MERGER SHE WROTE
Merger She Wrote is a podcast for business owners looking to scale, sell, or transition their companies. Each episode unpacks the strategies behind successful exits, the pitfalls to avoid, and the steps to maximize value. Featuring expert insights and real-world case studies, this podcast helps you navigate the complexities of M&A with confidence. Whether you're planning your next move or just starting to think about the future, Merger She Wrote gives you the knowledge you need to make informed decisions and build a business buyers want.
MERGER SHE WROTE
EP 5 | The Business Arc: From Foundation to Final Deal
Steve Adams went from bagging groceries to building—and selling—two successful businesses. In this episode, he shares how a family emergency led him to take over a struggling maintenance company, and how government contracts became the key to scaling and stability.
From the truth about vending machines to navigating tough negotiations during his exit, Steve offers practical advice and honest insight into what it really takes to build a business someone wants to buy.
Thinking about your own exit strategy? Don’t miss this one.
In the world of business, not all deals are what they seem. Fortunes rise, empires crumble, all with the stroke of a pen Mergers, acquisitions, hostile takeovers. Welcome to Mergers, she Wrote, where we examine strategies and stories behind the biggest deals in business, because in M&A, the real risks are the ones you don't take. Welcome to Merger, she Wrote, episode 5. I'm here today with Steve Adams, who was the successful business owner of two businesses for 35 years. One was a landscaping business and the other in vending machine repair right.
Speaker 2:And distribution, and distribution.
Speaker 1:okay, and so today I am pleased to have Steve on as a guest to talk about his experience starting, growing and exiting his businesses. Thanks so much for being on today, Steve.
Speaker 2:My pleasure, Paloma.
Speaker 1:So let's just hop right in. I would love I have your long bio and I've shortened it on purpose so that you can talk more about yourself, but I would love to know where you got started and what led you down the path of entrepreneurialism.
Speaker 2:Thank you. Basically, my first job was, like a lot of young people, I worked at a grocery store bagging groceries, and it seemed like something I really enjoyed. I spent 18 years with Basha's Markets in Phoenix, arizona. When I started, of course, it was in Tucson Arizona, where I'm from originally. It was something I thought well, I'm set for life, I want to do this the rest of my life. I love being around people, I love running a store and learning about how to make a profit, how to run a business, et cetera. It felt like it was my own store because eventually I became a store director.
Speaker 2:So 18 years with Bash's and then mom and dad had started their own businesses as well. My dad was in the construction industry for all his life and, unfortunately, his company sold to another company and I'll never forget it when he said oh, they guaranteed me All the supervisors and all the people in management. They're going to retain us all. We are in great shape. Of course, day one comes and my dad was let go because he was the maintenance supervisor and took care of all the fleet management et cetera, and they already had somebody to do that in the other company. So fortunately, at that time it started a small janitorial business in Tucson and it was fun to watch his little business grow. He went from just mom and dad cleaning offices at night to next thing I know they're cleaning all all major banks in Tucson, convenience markets and everything else and they had a fleet of eight to ten vans working every night cleaning offices nice so all of a sudden, dad you know, has heart issues as he got older and he had to sell.
Speaker 2:And very trusting man and I got a lot of his good characteristics, I think. But he sold his business to a Washington lobbyist who had no experience in what he was doing but he wanted to retire in Tucson. Well, within a year that business went belly up.
Speaker 2:They went broke and my dad had to learn the hard way that what are sometimes a promissory note is just a piece of paper. And he had to learn the hard way that what are sometimes a promissory note is just a piece of paper. And he had to start another business, you know and. But he did take over what was left and he made a lot of mistakes along the way, but I got to see that. But he also made a lot of great decisions and his company grew and grew and then he had a major heart attack and, working for Bashes, I went to them and said can I take a year's leave of absence? And they were one amazing, wonderful company. I said, sure, but we need you back.
Speaker 2:So I was granted a year leave of absence to go help my father, and it wasn't long, just a few weeks, maybe even a month. I thought to myself I'm not going back. This is an opportunity for me to do what I've always dreamed of, at least to say I tried it once. You know that owning your own business, even though Bash's was fantastic to me. So I was married at the time and I had to go to my wife and say I've got this great opportunity. I want to do. This is a dream of mine. But I'm going to leave my company, take a 50% pay cut with no benefits and no health insurance. What do you think? And fortunately we didn't have kids and it all worked out. I was able to help mom and dad, it didn't take long.
Speaker 2:Working out of their garage I said we need to get to Phoenix, be centrally located because we had accounts all over the state. So that company grew and grew and it was named initials were HMI and it stood for Handyman Maintenance Incorporated. So Phoenix was our central office. We had a little strip mall, baseline and mill and before long we were bidding on other accounts. During that time I started working on my licensing and qualifying parties for Department of Agriculture, which was weed management, right-of-way spraying, turf and ornamental, and so I was able to obtain my qualifying party license for that and then also my registered contractor's license. And these are things that have been challenging for my dad at his age at that time. So that company grew and grew and we went. At one time we had over 250 employees in that company, so very proud.
Speaker 2:And but back to bashes. We had an account managing the rest stops all around the state of Arizona. They decided through the federal government it was a little it was permissible now to make money at these rest stops which would help the blind and sight imperative Arizona. So I was very proud of the fact that we were able to put vending machines these rest stops and we were able to pay a commission to help the blind and sight-impaired of Arizona. I made many friends in that department so that was our second business I eventually formed in 2012-14 in that area.
