Started as SBA Searcher, Built to a PE Fund

Summary

Acquiring Minds Podcast Summary

Episode: Started as SBA Searcher, Built to a PE Fund

Host: Will Smith
Guest: Joe Wexler, General Partner at Blueline Ventures
Date: June 1, 2026

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Episode Overview

This episode chronicles Joe Wexler’s unique path from self-funded acquisition entrepreneur—starting with a small, troubled home care agency via an SBA loan—to founding a team-managed, PE-style fund (Blueline Ventures). The discussion delivers candid insights into the realities of buying small businesses, building a portfolio, evolving goals, and structuring unconventional investment vehicles. Joe shares lessons around partnership, leadership, due diligence disasters, and why a consulting background can be as powerful (or more so) than classic finance when acquiring businesses.

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Key Discussion Points & Insights

Joe’s Background and Motivations

• Origin Story: Joe spent 15 years in management consulting, including as partner of a boutique firm in Charleston, SC. After selling that firm, he deliberately chose ETA (entrepreneurship through acquisition) over returning to consulting or a traditional job.
  • Quote: “I’d always had an entrepreneurial kind of slant… I’d gotten really good at generating revenue as that small business owner… but I hadn’t done anything on asset acquisition.” (10:16)
• Financial Readiness: Liquidated from consulting with about $150k; net worth “squinting, maybe a million bucks,” with 60–70% cash.
  • Quote: “If I looked at it sideways, my net worth was a million bucks. You squinted... depending if it was Friday or Monday...” (09:33)
• Entrepreneurship Approach: Was inspired by Rich Dad, Poor Dad, and gravitated toward buying businesses as familiar, valuable assets.

Becoming an Acquisition Entrepreneur

• Education & Preparation: Immersed himself in books, podcasts, and Walker Deibel’s Acquisition Lab. Quickly saw the need for search focus.
  • Quote: “Early on I didn’t have any criteria…if you’re right for everything, you’re perfect for nothing.” (12:58–13:51)
• Business Buyer Fit: Realized the importance of buying businesses aligned with both his skills (leadership, strategy, not deep operations) and lifestyle: “Don’t buy yourself a job.” (17:00)
  • Intent: To be a highly-engaged owner, but not day-to-day operator.

Tackling His First Acquisition(s)

• Partnership Rationale: Chose to work with partners for shared risk, covering skills gaps, and fun.
  • Quote: “If you find the right partner…and you’re going into something a little unknown, you have somebody that is there with you.” (15:29)
• First Attempt (Home Care Acquisition That Failed):
  • Near-closing on a $4M revenue home care agency, but uncovered IRS liabilities killed the deal at the last minute.
  • Lesson learned: Keep searching “engine” running even if you have a deal in hand. (28:40)
• First Closed Deal:
  • Small home care agency ($1M purchase price, ~$280k SDE), acquired via SBA loan with a meaningful holdback.
  • Staff and founder soon exited unexpectedly; Joe and partner had to rebuild office team and fix major payroll/legal gaps (unpaid overtime).
    • Quote: “Within the first four months of ownership, the entire office turned over…we don’t know how to do anything yet really, and we have to completely restaff.” (33:00)
  • Used escrowed holdback funds to make employees whole on three years’ unpaid overtime (approx $60–$70k).
    • Quote: “We ended up making the decision to make everybody whole…for some it was the largest check they’ve ever gotten in their lives.” (36:37)
  • Result: Required intense, hands-on work for about a year but then achieved stability and growth. Fast forward, business doubled revenue with high margins and has become largely passive.
    • Quote: “That business has doubled…the last two to three years…we didn't take any money from it for the first two years, but now we have a regular monthly distribution…I don't remember the last time I was in the office.” (43:58–44:58)
• Perspective for Would-be Searchers:
  • There are many sub-$1M SDE home care businesses on the market. Despite the challenges, Joe is enthusiastic about the segment for entrepreneurs with the right expectations.
    • Quote: “It's a pretty good model for just great cash flow…I still like it a lot.” (43:58)

Scaling: Additional Acquisitions and Lessons

Second Acquisition: Metal Fabrication Business

• Profile: $2.5M purchase price, $750k EBITDA, second-generation family-owned, 35+ years old.
  • Sourced via broker, not proprietary outreach.
  • Seller phased out over a year; key hire for GM made 75 days after close.
• Integration:
  • Needed to modernize operations; sales/marketing remained a challenge.
  • Business had biggest year post-acquisition but has since plateaued. Under contract to sell to local competitor.
  • Quote: “First year after we owned it was its biggest year…haven’t done as well as we wanted on the sales and marketing side.” (52:37)

Third Acquisition: Telehealth Startup

• Profile: Carved out from a hospital system as a commercial venture; started with 25–30 employees, now 160+. Joe led as CEO.
• Unique Structure: Partnership with a major health system who brought the program, team, and became first customer.
  • “They just gave it to me, which is crazy.” (55:49)
• Time Commitment: This role was much more ‘operator-heavy’ and required a CEO-level commitment from Joe.

Three Businesses in About a Year

• Transitioning from Operator to Portfolio Manager:
  • After the first year, Joe paused to stabilize and ‘digest’ acquisitions, focusing on building teams, systems, and stepping back once things were running smoothly.
  • Quote: “Three acquisitions with three different partner groups, that was a little bit of much. So had them each running pretty well before I went to the next.” (23:12)
• Key to Juggling Multiple Companies:
  • Delegation, hiring effective GMs, and an “engaged but not entangled” approach.
  • Consulting background mattered as much as (or more than) classic finance skills.
    • Quote: “Probably 90% of my time and energy…is all on people and the credibility and the relationships…I absolutely agree that is one of the things that allowed me to go into these otherwise pretty tough settings to penetrate.” (63:46–65:12)
  • Observation by Will Smith: “A consulting background is more valuable than a straight financial background…based on you, a data point of one.” (65:12)

Building Blueline Ventures: PE Approach, Fund Structure, and Philosophy

From Holdco to Fund

• Vision Evolution:
  • Desire to build a real team/structure for repeatable, scalable acquisitions, not just “stack businesses in a row.”
  • “We wanted a structure that made them cohesive instead of just like adding them on.” (60:53)
• Blueline Ventures (BLV) Fund 1:
  • $25M equity fund paired with $25M debt—acquiring companies with $1–3M EBITDA.
  • Five partners, each with distinct backgrounds (e.g., real estate, PE, medicine, consulting, investor relations).
  • “We are not going in with a lot of leverage right now. We're absolutely people first…We underwrite for long term holds…10 years.” (74:14)
  • Eight acquisitions expected in Fund 1; currently five acquired, two under contract (as of June 2026).
• Deal Flow: Achieved robust pipeline—“good businesses are still out there”—via active process and improved credibility from experience and fund structure. (101:33–103:00)

