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- [00:00]
Host
Today's guest wanted to buy a business in his local geography of Greensboro, North Carolina. Now, regular listeners of Acquiring Minds know that if you're particularly strong on one of your search criteria, you'll likely need to show flexibility on the others. Well, happily, Rob Belk not only found a business in Greensboro, he really didn't have to compromise on the other two big criteria, industry and size. Sales Factory is a retail marketing agency. Rob has roots in retail, so the business checked the industry box and at 7 million of revenue with 50 employees, it easily checked the size box. We spent time on how Rob structured the deal, which was not a typical SBA acquisition. Marketing agencies like Sales Factory are relationship dependent, so continuity of those client engagements is key in a risk that needs to be managed in an ownership transition. Listen for how Rob did that. Now, if you're drawn to buying an agency business for yourself, we've had quite a few guests on Acquiring Minds who've acquired them. Recent examples include Joe Solberg, Brian Houck, and Scott Alexander. Links to those episodes in the Show Notes. Here is the latest example. Rob Belk, owner of Sales Factory and make sure you see Rob's Search Learnings, a list of 17 takeaways from his journey to buy the business. That too is linked in the show Notes. You know that the biggest unlock as an owner is making the leap from working in your business to working on your business. But knowing that and actually doing it are two very different things. In a webinar today Thursday, former ETA CEO and business coach Jake Buettner will show you how to make the transition from overwhelmed owner operator to growth focused CEO. Regular listeners will recognize Jake from his appearance on the podcast last year. He's the one who bought a struggling IT business for 600,000 and sold it a decade later for for 35 million 11x on earnings. Among the topics you'll learn today the shift from hustle phase CEO to Growth phase CEO. The seven attributes every scaling owner must develop, how to identify your biggest leadership bottleneck and the common mistakes that keep a business dependent on its owner. You'll also receive a diagnostic worksheet to pinpoint your highest impact. Next step the webinar is working on the how owners make the transition and it is today, Thursday, July 16, noon Eastern. Link to register is right at the top of this episode's Show Notes or on the Acquiring Minds homepage acquiringminds Co. Then on Tuesday, a second webinar, this one on a costly step that every buyer eventually faces the quality of earnings report. A Q of E uncovers critical financial risks in your target, but it also comes with a significant price tag, so you don't want to kick one off before you're actually ready. Chris Williamson and Derek Pitts of diligence firm Cane Crossing will show you how to do more of your own lift first, everything you should be asking for, thinking about and looking at what before you spend money on the Q of E. They'll cover how to run a pre Q of E financial review, what add backs are and the common mistakes to avoid the balance sheet red flags that deserve a closer look, and how to build an effective pre Q of the data request of your seller. The webinar is Don't Rush how to prepare for a Quality of earnings report and it is this coming Tuesday, July 21, noon Eastern. Link to register is right at the top of this episode's show notes or on the Acquiring Minds homepage. Acquiringminds Co. Welcome to Acquiring Minds, a podcast about buying businesses.
- [04:35]
Will Smith
My name is Will Smith.
- [04:37]
Host
Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who do it. Running payroll, paying your bills, closing your books and producing financials. These are critical tasks every business owner must do or oversee, but spending time on them distracts you from the leadership and growth work you want to do. So let system 6 do it for you. Owned and led by a former Searcher, Chris Williams, System 6 is a leading outsourced finance team for hundreds of SMBs, including over 50 searcher acquired businesses. Chris, Tim and the System 6 team understand firsthand the challenges, the opportunities of jumping into a business as its new owner. So whether you own your business already or have one under LOI, talk to System 6 about how they can give you time back and improve your financial operations. Mention Acquiring Minds and they'll provide a free review of your books and financial ops, a $500 value. Check out system6.com, link in the show notes or email helloystems6.com
- [05:56]
Will Smith
Rob Belk welcome to Acquiring Minds.
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Rob Belk
Thank you for having me, Will.
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Host
Rob, you bought a marketing agency that plays in a very particular niche.
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Will Smith
You saw it as having good business buyer fit for what you brought to the table. We're going to learn about that. We're going to learn about it, we're going to learn about the deal in some depth and and of course, your journey so far. Let's begin with some background on you, please.
- [06:25]
Rob Belk
Rob sure, yeah. Thanks for having me, Will. And as I'm sure you hear a lot, you know, full circle moment. Your podcast was Instrumental in my search and getting learnings. And this was the first deal I've ever done. So I certainly learned a lot. My, my story has what I call three phases. So quickly. A retail phase, a sports and entertainment, and then now an entrepreneurship and marketing phase to go into a little bit of detail on each. I grew up in a family business that was in retail. So one of my first jobs as a teenager was selling ladies shoes at the mall. You know, a very enviable summer job. And then after undergrad went into consulting, specifically in the retail industry. Thinking, you know, I would eventually go work with my dad and other family members. But ultimately the business was sold. And so that allowed me the opportunity to go back to business school and kind of rethink a different path. At business school I first heard about a search fund. But ultimately at the time I was really focused on sports and entertainment. For better or worse, a die hard Carolina Panthers fan. And ended up getting an internship at the NFL up at the league office. Was in heaven. And through that, got a job opportunity right after graduation with Call of Duty in Los Angeles to help them launch an esports product. Did that for five years before moving back to North Carolina with the COVID flexibility and decided it was time to scratch the entrepreneurship itch and just felt like we started a young family. If I didn't do it now, I never would. And so ultimately took the leap to do a self funded full time search to buy business.
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Will Smith
Awesome.
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Rob Belk
That was great.
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Will Smith
Rob, a few follow ups. So the family business that you grew up in was a multi unit
- [08:19]
Host
shoe store.
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Rob Belk
So it was. Yeah, multi unit department store. So shoes certainly a part of that. Yeah, you know, it's not typically part of my story that I lead with, but folks that know me and certainly employees can start to kind of connect the dots. But really important to how I grew up. I always felt bad for store managers that happened to be in between Charlotte, where I grew up and maybe the beach or the mountains. Cause my dad had a habit of showing up unannounced and doing store walks. And when I diligenced Sales factory, the business I bought, you know, one of the first things did with the owner and brought my dad along was doing a Lowe's store walk. And you know, I feel like with Sales Factory in a marketing agency, you know, that wasn't necessarily top of mind in terms of industries that I was going after. But I started to get excited about, you know, what I might call like an unfair advantage and something to lean into. And certainly with this retail backing and Understanding in that space, this, this niche that sales factory played in, I thought it was really compelling and led me to want to start going deeper on the opportunity.
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Will Smith
Yeah. And so the department store brand was one that North Carolinians would know.
- [09:38]
Rob Belk
Exactly. Yeah. So it's Belk Department Store, you know, Rob Belk. So, you know, sometimes people put the dots together quickly, sometimes they don't. And I just felt like, you know, in a search like, you know, that was something I could lean into. I, you know, I with it, like, you know, it's something I think a lot about of, like just being incredibly fortunate. And, you know, I look up to my dad as one of my closest friends and just a business leader that I would love to emulate and always thought I would grow up, you know, working with him and would have been fifth generation in that business. And so sometimes struggled to kind of lean into it. But it certainly was a factor that helped because I did do a geographic search and, you know, some owners did put two and two together. And I think a big learning for searchers is, you know, both, you know, owners and brokers are just trying to understand seriousness and willingness to get a deal done. And I think, you know, knowing that I had grown up in a family business helped help my cause, especially on the proprietary side, too.
- [10:40]
Will Smith
Well, we won't put you in the therapist's chair here, Rob. Yeah, but I imagine there's a, there's an internal tension in you of. Between wanting to lean into the name and wanting to make your own name 100%.
