Judd Goodrich - Advice from an expert who's helped hundreds of searchers

In this special team room session of The American Operator, JC goes behind the curtain with Judd Goodrich, Head of Capital Markets, to explore the world of small business ownership, investment, and operations. Whether you're an aspiring owner-operator or a seasoned entrepreneur, this episode is packed with actionable insights and candid advice.

Judd shares his journey from Minnesota to the startup world, offering lessons learned from supporting thousands of business founders and operators. Together, they discuss the challenges and rewards of taking over small businesses, from managing labor-intensive industries to balancing growth with sustainability. With an emphasis on the human element, Judd reveals why empathy and respect for a business’s history are critical for success.

Listeners will gain valuable tips on:

• Navigating the complexities of small business acquisitions.
• Building trust with employees and stakeholders.
• Setting achievable goals to drive sustainable growth.
• Leveraging the right support networks and investors.
• Why starting small often leads to big successes.

This conversation is full of real-world examples, practical advice, and engaging stories from the frontlines of small business operations. Whether you’re buying your first business, managing a growing portfolio, or just curious about what it takes to succeed, this episode delivers honest and relatable insights for every stage of the journey.

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Transcript

All right team, welcome back to another episode of The American Operator. We're doing something different today. Doing the team room session. What does that mean? It means you get to look behind the curtain with some of my favorite people here on my team that I work with every day on a myriad of things. Most importantly, everybody pointed towards helping pass the torch to the new aspiring owner operators here in our country.

00:00:25:23 - 00:00:35:21
Speaker 1
Keeping the fabric of America strong. And who better than you have on the show? Then my colleague and buddy Judd Goodrich. How are you, my friend?

00:00:35:23 - 00:00:37:08
Speaker 3
Doing great. Thanks for having.

00:00:37:08 - 00:00:42:06
Speaker 1
Me, man. It's good to have you and I'm glad we can make this work. Yeah, we actually had to. We had to bump this once because a.

00:00:42:06 - 00:00:42:18
Speaker 3
Couple times.

00:00:42:22 - 00:01:01:17
Speaker 1
A couple times life got busy. Man. Me and him are traveling. Actually, literally a few minutes before we rolled live here, I was flying in from North Carolina, at an armed services and aspiring owner operator ETA kind of group thing going out there. And Duke actually some really great people out there that we met salt of the earth.

00:01:01:19 - 00:01:03:10
Speaker 1
I actually have you been to Duke before?

00:01:03:10 - 00:01:04:18
Speaker 3
I've never been to Duke now.

00:01:04:18 - 00:01:27:11
Speaker 1
Never visit. Oh, man. It was it's like someone cut a piece of New England and put it inside North Carolina. And I hope that's a compliment for anybody that's listening right now. Like, I mean that in the best it. I got the back end of like the colors. Yeah. Like the fall colors coming through campus is gorgeous. It's like red brick and gothic I don't know, it just kind of they make that work.

00:01:27:13 - 00:01:48:03
Speaker 1
And I had a few minutes to kill before the event, and I before I met up with some of the veterans and, some of the, the students out there that are looking to get into this world of ownership and when go visit the Duke Chapel. Man, I mean, the thing is, first of all, it looks like they should film a scene from Batman.

00:01:48:03 - 00:02:05:14
Speaker 1
They're like, it's very Gotham feeling. Stained glass. Enormous. It's got. I mean, I don't even think they call it a cathedral or, you know, or, like, what do you call that? Like one of the. I don't even think you call it a major. They just call a chapel. Yeah. And you go in there and thing is unreal, man.

00:02:05:16 - 00:02:25:11
Speaker 1
Last thing that I'll say. And then we can jump back into more important business here. But, so I was in there, turn around and I saw a sign off to the side that goes crypt. And I mean, and it was open. Yeah. I wasn't sure if I was allowed to go down there, but I did. And they have all the old presidents and founders buried underneath there in their tombs.

00:02:25:13 - 00:02:26:01
Speaker 1
Or you can.

00:02:26:01 - 00:02:26:14
Speaker 3
Just walk in.

00:02:26:14 - 00:02:41:10
Speaker 1
There. I wasn't sure if I was allowed to, but I did. Yeah. And so, you know, nobody chased me down, but it was actually not as, it's kind of what you would expect it to look like at the same time, again goes back to like this, what you would expect to see somewhere in the northeast or something.

00:02:41:10 - 00:02:55:14
Speaker 1
So anyway, it was awesome. Great people, man. But it was good to get back here on time. And I was like, we are not we are not shifting this thing again. So thanks again, man, for for us continue to stay on. What are we going to talk about today? A couple things, I think. One, let's talk about Judd.

00:02:55:14 - 00:03:18:00
Speaker 1
First. I think folks, would gain a big benefit understanding just kind of some more of our teammates in who work here, you know, tirelessly behind the scenes to kind of keep, keep operators and great businesses in the capital that needs to kind of make that happen, all kind of come together. Yeah. So, Judd, just tell me a little tell folks a little bit about where you grew up.

00:03:18:02 - 00:03:20:18
Speaker 1
Probably. And what do you do here at the company.

00:03:20:19 - 00:03:43:23
Speaker 3
Yeah, absolutely. So I grew up in the great state of Minnesota. Great state of Minnesota. Yeah. So and then like life. Yeah. So I live there all the way through college. Went to school University of Minnesota then moved out, packed up the car, decided I needed to get out of the cold, moved to California. And then during that time, I actually spent a number of years at a company called Cada and basically, like our whole vision of the business.

00:03:43:23 - 00:04:11:05
Speaker 3
And now it's, you know, relatively large company. When I started decently small startup. Well, basically the idea is to increase access of ownership, mostly focused on, you know, angel venture backed businesses and increase, like, transparency kind of across the board. So there it was. It was great because I probably met maybe like 2000 founders. I think that also made me a little bit jaded with, you know, the, the venture backed startup life just because the likelihood of success is relatively low.