Speaker 2:So we had two businesses. We were running the vending, distribution and repairs and then also the commercial landscape company. The commercial landscape was part of the rest areas around the state of Arizona and I would hire couples that would work at these remote locations and a lot of people didn't realize that there was homes there. You know it was funny because you just mainly want to go in and use the restroom and get back on your journey. You know it was funny because you just mainly want to go in and use the restroom and get back on your journey, and I met some of the nicest people you know that loved that opportunity to be out on their own out in the middle of nowhere in some cases, but also some of the most beautiful places in our state.
Speaker 2:Oh yes, so that's kind of how that all worked out. I was able to use that connection with a lot of state government agencies and the state of Arizona and other counties in the state and was able to bid on government contracts, which became my specialty.
Speaker 1:So I want to ask something about that For someone who's starting out in a space that's maybe similar or has similarities, where you could work with government entities. Where does one even start when they want to get applied to government contracts or start working with government organizations? Because I feel like a lot of contractors in all different sectors look at that as sort of a golden opportunity.
Speaker 2:It really is, paloma. It's a great question and it's gotten a lot easier for companies to get involved in the bidding process for the state of Arizona and our municipalities here in the Valley ProcureAZ it's called procureazcom and also just going onto the websites for each city, if you scroll through you'll see our bidding opportunities and contracts and each city has a little bit of different procedures where you can get registered as a contractor. So the key is get registered in all the municipalities that you can get as many bid opportunities coming into you. But and also you can select the classification codes that you want to bid on, so you're not being besieged by a lot of different information, just the ones that you want to bid on. So you're not being besieged by a lot of different information, just the ones that you want to bid on and you know your expertise and whatever licensing you qualify, they all have different requirements you know as far as licenses and insurance and those type of things.
Speaker 2:So you have to kind of do a little bit of your homework. But once you do it, what I was attracted to was I like the idea of a long-term contract, a three to five-year contract where I can use my budget, I can see what my labor is going to be on a monthly basis and you have guaranteed income coming in on a regular basis, most of the time each month, and sometimes you might do items quarterly or bi-monthly or that type of thing. But generally speaking, most of these contracts are for regular full-time work and that makes it easier for you as a business owner to have a budget, know what your payroll is going to be and you can plan ahead for the future, especially with your equipment, your materials, assets that you might need to be successful and the hiring of future employees and so forth.
Speaker 1:I love that point because I think a lot of people take for granted this idea that you know the work's coming in. But you know, for a lot of people, even just using landscaping businesses around the valley that I've worked with, I know the worry, right, the constant worry deep down is that the clients or the work will just suddenly dry up. And so I love the point that you made there. Which government contracts lend to that predictability, which lends to your ability to more look at it and say I have guaranteed income coming in, here's how I can allocate it, as opposed to it being like can I afford an employee? What if it dries up next month or next quarter?
Speaker 2:right, that's correct and also along those same token, you can also look at HOAs homeowners associations that are larger or even mid-size that should have regular work that you can plan on and start designing your crews to that type of work. Residential is great as well, but it's a lower income. You know lower monthly amount coming in and I like the idea of having a larger crew working on a regular basis and you know you have a nice financial base that you can work on and hopefully get that profit as high as you possibly can.
Speaker 1:So I'm going to ask you more of a you know best kept secrets question, but from trying to get an HOA as a landscaping business. It seems like there's so many competitors in the Valley and I'm sure it's the same in any sort of you know state or location that has beautiful weather like ours. But you know, when you look and you see there's so much market penetration how does one go about even landing an HOA? Is it because the relationship is it sort of like banking, in that you're coming in and there's a pre-existing relationship but it's maybe one that they're not happy with? Or is it because maybe management is changing hands and there's an opportunity to have new bids come in for an HOA project, like I guess one of the things that I think, as a listener, I might be asking myself is like oh great, hoas sound like something I should pursue but, how do I even go about pursuing them in the first place?
Speaker 2:Good question, what I did. There's websites that are available that a lot of the homeowners associations belong to and basically by Googling different companies and places that you go by, they'll tell you. For example, I live in Notara in North Phoenix. You go on their website and it'll talk about everything that they have and the services, et cetera. So by clicking on the services you'll be able to see, you know, landscape and things like that and you'll see the contact people and that sort of thing. And there's also real estate companies and groups that represent a lot of the homeowners associations and so forth, and you can get on their websites and there is a network of all homeowners associations that put out for bid opportunities and so forth.
Speaker 2:But just basically looking at a property that's in your area, there's nothing better. When you go buy a property and go they could use some work over there you see that as you're driving by and you go, okay, let's find out where this is at. And then you go online and look and see and who's their contact person and some of the larger HOAs they even have little offices and, of course, their activity center or whatever it may be. And there's a lot of small ones too, which are even phenomenal to have, especially in some of the older parts of Phoenix. A lot of townhouses and condominiums and things like that are wonderful. The challenges of those in my experience, was they have to mainly go out for bid every certain amount of time, such as two years or sometimes even a year.
Speaker 1:Like it's a renewal built into their HOA requirements. Okay.
Speaker 2:And so we have to go out for bid. You're doing a great job. We love you to death. We're going to name our firstborn after you. All that stuff. But we have to go out for bid and sometimes that means can I sharpen my pencil a little bit more? Where can I cut? I want to keep this customer, I like this customer and other times, well, they've been a real pain in the you know what.