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Rob Belk
Yep. Yeah, definitely, like, you know, can go back and forth on it, but ultimately, just faith's important to me too. And, you know, the, the parable of the talents. I feel like we've all been given God given resources and, you know, we're. We're supposed to lean into that, not operate at a place of fear. And so I felt like I had this opportunity in front of me and ultimately wanted to go out and buy a business in the community where I live and, you know, serve our employees and our clients. And one of our, our longest tenured clients, you can see behind me, Channel Lock, you know, hand tool brand. They're actually on their sixth generation of a family business too. And there's a decent amount of family businesses kind of in the area that we operate. And so, you know, that's another thing where I feel like I can start to make some connections and certainly kind of empathize with some of the dynamics behind the scene, not just on the marketing front.
- [11:47]
Will Smith
Well, maybe I Hadn't planned on it, but maybe we'll return to this. The. The theme of our family business and multi generational. Yeah, you know, I think there's an affinity for that in our world and you lived it. So you might have some thoughts. But returning to the plot first, talk to us a little bit about the Call of Duty experience, which was, which was hard initially, but ultimately gave you a certain confidence.
- [12:15]
Rob Belk
Yeah, it was such a formative part of, I guess, my life and my career story. Growing up in North Carolina, you know, living and working in California wasn't something that, you know, I thought would happen again. You know, had kind of grown up with this thought of, of, you know, working in the family business, but have always enjoyed opportunities to do something new and different. And you know, at the, at the NFL, got to work with a woman who, Extremely talented. She was hired to be the commissioner of the Call of Duty League. And so she hired to be me to be on her team. At Call of Duty. We were going to apply the, or we did apply the traditional sports model like the NFL, the NHL with franchises, and we launched a league. What was so challenging but also informative about it is, you know, there wasn't really a blueprint for how to do this. Um, I also do not consider myself a gamer like most people. I had played Call of Duty right before the interview. I hadn't played in like 10 years. And so I can remember like frantically buying a PlayStation and trying to play it. So I felt like I could at least talk somewhat intelligently about it. But esports is a pretty new concept, so there was some imposter syndrome. But, you know, five years later, gosh, like, I felt like I learned a lot. I really understood the value of a fresh and diverse perspective. And because a lot of my coworkers had played competitively growing up, and so they. Things had always been done a certain way. And so I got to kind of question the status quo. And then, you know, from this search learning, I knew that, well, you know, whatever industry, you know, I looked at or, you know, throughout the diligence process, it likely wasn't going to be one that I knew. And so getting comfortable with, hey, you can come in not necessarily having grown up in the industry or even, you know, operated in the industry, but that diverse perspective can, can be a pretty big unlock.
- [14:10]
Host
Great.
- [14:11]
Will Smith
And you learned about search at business school, did you say?
- [14:14]
Rob Belk
That's right. Yeah. So.
- [14:16]
Will Smith
So it was in the back of your mind during the, during the NFL period, the Call of Duty period.
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Rob Belk
It was.
- [14:22]
Will Smith
It was kind of kicking around back there. Covid takes you back home to North Carolina and you decide that this idea that's been kicking around now is the time to act sort of thing.
- [14:31]
Rob Belk
Exactly. Yeah. I'd say like historically somewhat risk adverse. I thought the idea was interesting. But it's one thing to go from kind of thinking it's interesting to actually executing. I took a path that I think is probably pretty familiar with a lot of folks or something listeners might be considering of how do you maintain your W2 but try to break the learning curve on a search. What was unique for me was all my co workers were in LA on West Coast. I had moved back to North Carolina. I had a one year old that was waking up at 6:30 Eastern or 3:30 Pacific. Most meetings didn't take place until 12:00pm Eastern. So I have this six hour block where I did a lot of call of duty work. But it also afforded me the opportunity to have coffee chats, to talk to searchers, to talk to mentors. And so that did help me break the learning curve. But you know, eventually I just learned that, you know, you got to go all in. I had done Sam Rasadi's, you know, boot camp during a Thanksgiving break and had learned about it. So I was starting to put the pieces together. But like phase one of stepping off the diving board into the deep end is committing to the search and you know, kudos to the folks that are able to straddle the W2 and kind of seamlessly transition out. There's probably some ego involved in my end that I thought I could do it given that uniqueness with, with some flexibility. But you know, I eventually found out I needed to go all in and would be much, you know, had a much better opportunity to be successful by committing.
- [16:02]
Will Smith
You've moved back home, you want to do a geographic search. Where in North Carolina are you? And tell us about that limitation because that does play out here in a couple of ways.
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Rob Belk
Yeah. And you. I think the geographic search is probably that piece that can be the most contentious for folks considering this route. I would say on the search fund, I didn't go that route, but I had heard anecdotally that that was typically a tough sell for investors. They want you to be able to cast a wide net. I had moved back to my wife's hometown of Greensboro about an hour and a half north of where I grew up and really fell in love with the city and felt like its unique location on i40 and i85, you know, huge arteries, it had A nice tailwind of growth. But it wasn't Charlotte and it wasn't Raleigh Durham in the sense that, you know, maybe it's less picked over than those markets might be. And had a mentor and a friend here, Adam Duggans, who's been on your show, who kind of paved the path. And almost everybody I talked to, you know, inevitably would say, have you talked to Adam Duggins? And I had. And you know, he was a great help and a mentor and he believes in, you know, this community and wants to see people succeed. And so I really was searching in Greensboro with maybe a 45 minute commute radius. And the irony is my commute is an eight minute walk to Sales factory.
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Will Smith
We'll come back to that. Yeah. Adam Duggan's longtime listeners might remember his episode which was the kind of most indelible detail was that he did 600 coffees. He was, he was doing a proprietary search. He was just, he was just relentless in, in his local networking. He was also doing a geographic search, wanted to be in Greensboro, North Carolina, the Triad region. And so, you know, I just remember the 600 impressing him.
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Rob Belk
Wait, 600 literally?
- [18:00]
Will Smith
Or is that a figure of speech? No, literally 600 copies. So did you get connected with Adam before your search or you already knew him or. Just curious.
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Rob Belk
Yeah, I think it might actually be my, my brother in law that knew Adam and connected me and you know, him and his business partner Rick. You know, I think they've bought maybe seven businesses at this point, all within this area. And so I tell folks, you know, I want to be Adam Duggans and Rick Ramsey one day. You know, they've really done an excellent job. They, you know, my, my take, I don't know if they would say this directly but like they tend to be more like on the industrial side and the manufact manufacturing. I didn't necessarily know if those were going to be the best personal fits for me. So to some degree like we felt like we had a little bit of different lanes. And I think searchers probably always feel that tension where the community is super tight. And I think everybody believes in the karma of helping one another out, but at the same time in the back of your mind is this isn't a huge pond, you know, are we going to look at some of the same deals? And interestingly enough we did, but kind of had a good, you know, good understanding. And I think he always wanted to support me and you know, still does too, but was able to go down this path on Sales Factory independently and Love the fact that it's nearby. You know, we have a focus on, you know, what are called the trades from maybe a different angle than, you know, a pretty traditional search route, which is to go acquire an H VAC or a plumbing business.
- [19:30]
Will Smith
Yeah, yeah. And this idea that you might bump up against each other as you're looking for a business to buy in in Greensboro is because Adam and Rick, Rick, who I actually saw in person, met for the first time at Darden last fall, are acquisitive. They're they new Page Capital is their firm and they are, it's a Holtco essentially. So they're I guess, always on the lookout for great local businesses to acquire and so that's why you might bump into them.
- [20:02]
Host
The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human Resources. It lays out the key items you should be thinking about as you transition into CEO and owner of the business you bought. The link to download that is in the show notes, Aspen HR is a professional employer organization or PEO, which provides HR compliance, flawless payroll, robust HR technology and Fortune 500 caliber benefits, all for a fraction of the cost compared to using multiple vendors. Reach out to Aspen HR for your complimentary HR diligence checklist and benchmarking analysis. Go to aspenhr.com or contact Jenny Thier directly at jennypenhr.com how big is Greensboro?
- [21:09]
Rob Belk
It's the third biggest city in North Carolina. I don't know the actual population off the top of my head and I do think it's a decent drop off, you know, after Raleigh, Durham if you will. But what I love about it is, you know, there's all the amenities of a big city. But everybody in Greensboro likes to joke you can get anywhere you need to go in 10 minutes.