Unconventional Fund Structure & Investor Alignment

• Key Differences from Traditional PE:
  • No “2 and 20.” No annual management fee. Instead, team’s compensation is almost entirely a share of profits, after distributions.
  • Quarterly cash distributions to investors (“cash flow fund”), preferred return (10%), and a graduated split as investors are repaid, shifting from 80/20 to 60/40 in favor of LPs.
  • Quote: “You've been de-risked as an investor…the split goes to 60/40—the idea is that we align ourselves to be able to give the investors their money back as quickly as we can because the real upside for us comes on the backside of that waterfall split…” (84:07)
  • Team uses operating fees for real work provided to portfolio companies (e.g., HR, finance services).
  • Focus on long-term, patient capital. “Buy and hold” thesis, not quick flips or heavily-leveraged roll-ups.
  • Quote: “We're technically charging for our time, but we're not taking the money yet…it's essentially bootstrapped.” (97:48)

Talent & GM Hiring

• Process:
  • Became much more rigorous over time—define role, use “Who” method, Culture Index for leadership attributes, full-day in-person interviews.
  • Quote: “Probably the most important decision we can make in any of our companies is who we hire to run it if it's not already there.” (70:24)

Team, Scaling, and The Human Element

• Active Partnership Model:
  • Five managing partners—each “stewards” assets and engage heavily with portfolio companies, especially post-close.
  • Quote on team culture: “[Our] motto: awesome stuff with awesome people. We want to create the biggest positive weight we can.” (74:14)
• Importance of Tinkering and Adaptation:
  • “We've made mistakes and I'm not saying the structure is perfect…once we get done with Fund 1, the next vehicle…will look a little bit different from the lessons we learned.” (91:33)

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Notable Quotes & Moments (with Timestamps)

• “If you find the right partner and you're going into something that is a little bit unknown, you have somebody that is there with you to go through it and bounce things off.” —Joe Wexler (15:29)
• “Within the first four months of ownership, the entire [home care] office turned over...we have to completely restaff the business. In that case, my partner…did take on running payroll and things you don’t ever expect to do.” —Joe Wexler (33:00)
• “There were three-plus years of overtime that had never been paid...[For some,] it was the largest check they’ve ever gotten in their lives, and they weren’t expecting it.” —Joe Wexler (36:36)
• “My goal was to acquire assets that ultimately would be part of a holding company. I went to market as Blueline Ventures...none of those assets were ever owned technically by Blueline.” —Joe Wexler (55:36)
• “Probably 90% of my time and energy spent with the companies is all on...the people and the credibility and the relationships.” —Joe Wexler (63:46)
• “The financials? That's table stakes. Where I've heard somebody say, there's more lies that have been told with Excel than with Word.” —Joe Wexler (65:46)
• “Because when you own the company...the easiest thing to do is go into the weeds and ‘micromanage’...my experience has been the longer leash you give...that's when you're going to get the most benefit.” —Joe Wexler (67:12)
• “We're absolutely people first...we underwrite for long term holds...10 years...We firmly believe...if you really take care of the people, they're going to propel that business further than if you don't.” —Joe Wexler (74:14)
• “Our investors are seeing quarterly cash flow from their investment...unlike traditional private equity where you give a million bucks...you don't see that until they sell everything in 5–7 years.” —Joe Wexler (81:54)
• “There's no substitute for taking action. The things that propelled me...were actually getting into conversations with sellers and just, just trying to get out there and learn it by doing it.” —Joe Wexler (103:57)

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Timestamps for Important Segments

• Joe’s Background, Consulting to ETA: 07:39–10:16
• Choosing ETA, Searcher Prep: 10:16–12:44
• First Acquisition Attempt and Lessons Learned: 24:38–29:24
• First Closed Acquisition – Home Care Agency: 29:19–45:16
• Second Acquisition – Metal Fab Business: 47:06–54:14
• Third Acquisition – Telehealth Startup: 54:17–58:05
• Discussion: Human Skills, Delegation, Buy vs Build a Job: 61:53–68:17
• Talent & GM Hiring: 68:40–70:24
• Blueline Ventures Fund Structure & Philosophy: 74:14–89:47
• Fund Structure Mechanics & Investor Alignment: 84:07–89:47
• Deal Flow in 2026, ETA Landscape: 100:59–103:00
• Advice to Searchers: 103:57

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Takeaways for Listeners

• Founders’ Skillset: Delegation, leadership, people management, and comfort “parachuting” into new organizations are at least as critical as finance acumen for ETA.
• Buying Small, Troubled Businesses: Can deliver big upside, but don’t underestimate the time and emotional investment, even for experienced professionals. Expect bumpy transitions.
• Building for Scale: As your portfolio and experience grows, institutional structure, disciplined hiring, and systems are necessary.
• Fund Structures Can/Should Vary: Departures from classic PE models can better align interests, offer investor liquidity, and suit long-term “holdco” goals.
• Just Start: No book or podcast substitutes for taking action. Get out and talk to sellers, brokers, and partners.

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Connect with Joe Wexler & Blueline Ventures

• Joe’s LinkedIn: [Link in Show Notes]
• Blueline Ventures: [Link in Show Notes]

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This summary provides a comprehensive blueprint of what makes acquisition entrepreneurship both challenging and rewarding, with Joe Wexler offering a rare look at both the pitfalls and payoffs of buying small businesses and scaling up to a fund.

Transcript

[Will Smith]

The first business that today's guest bought did under $300,000 of SDE, which is small for a single acquisition entrepreneur, let alone two. But Joe Wexler bought the home care agency with a partner, making those earnings slimmer still. The business was also a falling knife, as Joe put it. So small and troubled. Not a great combination, but Joe and his partner were able to save it. Now, despite buying very small, Joe was not intending to buy himself a job. From day one. His vision was to acquire a portfolio of businesses, and the playbook would be to avoid buying a job and to give himself the capacity to buy yet more businesses. Which is not a new concept. In fact, it's probably exactly what many of you aspire to do. But it's so much easier said than done. So I pressed Joe throughout our conversation on how he did it. Now, to be clear, he did have some advantages. His balance sheet for one thing. Joe had enough liquidity that he didn't need to extract earnings from his acquisitions in the short term, it could reinvest them instead. Also, his consulting experience. So often acquisition entrepreneurs are worried if they don't come from a finance background. Well, after this conversation, you may wonder if it's actually the consulting background that is most valuable of all. Joe bought three businesses in his first year ish as an acquisition entrepreneur in the 2020-2021 timeframe. Eventually his model evolved and today he and four partners run a fund that looks more like traditional private equity. We hear about that evolution and why Joe landed on the model. He did listen for how he and his partners structured their fund, which is not the conventional 2 in 20 model. Their structure is designed to enable longer hold periods of their acquired businesses and earlier cash distributions to their investors. By the way, that first acquisition, the Falling Knife home care agency, it has doubled to $2 million of revenue. Joe's involvement is very low at this point and with margins north of 25%, it has become a great business to own. Here is Joe Wexler, SBA acquisition entrepreneur, now general partner at Blueline Ventures. This Thursday, Franzi CEO Alex Smarchniak will will host a webinar on the intersection of ETA and franchising. Alex will discuss the pros and cons of buying an independent business versus franchise resales as well as franchise resales versus de novo franchising. We don't want to be dogmatic here on acquiring minds. There are also great opportunities in starting franchise businesses. Of course. Alex will bring two franchise resale listings to do deal teardowns, unpacking how to evaluate the strengths and weaknesses of these opportunities, from category to franchise system to price to deal terms. He'll also share a number of case studies on empire builders, that is Entrepreneurs who have built very large holdings through the acquisition of existing franchise businesses. The webinar is franchising for the ETA Buyer resales, roll ups and real deals and it is this Thursday, June 4th at noon Eastern. Link to register is right at the top of this episode's show Notes or on the Acquiring Minds homepage.