00:04:11:05 - 00:04:33:00
Speaker 3
But during that time, that incredible amount of founders, operators, a lot of venture capitalists basically worked on every single, business unit of that team. A lot of times when we would spin out, a new product or offering, I would be on, like the leading go to market team. Right? So basically figuring out how to how to sell this, how to build the product, what are the clients really need?

00:04:33:00 - 00:04:52:18
Speaker 3
What's going to be the most valuable? And then, yeah, probably 4 or 5 years later wound up getting in, in, in mail from Will Frye say, hey, I'm building this new thing, you know, relatively jaded, as I mentioned. You know, they didn't have a website at the time, said that they were about to raise some capital.

00:04:52:18 - 00:05:11:09
Speaker 3
I've heard that many times before. So I actually joined as, like, a go to market consultant just to get an idea of what it would be like working here. And within the first month, it was, it was very clear that the, the opportunity was high. The team was going to be able to execute against this. And the mission statement has aligned to what I've done historically.

00:05:11:09 - 00:05:22:20
Speaker 3
And what I believe in is if if you have ownership in in businesses and in ventures, the opportunity to, you know, have a life changing, changes from that perspective is quite high.

00:05:22:20 - 00:05:43:13
Speaker 1
So and so that it sounds like you, your sniff test matter of is this going to be legit or not? Was, pretty stringent. Pretty rigid because you've seen so many different types of businesses that when you eventually did say yes to main cheers, it was sounding like, more than a gut check. This is the right call.

00:05:43:15 - 00:06:04:21
Speaker 3
Yeah, absolutely. I mean, I think a big thing that you can look across leaders is their ability to execute. Right. And it's at early stage execution can come in the form of like, very tedious tasks too, like very high strategic work. Yeah. Right. And like, that's something I was looking for, early on. And, like, the ability to execute for, leadership year is incredible, right.

00:06:04:21 - 00:06:17:16
Speaker 3
So, yeah, you know, you're going to get some stuff done when you have a founder that's doing data entry at midnight to get something out for a client just because it needs to happen. Right. And you create processes and you make it a lot better. But yeah, it is very clear.

00:06:17:20 - 00:06:38:18
Speaker 1
Yeah. The train moves hard here man. For sure. So yeah, talk to me just real quick. Going back to to the the Midwest Minnesota growing up, how do you feel like living maybe just even culturally in that world helps you with kind of engaging with folks who want to invest in SMB? Folks who are doing small business folks are operating.

00:06:38:20 - 00:06:39:19
Speaker 1
Did that help at all?

00:06:39:23 - 00:07:00:14
Speaker 3
Yeah, absolutely. I mean, I think like the the general, you know, obviously people think about like Minnesota nice. But I think it goes further than that. It's a lot of like empathy. Right. And I think being empathetic across the board, if you're looking to buy a business from a business owner that's been operating for 40 years, right, like you have to have a lot of empathy into that situation.

00:07:00:14 - 00:07:20:22
Speaker 3
It's wildly challenging for them to say, hey, I'm done. Yeah. And I'm going to pass over this legacy. Maybe it's been passed down for a handful of generations to someone that they're just meeting, you know, over a coffee couple months. So I think there's a there's a lot of that. And I think it's also what we've really tried to do here is it's like doing what's right.

00:07:20:22 - 00:07:45:18
Speaker 3
Right, and going a little bit of the extra mile. And I think that's carried a tremendous amount of goodwill, especially as early days. We we didn't have everything built out, and we didn't have hundreds of investors that are looking to invest into deals. We had a handful. So then we would do whatever it took to help people buy these businesses if it took calling into, you know, new Jersey to figure out, okay, what licenses do they need?

00:07:45:18 - 00:07:56:20
Speaker 3
Okay, well, let's find the paperwork. Let's fill out the paperwork on behalf of this buyer. Whatever it took. And I think that's, like, very, in tune with, you know, people from Minnesota and, you.

00:07:56:21 - 00:08:16:05
Speaker 1
Know, I actual parents, you know. Yeah. Yeah. No, I mean, not, having Midwest ears in my life now, along with having some good friends from the great state of Minnesota. Yeah. You recognize it's nice, man, but it's not like it's not empty. Nice. Though. I think empathy is a strong suit. And also, I recognize folks are just very industrious.

00:08:16:05 - 00:08:28:20
Speaker 1
Like, they all are hard working folks and, like, want to get stuff done. So talking about a lean for execution, I can imagine that resonates. Well, when you think about, well, let's do this now. Yeah. What should you do here? And you just.

00:08:28:21 - 00:08:29:13
Speaker 3
Yeah, yeah.

00:08:29:13 - 00:08:30:21
Speaker 1
You know, just hang out.

00:08:30:23 - 00:08:55:10
Speaker 3
Yeah, totally. So the the role as head of capital markets, what that really means is, I'm basically responsible for all the deals that we decide to, to ultimately partner on and, and help people raise capital for. Right. So what that looks like and it can happen in a lot of different capacities. It can be, hey, someone is like, I want to go and execute against this thesis, right?

00:08:55:10 - 00:09:12:09
Speaker 3
I think Hvac businesses are really intriguing. And I'm starting to look at some deals. Right. So in early days, we would, do a lot of deal reviews with folks to kind of be a soundboard of say, hey, like, what is what we what would we think about this opportunity? What questions should you be asking to the broker?

00:09:12:09 - 00:09:29:14
Speaker 3
To the seller? Okay, now we're to the spot where we're on site and we want to formulate an offer. Right? Okay. What offer really makes sense. And you have a path towards financing it. And that's really around like the yellow eyes. And then it's all all the way to queuing up the deal to you. Right. I need a, quality of earnings lender.

00:09:29:14 - 00:09:39:00
Speaker 3
I need a legal, actual attorney that knows M&A, securities laws, to, lending partners. And then.

00:09:39:03 - 00:09:39:22
Speaker 1
Sorry, I'm smiling.

00:09:39:22 - 00:09:41:22
Speaker 3
Because we've had we've seen the, the,

00:09:42:02 - 00:09:46:18
Speaker 1
Like what do you call it, the accident lawyer that comes in or like, a divorce lawyer. Is that quite the right pick?