- [21:29]
Will Smith
Well, and I guess what I'm also getting at is just as you approach a geographic search in a, call it a tier two, tier three city. That always, that always sounds so judgy, but we're just really talking population. Yeah, the pickings are slim. And, and it's a small world. I mean, you know, you'll hear big city people talk about how, oh this, you know, Manhattan is just a big village, you know, and, and if you're aggressively networking out there, you'll, you'll, you'll, that world will get small real, real small, real quick. And so I just would imagine that being the case here as well. And so I was just kind of trying to pick it what it's like to do proprietary networking forward searching in a smallish city.
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Rob Belk
Yeah, I have a lot of learnings here. I'd love to share. And, you know, you can. You can tell me if you think there's something to go deeper in. But that, yeah, that would be the downside, you know, the kind of quote unquote, smaller pond. You know, if other folks are searching, you know, you could and do bump up against that. I, you know, definitely thought the proprietary pathway was going to be the core pathway for me. You know, did I beat around the bush too much? I ended up finding my opportunity through a broker. But what I did like about a proprietary search in a somewhat smaller market is you could be really targeted with your networking. You know, you can go directly to kind of the classic lawyers, accountants, bankers. And, you know, because it's a smaller market, you know, they may have a better pulse on who may be considering a succession plan. I also found insurance brokers were another probably piece of the pie in terms of networking, that they also have a really good pulse on their clients and who might be thinking about that. So several leads came in from that route. And then I loved that I could. As I developed a relationship with an owner, I could take them to lunch and get to know them. And I had a very specific strategy with lunch. I had a go to Spot Fisher's Grill. It's kind of a dive bar. Um, always picked up the tab because it never broke the bank. Never wanted to kind of put that onus on the owner. And then I always wanted to watch his or her cell phone because that was a big tell to me about how involved they were in the business operation and one. One owner in particular. I mean, without fail, every time we got a meal, his phone went off. And so I knew that if I went down that route, you know, I had to have a plan to, you know, how I was gonna involve myself in the way that, you know, he had with his business.
- [24:09]
Will Smith
And the owners that you took out, did you find that getting an audience with them was difficult? I would imagine in a smaller market, it'd be easier just because, you know, interested, you know, And I just feel like a smaller market, people are going to be more receptive to a stranger saying, hey, let's get lunch.
- [24:28]
Rob Belk
Yeah, that's definitely right. It was somewhat easier to get that initial meeting. But I think the piece with proprietary, which is always a challenge, is you don't have the quarterback kind of helping to mediate the conversation and to push things along like you do when you have a broker involved. And I think for some owners that I talk to, you know, what would inevitably happen is, you know, here I am with my MBA and trying to run the search like I've been kind of taught and running a model to value the business and they've got a number in their head and then, you know, They've got this 35 year old who's never worked in their industry, hasn't built the business that they've built and they're spitting out a number that's less than what they had in their head. And so that's always a big hurdle to get on to get over as well as, you know, deal terms. And you know, I found that most owners maybe save the owner that I bought the business from had never done an acquisition. And so terms that, you know, folks may be familiar with and maybe they're coming from banking or consulting and you know, even things like a seller note, you know, several owners would, I could tell that, you know, what's a seller note. And then it starts to quickly, like again, my assumption was, you know, a feeling of like, is this person going to try to pull the wool over my eyes? Like, are they going to be affected? Fast talker and they're going to try to, you know, squeeze out a good deal that, you know, I'm not going to get. So there was always this tension in a proprietary deal that a broker can help overcome and in my case, it really did help it help overcome and get a deal done.
- [26:08]
Will Smith
Yeah. Before we, we start hearing about the deals that you looked at, Rob, the.
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Rob Belk
You did as, as you said you
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Will Smith
did SM boot camp in Tampa, which is Sam Rosati's boot camp. And Sam has a big three little two framework he's actually been on the pod to talk about. Do you, do you recall what it is?
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Rob Belk
I do remember it. I'm trying to think through how I fit into it. I guess I to some degree had my criteria, which was first and foremost on the geographic side. I wanted to stay in the triad. I did entertain Charlotte and Raleigh and Wilmington and Asheville, some other cities in North Carolina. But that was a big piece from a financial picture side. You know, I was looking for something from half a million to one and a half in profitability. And then industry was really where I had the most flexibility. I felt like, you know, kind of back to this smaller pond. You know, that was probably going to be the area where I couldn't be as selective and would have to look at, you know, businesses kind of in a, you know, diverse range.
- [27:13]
Will Smith
Yeah. Yep. Well, and just to. For the audience, big three, little two. Is the concept there that there are three big criteria in any search, and that is geography, that is industry, and that is size, which you just, you just gave us those three for yourself. And if the idea is if you're super strong and inflexible on one, like in your case geography, you have to be relaxed, you have to relax your criteria on the other two. So in your case, you were committed to being in Greensboro or it surrounds. So size, you're going to have to get a little bit more flexible on as well as industry. That's the framework. Obviously, you know, it's not to say that you can't have preferences on the other two, but if one is absolutely, you're absolutely inflexible on, you are likely to have to, to have some flexibility everywhere else. So happily for you, you, you really got, I guess, two of the two and a half of the three. I'd say the industry is, is, is, is, is kind of half.
- [28:21]
Rob Belk
Sure.
- [28:22]
Will Smith
Halfway. And then size wise, I'd say it's what you wanted and then geography is what you wanted. Eight minutes from your house after all. I know, so pretty good.
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Rob Belk
Yeah. And I, you know, I have three kids under five and just bought a business, so I'm living in the trenches, trying to keep my head low.
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Will Smith
Make that four kids.
- [28:41]
Rob Belk
Yeah, no kidding. And a puppy if you want to make it five. Yeah. So, yeah, the location was big for me and have definitely done a lot of soul searching on the search side and just felt like I needed to protect the family aspect. And as much of a push as it is to be successful in a professional and maybe a financial side, my family success was also really important to me. And the fact that I can get back home and get here pretty quickly and my kids show up at the office. A lot of the people I work with, they will bring their kids to the office. This like, I just love the culture that Jed King, who I bought the business from, had created and I love that I don't really have to change too much.
- [29:27]
Will Smith
Well, and after all, you had recently moved back from California, so the idea that you had moved home, that you were going to uproot yourself again was probably a non starter.
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Rob Belk
I mean, yeah, that would, that would have been a really tough sell on the home front. So my, my wife actually has a business here too. So she, she has a retail business. She sells stationary and gifts and so, you know, does a lot of invitations for weddings and whatnot, but has a brick and mortar presence. She's actually adding a third store in Winston Salem which is also in the triad. So maybe that gets back at kind of this, you know, retail has always kind of been a part of my life and yeah now even more so through, you know, my wife's business and now mine.
- [30:08]
Will Smith
Oh cool.
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Rob Belk
Yeah, okay.
- [30:10]
Will Smith
That Rob, this is all great background. The business that you did buy. Tell us about it or tell us about how you found it.
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Rob Belk
Yeah, yeah. So I bought Sales Factory. We're a retail marketing and consumer research agency with a niche that we work in the home improvement and building supply space. So brands that you would find if you walk into your low local Lowe's and Home Depot. I found it through a broker which is ironic and somewhat frustrating because I think I was the most caffeinated guy in Greensboro during my search and I never got connected to Jed. And if ADAM Duggans did 600 meetings, maybe I did 599. But we got, we got connected through a broker on the Axial platform which I'm curious Will, does that, do you hear that often? Like Axial was just another, you know, kind of tool in the tool belt in my search and it was how I got the deal done. But I don't know how often searchers are actually leaning into it because of the success fee.