Speaker 2:So maybe I'm going to bump this up 20% and I'm not going to that way. If I get it, okay, they're worth that 20%. Now you know I love them again, but it's one of those things that happens on a routine basis when you're dealing with some of those type of entities and so forth.
Speaker 1:Okay, so part of your evolution, of how you got from working at Basha's to working for your dad's business to then growing and evolving into this landscaping and the vending machine business, and I love that they're all connected in a way. Yes, because I find that a lot of people they're thinking about growth. A lot of times they don't think about growth in such an organic manner, right.
Speaker 1:Yes A lot of times they don't think about growth in such an organic manner, right, yes? And so it sounded to me very seamless, in that things kind of just dovetailed into opportunities which I think organic opportunities are sometimes the most rewarding financially and long-term vision and goal-wise. And so, thinking about what you've done, what you've built, if you had to name two or three factors that you think really contributed to your success in building these businesses up to a successful exit, what would they be?
Speaker 2:I just basically copied what I learned from Bashes. I know it sounds kind of corny, but you have to remember I went to a small mom-and-pop company and we didn't have a policy manual, we didn't have a safety plan, we obviously didn't have an HR department, but all these things and how we verbalized with our people who worked for us. I went from Dad we can't call them employees, we're going to call them all members, we're all members, we're doing it this way. And we're going to call them all members, we're all members, we're doing it this way and we're going to make sure we're following the Department of Labor laws and we're doing this. And dad was more of a verbal handshake and that sort of thing. So, learning from a company such as that, I was able to transfer that to our company and suit to our type of work that we were doing, because obviously the maintenance, building maintenance and landscaping was entirely different from a grocery store.
Speaker 2:But the same principles apply in how you treat people, your customer service. People still to this day, I truly believe, want to be appreciated for a job well done. Granted, we all want to make as much as we can, but at the end of the day, do I really like working there? Do I get treated with respect? Do I feel like I'm part of the team? You know, those are things that I was able to pick up and learn and it helped me so much along the way.
Speaker 1:Nice, all right, I feel like you. The two to three factors I feel like you distilled into one giant one, which I'm okay with, which is using bashes as your template, which I love. I love the fact that you took a lot of what you learned, right, because you were at bashes for so long and you worked your way up within the organization, you got to see behind the curtain in terms of what it was like to be a low-level employee all the way up to management. Right, and I think that's one thing that a lot of people don't realize is that you know. That's one thing that a lot of people don't realize is that you know, being sort of the grunt worker, right, gives you perspective about how you like to be treated as you know, employee, versus how management then turns around and treats them.
Speaker 1:And I always joke, you know, when you are in a law firm and you're working as an associate, same concept, right, is that you're working at the very bottom of the totem pole and you see things that partners are doing and you're like, oh, when I make partner, I'm not going to do it like this. And you know, I always tell people, regardless of your work, you know and what you're doing now. You never know where you'll be, and I think your story really highlights this is that you never really know where life is going to take you and on what path, and so wherever you are now, I would suggest take notes. I know that sounds silly because you're like I'll always remember it, but you know you might not be in a position like Steve where he was working there for, you know, 18 years straight and got it. You know, got to see it day in and day out.
Speaker 1:Maybe you transition to something different and you lose sight or memory of what you experienced in that time. I mean, I certainly remember times when I thought to myself, oh, this is how I would do this, and then I never wrote it down and poof, it's gone right. So I think what you've highlighted is that your past experiences can be so pivotal to your future experiences, and especially as a business owner, because I think a lot of people underestimate how much their early life employment opportunities I mean you know everyone can think of their very first job and thinking about you know how silly or a waste of time it was and it's like. No, you're learning key things right, and some of them are about how to treat employees, but others could be much deeper. Like you were talking about how to build and grow, and you know how to form teams and make things sustainable, so I love that. I want to talk briefly about how you owned the property where you operated your business and what was the deciding factor for owning the property as opposed to leasing.
Speaker 2:Yes, we, of course, were renting in Tempe for many years and an opportunity came up to buy a property, because I was looking for number one. Our landscape was growing and growing and growing. We had to have a place to dispose of waste. We had to have a place to dispose of waste. We had to have space and a property came up. It was right by the landfill off of Buckeye Road and 19th Avenue, just down the street. So I pursued that property and talked to my CPA first and said can I afford this, can I do this and so forth and the advantages of putting and buying a property, putting it in my own personal name and then leasing back to the corporation.
Speaker 2:We were an S-Corp which worked out perfect for us. You know we never got big enough to look at C-Corps and other things or LLCs, but the S-Corp was excellent for us. So I was able to obtain an SBA financed through my bank, which I had a long, long relationship with, you know, 20 plus years. So we were able to buy that first property, and then it was in the 90s and then, in 2012, I bought the property that we are at now and it was just recently sold. So I didn't need to do an SBA, then I already had a relationship with the bank and I was very fortunate and so forth. But, that being said, I also went to a bank before and went through the whole SBA process. I'm getting a little bit off track here, sorry.
Speaker 1:No, it's okay.
Speaker 2:But with the SBA process and I went through the whole thing to finance part of all these vending machines that I had around the state and, of course, a vending machine when you think about it, that's a high liability to an owner because things get broken into all the time. You know, in those days everybody kept their change and so forth, and the big deal was when we started taking dollar bills and all that. So I saw this whole thing, this journey, vending, improvement and so forth but not a bank would touch me or touch us, you know. So we went to the SBA and we basically I thought we had the loan all approved to buy all this equipment and the bank turned me down. And then during that time, the state of California was starting to issue vouchers and so forth and so I said well, I'm stuck with this huge high interest rate because only one at that particular time, only one company would finance this type of operation.