00:09:46:18 - 00:10:03:01
Speaker 3
Yeah, you know it totally. And it happens. Right. So, you know, we will help assemble these teams, and then ultimately set people love to be able to, you know, efficiently raise capital, which a lot of that work is, is done on the front end, you know, picking the right opportunities that have a higher likelihood of being being financed.

00:10:03:05 - 00:10:27:11
Speaker 3
And then so a lot of, you know, what we built out is, is supporting operators, searcher sponsors through the various stages, of what it takes to actually execute and buy a business. And then I also kind of sit on the side of, the investors. Right. So I scaled out a majority of our, like, investing community over the last couple of years.

00:10:27:13 - 00:10:51:11
Speaker 3
You know, obviously we need capital to finance these transactions. And, like, it's a relatively challenging, solve because right now, say we have a dozen different deals, they're all different sizes, they're different industries, and some of them have different, some of them are distributing cash regularly. Others are, you know, they're growing the businesses and they're trying to, you know, sell these eventually, right?

00:10:51:11 - 00:11:11:20
Speaker 3
So that all of a sudden becomes relatively challenging to find the right capital. So I do spend a lot of time with various investors from owner operators. Right? A lot of times these are viewed as like strategic capital where they can, you know, write checks, but also be like a sound board. Right? I've been operating you know, staffing company for the last 20 years.

00:11:11:22 - 00:11:30:13
Speaker 3
I've learned a couple things. Right. And I'm going to put in $250,000. But like you call me if you have, you know, challenges that you're trying to solve for all the way to, you know, larger, you know, more family office type and everything in between, which then basically gives us like a really good scope into what do people care about, right.

00:11:30:13 - 00:11:55:12
Speaker 3
And if you think about like an investor, they serve a lot of different capacities. One of them is, they should be very aligned with the outcome. Right. So feedback about the deal of something they like or don't like, is directly impacting you as the individual. Right? So that's we're basically using these investors as a feedback loop to figure out, okay, like what what are the best deals and what questions should you ask?

00:11:55:14 - 00:12:07:17
Speaker 3
What are actual red flags that could sink the ship? So it's it's both on the, you know, working with people to help them set up capital raises and then also ensuring that we have, you know, sufficient capital on the other side.

00:12:07:21 - 00:12:16:06
Speaker 1
Yeah. Do you find that these investors are generally optimistic about investing in small business?

00:12:16:08 - 00:12:34:04
Speaker 3
Yeah. I mean, I think you have to start thinking about the different personas of these investors. The reality is, is it's not as, solidified as a market as like, say, real estate, of course. Yeah. Everyone is, a lot of people been doing that for 20, 30, 50 years, whatever it might be. Yeah. So everyone kind of thinks about it a little bit differently.

00:12:34:06 - 00:12:38:08
Speaker 3
The ones that are optimistic probably had a good outcome. Right?

00:12:38:08 - 00:12:40:23
Speaker 1
They depend on experience. That went well.

00:12:41:02 - 00:12:55:21
Speaker 3
Yeah. They bought a business. They invested in a business sold pretty quickly. Or maybe the business just performed really well. Yeah. Although a lot of other people are you know, there's maybe they made a investment or two and they're still kind of waiting to see.

00:12:55:22 - 00:13:07:07
Speaker 1
How it turns out. Oh yeah. How many, how many of those folks you investor you speak with like used to be operators, which is why maybe this is an interesting investment class for them.

00:13:07:09 - 00:13:12:01
Speaker 3
I would say for active investors that are kind of like known in the space. Yeah. Quite a few.

00:13:12:04 - 00:13:19:15
Speaker 1
Yeah. So they they've sat in the seat before. So in a lot of ways they already have this kind of like intrinsic buy in to this investment class. Yeah.

00:13:19:20 - 00:13:38:09
Speaker 3
I think it's also a testament to show that it's it's not terribly easy operating a roofing company. Yeah. Right. After you do it. And, you know, I was talking to someone recently is ten years of operating this roofing company. And he's like, yeah, great outcome. But it was quite the journey. I would rather, you know, passively invest into these opportunities.

00:13:38:09 - 00:13:53:22
Speaker 3
Advise. Where I'm not, you know, under the gun of a peg until I'm ready to do so. Right. And then you kind of see the, the transfer of operating, investing. Okay. Now I'm ready to step back into an operating position.

00:13:54:02 - 00:14:12:06
Speaker 1
Yeah. Now that that's a good call that I think you you do find that there's a rare breed that will continue to operate after operate after operate, you know, or whatever it might be or grow, grow, grow. And we have folks that are advisors and operators that do that. But you do you do see that a lot of folks, their, their, their second show.

00:14:12:07 - 00:14:29:13
Speaker 1
Yeah. Is, you know, is more in this investment or advising capacity because they do recognize how much grit it is. What's something that you think folks getting into this world of becoming an owner probably underestimate? You talked about it being hard work, but like, can you can you just like double tap into that? Like when you say hard work?

00:14:29:13 - 00:14:36:18
Speaker 1
That guy. Yeah, I've worked hard before. Like, what do you actually mean when you say that? Like, hey man, this is not an easy thing to get into.

00:14:36:20 - 00:14:38:09
Speaker 3
On the actual operation side or.

00:14:38:09 - 00:14:46:06
Speaker 1
More on that. Yeah. From what you've heard, just back from folks who've done it before. Like, what are the things that always stick with you as like, yeah, that is hard.

00:14:46:08 - 00:15:10:09
Speaker 3
I think the human element is easily for a lot of these businesses, especially, I think the trend is a good amount of, you know, B2B services, home services, it's all human capital. Right? So it's individuals are you're working with laborers, you're working with. So I think it's wildly underestimated. Right. I have a good friend who started up, a moving company in Minnesota, many movers.

00:15:10:11 - 00:15:32:08
Speaker 3
Yes. And, so, you know, now they have 50, 60 movers, you know, a dozen different trucks. The reality is, is very challenging work. Right. So now you have to think about who actually is able to move for 12 hours a day. Thousands of pounds. Yeah, right. It's, people that are going to be gritty, but they're also, occasionally not reliable.