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Will Smith
They are not, it depends. Generally a self funded SBA style searcher is not using Axial. I'm not sure why. Probably because I'm not sure people know what the success fee is. Spoiler, it's, it's not insignificant but if, you know, if you find your business there, it's, it's, it's probably an investment worth making. Also the businesses on Axial are quite a bit larger. So we hear at Mines Capital independent sponsors that sort of, you know, 1 and 2 and 3 and 4 million dollar of EBITDA level of business is. Where is Axial? Sweet spot. So it's much more, it's very commonly used. It's the, it's the biz buy sell of independent sponsors and small private equity groups. So that's how I'd break it down. But yeah, it is interesting that it doesn't have nearly the mind share among searchers that it does among independent sponsors and in lower middle market private equity groups.
- [32:11]
Rob Belk
Yeah, and that kind of tracks with my understanding. So I think my deal was probably on the smaller end of what's listed there. But I'm guessing because my profile probably said something about North Carolina or Greensboro or retail, the broker put two and two together and so one day just going through My routine. It opened up an email from a broker there listing a Greensboro retail marketing consumer strategy business. And so jumped at it and, you know, went to go initially meet Jed, the owner. And I told him, I said, hey, let's pick somewhere. Let's pick somewhere somewhat random, because if anyone I know sees me talking to you, they're going to know why I'm talking to you. And so another kind of nuance of a small town and, you know, we've got 50 employees too. So, you know, he wanted to be pretty sensitive to that fact. So we met and, you know, started to understand more about the business. Had mentioned we did a store walk. And then something that was super unique in the diligence process is and kind of speaks to Jed's style and, you know, willingness to bet on his team. And our team is he offered to do a project for my wife's business. Ironically, we were looking at, should we expand her business, do we need to rename the business to kind of convey more of the scale? And so I got to work with the team through my wife's business that wasn't known to the people executing kind of the project for us. And that was a little bit of like a mental struggle. You know, I think folks that have gone through this process and know that the owner, for very good reasons, needs to keep the team in the dark, you know, is tough because ultimately, you know, in my case, when I bought the business, it is like a little bit of a surprise, you know, yeah, the new owner and, you know, they can kind of put two and two together. That, you know, part of the reason they did that project for me was to help me understand, you know, their, their skill set, what the team does, how they operate. But, you know, obviously I was, I was really pleased.
- [34:14]
Will Smith
Well, a few follow ups on that, Rob. So, so test driving the business as a customer and not revealing, of course, to the, To. To the people of the business that you're working with. Their. How your vendors, you're their client. I do understand how it can feel like you're deceiving them because you're, you're obviously not letting them know that you're, you know, using their services as an evaluation of the business to buy it. I. But I would also feel it, you know, it's. It's a. I guess it's. It's gray. But I would also feel that they would understand, you know, you. You then do buy the business. You say, hey guys, I was your, I was your client. Now I'm your boss and I own the place. But I. I feel like they would understand why it needed to. To happen that way.
- [35:01]
Host
There are more extreme versions of this
- [35:04]
Will Smith
where, you know, a business buyer will be brought in as a consultant and it's kind of a complete lie, frankly, or misdirection that's a little bit less forgivable. But I feel like in your case, not ideal, but you could, as one of the employees of the business, be easily forgiven because there's no way around doing this exercise without obfuscating who you are.
- [35:31]
Rob Belk
Yeah. And you're right. And like, we genuinely were looking for support. And so we had actually been talking to another group in town kind of as this opportunity with sales factory came up. And so that part was really genuine and needing it. But, you know, obviously the kind of keeping things close to the chest. But one thing our, we've leaned into from a culture perspective is transparency. And I think this is less like a change from how things were to how things are now under me, but more of like maybe an evolving culture piece where I think employees, especially younger ones, like, really value transparency. And so I do think about that and that the culture I'm trying to instill is one of like, maybe sharing a little bit more on performance or a little bit more context behind decisions. So kind of transitioning from that initial point of how they met me into. Into what, you know, I hope things are and how they're perceived now.
- [36:28]
Will Smith
Yeah, yeah, fair enough.
- [36:30]
Rob Belk
Yep.
- [36:31]
Will Smith
You said store walk a couple times. What does that mean?
- [36:35]
Rob Belk
Yeah. So this is an interesting segue because it's, you know, a clandestine to some degree. You walk into a Lowe's or a Home Depot typically to do some research either for an existing partner or prospective one. A lot of, A lot of, you know, the strategy is how items are merchandised, whether it's, you know, the wear on the shelf, the packaging, some of the in store marketing. And it really helps, you know, us contextualize some of the trends we're seeing. And Home Depot and Lowe's is such a big part of the business for our brands, and they operate in this interesting B2B to C model where a Home Depot and a Lowe's is that B2B, you know, that's their big client. And then, you know, ultimately the consumer is the customer. So, you know, getting shelf space is just step one. And then selling through once you're on the shelf is another massive part of the puzzle.
- [37:32]
Will Smith
Well, I want to return and hear Ed kind of in more depth about what the business actually does, because it's not totally clear just yet, but before we leave the search piece. So you're being the most caffeinated guy in Greensboro. So was the networking working? You ultimately found it on axial. It was eight minutes from your home. And so there's, there's some irony there. But was it working your. Your approach?
- [37:58]
Rob Belk
I felt like it was. Yeah. I, I never, I never felt like deal flow was my challenge. It was more of like, you know, getting up to the 10 yard line and, and trying to, you know, progress from that point. And you know, you hear many stories of people that get deals done. And I searched for about a year and a half before, you know, closing on sales factory and I had some interesting things in the pipeline as this was going on. So impossible to know. But I do feel like there was still a pathway to get a deal done on the proprietary side. One other piece kind of with that is trying to sound this out, sounding kind of nerdy, but like I really like enjoy the networking piece and the kind of connecting. So that part of the search was. I really enjoyed it, like just learning. And part of what I got excited about with this business and maybe some other ones I looked at was, you know, could that desire to network and do the business development be an unlock? And I felt that with our business where I am playing a pretty heavy business development role and because I like the connecting piece and meeting folks like that's been able. That's translated into a pretty healthy pipeline and we've been able to convert a couple quick wins.
- [39:09]
Will Smith
Oh, wow.
- [39:09]
Rob Belk
Yeah. So that, that kind of was something that crystallized for me later in my search. Kind of back to this concept of like fit and maybe even like unfair advantages. I've been writing a newsletter for five years at this point on Substack and I profile an interesting person in my network and have them share recommendations. Yeah, it's super fun. And you know, to do it for five years, you know, it's a labor of love. And so for one piece, like it kind of told me, hey, I really, I think of myself as creative now. I enjoy writing. You know, I think if I was more on the execution side of our business, I'd be a copywriter. And then, you know, I'm just meeting folks constantly. And even in my search, I would do a little plug of like, has anybody ever worked for a marketing agency? And you know, we've got about 5,000 subscribers. And so sometimes somebody reaches out and every time I profile somebody, I now follow up with them and I say, do you know anybody in Your network that works for a brand and Lowe's and Home Depot and yeah, we actually just won some client work with a personal care brand kind of through that method of leaning into to the newsletter.
- [40:16]
Host
No kidding.
- [40:17]
Rob Belk
Yeah.
- [40:17]
Will Smith
Well, it's interesting Rob, the thing about business buyer fit is always that you don't want to be so good at some technical piece of the business that you get in there. And that because you know, you all, you always over the trajectory of your ownership need to be able to rise above it all and fundamentally just be the CEO and owner. And so you know, if you, you know, if you know H Vac and you get in there as a technician, you just don't want to get stuck in the thing that you're too good at. But of all of the things in a business that are valuable and you might stay in the longest, sales is probably the best one. And in fact you'll hear in about like in corporate America that the best CEOs came up through the ranks of sales that in some sense the CEO or in small business context, the owner's chief role is to always be selling their business. So I'm, I'm. This is sort of just a exploratory on my part, but it's, it's interesting to think about. I'm not sure that I've heard somebody say business development, networking, relationships, sales fundamentally is where I shine.