Speaker 2:So six weeks after I was turned down, my loan officer from the bank was hired away to a national bank and he called me up right away and he said Steve, I thought you were mistreated. You have a great financial record, you have a great credit scores and all these things. You're well qualified, but the bank just for whatever reason, when it came to committee, got nervous because, in his words, all your eggs are in one basket. You know you have just only two or three primary contracts. So that taught me a little bit about diversification.
Speaker 2:I can't. I have to be careful, I have to have more revenue streams than just one or two or three. You know government contracts, so that really put me my emphasis on the future as far as getting that taken care of and diversifying more. So the credit was, the SBA loan was approved and I was able to pay off all those vending machines at half the interest rate and it was a huge step in the right direction for us in that vending company. And not long after I think it was around 2018, I finally separated both companies and to this day, paloma, I regret not doing that sooner and so I was keeping everything all of the companies all together, but I couldn't really verify and watch which was our strengths and where our weaknesses were, because I put so much together financially as far as our QuickBooks programs and so forth.
Speaker 1:That makes sense.
Speaker 2:So it was really important and it made it a lot easier for me to evaluate where I was at, as I was getting older, when I separated those two companies. So finally, I did the right thing, but I wish I would have done it sooner.
Speaker 1:Well, so it's my turn to go a little off topic. So there's a lot of influencers out there that talk about buying and selling businesses, and I'm just thinking of one like Cody Sanchez. She's on Instagram all the time and she talks about buying boring businesses. And you know there's a lot of stuff online about how vending machine businesses are. It's kind of like laundromats. There's like this short list of like really financially solid businesses that don't require a lot of capital to get into, and it's sort of this mythological creature at this point in the business world of like here's a business that could make you a millionaire, um, and it's easy to get into. So I want you to tell, tell everyone who's listening is is the you know, fangirl like ideologies about starting a vending machine business. Are they true? Are they false? Do they lie somewhere in the middle? What's your take on starting and operating a vending machine business?
Speaker 2:Oh boy, don't get me started. I honestly talk more people out of getting into the vending business than I did. As far as people who wanted to try it, it's gone through several stages over the last 15 years with technology, the cashless systems, et cetera, et cetera. But there were so many ads out there where you could, you know, with low revenue you could go out and make work 20 hours a week and make $80,000, $120,000 a year, those type of things, and it's almost unheard of. You should have been in it a long, long time ago.
Speaker 2:But the vending business and industry is really affected by COVID.
Speaker 2:So I would take a really hard look at if you're going to go into this business to be prepared for that, because we've changed All those vending machines, all those break rooms that we had in all these buildings. You know they went dead cold during COVID and they are slowly coming back, but they'll never be what it was before. There was a peak time when I had many, many smaller private vending companies buying from me parts, doing their repairs or moves or helping them in their business. It was a lot of fun and they were doing very well, but once COVID hit, then they were the most mostly affected by all that. So the larger companies are doing very well your national type companies and vending companies, and especially the ones that are emphasizing more on healthier foods and so forth but it was such a cashless business I mean cash business at the time during the old days, and now it's more accountable, which is good because we have card readers. No one carries money anymore, right? So I would be very careful.
Speaker 1:Well, I was going to say asking for change. When you go to the register anymore, they just look at you with fear that they don't have enough change to make it for you.
Speaker 2:Right right.
Speaker 1:No, I think that's a great point you made about COVID and just I mean, covid has impacted so many vending machines as being a, you know, predominantly like in corporate settings, right.
Speaker 1:Break rooms and how that, you know, lack of coming into the office truly impacts. Or even downsizing the office into spaces that are more co-working spaces, you know modifies the need for how many vending machines. You're not having three floors anymore. Maybe you're one floor with hoteling, right? So that's fascinating. Well, and I think too, the one other misnomer that a lot of people have online is that you know you can just go fill and tell me how off I am on this. You can fill in the blanks for me, but you know the promotion of vending machine businesses often, you know you had mentioned even when you were describing it to me. You know going around and working X amount of hours per week, and then you know taking home a really nice paycheck. But at the end of the day, when you're starting a vending machine business, it's all you right, stocking and fixing and making sure the machines are working right, and so inevitably, if you have machines all over the city, you could be driving all over the city all week long. Is that an accurate description?
Speaker 2:It is. You have to have a lot of accounts Okay, because you're paying a commission number one to the owner of that building and you have to have accountability and so forth, but you have to have an amount of machines to balance out the amount of hours that you're going to put in. So a lot of it depends on what you're trying to sell, and the small mom-and-pop type companies now are really having their challenges and they are switching also to not as many vending machines, paloma, but they're looking at micro markets where you can go into a place and you're basically in a small little convenience store. That's a lot of the trends for the companies as they're growing and becoming larger, those are great accounts to have in that particular industry.
Speaker 1:Be prepared for that. Okay, fascinating, all right. Be prepared for that. Okay, fascinating, all right. Back to our main topic. Sorry, I digress. So what made you decide it was time to sell, right? You've been growing, you've been growing and I think I kind of inevitably, kind of know your answer because you and I know each other personally. But you know what was, if you were going to talk to somebody else who's been in business for quite some time and has grown their business to be successful. You know when is the right time, because I think a lot of people think about retirement, they think about changing their what they're doing on a daily basis, right? Maybe they're just tired of being the owner operator. You know what kind of went into-making and when did you think was the right time for you?