[Interviewer/Host]

Acquiringminds Co

[Will Smith]

Some good news out of the SBA last week. You may have heard recently that anyone who so much as invested in an SBA deal that went into default was denied access to any future SBA financing. Meaning, for example, if you wrote a $5,000 check into your buddy's H Vac acquisition 10 years ago and he defaulted, you would never be able to access SBA financing again. There are reasons of bureaucratic process that this policy came into effect. Too long to explain here, but happily this has been reversed. If you invested in a defaulted SBA deal but were non controlling, non guarantor and held less than 20% ownership, you can continue to access SBA financing now. Which is good news and actually just a reset to how things were in 2025, but certainly a welcome reset. Separately on the SBA, you may have seen that the SBA loan limit has expanded to $10 million for entrepreneurs, combining 7A and 504 loans. There is nuance here and last week SBA loan broker extraordinaire Heather Anderson presented an Acquiring Minds webinar explaining that nuance

[Interviewer/Host]

and the new possibilities.

[Will Smith]

You can find a recording of it

[Interviewer/Host]

on our website acquiringminds Co under webinars.

[Will Smith]

Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs, and on this podcast I talk to the people who do it. 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 in 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 helloystem6.com

[Interviewer/Host]

Joe Wexler, welcome to Acquiring Minds.

[Joe Wexler]

Hey Will, how you doing? Good to see you.

[Interviewer/Host]

Thank you for being here.

[Will Smith]

Joe, you started as a self funded

[Interviewer/Host]

searcher, so typical story of buying a business with an SBA loan. Today, about seven years later, you and

[Will Smith]

four partners are building what I would

[Interviewer/Host]

call a more traditional private equity firm, sort of PE with search searcher characteristics.

[Will Smith]

So we thought the audience would be interested in learning from this trajectory of yours.

[Interviewer/Host]

Let's start off as we always do. Joe, with some background on you, please.

[Joe Wexler]

Yeah, well, happy to do that. Thanks for having me again. Yeah. So I'm originally from the Northeast, went to school in Ohio, in the Midwest. I currently live in Charleston, South Carolina. Been here for about 12 years. I would say most of my career early on was in management consulting. So I spent 10 or 15 years doing management consulting after going back to grad school and had a really cool opportunity there to just to see a lot of different businesses, see a lot of the world. I did a lot of international types of projects, all strategy, organizational structure and redesign, mergers and acquisitions. Really smart people. Everything was new every time, all the time. Which, which I loved about that. So my last stop in management consulting was with a small boutique firm as a partner here in Charleston. And we did that for about five years. Happy to go into any of the details there, but we ended up selling that company in 2019 to kind of be the next iteration of what our, that small consulting firm was going to do. I was on the board of that newer combined company for a few months and realized didn't really want to do consulting any longer. I don't think the cultural alignment of putting those two companies together was going to work out long term anyway. So I decided to take an exit in 2019 and go figure out what to do next. So. Right. Yeah.

[Interviewer/Host]

And was that a liquidity event for you?

[Joe Wexler]

Small one. I think my take home out of that when they said Joe, your release, you can go was like 150 grand. So it wasn't like, okay, meaningful. But that combined with, you know, a few good years of earnings before that is all I had when I, when I decided to start this journey.

[Interviewer/Host]

And so what, what would that be? What did your balance sheet look like in total?

[Joe Wexler]

I think if I looked at it sideways, my net worth was a Million bucks. You squinted if I squinted and depending if it was Friday or Monday kind of thing, you know, but it was, you know, probably 6, 6, 700,000. That was cash. And again, it was really built on the back of maybe three or four good years of earnings as an owner of that business, that small consulting business, and just probably good financial management, personal financial management over the past 10 or 15 years.

[Interviewer/Host]

So, yeah, great, Joe, thank you for that. Your interest in eta, buying a business, how does that happen?

[Joe Wexler]

Yeah, so I, when I decided to leave consulting, what I'd always had an entrepreneurial kind of, I would say, slant. And in consulting, you're running your own business, whether you're part of a really big company or. Those last five or six years, I was running a small, small business. We had a team of. I think the biggest we got was eight. So I was, I was involved in everything from all the P and L, planning, management, our budget, customer acquisition, sales, the whole thing. When I. When I decided I didn't want to have a traditional job, to go find another job somewhere, and I had really just read Rich Dad, Poor dad, which gave me the first fundamental principles of acquiring assets I'd gotten really good at generated generating revenue as that small business owner and that consulting leader. I hadn't done anything on asset acquisition. So then I thought about what are the assets that I'm familiar with? And having seen so many businesses in the consulting through the consulting lens, I thought, I've helped businesses perform over the last decade and a half. I think I want to go do that for myself. So I didn't know what ETA was. I. I didn't know what a search fund was. I just thought it would be really cool if I could go acquire some companies and have a portfolio of businesses that operated with relative autonomy that I could support at a top level. So in my head, that was maybe a hold co type of situation. But I didn't have all those words at the time. I just said, I'm going to go. I think the assets I want are businesses, because that's what I understand.

[Interviewer/Host]

But you did have the sense that acquiring a business was possible. I mean, you knew enough to know that even as a lone entrepreneur, this could be done.

[Joe Wexler]

I had a sense of that. And then as soon as I exited that consulting, I just went and read all the books, listened to all the podcasts. I actually took Walker Deibel's course. I was one of the first cohorts there. And then really just started talking to people about this is what I want to do. And that's where the opportunities really came. Great.

[Interviewer/Host]

Okay, so you did the acquisition lab, one of the very early cohorts, probably even earlier than me. I was in a, like a, I think it was January 22nd. So you would have been. Yeah, I think I was 21.