- [41:29]
Rob Belk
Yeah. And I think what you said resonated in that it's helping me understand, you know, what exactly it is we do because I've got to speak to it and we're a full service agency which means we do almost every marketing function soup to nuts. We don't always do that for every client. You know, some of our larger clients, they work with multiple agencies so we might just do their paid media, retail media and research. And for some, you know, we do do everything. We are their agency of record. So kind of being able to get in the weeds and speak to that is a big piece for me and it get, it kind of helps me or helps me get comfortable with the fact that, you know, marketing agencies may not be the, the first thing that comes to mind with searchers because of the roller coaster you have to ride with clients, you know, as they that ebbs and flows. But this was kind of a bet on something. I felt like I had a passion for and could be good at and help help our business.
- [42:27]
Host
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- [43:13]
Will Smith
to know August and the team at Oberly.
- [43:16]
Host
To take advantage. Check out oberly-risk.com that's O B E R L E hyphen risk.com link in the notes.
- [43:28]
Will Smith
Let's now do here very specifically what the business does and then we'll turn to numbers and more bullet points about the business. But, but so, so say more about the tie in with Home Depot and Lowe's and the retail and merchandising piece and, but also it's a first full service agency. Paint a picture of the business, what it does.
- [43:46]
Rob Belk
Yeah, so the business is 40 years old. I purchased it from, from Jed and Matt King. Their dad, George King, he started the business. As the story goes, George King was at Black and Decker and he used customer research to create the Dustbuster and.
- [44:05]
Will Smith
No way.
- [44:05]
Rob Belk
Yeah, yeah, I know. And so Jed and I like to talk about how, you know, this partnership that we have now is a nice intertwine of some family businesses and some retail there. But you know, that has been core to the business, this having an in house research team that can do the consumer insights that can help our brands with product development. Like I look at just some of the tools behind me with channel lock, we've certainly kind of supported them on that piece. But also for these brands that sell through at Big Box, this concept of a PLR or a product line review is really big. I mean, to some degree it's their biggest and most important meeting of the year because it determines their shelf space and how many doors they're in across the store's network. And so you really want to go into that highly prepared and like quote, unquote, win your plr. And so we do support teams and brands a lot on that aspect by helping them with their storytelling, helping them with the data so that when they're speaking to the merchant in their category, they can really nail that. And nailing it in a big way is the difference of millions of dollars.
- [45:15]
Will Smith
To be clear. To be clear, Rob, so your client is the one on the shelves, is the Manufacturer and they have an annual meeting, audit, whatever this PLR with the merchant, meaning let's say Home Depot. So Channel Lock meets with Home Depot corporate once a year to evaluate how things are selling, etc. And what we're going to do next year. And so it's a big deal meeting for Channel Lock, the ones on the shelves every year because they, you know, if they get more shelf space, they sell more and less less. And so you, your agency helps them plan for that meeting, strategize around that meeting, present at that meeting.
- [45:57]
Rob Belk
Yep, that's right. So that's, that's a huge piece of every one of kind of the brands, the portfolio, their life cycle. And then because that is somewhat of a one off, there's a lot of prep work there, but then there's still this whole piece of how are you presenting yourself kind of throughout the year. So we do everything from helping manage a website, social media, pr, SEO. There's a huge tailwind in marketing right now on what we're calling AI visibility. And some might say this is just the evolution of SEO to instead of how are you showing up in Google, you know, how do you show up when someone researches in Claude or ChatGPT? And so that is something that almost all of our brand partners are asking about and something that we're talking a lot about on when we're prospecting because everybody wants to try to figure out what that white space is and what that opportunity could look like for their business.
- [46:54]
Host
And do you serve only this industry?
- [46:57]
Will Smith
And by the way, what is the name of the industry?
- [46:58]
Host
Cpg.
- [47:00]
Rob Belk
I would call it Home Improvement. Building supplies.
- [47:02]
Will Smith
Home improvement. Okay, okay. And so are all of, is your whole book of business in that industry?
- [47:07]
Rob Belk
Not all of it, it's, it's more of maybe I would call it the legacy. Like we do, you know, also work with like what I would call like durable goods. So we have a large mattress company as one of our clients and then we will do some, some local work, you know, with some local, some local companies that maybe want some web or some brand. And then we've started to explore an angle which is with the trades still. But instead of supporting the trades from the tools and the supplies they purchase, can we support them directly? There's a lot of private equity ETA activity here. There's a lot of money, especially in home services to distinguish yourself. And so we think there's a real opportunity there. And I personally think that there could be an opportunity to leverage the search community as folks purchase trades, businesses, you know, wouldn't it be cool to say, like, hey, we're working with the same company that supports the tools, you know, the pliers that our technicians use, but they're also helping us here. And I think it's a good diversification play too. So that's been something for the. Since I've kind of taken this seat, we've started to explore more.
- [48:21]
Will Smith
So to be clear, the starting to engage as your clients local trades businesses. The local H Vac business. Exactly. Of the variety that a searcher would buy or private equity is gobbling up and helping and, and helping them with their brand. And, and big name of the game would be if in a B2C business would be driving leads, mostly digital.
- [48:46]
Rob Belk
Yeah.
- [48:46]
Will Smith
And then, and then, and then, yeah, you have this great play where you can say where we represent the manufacturers, some of the tools that many of your technicians are using. So there's a, there's a wedge into that industry. And that seems like an awfully big industry. Although the industry you're already in, I mean there's got to be thousands upon thousands of different manufacturers on the shelves at Home Depot, but there are probably tens of thousands of local trades businesses around the country. As we talk about ad nauseam on this, that's.
- [49:16]
Rob Belk
Yeah, you're kind of reading my mind of, you know, hey, there's, there's got to be an opportunity there to kind of support the trades holistically.
- [49:23]
Will Smith
Yeah. And you know, I do feel that in agency land it's a, it's a competitive space. You know, anybody can kind of hang a shingle and say, I'm, I'm a digital marketing agency now, you know, and they do online. So your differentiator is that industry focus. So that would be something you'd hold on to tightly to. And however you try to diversify, you, you wouldn't, you would try to parlay your existing industry focus into something adjacent because that is otherwise, you know, kind of the generalist agency is in a rough, a rough strategic spot in terms of its positioning in the market. Correct.
- [50:03]
Rob Belk
That's. Yeah, that's well said. You know, another piece for us is we actually have the in house research team too. So when I was doing my diligence, you know, there are other agencies kind of in our area and I think folks will, you know, or at least what I heard was folks think about us that leverage data to drive the strategy. So less about kind of coming up with like a Super bowl, you know, creative campaign, but more of like, okay, the data is telling us the Consumer wants this. So how do we structure our strategy to match what the data is telling us?
- [50:34]
Will Smith
Great, Rob. And the numbers of the business?
- [50:36]
Rob Belk
Yeah. So I bought this business with four times multiple on ebitda. It was actually down from. It was marketed at five and a half. And I can share a little bit more about why that got restructured. I did a quality of earnings, and then in terms of just the deal at close, 50% was in an earn out, 40% was cash at close, and then 10% was an equity role. So that was big for me that Jed was willing to be my partner, enroll some equity and have learnings kind of across the deal structure from that process, though.
- [51:10]
Will Smith
Okay, this is great. We're going to unpack this. So no sba.
- [51:14]
Rob Belk
No. I think the marketing agencies. You know, one thing that's, you know, a nuance here is people are the biggest asset in the business, so that can be difficult to lend against. And so I did, you know, I did go the route of, you know, heavy earn out. Did get a commercial loan with some personal assets as backing and then. Yeah. Having the equity role as well.
- [51:42]
Will Smith
Oh, you got a commercial loan for the 40% cash at close to some degree.
- [51:48]
Rob Belk
Yeah, most of that was from a commercial loan, but there was some cash out of pocket.
- [51:53]
Will Smith
Oh, okay. Okay. And, well, we haven't heard the numbers of the business. What can you tell us there?
- [52:00]
Rob Belk
Yeah, so the. The top line of the business is about 7 million. Okay.
- [52:05]
Will Smith
And can you share what earnings look like or margins roughly?