Speaker 2:Yes, I had a goal, like we all do. You know I'm going to reach I'm 62 in six months and I have Social Security or whatever it may be having all those things in the future. Be prepared for that. The challenges I had in preparing for that was number one. I knew that I had to make sure that I had contracts in place for some time because I wanted to have that financial sales base where I could make my company look more as positive as I possibly could. You know, because of the type of businesses I had, I ran, you know, 60, 70% government contracts and the rest were all other commercial accounts and regular businesses that we took care of HOAs, et cetera. So planning that was going to be a challenge because I had several of my contracts were depending on when their five-year term or three-year term, whichever it was and during all that I planned to sell.
Speaker 2:When I was in my early 60s and during that time I planned to sell. You know, when I was in my early 60s and during that time I didn't expect. But I went through a divorce, had some personal issues and I had a great customer lined up to buy the commercial landscape company and I was busy also trying to sell the vending because I felt the vending business I should sell first, especially before COVID and after COVID. But that deal fell through because I was working with too many irons in the fire. I had an ex-wife and this and that type of thing, so he basically bowed out of that particular transaction. I had many not many, excuse me, I had about four different companies during that time that approached me and we went through the process and the process is every business owner will find out or already knows it does take time because of documentation, of providing all the information. So we went ahead and I worked with a business broker and we got ourselves really prepared and basically waited for the right particular times and during at least two times during that four-year span of trying to sell, I took the business off the market because it really wasn't that time. I wanted to wait till I was rewarded a couple contracts and that sort of thing. So the goal was 62, 63, and I was hoping one of my kids might get involved and that didn't work out. They were smarter than I am but they all done well. And then I was able to wait until the right time to when I was awarded several larger contracts, the ones I've had for 20 plus years in certain cases and okay, I can put it for sale. Now I can be a little bit more aggressive in the market and so forth, but I had a.
Speaker 2:I'd like to share one experience, if I may. I had a company that was a competitor, and that's who I was looking at is the larger competitors in the Valley, because everyone who, I think, owns a business knows the kind of person that they want to sell to, someone that they know that does a good job. Already. You already respect what they're doing, so you're hoping that they will be the right partner for you, the right fit to make your transition a positive one. And so this company approached me and I knew some of the ownership. I've been across tables with them at the bidding, the bid awards and bid evaluations and all that good stuff, and what I meant to say is the bid openings. So I've sat at these bid openings and we're all looking across the table and seeing what bid they were and make sure the bid's in at 3 o'clock in the afternoon and we're all nervous and how many bidders were there, and so I had a company in mind and they seemed very interested. We provided all the documentation and I thought we had a deal done.
Speaker 2:As a matter of fact, driving into work that day, their chief financial officer was flying out from Florida and we had two hours lined up for that meeting to work out the details. And, paloma, they spent 30 to 45 minutes going over all the books, complimenting us on our company, on the positivities, all the things we're doing right, and so forth. And then it was almost like you could not believe it. He said, technically, steve, we could bid all these jobs here in another two more years and just get them all away from you. And so it was like, oh my gosh, I was like I wanted to throw the guy out of my office.
Speaker 2:But I saw his point. He had valid points he made and I think the purpose of the meeting was hopefully to see if I would come down in price or maybe renegotiate and things of that nature. And I had looked him right in the eye and I said you know I have value. Why do you think I've been awarded these bids? You know, for 15, 25 years I have a relationship that's high. And so you as a business owner, if you've been doing the right thing and you have a good customer base and you've had great customer service, repeat customers. They are going to come back to that name. They know you, they know that company name, they know that brand. So I made that comment to him. He goes well, you have a good point there, but you know we can still do the same thing you're doing, you know, and just outbid you.
Speaker 2:And I said, okay, well, good luck, and that's how the meeting ended. So that was an eye opener for me, but so that's it.
Speaker 1:So, would you say. One of my next questions was going to be what was the big, one of the biggest challenges in going through the sale process? Do you think it would be accurate to say, then, that one of your biggest challenges was finding a buyer that was on the up and up, that you know, respected your business and was willing to go through this process with you, or was there something else that you think was bigger than that?
Speaker 2:Yes, I was very fortunate to find Jim McGrogan who works for Maycore Associates. Jim and I hit it off really well. I did interview several other business brokers and the first shock I found out as a business owner is gosh darn, those guys make good commissions. You know I was like holy cow and it's higher than a lot of real estate commissions. So that was a learning process. That was a sticker shock for me.
Speaker 2:But meeting Jim after interviewing other people, we had a connection. I liked his finance and accounting background and he was able to look at my books and give me some good information During that time. Also, with the divorce and stuff, I learned about getting evaluations on your business and they have CPAs that specialize in business evaluations. They even represent the person who did mine, works for the court system and is called in as a witness to during divorces and separations and unfortunate situations, maybe even trust issues etc. And he did a wonderful job of giving me a good business evaluation. It was higher than what I expected but the key was most people who are looking at buying a business, they're looking at the comps for Arizona and the Southwest. He used a lot of the national comps for landscape companies and service contractors etc. So my worth of the company was higher based on what is happening around the nation. But Arizona is very competitive, phoenix is very competitive and Arizona in general. So that was a lesson learned too along the way.