[Joe Wexler]

Early 2020. Mid, I guess maybe early 21. Yeah, I think I was cohort four or five, something like that.

[Interviewer/Host]

So what were your criteria then when you settled down to properly go find a business?

[Joe Wexler]

Oh man. Early on I didn't have one. I didn't have any criteria. The, the curse of being a generalist in management consulting is that you kind of get thrown into all kinds of industries and situations. And I just thought I can own any business because I, one of my skill sets was being able to go into a company and quickly understand it, learn it, get the credibility and synthesize what some of the opportunities were. I quickly found out that having no thesis was not helpful for me. So if I was going to go try to talk to somebody, I didn't know where to start and if I was talking to somebody who said, oh, what are you looking for? And I said, it doesn't matter. I wasn't really getting any help.

[Interviewer/Host]

Being a generalist or positioning yourself as a generalist wasn't a negative necessarily because,

[Joe Wexler]

because it wasn't true.

[Interviewer/Host]

It was just the, the market responded badly to you being a generalist because if you're, if you're right for everything, you're perfect for nothing sort of thing.

[Joe Wexler]

I think that's a good way to say it. And I didn't have enough focus when I was sit, if I was going to sit down and go look for book of companies, I, I, I didn't, I wasn't able to focus my energy enough to define the specific thing.

[Interviewer/Host]

Right.

[Joe Wexler]

So fast forward and some, some of Walker's class helped on this too, was just. Okay, I, I need to hone in on this a little bit more. And what one thing I liked about that process was really understanding why I wanted to own a business and what were the characteristics that I brought to the table regardless of the industry? That was the first step before looking at industry specifics. It's, it's why so what are the characteristics of the business that I want so that my, my life looks the way it wants to? And then what are the values that I can bring? And then I can match those two things up with that opportunity? And then I got a little bit more focused on the industry search. The other thing that helped me in the process was talking to other folks. And one thing I decided kind of early is that I would probably not do any of these a hundred percent by myself for various reasons. So I had two different targets in my early search days. Two different theses, if you will, with one of them was with. With one. One partner and one of them was by myself that I ended up doing an acquisition with another partner on. So we can talk about that too.

[Interviewer/Host]

And why was that that you wanted to work with partners?

[Joe Wexler]

One, because I. There's a lot of things I didn't know for sure. Definitely gaps that I had, I didn't have. While I had enough money to not worry about putting food on the table immediately, I didn't have a huge nest egg to be able to go do it. If in my head is I had enough money maybe to do one acquisition, but I wanted to probably do more than that and maybe not put all of a hundred percent of my cash into something. And I think it's more fun, to be honest, if you find the right partner and you're going into something that is a little bit unknown, you have somebody that is there with you to go through it and bounce things off. And for me, I wanted what that next iteration of my career to be. I wanted to be fun and do it with the right people. So.

[Interviewer/Host]

And what did you envision their involvement being? It sounds like more than just capital. It was actually they would. They would help you build these businesses.

[Joe Wexler]

They would be active in it, in it together for sure. That was the idea.

[Interviewer/Host]

Great. And when you talked about how you refined your search criteria and like what you could bring, part of that was what could you bring to the table? So kind of figuring out business buyer fit or the type of business that would have good business buyer fit. But also about the lifestyle you said, I think that word you chose. So what, what was the picture of your lifestyle that this was going to afford you? Because I remember from the pre call you being explicit about no buying a job.

[Joe Wexler]

Yeah, I mean that's the catch phase. Don't buy yourself a job. And that was something I was trying to be intentional about. Again, with the consulting background, all I did for that time was influence other folks to do their job the way I wanted it or the way I thought it could happen. I never had a specific role in any of the companies I was advising in the consulting world. So that kind of skill set I thought would translate over to being able to motivate folks at the companies that I owned and paint a vision for it. Definitely nothing passive Let me just say this. I never expected that I would have zero involvement, that I would just be off collecting mailbox money on these things. Very, very engaged with the team, with the culture and the people understanding the business to be able to help them make decisions. But I was intentional from the beginning of each of these to not take on the responsibility of any of the day to day stuff. But that doesn't mean I wasn't there. Engaged with the team and supportive of them doing the thing. So that's what lifestyle looked like for me, is an engaged resource, creating an environment that was a great place to work for people that they believed in where the business was going, but they also had responsibility and accountability to run it themselves.

[Interviewer/Host]

And would you be full time on. On this? No. You've said that you wanted to do two.

[Joe Wexler]

Yeah, I mean I guess full time on the businesses that I acquire. No, full time very early on. Yes. So probably the first few months of ownership there every week, maybe not every day. Intentional absence I think is a good thing. Right. It allows the people to know that they have the autonomy to continue to run the business. I mean this is the thing. You're buying businesses that have been there for a long, for a long time that have. Presumably the goal was not to buy a turnaround situation which is a full time job. It's continuity and growth. So not full time for me except for those first few months, maybe boots on the ground and everyone I do now it's the same way.

[Will Smith]

The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human Resources. It lays out the key items you should be thinking about as you transition into CEO and owner of the business you bought. The link to download 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 Theere directly at jenny aspenhr.com

[Interviewer/Host]

and how did Walker and Chelsea at the acquisition lab think about your vision?

[Joe Wexler]

Yeah, I mean I think it fit into their. To their concept. I mean they just go buy one company and go all in on it. Um, which I think obviously is a great strategy too. The. The. One of the coolest things about the time I went through the acquisition lab was I actually had my first deal under contract at the Same timing as the course was going through it, which was, which was really helpful. So we'd be, we'd have the conversation of how to, how to approach the lender for the first time in the lab. And then I, that week I'd have to go have a conversation with the lender for the first time. So we got to interact during my time at the lab on this actual deal that I was working on that first time. And, you know, they, they knew where my vision was. And, and now fast forward what, five or six years and I've interviewed Walker once or twice, and they've. I'm still an active part of that lab, and my story is a little bit unique because it's not just one acquisition, but I think it still fits into that whole, their whole theory there.

[Interviewer/Host]

Well, I would agree, although I think that they and I generally dissuade people from being too eager to, to go off and do multiple acquisitions. It's like get the first one right. This path can take you an incredible. Two incredible places. And the Holdco vision is real. I mean, I've had multiple guests doing it. But there is, as this path overall of ETA has gotten more popular, there is an impatience among people that you see to, you know, the mini Berkshire Hathaways. And so I think that in general, they, and I kind of encourage people to pump the brakes on that thinking. And again, let's, let's do get your first deal done, run that successfully, and then we can talk. Yeah, but you did, you did do it, but you hadn't done it yet. And so I, that's why I asked. I didn't, I didn't know if you might have bumped into a little bit of, of, of. Hey, Joe, it sounds good on paper, but just get your first deal done.