00:15:32:10 - 00:15:54:18
Speaker 3
Right. So if you're sending 50 people out, you might have to bring 3 or 4 just to the warehouse, because inevitably, every day, 1 or 2 people don't show up and it's all of a sudden that becomes relatively challenging. And, you know, frustration kind of builds in. So then having like really strong managers and, they can actually negotiate like handle some negotiations with these, you know, workers, becomes really helpful.

00:15:54:18 - 00:16:19:18
Speaker 3
Right? So I think it's, you know, being able to interact with the, the types of clients that you're working with, the types of employees that you have is, is very key. And then, if that's not really your strong suit, you need to find incredible managers to do so. So I think like if you think about look at hundreds of pitch decks, most people are all talking about, okay, what are all the different ways that I can like, grow this business.

00:16:19:20 - 00:16:37:17
Speaker 3
Right. And they're thinking about, okay, we're going to increase that SEO, we're going to increase marketing, etc., etc.. No one's really talking about like allocating a lot of resources on the hiring side. Okay. What happens if my my GM goes out and he decides he's he's gone? Do I have anyone to to backfill.

00:16:37:17 - 00:16:39:06
Speaker 1
That person to manage schedules.

00:16:39:06 - 00:16:58:15
Speaker 3
And schedules, whatever it might be. But I think people that are really good at this, they're, they're hyper focused on the, on the people side and then the hiring as well. And they've done a great job at preparing themselves for it. So that really goes into like their business plan and strategy or sound. They've talked to other owners.

00:16:58:17 - 00:17:16:23
Speaker 3
Right. If there's stuff in a new space, it's pretty surprising. But a lot of people, you know, so Hvac, for example, there's 147,000 Hvac businesses in the United States. I talked to maybe ten people that are planning on buying Hvac, have Hvac businesses under contract. Only two of them. Ever talk to a Hvac owner, right?

00:17:17:00 - 00:17:24:00
Speaker 1
Why do you think that's the case? Like, is there a dedicated aversion to hearing news that you don't want to hear? Like, why is that?

00:17:24:02 - 00:17:38:00
Speaker 3
I mean, I think I it's a good question. Why why they don't I think it's to the podcast like you should reach out. Because you can learn a lot of, like, very intriguing things. But yeah, I don't know if I've a good answer of why they don't.

00:17:38:00 - 00:17:43:19
Speaker 1
What's your gut say on it? Is it just, like it? Pencils on a spreadsheet. So why do I need to talk to anybody? Yeah.

00:17:43:21 - 00:17:59:12
Speaker 3
Or maybe, like, a little bit of overconfidence. That it's like, oh, if I talk to an owner that's been doing this for 20, 30 years, you know, it's, old school tactics. Yeah, they. I want to come in and I want to create some automation workflows, a bunch of change that's going to be a lot better than this.

00:17:59:12 - 00:18:01:00
Speaker 3
Like old school operated business.

00:18:01:00 - 00:18:03:12
Speaker 1
Yeah, we can throw some AI on it and it's going to fix it.

00:18:03:12 - 00:18:30:11
Speaker 3
It's going to be sweet. Yeah. But the reality is, is like a lot of these business owners, you know, that have been around for multiple recessions, multiple depressions like these businesses have clearly figured out a way to make this thing work. And a lot of them, you're buying them because they have been really, sustainable from like, top line revenue from a cash flow perspective, which means that they're likely going to be significantly better at operating this business than you are.

00:18:30:14 - 00:18:30:23
Speaker 1
Yeah.

00:18:30:23 - 00:18:41:13
Speaker 3
So I think it's it could be a little bit of a overconfidence. But I think a lot of people that's kind of how they do their research if they want to get into, industry in the first place.

00:18:41:15 - 00:19:05:06
Speaker 1
I had this thought, I've been working. I'm sure you do the same thing, too. I think about different ways and analogies I can do to kind of help people understand that. Like that one. The stuff isn't easy, but also that it requires, like one of our values here is like honoring the past, right? So, like, it requires this, like, true reverence for what was built, but not in a like I respect you and then let me move on.

00:19:05:12 - 00:19:24:03
Speaker 1
More like I respect you. But let me pay attention to like, why you did that. So I did start the other day, actually. These small businesses remind me a lot of sports. The fundamental principles of baseball haven't really changed. Yeah, right. There's a certain way you hold the bat, a certain way you kind of like, you know that you the right person on first base is probably a lefty.

00:19:24:04 - 00:19:41:14
Speaker 1
Yeah. You know, there are certain different traits that a shortstop needs to be able to do and more importantly, different ways you read plays and like all that stuff right there. Certain ways you set up and rack and stack a lineup, like all those things. Right. What changes is like the incremental stuff like the helmet got a little bit easier.

00:19:41:15 - 00:20:14:07
Speaker 1
Maybe the bat technology got a little bit more increased, but like, nothing was immensely, you know, nothing was changed overnight. They didn't start going from like, using baseball bats to now, like using this like mini club that like, it's just like, you know what I mean? There's like a whole new technique on that. Right? And I often think when new owners come in, they go like, I'm changing the game and it's like, you know, like there's I'm sure new techniques in plumbing, but there is a way that it's been done for so long because at some point, the way physics and gravity and Earth works, when you're doing plumbing, it's just kind of established.

00:20:14:07 - 00:20:17:09
Speaker 1
Yeah. So I think about that. Or is that stuff ever cross your mind that like.

00:20:17:09 - 00:20:17:20
Speaker 3
Oh yeah.

00:20:17:21 - 00:20:28:17
Speaker 1
Just trying to break the thought of like, look, I want you to be innovative and I want you to add your sauce and your hot sauce to get in this business by step. But you got to remember, like, there are fundamentals to the game.