- [52:08]
Rob Belk
Directionally, yeah, the margins, it's kind of gone anywhere from, you know, 20% in. In Covid times. You know, we're highly tied to home improvement and there's some cyclicality. So times were good in Covid. A lot of people were fixing up their house, and then it's closer to probably the 10% now, you know, we're dealing with a little bit of, like the macro environment and interest rates. So I'll be heavily watching the announcement. Interest rates coming up.
- [52:38]
Will Smith
Yeah, yeah. But the. Typically a. The macro environment will affect your sales and how much your. How much your revenue is, but not necessarily what your margins in internally, because that's more based on operations than anything.
- [52:54]
Rob Belk
Yeah. I think one thing that kind of came up in the deal and I kind of teased it a little bit, was the quality of earnings. So that was important to me to go through that process. I leveraged someone locally. They did a great job. You know, I think one, if you want to have your cake and eat it too, you know, you would have Somebody who also has done some work in the industry. You know, sometimes in marketing there are some nuances around, you know, pass through costs and whatnot. Unfortunately, you know, our business, we did, we did lose a client. As I was going through the quality of earnings process, I got really comfortable with the reason why. And so, you know, we did, you know, update the deal structure to account for that. But in essence we were on a commission structure with a client where we were paid, you know, based a percentage of their, their sales in Home Depot and that was approaching the million dollar mark. And so they took a look at it and you know, don't fall from the them for this at all. You know, could I just pay somebody internally as opposed to paying an agency, you know, really high dollar amount so that, you know, that was a big impact to profitability on the commission side and kind of playing a sales support. But you know, we, Jed was a great partner through the process. You know, kind of back to what I was saying about, you know, sometimes when both sides feel like they're giving up a lot, you know, you're probably in a good spot and you've got a good deal to do. One side doesn't feel like they've necessarily, you know, won the deal. And you know, him being a partner was big. I knew that, you know, we were going to have to work together and I felt like he brought a lot to the table. He's actually a professor at Wake Forest of marketing. And I love the fact that, you know, he would be a teacher and advisor to me and that's been the case since day one. And man, he has been incredibly gracious because I can't pretend to know what it's like to run the business for, you know, since he was basically 25, he's in his late 50s now and then to hand it over and to be an employee, you know, I have been managing him and you know, just being really gracious to kind of sit back in meetings and, you know, not jump in and interject. And you know, that's always the really hard part I think for searchers when there is this transition period of how do you gain some autonomy and still leverage, you know, the sellers, all the knowledge that, you know, she or he may have, but in a way that works for both parties that I feel like that can be really tough.
- [55:33]
Will Smith
And so he is remaining active in the business, I guess he is, based on what you just said. But also an earn out, especially a heavy earnout structure means that he's actually got performance metrics. He needs to hit or the business needs to hit related to his own internal performance to see the full consideration of the deal.
- [55:52]
Rob Belk
Yep, that's right. And so he's, he's supported me on the sales side. Extremely gifted in that, you know, has a knack for that. And as I like to tell people, I can tell you firsthand, he's very good at selling because I have bought from him. And I, you know, again, like, I haven't really ever played a direct sales role role. You know, I've played more of like a relationship management role. So being a little bit more aggressive on the outbound has been something I've been learning a lot. And I've, you know, been able to sit in on calls with him, which I'm grateful for. And yeah, obviously has incentive too. And as an equity holder too, there's, there's that piece and you know, that would be another thing. You and I talked about this in the pre call where there's a little bit of a tripwire at 20% of an equity position that I didn't fully appreciate. And I do think that there's some nuance between, like a legacy owner, if they're going to stay where you don't want them to go above 20% because, you know, if you get a line of credit, you know, they'll have to sign on to that. That's typically the tripwire for banks, but you also want them to have enough where they still feel highly incentivized with how the business performs. But maybe, you know, this delicate dance of the equity position is low enough so that, you know, you're still able to retain autonomy in your decision making. You know, if it was like a 45% owner, like, sure, you maybe if you own 55%, you still had the final say. But, you know, if I own 45%, I would, you know, think that my point of view would be heavily weighted and potentially influence what's done. So there's a lot of that dance that goes on and I'm sure folks have, you know, different thoughts and have navigated that differently, but I'd say, you know, six months in, that's, you know, I probably would push, if an owner was going to roll, I would probably push for like 18 or 19%.
- [57:51]
Will Smith
Okay, so he's, he was at 10% and in retrospect, or next time you'll feel like you'll, you'll push for higher because 10% maybe isn't quite motivating enough. And 20% is this tripwire. So, you know, Right up to that ceiling, kind of 18 or 9%, 19%. And you, and so you do feel like, I mean, that is twice the equity, almost twice the equity.
- [58:14]
Rob Belk
So.
- [58:15]
Will Smith
Answer to my next question is probably yes. But you do feel like that moves the needle enough in terms of an incentive that it would drive different behavior.
- [58:23]
Rob Belk
Yeah.
- [58:23]
Will Smith
Difference between 10% role and an 18 or 19% role.
- [58:26]
Rob Belk
Yeah. And always hard to say. Right. You know, it's easy to kind of, kind of in retrospect think through this. And I would still say, you know, highly incentivized and a great partner. I just, you know, we're, we're six months in and I think about like two years from now, you know, how do you make sure that the owner, regardless of who it is, like, still really, you know, is invested in the business, that they potentially hop on sales calls and whatnot. And like. So I have, there's been no issues with that piece at all. I just have already started to think long term and you know, certainly if I was advising someone, you know, I think that's probably the sweet spot and it's probably worth it, especially if that maybe decreases how much you have to take on a loan or cash at close.
- [59:09]
Will Smith
Yeah, but the, the thing that I, I'm not getting here, Rob, is that the earn out that is also enormously motivating in 50% of the, of the purchase price was in earnout. So it's not just about that equity piece, it's about, and, and in some ways, I mean, probably, I mean, the earnout is more immediate because he'll get compensated that earn out progressively in, in the months post transaction, whereas that equity piece might not, he might not see any money from that until you go off and sell the business years from now. So the, and the earnout is significant in this deal at 50%. So to square that circle for me.
- [59:53]
Rob Belk
Yeah, that's, that's a great point. Yeah.
- [59:56]
Will Smith
And Rob, just this point about the tripwire of the 20%. So searchers will recognize that in the SBA loan context, where if somebody is on the cap table of a deal where there's an SBA loan and they own more than 20%, they too are under a personal guarantee. And so there's always this incentive to keep people under 20%.
- [60:18]
Host
But you're.
- [60:19]
Will Smith
Actually, I didn't, what I didn't realize until talking to you is that, that, that that 20% is a magic number in a lot of different kind of commercial and loan products. So to be clear, because yours isn't even an SBA deal, that 20% number still comes up as one that as you said, is a tripwire.
- [60:37]
Rob Belk
It is, yeah. So like a good kind of like post deal example is if you're going to renew your line of credit or whatnot, they'll look at that and want to see who's on your cap table and what percentage. So you know, if he had been above 20%, he would then have to also sign on, you know, as a guarantor to the line of credit. So you know, certainly wouldn't want to put that onus on him or you know, recommend that probably for other folks. So it's just something to be wary of and kind of gets at that, you know, what's the right balance of, you know, if you do want them on your cap table and you do want them as a partner, like how do you balance enough skin in the game to be excited and motivated, but also kind of protect maybe some of the nuances and the administrative pieces on the financial side.
- [61:26]
Will Smith
Great.
- [61:26]
Rob Belk
I think with the way this is structured, it's probably maybe getting at another learning for me is like I just feel like I over engineered the deal. I think maybe in retrospect you've got a couple levers and maybe I pulled too many of them with earn out equity, role escrow, kind of all these different things you can do. And I would have preferred just to keep it more simple and straightforward even on just the way things are structured from an earnout perspective of like there's a profitability number to hit and there's a revenue number to hit and there are aggressive numbers too. So just kind of thinking through all those things together, it's probably a good metaphor for how I should run the business. Just keep things simple.