[Joe Wexler]

Probably a little bit of those conversations

[Interviewer/Host]

happen

[Joe Wexler]

at home, too, if you will.

[Interviewer/Host]

And what, and were they wrong?

[Joe Wexler]

No, I mean, I think.

[Interviewer/Host]

Did they underestimate your ability? I, I, you know, what you just said about with the skills you brought was actually really interesting that you had, you were practiced years of experience making prescriptions to teams and then motivating them to implement those prescriptions. That is the, that basically that's delegation in a, in a, in a word, or delegation with strategic direction. And that seems like a great skill set to bring to multiple acquisitions.

[Joe Wexler]

Yeah. So were they wrong? I mean, I, I've created a lot of things to do. I was busy. I continue to be busy, but I mean, that first year I did three acquisitions and I didn't do any More for a while I just made sure those were stable and steady. Three acquisitions with three different partner groups, that was a little bit of much. So had them each running pretty well before I went to the next. To the next step for a number of years before we are in our current iteration. So and I actually it was four acquisitions, but two were in the same. Were like at the same time into one company. So no, I don't think they were wrong. They didn't all happen on the same day. Like I said, I was very engaged, very engaged early on at each of them. They each had their own challenges from, from the jump, but also great opportunities and great people. I mean that was the thing. One of the things that I did and continue doing all due diligence is understand the people and the team that's there and is, is there enough there to build on. And that was true in those first ones.

[Interviewer/Host]

Well, let's hear about these in more depth. Probably the very first one would make the most sense. Is that a good one to unpack?

[Joe Wexler]

Yeah, that's a good one. Let me, I'll tell a quick story about the, the one before the first one because I think that's where I learned everything. One of the theses I had created with, with a friend and a former colleague who is now my partner in one of the acquisitions was home care. You've probably, I know you've had some home care folks out there. I was having breakfast with the guy that I had done a lot of work with in my consulting world, about my age, really trust like him, understand the values there. And said he, I had just sold that consulting company and we're, I said I'm going to go buy some businesses. He said, man, I've been thinking about doing the same exact thing. He worked for a big CPA firm locally supporting a lot of privately held businesses in that function. And we ended up saying let's, let's try it together then, you know, and we spent a weekend together, we went away, we got a house somewhere, played some golf and we, and we worked and said, okay, what, what's important to us individually, what's important to us if we do this together? I think that time up front, if you're going into a partnership is invaluable. And we came out of that feeling pretty good and out of that process said, let's go, let's go look at home care. And we looked at a bunch of different things and home care is the one that shook out of that. And then that was the first time I had a really specific target of a type of business to go to go acquire. We ended up doing a couple of different proprietary outreach things. We sent. Well, let me take a step back. The first one we got under contract was somebody at a cocktail party said, hey, what are you doing? And we said, oh, I'm looking for a business. What kind? And for the first time, I actually had a succinct answer. Say, we're looking for home care businesses in South Carolina. And he said, oh, man, I know somebody you should talk to. And it made us made an introduction to a business owner that was pretty much had been running it for 25 years. Great company, great reputation, culture, the whole thing. And she said, yeah, maybe now's a good time. And we walked her through the process and. And got her. Got. Got her business under contract. It was a big, big company. I think it was 4 million in revenue, which was big for us to think about as the first thing.

[Interviewer/Host]

And

[Joe Wexler]

we were about 10 days from closing, so I had gone through SBA, all the legal documents, all the things for the first time, which was a massive learning curve, but you have to do. At some point, I actually went to the office and she introduced me to the team as the new owner. There were tears. You know, it was. She was the. Before closing. Yep. And then I didn't hear from her for a few days. And finally she called and said, I can't do it. I'm out. So the first one that I got really far down the path with was. Was one that actually didn't go through. What had happened was we found some IRS liabilities during due diligence that we carved out. And we were very explicit and rigid on in the purchase documents. And her counsel said, why are they being so strong here? And she said, well, I've got these 10 plus years of letters from the IRS. And they said, oh, you can't sell your business with that. And it was not an operating problem. It was an accounting problem. The business was sound. It was just the way she handled that one thing. But for her to fix it, it made sense for her to stay hold on to the company. But we learned there.

[Interviewer/Host]

And so it was not a change of heart.

[Joe Wexler]

It was correct.

[Interviewer/Host]

There was an issue that needed to be on.

[Joe Wexler]

Yeah, it was not a change of heart. She had to go fix some things. We've stayed in touch, you know, that

[Interviewer/Host]

one will come back around, and I'm sure you're waiting.

[Joe Wexler]

Maybe, maybe, maybe not. We're staying in touch. But I think, you know, the thing that Happened was because we had the. We had something in hand. We totally stopped any other searching activities. So we, we pipeline dried up. You know, we kind of took a week to lick our wounds and then said man, we gotta start again almost from scratch. So that was a good lesson that a. You know, it's not done until it's done. But also if. If really you're wanting to do this, you gotta keep that engine going until it's done. Sure.

[Interviewer/Host]

Very hard to discipline oneself to do that. But yeah, yes, you're definitely not the first searcher.

[Joe Wexler]

Due diligence legal documents and let. So. But yeah, it was a hard. That was a hard lesson but a good early one for sure. So we got back back to it within a week or two. We did a. We actually sent out physical letters. So we. Good thing about home care is they're listed on every state's website. You can find them pretty easily and find their contact information. So we took that whole list. We kind of lit in this test, looked at websites and said which ones look legit, which don't. I think we had like 24 companies that we said let's go try to talk to them. We sent out 24 letters. I think four or five of them got returned to sender. But I had six phone calls, two offers and one closing out of just that one letter, which was pretty crazy. So yeah, we did that. We did that acquisition. Pretty small company. I think it was a million dollar acquisition, so not a ton of cash. Small team. 280ste maybe bought it for a million dollars. Probably smaller than we wanted to do and certainly smaller than that first one we were looking at. The seller was pretty clear that he wanted out. He had bought it about five years earlier from the founder. Founder was still involved as a nurse. And he, he did it just as like a little investment. He was engaged early, went back to his regular job and, and when he got our letter said yeah, maybe it's time. I'm not really doing this anymore. So it was a timing situation that worked out for us.

[Interviewer/Host]

And, and why did you like it, Joe? I mean it's. That's very small for a guy, for a lone entrepreneur, let alone two of you. Now obviously you're going to say, well it was one of. It was going to be one of my portfolio. So, so this one didn't need to. To be. It wasn't going to be my sole source of revenue. But still, especially if, if you're. If your goal here was to work intensely in the business for a while and Then step out and have it kind. You'd want that to be self growing from a larger foundation, would you not?