00:20:28:20 - 00:20:54:05
Speaker 3
Yeah. No. Absolutely. I mean, if you think about it, like if you talk to most like business owners that have gone into like okay, acquired displacing a or like transitioning from like this existing owner, they commonly won't or they'll make comments about like change is challenging at every level. Right. So you kind of have to understand when and why you're going to pick your battles.

00:20:54:08 - 00:21:16:14
Speaker 3
Yeah. But it's also like to your point, right. You could easily ask why this system or this process is run this way. Right. And understand like what was the philosophy behind it in the first place? Okay. Maybe it's actually makes a lot of sense because, you know, now we're able to, kind of weed out people that are ultimately never really gonna, you know, get our service by our service, by our product.

00:21:16:16 - 00:21:37:19
Speaker 3
And we kind of have like an indication of why, you know, or you could say you sit next to them, you're like, well, maybe there's a better process to do so and go back and try to figure out what that better process is and presented in a way that, you buy in as well, because you can do all these cool things, but you have to convince a handful of people that have been doing some in a very specific way to do something different.

00:21:37:20 - 00:21:39:18
Speaker 3
Right? So the positioning of that I think is.

00:21:39:18 - 00:21:54:21
Speaker 1
Key, the human thing. Right? Even if it is definitively an objectively a better way to get 15 people on the team to do something that's been different just by nature is, is something that you're not going to gain by being on the first day by saying, we're just doing it different.

00:21:54:23 - 00:22:19:14
Speaker 3
Yeah. And to add on to that, I think it's this interesting concept of like, say, if you're able to, create like a system or a process that decreases the amount of time it takes, maybe like an office manager 50%. Right? And you're like, oh, fantastic. I just save them 50% of the time. What a lot of people would do is they go to that office manager and say, like, okay, like I'm able to save 50% of your time.

00:22:19:14 - 00:22:38:01
Speaker 3
Like, what could you do if you had 50% more time? Right? In the first instinct that they're going to have is, well, first of all, I haven't really thought about that. So they're not going to have, you know, a bunch of creative ideas. You know, they you've just saved their time. It's more so going to be like, job security.

00:22:38:03 - 00:22:55:12
Speaker 3
Yeah. Right. So instead you could change that entire, process up. It's like we figured out a way to decrease the time. You come up with a handful of ideas for them, and you present those ideas first of like, would love for you, you know, to work on X, Y, and Z. This is something you'd be interested in.

00:22:55:14 - 00:23:13:01
Speaker 3
What else would you want to do that would, be really intriguing, that you, you know, haven't been able to do and you kind of end with that and then you can come in with, the solution. Right. Hey, let me show you this process. It's going to save 50% time. Now, you can actually do all these things that you just said that you'd be interested to do, right?

00:23:13:01 - 00:23:21:17
Speaker 3
It's a reframing. To get the buy in. But if you if you don't get the buy in, then the likely low adoption.

00:23:21:19 - 00:23:39:14
Speaker 1
Yeah. And or if you just, said something that I hadn't thought about, which is you can almost tee it up something positive in a way that someone goes like, are you going to fire me? Yeah. I'm like, wait, no, hold on. I'm not going to fire you. Like, well, you just said you just for five remove 50% of my workload, you know, and like, you know what's going to happen here.

00:23:39:14 - 00:24:04:23
Speaker 1
And I think you're right. You got to give them the light that goes like, dude, this would be awesome, right? Yeah. Oh, yeah, that'd be awesome. If I had more time to do this. Cool. So now let's go do this and allows you to go do that. No, it's such a bummer. That's all the human stuff that you talk about that I don't know any MBA book or, you know, how to SMB thing is talking about, you know, it's typically through talking to an owner or talking to folks who've done it before.

00:24:05:01 - 00:24:25:06
Speaker 1
It'll give you those nuances about how and what to do. And asking a lot of good questions if you can afford to, which I think all of us can, especially before you could take on this multi-million dollar thing. Yeah. So you're signing your name on what do you when you're actually. We were catching up earlier, so I'd love to if you don't mind.

00:24:25:06 - 00:24:48:06
Speaker 1
Share like the day to day here at the company. And the team is awesome. There's a lot of there's no days the same. No no opportunity in business. And operators are the same. It's almost this different like scientific chemistry set that we're putting together every single time. Which makes it fun. Anything top of mind right now. And I'm kind of alluding deliverable.

00:24:48:06 - 00:25:00:17
Speaker 1
We talked about earlier. Like anything top of mind right now that just makes you go, yeah, that's an interesting either trend or pattern or conversation that I just had. That's probably worth sharing with folks who might be considering this path.

00:25:00:19 - 00:25:22:16
Speaker 3
Yeah. Yeah. So it's actually with, recently with like a business owner that had a successful exit, you know, it wasn't a situation you necessarily wanted to exit out of. But either way, you learned a lot in the, in the first, couple years of like operating. Yeah. CNC business and and I think it's you start realizing it's kind of back to your point that, you know, you don't have to recreate the wheel.

00:25:22:18 - 00:25:38:05
Speaker 3
But effectively, he came in and he wanted to understand started with the sales team. Like what were like goals and objectives. Like you guys have been crushing it for the last couple of years. And he's like, well, you know, the lead sales guys had $4 million in, you know, new business last year is like, what were you hoping to get?

00:25:38:07 - 00:25:56:03
Speaker 3
He's like I mean as much as possible, you know. Then he starts going over to some of like the service managers and like some of these other individuals and try to understand like what were their goals and objectives over the course of the last ten years that they've been working there? I think what they found out was there was never goals, there was never KPIs.

00:25:56:03 - 00:26:21:15
Speaker 3
There was never, ever anything to strive for besides really high level, you know, we want to make sure that customers have a good experience, right? And they're, giving positive reviews and we're, you know, being right by them. We're selling more business. And all he did was he went in and said, okay, like, if you did 4 million, do you think you could do four and a half?

00:26:21:17 - 00:26:46:09
Speaker 3
Right? If you're able to do five, we'll be able to compensate you more. What he noticed was 20, 25% year over year. Topline, growth. Right. And then kind of across the board, they were able to figure out how to service, you know, a number of their clients better. And they realized that it, you know, with the existing machinery, they would be able to actually, provide different products to them.