- [62:11]
Will Smith
Well, Rob, good of you to be self critical. On the other hand, it seems like you structured this really well for yourself and you've really mitigated a lot of risk here. Yeah, 50% earnout and 10% equity and then 40% cash at close.
- [62:32]
Rob Belk
There's probably some context of like marketing agencies because there's so many like you mentioned, like there actually is like a pretty well established benchmarks for deal structure and maybe back to that quality of earnings. Like when that when I initially found out that the client had left, you know, I had been a sell, I was doing, you know, search by myself. I still really believed in the business. I really believed in the ownership group and the team, like excellent team. But I wanted, you know, a third party to come in and kind of help me assess like hey, in what I seeing, this is still a great business. Right. And so a friend had told me about basically an industry group in marketing. And this industry group also does consulting for deals, typically, you know, when one of their members wants to sell their marketing agency. So I think it probably was a little bit unique in that I was seeking to acquire for the first time and not coming from the industry and so did hire somebody from here and then, yeah, they did basically help me understand that in agencies because you're dependent on client relationships, you know, earnouts are pretty heavy within marketing agencies because, you know, a client could leave and sometimes clients can, you know, obviously if there's customer concentration, that's a pretty big deal. He might even argue that, you know, there was enough of an earn out, you know, maybe even less cash at close for most of the deals that he had seen. So I thought it was really helpful to have him because he helped me get comfortable. Like again, first time buyer wasn't coming from marketing, industry confirmed, this is a great business, you know, get the deal done. I think my big learning was, you know, maybe pause the relationship once the deal was closed. He did stay on to kind of help with some strategic planning.
- [64:27]
Will Smith
And then this consultant that you brought in.
- [64:29]
Rob Belk
Exactly. And my thought process at the time was again, somebody who knows this industry well, you could help us with best practices. But you know, in retrospect, a new ownership change is like just such a huge thing for a company to process and maybe even more so. And this line of work with, you know, everybody in the office together every day, when you bring in a consultant plus new owner, I think that can be pretty intimidating for the employee group. And so while I personally believe he was very net positive, I would recognize that maybe get your feet underneath you and don't start pushing a bunch of best practices right off the bat. Really try to understand the business. And so I would have, in retrospect, probably would have waited a couple of weeks, months before, you know, going down that path if I did want to still try to have someone from a consulting background.
- [65:25]
Will Smith
So you, you worked with his consultant to really understand kind of the deal structure and appropriate valuation and kind of, you know, gut check that the deal, the whole kind of, the whole project here. That's right. And then you close the deal and you continue working with this, this industry expert consultant and bring them now into, bring this person into the business to start talking about implementing best practices, which is, you know, the C word change. And so, and so you feel that you maybe did that second engagement with the consultant too aggressively because new owner consultant, talking about all these changes that are going to be made. And as we know, employees chafe at all of that. They're skittish in that moment. And so one of the arts of this world is figuring out the right moment and cadence to introduce change. You feel like you did it too soon, too aggressively.
- [66:25]
Rob Belk
That's right. And one of the reasons why I really fell in love with the business was because of the team and the people. Excellent group of folks. Really strong leadership, team already in place. You know, we kind of joke that like the kind of hit by the bus, the win the lottery. If that happened, you know, the business would continue on like it really. You know, I like to think I'm a net benefit, especially on the, you know, as we're trying to grow and think about strategy. But there's folks that have been in this business for several years and know what they're doing and do it extremely well. And so I think getting in there, working with the team, building those relationships first as a team, deciding, hey, let's push ourselves to really benchmark ourselves against industry standards would have been the better approach than to kind of come in hot. The deal closed kind of at that end of the year, started the new year. So it was this person coming in to help with annual planning and strategic planning for the year. So maybe if the timing of the deal was different, maybe it wouldn't have kind of played out like it did. But yeah, I mean it's only just something to learn from and I think at this point I've been operating for about six months and you know, been top of mind to build those relationships, did the kind of one on one tour with every employee would highly recommend that does feel like that's kind of like a no brainer. But again, you know, it's hard to carve out that time in the moment, but building that trust is huge and you know, try to remind myself to carve out more time to continue to have good one on ones and an open door policy.
- [67:59]
Will Smith
How many employees are there?
- [68:01]
Host
Did you tell us?
- [68:02]
Rob Belk
About 50.
- [68:03]
Host
50.
- [68:05]
Rob Belk
Okay.
- [68:05]
Will Smith
And how old is the business?
- [68:06]
Rob Belk
40 years old.
- [68:07]
Will Smith
Did you tell us that?
- [68:08]
Rob Belk
Yeah, yeah, I think you said that. Okay.
- [68:09]
Will Smith
40 years and 50 employees.
- [68:11]
Rob Belk
Great.
- [68:14]
Will Smith
You were something of a student of ETA and search. You know, you were listening to Acquiring Minds and did SM boot camp and, and probably many other things as well. So fair to say that you heard about the delicacy of change management and, and, and yet you still came in hot, as you put it. Curious why?
- [68:39]
Rob Belk
Yeah, probably some combination of like ego to think that I had good ideas and maybe just like a, you know, had been searching so long, like the opportunity to kind of flip the dial and start operating was pretty exciting. But yeah, only person, you know, to blame is looking in a mirror. Because I'll never forget someone telling me the story about they had asked for advice of like, hey, what should my 100 day plan be? Like, what advice do you have for me? When I bought the business and the person sent them an attachment, they opened up the attachment and it was a blank page, which I think conveys pretty strongly the point, which is observe, observe, observe. One thing I loved doing with employees in the one on one setting was asking them, hey, what should I just observe? What should we stop doing and what should we pour gas on? What should we invest in? Those kind of three questions together were super telling. And you know, I think those type of things are good to do in the short run. I just felt like.
- [69:46]
Will Smith
And did, and did consensus good and consensus bad shake out of asking so many people that question. Were there, were there really things that everyone was like, we should be doing this and we shouldn't be doing that?
- [69:57]
Rob Belk
Yeah, there were some themes and ironically, kind of back to the consultant, one really good, positive and maybe again, while I was really excited about the business was we did both a anonymous employee survey and an anonymous client survey and both of those came back, you know, great. Like, you know, there wasn't any red flags per se, I think on the employee side, you know, there was this ask for some transparency and accountability. And you know, I think one thing that came up too, that is, I can feel now in the, you know, the CEO seat is being careful about, you know, engagements, you know, with personal relationships too, or trading, you know, service instead of cash for engagements. And I mean, I just feel it as I'm out there speaking with folks and you know, to some degree you tap your personal network when you're coming up with, you know, things to go after. But it can get somewhat dicey, you know, if it's a personal relationship or there's like a value exchange that isn't just the traditional cash.
- [71:06]
Will Smith
You mean like bartering services like you guys?
- [71:09]
Rob Belk
Yeah, exactly. So that was just another interesting learning. But I would say, like, it's so funny to kind of sit in the seat where you're observing and just kind of saying like, oh yeah, I'll do some, some things differently. And then, you know, you get into the seat and you're like, oh man, I Talked to my friends and, you know, they would, like, help marketing their business and, you know, they want a friends and family discount to do so. So it's just. Yeah, I think everybody probably experiences, you know, that transition from what feels like it's easy to do in practice versus once you're sitting in the seat operating, you know, how much harder it is to. To make decisions. And trying to be decisive is another big one, too, just to make strong, good decisions and keep things moving.
- [71:56]
Will Smith
So how are you doing there, Rob? How are you as a leader? How are you. How are you finding it?
- [72:01]
Rob Belk
Yeah, I mean, I. My style is a lot of, like, decision making by consensus, for better or worse. You know, I don't love, like, a hierarchy in terms of an org chart. And maybe that's why, you know, a traditional trades business maybe didn't feel like the right fit, whereas this, like, it feels much flatter. So I do love to take in consensus and make sure I kind of have the heartbeat of the team and then, you know, try to do that to make a decision. Sometimes that makes us move slower. Um, but I'm also trying to use this lens of, like, really, you know, maybe not moving too fast in a way that I might have, like, later regret.
