, and you've got the smile on your face and I feel like this is going to work out very well for you and your family. Thank you so much for sharing.

Speaker 1:

It was so much fun. It's great catching up with you. Thank you.

Speaker 2:

Today's key takeaways. If you're ambitious and feeling like you're capable of more than what you're doing in your job, start by reading a few books about acquiring small businesses. Educate yourself on the process. Two great ones to start with are Buying a Small Business from Harvard Business Review and Buy Then Build by Walker Diebel. Look at the skills you already have. Then figure out what level of cash flow a business would need to support both your lifestyle and the business itself. You're looking for an enduringly profitable small business with an owner who doesn't have a succession plan, that's too small for private equity to care about, but big enough to employ a team and has a reason to sell. Working hard and taking on risk and responsibility isn't for everyone, but if that's in your nature, this path might be a perfect fit. But if that's in your nature, this path might be a perfect fit. Keep in mind that business broker websites only show a certain type of listing. You may find a few diamonds in the rough, but they're not always representative of what's out there. Start narrowing things down. Know what you don't want. This alone will eliminate a lot. Think about your skills and what industries you understand. Work backwards. What level of cash flow does a business, need to cover debt and put a roof over your head. That will help you narrow down what size business to look for and make sure it's scalable.

Speaker 2:

Now, how do you find a business? Start networking. Talk to accountants, attorneys, anyone who handles other people's money, even small to mid-market private equity groups. Ask if they've come across any businesses that are too small for them to pursue. By doing this kind of outreach, you'll likely meet people who evaluate businesses and advise on acquisitions. Ideally, you want to talk directly to the owner, but you can also start by reaching out to business brokers in regions you'd be willing to live in.

Speaker 2:

Sign NDAs, start reviewing financials and see what you might want to explore. You don't need money to start this process. There's plenty of low-stakes learning you can do now, like going to open houses before you're ready to buy a home. It's the same thing. That said, just because you want to buy a business doesn't mean the seller wants to sell it to you. You have to prove you're the right person to take the reins. For many founders, the business is their baby. When it comes to financing, consider negotiating more seller financing. It often comes with a lower interest rate and keeps more of the seller's skin in the game. Getting an SBA loan is time intensive, more like a mortgage process than you'd expect. You'll need to provide multiple copies of documents repeatedly. You'll also want an accountant to help with tax implications, a lawyer to review the legal details, possibly a mergers and acquisitions advisor to support valuation strategy and reduce your risk.

Speaker 2:

Be honest about what you don't know and surround yourself with the right people. Fill the gaps From start to finish. It can take about 10 months to identify a business, sign a letter of intent, an LOI, go through due diligence and finally close the deal Once you own it. Don't rush in and make massive changes. Use that first year to learn. Focus on small, incremental improvements that strengthen the business over time.

Speaker 2:

If you're transitioning from corporate life, narrow in on your skills now. Compare them to the skills the business needs. Identify what you're not good at and make sure there's enough cash flow to hire for those roles. Know your strengths and weaknesses. When everything is your decision, it's a different kind of stress. Mindset is everything. Do you believe you're capable? Do you believe you can figure it out?

Speaker 2:

One of the top regrets of the dying, according to palliative nurse Bonnie Ware, is not having the courage to live a life true to themselves. No regrets. Don't be afraid to take the next step. Start small. Go to networking events. Talk to people. Call a banker. Reach out to a business broker and just screen a conversation. Learn about the acquisition process. Talk to a few business owners and see what those conversations feel like. It's a great time to be someone who's willing to work hard. A lot of people are out there looking for shortcuts. Look for a business that is enduringly profitable, one with consistent performance over time. Ideally, you want a sleepy business, a niche player with limited competition, and if you're in your 20s, you've still got a lot to learn. But if business ownership is even a faint idea in your future, go work for a small business. You'll learn more, faster and from closer to the center of real decision-making. That's it for today. I release episodes once a week, so come back and check it out. Have a great day.

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Anne McGinty

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