00:26:46:14 - 00:26:52:22
Speaker 3
And it was a lot just because they set some objectives and goals. And then people were bought in.

00:26:52:22 - 00:27:13:01
Speaker 1
so you got these folks that are, looking at the. It's almost like, energetic. Yeah. Right. Like they have this, whatever you want to call it, like this momentum or this energy. So they just kind of get in the motion of doing the work day to day and never really step back, maybe in and go, but why are we doing or where are we going.

00:27:13:02 - 00:27:33:16
Speaker 1
Yeah. How hard do you find I do find that that's like something that an operator, new owner can come in right away and at the very least, like they're going to try to do something innovative in the first. Yeah, I don't know, 30, 60 days is probably just learning what the goals should be and then establishing them and then holding folks accountable to them.

00:27:33:18 - 00:27:47:00
Speaker 1
Or do you think it should be something outside of that? Because it sounds like that they may not be able to bring that same kind of just energetic go get it that the original owner of the business maybe had. That allowed everybody to keep going.

00:27:47:02 - 00:28:03:12
Speaker 3
I mean, I think this is an interesting one. I think like I've heard it I've heard it both ways. Right. So I don't know. This is not going to be like the best answer. But like I've heard a lot of folks that will come in and they'll be a lot more patient with their decision making, right? Especially if they have like kind of a larger organization.

00:28:03:12 - 00:28:30:21
Speaker 3
Maybe they're working like a professional services business where they really want to just understand, others are, you know, maybe buying more of like a distressed business, things that aren't going well. And it's more like clear across the board. And they'll they'll make decisions and, quick shifts, I would say, into what they're looking to ultimately achieve. I think like the way that I would think about it is, is like, who who do you need to convince to make those changes?

00:28:30:23 - 00:28:52:16
Speaker 3
Right. And like understanding their, if they would be like, willing to, to make changes and if they, if they see that there could be a better like, outcome future for, for the business. Right. Because like another friend commercial cleaning company that he bought all of his management were very bought into, you know, he kind of sat down with them.

00:28:52:16 - 00:29:10:03
Speaker 3
He's like, here's the vision. What I see this business and this is where I want to bring it to, and this is what it can mean for you instantly. They were all bought in on what he wanted to execute against, so he started making, a lot of hiring, a lot of brought a ton of new customers. Right off the bat.

00:29:10:05 - 00:29:20:21
Speaker 1
Why do you think he had better luck doing that? Or maybe another company might be, have a lot of resistance to another owner, might have a lot of resistance to to that immediate change?

00:29:20:23 - 00:29:29:22
Speaker 3
I think it had a lot to do with the, with the opportunity that they wanted. So it's like the aspirations of the individuals. Right? So they've been.

00:29:29:22 - 00:29:32:06
Speaker 1
There. They are already aligned with what he was putting down.

00:29:32:11 - 00:29:58:15
Speaker 3
Yeah. I mean, I think they they'd been working there for, you know, five, six years. Things are all right. But you know, more opportunity obviously. You know, as a business grows, there's a higher ability to actually, you know, pay them, maybe what they're worth if it's all under what they think it is. Or, you know, things are kind of just running, like status quo, and they're getting a little bit, you know, uneasy with, you know, it's not as, enjoyable.

00:29:58:17 - 00:30:16:18
Speaker 3
So I think there's a lot of things, but it's figuring out what those, levers are in the first place, and then you can really decide when it makes sense. Right. If people are highly resistant to change, then you have to think about how you're going to incorporate some of the strategies and change that you want to do a little bit more.

00:30:16:20 - 00:30:37:10
Speaker 3
Methodically, maybe. Yeah. That's maybe why you have different stories with this and also with like sellers. So like you keep them around, do you not, you know, in some circumstances, you know, they, you know, new owner and CEO comes in and they're kind of everyone's still turning to the existing old owner and they're like, is this a good idea?

00:30:37:11 - 00:30:37:21
Speaker 3
You know.

00:30:37:23 - 00:30:41:07
Speaker 1
Yeah. Hey, yeah, I know Jocko used to.

00:30:41:09 - 00:31:01:11
Speaker 3
Do this technically the boss, but does this make sense? Right. In those circumstances, you know, you usually see the existing owner kind of like, hey, let's, you know, I wanted you around for a year, but, like, I think we need to, like, you know, part ways here. Other times it's, you know, very collaborative. And they're able to provide a lot of value and they're still standing back on the, you know, major decisions.

00:31:01:11 - 00:31:08:00
Speaker 3
And they're not, second guessing what you're doing. Yeah. And that's maybe why you have these, like, kind of different views.

00:31:08:02 - 00:31:23:17
Speaker 1
It sounds like the common thread is take the time to kind of understand the situation and figure out where the winds are. And it sounds like, like early wins might be don't do anything. Just let the team kind of let you and the team ease into whatever new reality is. Is it sounds like another win, like with your buddy there?

00:31:23:17 - 00:31:27:13
Speaker 1
It sounds like. Who? Commercial cleaning, you said. Yeah.

00:31:27:14 - 00:31:28:05
Speaker 3
Spotless.

00:31:28:05 - 00:31:31:05
Speaker 1
Spotless. Another shout out. So Minnesota.

00:31:31:07 - 00:31:31:12
Speaker 3
That.

00:31:31:17 - 00:31:52:10
Speaker 1
Manhattan. Manhattan. So it sounds like another type of, opportunity there where folks are like, please do something different. Yeah. You like? Great. Let me get a couple wins here because I'm aligned with that. Different. Let's go do that. I do think that, like, building momentum early on sometimes means you're taking action. And it sounds like in other ways it just means you're doing a lot better job.