[Joe Wexler]

Yes, no doubt. And in hindsight, having a little bit more cushion might have been good. So. No, what we liked about it is we liked the founder who was still involved. Like I said, she was a nurse. She was super passionate about it. They had a great reputation. Some of the things to make it more of a professional business that, that that nurse founder didn't necessarily have the acumen for that subsequent buyer put into place. So there were some systems, there was some good marketing things. So there were elements of that part of it that we liked and I think we were excited to have something, to be honest, that that looked like would be more upside than downside, even though it was small. So my, the partner on that, he didn't plan on quitting his job, so he wasn't necessarily needing to replace an income. And I had set my mindset as being pretty long term, so I wasn't counting on a lot of income from that from the first acquisition anyway. And I had, I was doing some consulting on the side and getting a little bit of kind of keep the lights on money for the house. Interesting. Yeah.

[Interviewer/Host]

And the founder was going to stay with you as well from the same continuity.

[Joe Wexler]

Yep, yep. Now fast forward to post closing. We uncover a bunch of stuff that it was more of a falling knife than, than we had anticipated. And I think the seller didn't even realize it, to be honest. I don't think he was disingenuous with what he shared. But as we got into it, there were some things that were trending in the wrong direction and within the first four months of ownership, the entire office turned over. So here's my partner and I owning this thing and we don't know how to do anything yet really and we have to completely restaff the business. And in that case, my partner specifically did take on like running payroll and things that you don't ever expect to do. So that was a tough one, but it's great. Now the, you know, we caught the knife thankfully early on and,

[Will Smith]

and wait,

[Interviewer/Host]

Joe, when you say the entire office staff turned over, does that include the founder?

[Joe Wexler]

Yes, that includes the founder. Yeah, that was our.

[Interviewer/Host]

So the only people that were that didn't turn over were the fields care providers. Correct. Sorry, what was that word?

[Joe Wexler]

Caregivers.

[Interviewer/Host]

Caregivers. Thank you. Yes, the caregivers. Wow.

[Will Smith]

Now you know, you say this with

[Interviewer/Host]

a chuckle now, but this would be. This could, you know, if I were interviewing Maybe somebody else. This would end up as a horror story acquiring minds horror story episode. I guess you guys both had cushion, right? I assume this was an SBA loan and there was a personal guarantee. By the way, what was the acquisition price and structure, if you would?

[Joe Wexler]

Yeah, it was a million dollars. It was about 86% SBA loan, maybe, maybe 80, 81% SBA loan, something like that. The balance was cash and we had a no seller note, but we had a holdback, a pretty meaningful holdback which we ended up having to use. So, yeah, probably about 150, $180,000 cash. The rest holdback and SBA loan.

[Interviewer/Host]

And how much was the holdback?

[Joe Wexler]

I think it was 15%.

[Interviewer/Host]

And how, how is that structured exactly?

[Joe Wexler]

It was pretty much reps and warranties holdback. I think we had 12 months. At 12 months we had to pay 50% and at 18 or 24 months, the balance of it. Some, it's a long time ago, but some, something like that.

[Interviewer/Host]

And that money is sitting in escrow.

[Joe Wexler]

In escrow, that's right. Yeah. It was funded at closing and put into escrow, managed by a third party, which again, I'm glad we did it that way because we ended up having to use it. One of the things we discovered was that the company had never paid overtime. People worked overtime, but they never actually paid overtime dollars. They just got straight time for however many hours. And the thing that was trending down was the staffing person in the office would just call the same two or three people every time a shift needed to be filled and wasn't kind of filling the pipeline of caregivers to be able to take on the work. So we had this reducing number of caregivers and a ballooning amount of overtime and suddenly three plus years of overtime that had never been paid.

[Will Smith]

Wow.

[Joe Wexler]

So we fixed it all. It was hard. We obviously changed the policy going forward that if somebody works overtime, we're going to pay overtime, we're going to manage overtime, we've got to do some recruiting, but we're also going to go. We ended up making the decision to make everybody whole on their three years of overtime before we own the company. I think it was maybe 60, $70,000, something like that, that when we brought it to the seller and said, hey man, you haven't been paying overtime. This, this IRS has long arms. This is, this is something that A, is the right thing to do for the employees, B, we want to keep them, but we also don't want to get sued if somebody becomes litigious on this thing. So, you know, the, the staff obviously appreciated it. So for some of them it was the largest check they've ever gotten in their lives. And they weren't expecting it, probably were not expecting it. And we made sure that we're changing the policy going forward. But that was a fun time. Like you said, it could have been a horror story. We never had to put any additional capital into the business, which is awesome. I think we only had to tap into the working capital line of credit once or twice just for short term cash flow things. But. And I think turning over of the staff, like I said, the seller was not disingenuous with things when we bought the business. He said the team is fine, but it's probably not the team you want to build the company around going forward. So we knew going into it we were going to have to retool the office team. It just happened a little sooner than we thought. But we had already been in the process of looking for a new administrator to take over the business who would then build her team. So we, we were in it a little bit more day to day than I think we, we thought we would need to be in those first couple of months.

[Interviewer/Host]

And you, were there anything, was there anything else in the business that like, once you fixed that, was it kind of back to the growth that you. Growth plan that you had envisioned?

[Joe Wexler]

Yeah, I mean, I think with home care you learn especially when it's kind of small. It's, you know, the nature of your clientele is that it, it can turn over for obviously sad reasons. So just learning the flow of it felt like for that first year or two, we'd take one or two steps forward and then get hit with something that took us back a little bit. So that stabilization period for us was, was probably longer than we thought it was going to be. Again, never went negative, never, never missed a payment or anything like that. Never had to add more capital. But once we got the right team in place and the dynamic in the office was grooving, we were very much hands off.

[Interviewer/Host]

And how long did that take?

[Joe Wexler]

I would say the first time we felt really, really good about where it was was probably a year in. Okay. You know, the, the new administrator had been there for maybe six months at that time and we had a couple of good office people in there. So it was, wasn't bad. It just was kind of not, not really going anywhere for those first, those first few months. And it took us a while to get caught up on that. So.

[Interviewer/Host]

And this was B.A. south Carolina. So this was local to you in Charleston?

[Joe Wexler]

That's right, yep. All right.

[Interviewer/Host]

And so Joe, despite the falling knife nature of this and the small nature of it, you. You decide to do more acquisitions. Although maybe because it was so small, you decide to do more acquisitions.

[Will Smith]

I just, it just helped me understand

[Interviewer/Host]

like how you were able to do that, comfortable with doing that when everybody else is. Is not and we're told not to. Um. Is it just because of. Yeah. I mean really.

[Joe Wexler]

Yeah, I, I guess I hadn't read enough of the literature for to advise people otherwise. But, but it just, I had the goal or the vision of what I wanted to create and I wanted, I just marched towards that. Even the days when I was working in that home care business, for example, there's nothing still for me to do like the whole day. So I might go physically sit in the office, but I'd be spending at least half of my time or energy looking, looking at another cup, looking for another company or doing some of the consulting stuff.