Speaker 2:So with Jim we spent a lot of time, a lot of it on the vending, trying to sell. Then COVID hit and that just stopped everything and we basically stopped during COVID as well. So right after we kind of put a hold on selling the commercial business and I just was going to wait till those contracts renewed and I was so fortunate that my brother-in-law had a friend who owned two landscape companies but also needed commercial property. He needed real estate. He was looking at going into the pool business and concrete and all kinds of different things. He had a great vision and so he recommended this gentleman to me and I wasn't even for sale I didn't have the business listed at the time and we met and within a matter of less than a month I had a purchase agreement. So that's how that all started. So I was very lucky in that respect.
Speaker 2:But when I met Jim and one thing I going back to my comments on you kind of know who you want to sell to already, or the generics of who you want to sell to. I told him I said, look, there's a chance that this company, this company and this company may come to me. So we negotiated commissions based on those particular companies. If they came forward, because they've known me for years, they all know I was getting older, they could tell and he was agreeable with that, with him and his partner. So very good company and their experience. I think they'd sold over 300 businesses here in the Southwest. So I was very lucky to have him and he helped me through that process, because I'm still having to run the business every day. It's very challenging to get those documents, to do all the legwork that it takes and working with the legal team and so forth. So that's how I met you, of course, and it turned out to be such a great opportunity for me and you came to the rescue and helped us both.
Speaker 1:Well, and I'm surprised to hear that you had been going through the potential sale process for so long before we started working together. I did. So that's news to me. I didn't know that you had been out on the market for so long. You know you popped it up and it was such a good business that it just sold really fastly. So that's fascinating.
Speaker 2:Thank you. It's also because we're a little unique in the fact that we did specialize in government-type contracts. It makes some people nervous, but it's just like any customer. You just treat them like you want to be treated yourself and you do what you say you're going to do. And they love the fact that you have a reliable person out there every day taking care of their properties, because they have a job to do to maintain those government facilities and the right-of-ways and their landscape and their properties.
Speaker 1:Good points all the way around. So we've talked about your evolution, about starting working in your father's business, growing it, having it evolve over time, then getting to a point where you're starting to look to the future, thinking about exiting at some point now that you're post-sale and I know you've been doing some traveling, which is wonderful and I think is one part of the dream always when you sell your business and retire. But how has the emotional roller coaster been? I think a lot of people also wonder when they're in similar shoes and they're thinking about selling their business. The common questions are always how do I get from point A to point B? But then, once I've gotten to point B and successfully sold my business, what does the future look like? Did you have a plan for retirement about what you wanted to do? Has there been moments where you've missed working in the business? You know how has it been for you post-closing.
Speaker 2:Oh, it's been wonderful. I mean, nancy and I, we look at each other every morning and we just it is a life grant. We are so blessed and, uh, it's everything I dreamed of and more, and that's that's no joke. But then again we seem like we're busy with all things that people think that's not busy, but in our minds we think we're busy, you know. But, um, we um have a cabin up in Northern Arizona so we got plans for remodeling that.
Speaker 2:Uh, traveling I've never. I'm like a lot of business owners, I never got to travel. You know, I can never take more than a week off, you know. So now we've got all these things we want to do and enjoy it and, like financial advisor says, most of the people in your position, they want it's called the go, go, go years, you know, and why not? You know you may not have this opportunity again.
Speaker 2:So my advice is and like my dad said, I wish I would have done it five years sooner, one year after my dad retired and I bought him and mom out. My mom calls me out and she goes I need to have lunch with you and I'm like, oh crap, what did I do wrong? Now, you know, mom never wants to meet me for lunch. So crap, what did I do wrong? Now you know mom never wants to meet me for lunch, so we meet for lunch. She looks at me and says you've got to find something for your father to do. He's driving me crazy. I turn around in the kitchen. He's like they're like a dog just looking at me, like, feed me, do something. And so that point was well taken to me. I mean, I've got to stay active and uh, and I've been doing that with Nancy's help. We are just loving life, and so thank you for that question. So I highly recommend retirement.
Speaker 1:That's awesome. I'm glad to hear it. I think there's always the mix of hearing. There's only two sides. It almost seems like out there, the people who have sold and they're absolutely in love with their new life and the people who have sold and they're bored out of their mind. It happens. I'm glad to hear that you're the former. For sure.
Speaker 1:I was thinking, while we were talking about this process of selling, with us having worked together directly on the sale of your business, was there a part of the legal process that was surprising or that you didn't expect in part of the legal process that was surprising, or you know that you didn't expect in part of the negotiation, Like, is there anything that, if you look back on, you know obviously finding a seller or finding a buyer is hurdle number one, right, but you mentioned in passing getting the purchase agreement solidified and all these other kind of pieces to the puzzle. Was there anything in that process that was just different than what you imagined? Or was it more like you just were going through it and were kind of along for the ride? Because I feel like there's some people that I work with that feel that way, where they're like I'm just, I'm just here for the ride.
Speaker 2:And see what happens, you know. But, seriously, the biggest thing during all that period, it's really stressful for everybody, and being transparent with your attorney, your legal team, et cetera, is key. And the biggest thing is the buyer wants to go fast too. He has his legal team and I had during the vending sales I was trying to get sold the vending company I had a previous legal team that they were just so slow in getting back to me. I'm dealing with an out-of-state client who wants to buy this business. They were coming in and so it's really important that we, you know, talk about that in detail with our attorneys and our legal team, what we expect and so forth. I that in detail with our attorneys and our legal team, what we expect and so forth. I was very fortunate that your team and yourself were right there with me the whole along the whole way and helped us and we we got it done fairly quickly.