00:31:52:10 - 00:32:25:12
Speaker 1
But just listening to like, understanding, you know what the reality of it is? Do you find that a lot of these, these operators and these owners, when they're coming to you, they're pitching their deal and they're talking about how they want to do these things and whatnot. Do you get this idea that they might have a skewed view of what is productive and maybe point in case being or an example that's going through my brain is, and we all suffer from this, which is like, well, if I'm not doing something just like physically doing something, making moves, then I'm not being productive where you might look at something and go, you know, I

00:32:25:12 - 00:32:39:06
Speaker 1
think the most productive thing you could do is actually like the business has been running for 30 years is maybe don't change anything in the first 45, 60 days or whatever it might be. You sent. Do you see that eagerness all the time? And do you ever find yourself having to kind of talk people back?

00:32:39:07 - 00:32:54:12
Speaker 3
Well, I think the biggest thing is, is everyone is optimizing towards growth, really, really aggressive growth, which, you know, growth can be good, but if you grow too quickly and you, you know, start running into like capital issues, right? That's also pretty common. Right. And now all of a sudden.

00:32:54:14 - 00:32:55:16
Speaker 1
I've had a business.

00:32:55:18 - 00:33:15:10
Speaker 3
Yeah. Well all of a sudden like your, you know, accounts payables are coming in or longer than your accounts receivables right now. It's like, oh we had to buy all this equipment, buy all this product, and it's going to take us longer to get the money back. And now it's like, okay, we've been growing 25, 30% year over year.

00:33:15:12 - 00:33:38:06
Speaker 3
That sounds all good. And then all of a sudden you still have the same debt issue. And maybe not enough cash to, actually, like, pay it off. And then you run into some challenges there. We've kind of scale too much. Right? So I think like, flexible scaling makes a lot of sense where people will do, contractors to 99 and specific industries where they can flex up and flex down.

00:33:38:08 - 00:34:01:02
Speaker 3
So they're not bringing on all these employees, bringing on all of this inventory, and then run into situations where they don't have enough cash on hand. Just because I scaled really quickly. I think the back to the point of these businesses has been around for a long time. Like if a business has been, you know, sustaining a certain level, figuring out, okay, like, who are those customers?

00:34:01:02 - 00:34:28:11
Speaker 3
How did we obtain those customers? What is our cost like our our cash, right. How much does it cost us to replenish a new customer? If one turn turns, what's the what's the churn rate and retention rate? How long do they stick around? Like really understanding that like the core aspects of the business to make sure that you at a minimum, because, you know, back to the 30 year owner that has probably made a lot of key moves to keep that business sustainable.

00:34:28:13 - 00:34:46:21
Speaker 3
Right. You got to figure out all of those pieces as well. So yes, you are doing a lot of things to make sure that the ship is at the same level as it was before, because if that owner wasn't focused on growth, they're focused on something else. Yeah, right. And there's not a lot of owners that actually are working five hours a week.

00:34:47:02 - 00:35:10:23
Speaker 3
Reality is they're probably working 60. So they're doing something and it could just be keeping the business currently where it's at. So I think like being, if you're able to do that sustain for the first couple of years or at least the first year, you can still make some changes. You know, you don't have to keep it the exact same, but at least, how much you're bringing in and you know how much cash flow you have.

00:35:11:00 - 00:35:18:11
Speaker 3
Same level customers, maybe diversifying a little bit, and then you can really start expanding on top of that. When you have your foundation covered, give.

00:35:18:11 - 00:35:44:20
Speaker 1
Yourself some time to really kind of like get settled into what's going on. And I do think that that's a a salient point mean when you think about like how because a lot of these businesses where they operate is not almost all of them don't have this kind of traditional SaaS recurring revenue. That's like we got people locked in and they're like, they getting like they got to go hunt every single year, every single month, every single day for their business.

00:35:44:21 - 00:36:05:12
Speaker 1
And yeah, they got regulars and customers that come back and all that stuff. But like if you're working construction and yeah, keeping a $10 million a year or $7 million a year, $5 million a year business going and retaining and going and just hunting to keep the the top of funnel for as as much work as like adding another 6% of growth that year.

00:36:05:14 - 00:36:18:07
Speaker 1
And I think it's easy to just go like, oh, that'll be fine. You work it up the next year and you go, where's the business as I go? Because you didn't do any of that. Did you do the trade shows? Did you go do this thing and did you, you know, have dinner with this referral partner, like, no, like, okay.

00:36:18:07 - 00:36:19:07
Speaker 1
I mean, good luck.

00:36:19:13 - 00:36:36:12
Speaker 3
Yeah. Yeah, those are all things that you're, you know, and inevitably over time you can, you know, probably have other people that can help out with like making sure that you're at status quo. But at the end of the day, this is everyone that's working there is looking up to you, right? Yeah. You're responsible for all of these livelihoods.

00:36:36:14 - 00:36:48:17
Speaker 3
Obviously yourself. You're put in, a situation where you put the personal guarantee on this, most likely. So your family as well. So I think understanding that, is, is critical.

00:36:48:20 - 00:37:11:09
Speaker 1
Yeah. I know we get, like, I don't want to I don't want to. I don't want to expose all the good parts of good here. We're going to have plenty more conversations to come. But I do have one more, at least, to leave folks with. And then we'll we'll get another session teed up for us to kind of go dive into so many of the things that I think folks want to hear from, especially from your perspective.

00:37:11:15 - 00:37:33:08
Speaker 1
But I think the one thing I thought about was the conversation we had, I guess, a couple weeks back now where we were, you were talking about where folks who are doing this for the first time should probably be thinking about, should I do it? Versus just can you and we were talking about deal size in particular.

00:37:33:12 - 00:37:53:07
Speaker 1
Right. Like, yeah you can you got great credit. You got you know, you know, you don't have a, criminal background. You've got the expertise. So yeah, you could buy that $10 million business, but it might not be a bad idea. This is your first go at business and ownership to maybe consider the $5 million business, right.

00:37:53:07 - 00:38:07:23
Speaker 1
And get a win and you're about just. Can you can you shine any more light on why that might just be a healthy exercise to go through, starting with a smaller group, even though some might argue that a bigger deal may be less risky or whatever. Might it be?