[Interviewer/Host]

Well, I should say too that as much as I try to emphasize to the audience how hard this is and you know, discourage everybody from doing it, only half joking there the, and, and, and there are of course our horror stories and there are plenty of catching of a falling knife stories and transition itself can just be choppy even if it ends up fine ultimately. Okay, so despite all that kind of negative hard stuff, there's also I, I've, you know, later caught up with guests or even in, by the time they come on the show.

[Will Smith]

There is also a sense of like once you've stabilized things,

[Interviewer/Host]

it doesn't all like there's a lot of, there's a lot of searchers who once they've stabilized their acquisition, find that they actually have excess capacity. It's not, it's not a 40 or 50 hour a week job depending on the business they bought obviously every and

[Joe Wexler]

the roles but take on in that business.

[Interviewer/Host]

Well, and because you went into it so intent on. I am not buying myself a job. You were, you were going to be somebody who hopefully emerged on the other side with a lot more capacity. You were going to need that for your vision.

[Will Smith]

But I guess I'm just calling out

[Interviewer/Host]

the fact that despite, you know that there are a lot of examples of, of people who are like huh, I'm actually, you know, now that the transition is kind of, I'm through, I'm on the other side of it and things are stable. I got some time on my hands here. So anyway, just something for the audience to not discount as a possibility, a happy possibility.

[Joe Wexler]

No, it's true. Absolutely. And the trick is not filling up that time. You know, it's like the, it's probably not a fair analysis, but the women's personalis like no matter how big it is, it's. You're going to fill it. So no matter how much time you have, you're going to fill it with something. I was intentional about filling my time with not just the one thing that was there, but my one thing being that bigger vision. So.

[Interviewer/Host]

Yeah.

[Joe Wexler]

Yeah.

[Interviewer/Host]

Okay, great, great. And by the way, before we. Because I, I do now want to hear about the, the second and third acquisition of this year, of this first year. The. But, but a home care business. A million dollar home care business with call it 280 of SDE is. There's a lot of those on the market actually. Is that for the audience for a would be acquisition entrepreneur? Do you. How do you feel about that profile of business for somebody to go buy themselves?

[Joe Wexler]

Yeah, I really like it. I mean the things that attracted to us, attracted us to it at the time was. It was still very fragmented. I think it still is pretty fragmented. You got a good, you got a good tailwind with the population that's aging and the desire to stay at home. And if you build the right systems and take care of your people, then it's a pretty good model for just great cash flow. So I still like it a lot. That business has doubled kind of in the last, I'll say two to three years again once we got that team in there and some of those things moving like clockwork. It's been great. You know, we didn't take any money from it for the first two years, but now we have a regular monthly distribution that, you know, when I didn't count on it, it was fine. And now that it comes in, it's like, oh, this is kind of cool. You know, this is great. And, and I don't remember the last time I was in the office probably four or five weeks ago. So.

[Interviewer/Host]

And, and so it's a $2 million business now.

[Joe Wexler]

Yeah.

[Interviewer/Host]

With 25% margins. Call it better, maybe 28% margins.

[Joe Wexler]

Slightly better. Yeah. Yeah.

[Interviewer/Host]

Wow. Wow. And you're now six or seven years into your SBA loan. So that's going to fall off here in the next couple years.

[Joe Wexler]

Another thing that we got the SBA loan on those first two acquisitions before the interest rates went crazy. So even when we flex the underwriting for interest rates to increase, I don't. It went from five and a quarter to 11% both of those acquisitions. That's real money. So yes, we are looking forward to that. We're starting to chop away at the principal which we hadn't done for a while. So that'll come soon. Yeah.

[Will Smith]

The team at Pioneer Capital Advisory has started offering peripassu debt for SBA business buyers. That means they can help unlock up to $3 million of conventional debt on top of the $5 million limit of SBA 7 loans. So Pioneer can structure larger, more complex acquisitions. Listen to our story with Anika John from one of their clients who did just that, buying a $10 million business as a first time self funded searcher. The Pioneer team has closed more than 100 SBA loans averaging timelines well below industry standards. Founder and owner Matthias Smith and COO Valerie Stash bring over two decades of SBA lending experience. Matthias and Valerie have a full bench of analysts and associates who work your deals with them. A true deal team.

[Interviewer/Host]

Not just a single point of contact.

[Will Smith]

Visit pioneercap.com or click the link in

[Interviewer/Host]

the notes okay, this is all we're only halfway through year one. I want to get through year one because I also we of course we need to leave time for what you're building today and how Blue Line has evolved over these last seven years. So let's quickly hear about your second and third or second and third fourth acquisitions in that first year.

[Joe Wexler]

Second one was similar. This was a different thesis than the home care one. It was more manufacturing distribution focused. Most of my clients when I was in consulting were manufacturing distribution type clients. So I understood a lot of that world. My last consulting company was healthcare. So between the first 10 years and the last five years of my consulting career I had a lot of manufacturing distribution and then I had healthcare. So part of the home care business was I understood enough of that ecosystem to bring some value there and then same thing on the manufacturing side. So this one came through a broker. It was listed on on that broker's website. I kind of spent a lot of time kissing frogs on the broker list if you will. I didn't spend one minute ever on biz by sell, but I did network with a bunch of business brokers. There's a manufacturing company 35 plus years, second generation owner outside of Charlotte, North Carolina. So not in my backyard but something I could get to. Maybe a three hour drive at most. And you're, you're going to what did

[Interviewer/Host]

it manufacture and distribute.

[Joe Wexler]

It's a metal fabricating company. Custom metal fab, big things. So a Lot of. Not necessarily like structural steel, but big elements of large buildings, maybe architectural type of installments they would help build, like the lines for other manufacturing companies, the manufacturing lines themselves. They also had some unique capabilities and insulated foam panels that would build large H vac systems for hospitals and other institutional buildings like that. But it was pretty much all custom.

[Interviewer/Host]

So project based revenue.

[Joe Wexler]

Project based revenue, yeah. They didn't have any widgets that they were cranking out.

[Interviewer/Host]

And what else, what other bullet points about the business could you share again?

[Joe Wexler]

35 years. I think the biggest thing was meeting the owner and the team and getting comfort on what it was there. Their unique capabilities weren't much different than any other metal fab shop, except their building was massive and they were used to building very large things that most shops like that didn't have the capacity for. So they had some unique differentiation. But I had a great, just a great feeling about the team and the owner, the, the, the seller who now, five years later, I mean, I talked to him yesterday and he's not there anymore. So.

[Interviewer/Host]

And numbers about the business.

[Joe Wexler]

$750,000 EBITDA, $2.5 million acquisition, 90% debt. So some of that was a seller note.