Speaker 2:The fun part was after the sale and going into my own office. I'm not the guy anymore, you know, and I've got two months of. You know who is this. You know what's going on here, you know, and I have to be careful, you know, and I'll never forget Jim mentioned to me. He said most of the time the seller and the buyer they get along great at the beginning but towards the end they can be bitter enemies. It can happen and I can see how that can happen. So my advice there is just be transparent. If you have any skeletons in the closet in your business or things that you've kind of tucked away, that you don't want anybody to know about you, better tell them because it's going to come out during that time when you're there training them or doing whatever it may be. So it was a great experience and it was great when it was over.
Speaker 2:But it was also the stress for me then for the owner of the company. He sold it to new people who are coming in and especially if they're expecting payments for the next 3 to 5, 10 years, wherever it may be in the back of your mind, you want them to be successful, you want them to be so happy. You know and that's where you can go into a lot of the things and not to get off track but are you doing a stock sale? Are you doing an asset sale? All those things come into play during that time and that's where your legal team attorney is so, so important that they can help you make those decisions.
Speaker 2:Because for me a stock sale is wonderful.
Speaker 2:I I'm so proud the fact that data from above and mom from above, their company they started in their garage, you know, and dad building sideboards, you know, going to home depot and putting sideboards on an old Ford pickup that we bought at auction for $1,500 or whatever it was. I mean those things, those memories are part of what we became and so that legacy is important on that for a stock sale for me, because the name is still there and even though it's different owners and so forth, it just makes us feel very proud. So that's why you have to go back and look at and that's where your attorney can help you what's going to be best for you. A lot of times it's going to be an asset sale. So your baby company that you're so proud of may change names and have all kinds of different things happen, but you have to be prepared for that and let it go, especially if you've got the money you were looking for and you know you have pride in it and so forth, and you can move on to your retirement.
Speaker 1:Well, and I would say too, for anyone listening about the, you know, asset versus stock sale kind of differential is, not only is there potential to lose the legacy, but there's tax implications, right. So you know, a lot of people think it's, you know, from a very high level view. They get the first LOI and it's just structured. However, the buyer has, you know, put in the LOI. And I think for anyone out there who is starting to think about this process, you know be aware that the LOI is not gospel, right, it's not set in stone, you don't have to sign it as it's drafted.
Speaker 1:And also, you know, steve has made some solid points today, which is that you have to involve your advisors. I mean, he's talked about working with his bank, working with his accountant, talking with attorneys, his broker. I mean there's, you know, there's a dream team in there in his story that has helped him to make the right decisions in how he changes and evolves his business and then structures it ultimately at sale. And I think a lot of people discount how important it is to have those advisors talk and be involved with each other as well, because, for all, operating in a silo doesn't really help the business owner in the long run. So all excellent points that I'm just trying to tie together for anybody who's listening. So I want to jump back just briefly to the real estate.
Speaker 1:Yes for some people who sell their businesses and have real estate, they plan to either keep it long-term and utilize it as a source of passive income and a rental, or it gets packaged in with the business itself and gets sold, as you know, part of the assets. Ultimately, were there factors about why you decided to, you know, in short course, after the sale of your businesses, just go back and sell the property as well, or was there you know kind of broader picture? You know, the real estate not being sold, with the business not wanting to keep it, because it's a headache post-closing, I know, for a lot of business owners. Something they've just expressed to me is that having a rental seems like a lot of work to them.
Speaker 2:Yes, I was fortunate in the fact that the buyer of the landscape company wanted that building right off the start. And so three days after we started, he says how much? And I'm like, what I wasn't prepared for, that you know. So he says how much and I'm like, well, I gave him a range, you know, I threw out a couple numbers and I said but that made me happy that he was interested, of course, but in the same token, in the back of my mind, go don't, you know, be careful what you say here. You know, but it's good. But he basically had a two-year lease. So during that two years I was really enjoying getting those checks for rent every month. That was pretty darn good and I liked the idea and I was okay with that, paloma, to keep that building because, you know, again, retirement gives me something to do. I can handle taking care of the building. I know the building.
Speaker 2:But that being said, you know things can happen. You're older, you know, and all of a sudden I get the cancer scare, you know. And right before all this happened, I had a merger and acquisition company approach me just out of the blue. You get that a lot, and so anyone out there who's considering buying their own property highly recommend it. Only because I see Phoenix Arizona in general is going to be, is just going to continue to grow. What are we? Number five in the country now, and it's going to get better. And so property with the space for parking and growth are essential, and they're they're very rare. So, that being said, um, I had to approach the new owner and say I've got this deal, that's really best, it's best for me, but I will make sure we get a lease in place, etc. So I don't want to leave you high and dry, I don't want you to feel like you're going to be penalized, and so forth. So that communication was important and he was very understanding, especially understanding my age, and my goals was to have an exit strategy. But that's how that all worked out. I think I would have been fine if it would have worked out the other way as well, but it turned out to be a better thing for me because it came out of the blue. The other way as well, but it turned out to be a better thing for me because it came out of the blue. You know, I didn't have to. I did not have to deal with putting it out on the market, improvements to the building. I was buying it as is, and again, I was going through a little bit of a cancer scare, which is now all fine. The good Lord took care of me. Nancy was a great nurse and you know I was well taken care of and everything's great now. So, but I didn't see it coming, paloma, he paid me off early. He merged with another company.