00:38:08:01 - 00:38:35:22
Speaker 3
Yeah. Which I do think that there's there's some merit to like, you know, more infrastructure, more layers of, managers or whatever it might be does provide, some stability. And I think that's really to the the counter of a one man shop with a couple, you know, employees underneath them that were they're doing everything. Yeah. Right. That's where I think it's like a very risky transaction unless you really know this space.

00:38:36:00 - 00:38:56:05
Speaker 3
But I think if you look back at, like, the, you know, all the people that I've and a lot of these investors that, I mean, their first deal isn't their homerun deal, right. And I think that's kind of the common misconception. And it's even for people that don't plan on operating this forever. Right. I think it's too much of this, like, four hour workweek transferred over.

00:38:56:07 - 00:39:19:05
Speaker 3
Hey, get rich quick. But the people that are really, really successful, that have paid, you know, tens of millions of dollars owning and operating businesses, they started relatively small, right? I, I look back at this guy, had a conversation with, about a year ago about a small, junk removal franchise. And, you know, they operated it for a year.

00:39:19:05 - 00:39:35:05
Speaker 3
And it's a really easy, you know, they have a lot of the education. They have a lot of the kind of back office. How do we do sales marketing, how do we do payment processing. All that stuff was really all built out. So it kind of like refined down. What does it actually mean to operate this business?

00:39:35:05 - 00:39:57:16
Speaker 3
And like, how can we grow this thing? What he realized and found was he made a ton of mistakes, but he wasn't highly leveraged on this deal. Right. So he was able to take you know, some compressions. He was able to make those mistakes. They weren't devastating mistakes. And now now they're looking to, you know, add more locations and, like, really expand it.

00:39:57:16 - 00:40:20:11
Speaker 3
Right? So I think it's like, if you go if you look at the people that are the most successful and they all started with a reasonable size business, and then now they're on these, they're like, oh, they have this holding company with like ten different businesses. It's like, yeah, they've been at it for ten years. Yeah. Right. And they've also met a lot of other people that they can plug into these that are going to provide a lot of value, and that gives them some leverage.

00:40:20:11 - 00:40:39:16
Speaker 3
So like I always think about it and try to take all of these, you know, hundreds and hundreds of conversations I've had with folks is like, there's a reason why they they want about that. And you do see a handful of these like search funds, for example, their average deal size is probably like 15 to 20, 25 million.

00:40:39:18 - 00:41:02:03
Speaker 3
Yes. A lot of them are successful, but a decent amount will will go under. And that is you're operating a relatively large a large business. Honestly, 50, 60, 100 employees for the first time. So the risk is a little bit higher, but there's no stopping you from from doing that in a couple years if you have some, concept of patience.

00:41:02:05 - 00:41:19:18
Speaker 1
Where the opposite might not be true. If you start too big and you find yourself even just mentally underwater. I think that's the other thing. You talk about the money saving. You also have the, the stress that comes with running a bigger business. You may not just be able to easily go back in time and just you won't be able to go back in time and just say, you know what?

00:41:19:18 - 00:41:47:18
Speaker 1
I wish you heard about a business. A 25% of the size, because I think I would have really get my arms around it again, going back to like learning the fundamentals and then getting after it. Now I think that's that's killer, man. I think there's so much and it's different for each person. I know. I just know you well enough to go like you're not saying this applies to everybody, but you kind of got to know yourself and then understand where you can add value and then really look at what's going on in front of you with this particular opportunity and figure out, like, does this make sense or not?

00:41:47:18 - 00:42:06:17
Speaker 1
You know, or you getting shiny ball syndrome and you're just like, yeah, but that one is big. Yeah. And I can be like, I can just be killing it overnight, you know? And I have something I can tell my buddies that there's, you know, barbecue next week, that I own this big business. We underestimate the fact that, like, yeah, none of this stuff is just that easy.

00:42:06:17 - 00:42:23:00
Speaker 3
Yeah, and you'll figure out what you're really good at, too, right? At a small scale, and you'll figure out what you're not good at. Yeah, right. Which then kind of maps out. Okay. If I want to do something bigger, I know that I'm really bad at hiring, but hiring is key, right? Okay, let's go find someone that's really good.

00:42:23:00 - 00:42:41:18
Speaker 3
On the people side, I can, like, see characteristics about fantastic managers. Right. And that's, you know, every single hire I made crushed me. Yeah. You know okay, let's go find some of those people that are actually better at it. So I think it's also like identifying where you're, you know, really strong at. And I think you figure that out by actually doing the work.

00:42:41:20 - 00:42:58:08
Speaker 3
And then also where you're not as strong, that's totally fine. Like most of these deals I see put together, they have really strong advisory teams from very specific backgrounds because they're like, I know nothing about Excellency, but this person does and they're, you know, motivated to help me execute it.

00:42:58:10 - 00:43:15:18
Speaker 1
Yeah. I mean, Judd, I could talk to you for days, man, on the stuff. I do talk to you for days. Yeah, but, thanks for coming on, man. I think we'll do. I look forward to do more of these sessions with you and the other teammates just behind the scenes. I know for a lot of folks to gain a lot of value, just the beauty of talking to owners and operators.

00:43:15:18 - 00:43:31:21
Speaker 1
You get to dive really deep into the human story of what they've dealt with and how they've kind of navigated some things and how they've come out either failed or triumphed. But I think he's really great about talking to some of our teammates and really kind of seeing him as like this pattern recognition that happens with so many things coming through our brain.

00:43:31:21 - 00:43:49:16
Speaker 1
So just greatly appreciate that. And, I don't need to say this, but it will mean it's always a it's a pleasure. I always kind of think in these type of things with you because you do have a very you don't have just like a numbers approach. You don't have just like a humans to kind of like, how do these two things cocktail together to make sense as well?

00:43:49:16 - 00:44:04:23
Speaker 1
I love business, it is Wild West because it's a little bit of everything, right? It's not just cowboys shooting guns, but it's also like, you got to worry about the terrain and the horse and all the things that come along with it. And I think that's what makes this business and makes helping operators fun. So I appreciate the time and.

00:44:05:01 - 00:44:07:04
Speaker 3
Thanks for having me.