- [72:40]
Will Smith
Now that you've learned.
- [72:41]
Rob Belk
Yes. About the chase. Yes, definitely. Now that I'm learning, I continue to learn. I stub my toe often, but try to keep things moving.
- [72:49]
Will Smith
Six months in. So you closed when?
- [72:51]
Rob Belk
In January of 2026. Great.
- [72:55]
Will Smith
And what does. How is business going? We've heard kind of qualitatively how. How things have gone. What about numbers wise, revenue wise, sales wise?
- [73:04]
Rob Belk
Yeah, I mean, I think the. The big kind of piece and kind of touched on it with, like, kind of that nuance on the nerd outside is, gosh, the transition, you know, when you're introducing a new owner into the business and as a client, do they get a little bit skittish? Do they try to use that as an opportunity to get out of the relationship? And, you know, knock on wood, we're able to keep all of our relationships intact, which is awesome and, you know, a testament to Jed and the team and the relationships they've built. And maybe the insular nature of. It's not, you know, just one person that determines whether or not someone wants to work with us. So that's been really positive. You know, there's definitely the macro piece right now, again, being tied to home improvement with some of our larger accounts, where there is some budget compression, which in turns, you know, has hurt a Little bit on the margin, but building up the pipeline and landing a couple deals. Like we had, you know, a couple positive conversations. We've closed a couple of deals already in Q2. And so the team, I think feels really excited and as am I about what's ahead of us.
- [74:08]
Will Smith
We'll close us out with kind of the forward looking. I heard you mention moat against AI. So maybe give us kind of your thoughts on AI and then whatever else you, you have in store for the next five years.
- [74:21]
Rob Belk
Yeah, I'm really excited about the prospect of AI. The way we're approaching it is we've got kind of one small team that is, you know, if I use a metaphor, like they're the jet ski, they're moving quick, they can turn quick, they can experiment and they're really pushing the boundaries and figuring out how, you know, we can automate some manual back office type workflows and, and then most of the company is more of the cruise ship. You know, it doesn't turn as quickly, but it is still turning and we are embracing it. You know, our internal tagline is we love to learn, we love to win. And part of the loving to learn in this day and age is learning about AI. But as marketers, you know, we want to be careful that, you know, our product and the work we're doing for our clients is still very authentic. You know, have seen other brands or agencies kind of get in hot water so they try to offload it. I think, you know, I myself and others probably feel like they can, you know, spot AI generated copy or AI generated assets. So for us, it's been great for reporting. It's helped us be quicker on proposal work and even brainstorming. But it hasn't been, you know, a wholesale change. But yeah, there's, you know, every day is a new day kind of as this technology evolves. And like I said, there's a huge tailwind of showing up in the LLMs, showing up and call it in ChatGPT. And so that's been a big strategy, one we want to push on when we feel like there's white space. Whether you're a brand in Lowe's and Home Depot or, you know, you're a trade service provider that you want to be the first, you know, brand that shows up when somebody asks for a recommendation in chat. GPT.
- [75:57]
Will Smith
Yeah, two follow ups there, Rod, just because I'm getting into the weeds a little bit here in marketing land. Interesting to me. First, the. So I guess from what I, from what you just said, there's sort of an internal debate in the industry of marketing agencies of to what degree creative assets are are created with AI versus not. And your stake in the ground, or at least where you land now is that you guys are maybe using some kind of AI supported things, but you're not just having AI create the assets, whereas other marketing agencies are presumably leaning right into that happily. And just having AI create the assets is that is. Did I capture the debate and how does it look from where you sit?
- [76:45]
Rob Belk
Yeah, I mean it's highly client dependent. You know, I think a majority of our clients probably aren't looking for us to leverage AI to generate the assets, but we did just do a project for a client that specifically asked for AI generated. So yeah, it's really interesting and if I were going to put myself on the creative team's shoes, I could understand maybe like, hey, what does this mean for my job and kind of what I'm doing? And so I do think it's really interesting to hear not just a leader kind of push it, but also a client. And I really appreciate the team being kind of open to it and know that we're going to be really thoughtful with how we integrated and what it looks like. But at the end of the day, like, you know, they're here because they're creative and whether it's an asset they generate or you know, chatgpt, like there's still this element of taste and curation that, you know, a creative person has much more than me and can help understand, you know, what is going to be the right fit. So I don't see that ever going away.
- [77:46]
Will Smith
Taste sure is doing a lot of work these days. You do hear that as the response to AI just subsuming everything. And then the other piece I'm getting, as I said, back into the weeds a little bit. But yeah, I just, in my interview yesterday with Chris Farkas, we were talking about he hired some marketing folks or an agency for his E commerce business. It didn't go well. And where he landed was now he hires what you might call point solutions or point specialists. So he'll go on upwork and find, you know, somebody who's great at, specifically at ppc, great specifically at SEO as opposed to full kind of full service agency.
- [78:34]
Rob Belk
Sure.
- [78:34]
Will Smith
We've heard you say that your model and most models, most agencies of any size are going to be full service because otherwise you just, you can't build a very big business if you just do one thing. So anyway, how do you think about that and how should Others think about that, because this is. I know, another debate kind of in your world.
- [78:56]
Rob Belk
Yeah, maybe there's. There's two initial things that come to mind. The first is just talking to clients directly. And one of our largest clients, you know, they're a big multinational firm. We help them with their construction adhesive product. And, you know, that client told me explicitly, like, one of the reasons why I love working with your team and is if I need something new, I don't have to then go through the hoops and procurement and legal to add that skill set. Like, you've got it and I can just work with you directly and it's really efficient. So that would be one piece that is great. And then the other piece too, with kind of full service is the strategy, I think, is a lot more cohesive. So if you're kind of picking off people one at a time, like, how well do they really understand the holistic strategy? Everything from, like, your brand identity and marketing positioning all the way down between, like, how you're showing up on your website or how you're showing up at Search, you know, it can be a little bit bumpy, I think, and, you know, if you do go that route, whereas you've got a team behind the scenes that should have a much better grasp on, like, what your brand is, what your strategy is and how it needs to come to come together throughout the entire life cycle. Or the full funnel.
- [80:10]
Will Smith
Yeah, yeah. And of course, strategically that's better for you because then you have that many more sort of touch points at the client and you're more embedded really, in. In their. In their business.
- [80:23]
Rob Belk
Yep. And the kind of. The other piece with that, too, is a little bit of a Trojan horse of, you know, maybe you're providing one service for a client and they have a good, you know, experience with. With your agency. And then that kind of leads to the next question of like, oh, hey, we've got this product or project coming down the pipe next month. Like, is that something you can help me with? So it can help make you stickier with a client and lead to those coveted retainer relationships.
- [80:52]
Will Smith
Very cool. Rob, anything that we didn't touch on that you wanted to share?
- [80:55]
Rob Belk
No, I just. I'm super grateful for the opportunity and yeah. Feel grateful for the team. And Jed, who I bought the business from directly, he's been an excellent partner. Partner. And, you know, he's a big part of why I'm here today is that owner relationship and getting to work with him and really buying into what he's built and working together.
- [81:13]
Will Smith
Great. Well, you I am going to be at Fuqua Du Business School for the Southeastern ETA Conference in the fall. Yeah, you are a Fuku Fuqua grad.
- [81:25]
Rob Belk
That's right.
- [81:26]
Will Smith
You are in the neighborhood. So maybe I'll meet you in person.
- [81:28]
Rob Belk
Yeah, that'd be excellent. Love to.
- [81:31]
Will Smith
But thanks for coming on Acquiring Minds.
- [81:32]
Rob Belk
Rob yeah, thank you, Will.
- [81:34]
Will Smith
Hope you enjoyed that interview.
- [81:35]
Host
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- [81:41]
Will Smith
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- [81:46]
Host
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- [81:50]
Will Smith
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- [81:52]
Host
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- [81:54]
Will Smith
time to listen or watch it, subscribe at acquiringminds Co. You'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars.
- [82:07]
Host
At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business.
- [82:16]
Will Smith
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