Speaker 2:So I mean, you never know what's going to happen. You're going, you can have this great, you know, two or three-year, four-year plan, but be prepared because even better things may happen. Or if something on the negative side happens, you can also be prepared for that. Your commercial building will always have that value and I'll never forget. When I bought it, a close friend of mine said to me well, there's your retirement right there, you know. And I thought, no, the business will be more than that. But I was wrong. It turned out the commercial building was better than the business itself. So real estate is still a good thing.
Speaker 1:Well, it sounds to me and just to make an observation based on what you've described today that your level of agility and flexibility throughout the process as a business owner has absolutely played a large role in your success, because every turn it sounds like something has come up or an opportunity or something or someone gave you feedback about. You know you were talking about having only one or two contracts and maybe not being able to get a loan and all of a sudden you're like, okay, I need to now get more contracts, I need to get more variety, and so every chance you've had this opportunity to not only remain flexible which you have throughout this process but also to take in feedback and really absorb it and modify what you've been doing in your business, as opposed to just listening to someone's feedback and being like, ah, I'm just going to stick with my two main contracts, right, and all of these piece together right. They all might seem really small and inconsequential alone, but when all pieced together, I think ultimately just breeds success in what you've done.
Speaker 2:Thank you so much. I appreciate that. But looking back, paloma, I can say to myself gosh, I wish I would have hired an assistant manager who had more technical knowledge to get our apps going, get our online marketing, all these different things or good sales rep, because, like a lot of us that own businesses, we think we can do it all. And that's one of the things I look back on and go boy, if I would have done this and this, maybe I should have hired that sales representative, maybe I should have brought in an assistant manager sooner, or that type of thing, and delegate more. And I mean we heard that from the day one. You have to learn how to delegate and that was one of my weaknesses. I thought I could always do it better myself.
Speaker 2:I had a great situation come up on an audit, for example, and it was an account we had with Maricopa County. I get this formal certified letter saying we did an audit on our billing and there was close to 60, 70 bills that went out each month for Maricopa County and they said oh, you owe us $60,000 over this last five or six years. We went back and checked everything over this last five or six years. We went back and checked everything. It was all about bi-monthly and weekly and bi-monthly services. In other words, 24 weeks in a year did you bill, or 26 weeks over this long period. So it was like over $60,000. Okay, we explained to them it all depends on what day we did the service and all this good stuff. Fortunately, it all made sense to the auditor. Okay, now I get it, but we have to delegate what days of the week we're doing and adjust on an annual basis. So, long story short, they were all happy. I was happy, but we found a mistake that we did on our billing. We had a large account, several thousand dollars a month, that we are only charging for one week service. It should have been for the whole month. They end up owing me over $100,000.
Speaker 2:The lesson I learned there was audit yourself. Yes, you know, don't just you know. I had a great office manager and she worked so hard, such a great person. She was my right hand, but it was just a typo and this went on for many years and it added to that large amount. So I always thought, oh gosh, these guys charge so much money an hour to come in and audit you and do this and do that, but learn to self-audit yourself, because you're not perfect, you can make a mistake. So that was a thing I learned the hard way but it turned out great. So even my customer says we don't ever audit you anymore because every time we do it costs us money. So I was like it was a good one, you know well.
Speaker 1:I'll ask a final question in closing, which is obviously, having a conversation with you probably is the top tier in terms of someone who is looking for advice about doing a business in these industries, but were there resources that you utilized throughout the years, like a book or a podcast or anything that someone else could maybe access and get some ideas from, in the process of them building and exiting their business?
Speaker 2:Yes, that's a great one. First of all, being in the landscape contractor. We have the Arizona Landscape Contractors Association. They're phenomenal in working with us to help us make our businesses better. You know they have seminars and on-site meetings and just helping everything from the finances to training human resources, everything you can think of and how to run. That was number one. I also went to several through the National Business Institute. They ran seminars here and you go to these classes and how to understand a financial statement.
Speaker 2:My goodness gracious, I went to two of those and I still not really sure I got it, but I have to ask a lot of questions on those. But those type of things are imperative and even when you're working on your registered contractor's license, those same things are available for you as a contractor to help you with all the laws and owning a business and insurance requirements, et cetera. There's so much out there right now after COVID with our human resources departments, and they're online that you can find. But those are the type of things that were very helpful to me those two companies. So I hope that answers that question.
Speaker 1:Okay, yeah, no, that's great.
Speaker 1:And for anybody who's not in landscaping, there are other organizations too that you can rely on that will provide the same benefit, and you know anything that I think now, with the world of the internet, I mean you could just google right organizations that might be in your area that are tied to your industry, and so you know, take what Steve has said and kind of extrapolate it to your industry if you're not in landscaping. But well, I appreciate conversation. It was lovely having you on. Thank you so much for being here.
Speaker 2:It was my honor and pleasure. Thank you.
Speaker 1:Thank you for listening, like, subscribe and comment so that more people can see our episode and hopefully it helps them build and exit their In the world of business. Not all deals are what they seem. Fortunes rise, empires crumble, all with the stroke of a pen. Mergers, acquisitions, hostile takeovers Welcome to Mergers, she Wrote, where we examine strategies and stories behind the biggest deals in business, because in M&A, the real risks are the ones you don't take.