[Interviewer/Host]

The balance was sba and the plan there was the same, which is your involvement, your intense involvement for some number of weeks or months and then stepping back out. And were you living at the business or living up in Charlotte? How are you managing this three hour?

[Joe Wexler]

I was not. So for the first, call it two and a half to three months. I would drive to Charlotte every week and spend maybe two days a week there. We had, you know, it was a little bit larger of a company. So they had some really well established office folks and team. There was maybe 25, 30 employees, 35 employees, maybe all in the agreement with the seller was that he was going to stay on for a year. His first, first three months would be at 100%, next three months would be at 75%, third three months at 25%, some, some 75, 50, 25. And then out after a year with his ability to get the seller note predicated on his support of us, helping to find, hire and train a new general manager. So my time in those first three months was spent once again establishing the relationship with the team, understanding the processes, the people, the business to be able to help them make decisions and recruiting a general manager to come in and take over the reins. We got lucky. I mean, honestly, we, we found a really great hire who was. Spent his whole career in that field. In that area. He started I think day like 75 of our ownership, something like that, and just did a tremendous job kind of professionalizing things in the business that historically the previous owner, who was a great metal worker, didn't have in place. So everything was on paper. They had no idea what their cash flow situation was like. I mean, they took, they had all the data, but they didn't really ever use it. So there was a lot, a lot of opportunity there.

[Interviewer/Host]

Okay, and what does that business look like today?

[Joe Wexler]

Yeah, it's done well. The fir, like the first year after we owned it was, I think its biggest year in history, which was cool. We've had to make a ton of structural changes to the business. You know, they hadn't changed pricing, changed pay rates, done any technology. So we, it took probably a year or two to kind of bring it to current market levels on those things. Probably the thing that we haven't done as well as we wanted to is the sales and marketing side. So there's, there's never been a sales function at the business. We've had a couple of people through the door to try to take that function over, probably with not any success, I would say. So it's basically holding where it was after that first year. We actually are under contract to sell it to a local, I would call it a competitor. Although there's complimentary services, I would say. So it's. It'll be in great hands. The team is all still there. I think everyone still really believes in what we're doing and supports us and we support them, but it's been sort of status quo. And to point about the interest rates, you know, for that business at that loan, I think it was our interest rate payment. Our interest payments alone are like 200 plus thousand dollars a year. It's crazy. Yeah. So yeah, it's been, it's been a great company to own. I love the people there. It hasn't like rocket shipped like we wanted it to, but it's. But it's just been solid. Great. Okay.

[Interviewer/Host]

And business three and four.

[Joe Wexler]

So business three is a little bit different. This one is a telehealth company that now has 160 employees. From when we started, it was maybe like 25 or 30. I. My partner in this one is actually a large health system. It's the largest health system in the state of South Carolina, Only academic medical center. They were a client of mine when I was in that last consulting role and they wanted to commercialize one of their programs. So a little bit different in That I didn't necessarily acquire an existing business. I acquired a capability within a health system and went and created a business out of it. So it's been pretty fascinating. You know, again, my early days, I was sort of just not necessarily throwing spaghetti at a wall and seeing what stuck, but my goal was to acquire assets that ultimately would be part of a holding company. I went to market as Blue Line Ventures when I went to go buy them. But none of those assets were ever owned technically by Blueline Ventures. It was just me or me and that partner. So the telehealth company is similar. They're a little bit different. Basically had zero.

[Interviewer/Host]

How did you price a. A business that wasn't a bit. Or a, as you put it, a. What did you call it, a function or capability that wasn't even generating revenue. How do you price something like that?

[Joe Wexler]

So with. With what I didn't know at the time, but what I've learned since is like really good negotiating because. Because there wasn't really a value there. They just gave it to me, which is crazy. So they said, here's the team, we'll split it 50, 50. We'll be your first customer. Let's see what happens. So.

[Interviewer/Host]

And they knew you and that's how they were able to trust. I mean, they wouldn't do this to any searcher off the street.

[Joe Wexler]

Correct? Yeah. Yeah. So a little bit more like a startup in that sense. But it was still a really established program. They had all the processes and how to do it was there. I just had to go, you know, before I. Before we agreed to do this, we did all of the market research to see that's viable product market fit. And that's been validated, of course, in the last five years. But it's been.

[Interviewer/Host]

And this was pre. Covid. This was still 2019.

[Joe Wexler]

This was. No, this was 2021. That, that last one.

[Interviewer/Host]

Oh, I thought, I thought your first three acquisitions were all in the first year.

[Joe Wexler]

Well, I guess they were all within a year of each other, give or take. So my first acquisition was 2020. I started my search in 2019. First acquisition was 2020. And then. Yeah, this was that last one.

[Interviewer/Host]

Gotcha. Well, that third one sure seems like something where it's going to require all of your attention and involvement. I mean, you're standing up a commercial entity.

[Joe Wexler]

Yeah. So of those three, it's definitely the one I was most active in. And again, I wasn't. I had, I had a role in that one way more so than I did in the other. The Other two. And yeah, that was the CEO of that company, whereas I never even had a title or an email of the other businesses. But.

[Interviewer/Host]

And how long were you acting as CEO of that company?

[Joe Wexler]

Technically still am, but now have a team that does all of the things and kind of moving towards an exit there as well. So.

[Interviewer/Host]

Okay, yeah, so now you're. I don't know, it's. You started your search in 2019, first acquisition, 2020. This latest acquisition, 2021. So call it, I don't know, late 21, early 22. You got three businesses, you've got a lot of experience under your belt doing this acquisition entrepreneurship thing. How are you feeling? What do you. Has the vision evolved, you know, as you, as you kind of pick your head up from your hard work? What are you thinking at that point in the story?

[Joe Wexler]

Yeah, I mean, I was. I was feeling great. I mean, it's, it's a lot of responsibility. It's. It doesn't feel risky to me because I've been doing it for a long time, but I, I can see where the perceived risk can sneak in for folks and, and if you, you know, it doesn't take much to make a bad decision and have things go south. Um, you know, I, I had a couple of years of feeling like, okay, this is about all I can handle and I want to make sure everything is good on. At these, at these businesses. The whole time I had still had this idea of doing more and more as things go, but I, I couldn't do it just myself. And if I was going to go do the holding company thing, what the. One of the purposes of that was that there's a team and some resources at that holding company level that can support the operations of those businesses. So after a couple of years of owning these things to your point, my capacity started to go up and I wanted to go do more, but I didn't want to have another incremental business on, just that got stacked up alongside those other ones. Um, one of my partners in that metal fabrication company was. He and I always kind of talked about what, what the next step would be if we wanted. When we wanted to do more. And we threw around a lot of different options between a fund or a multipurpose vehicle to go. To go put acquisitions in almost like a syndicate model. If we were going to do it, what would it look like, what we would need? And we probably talked about it for two years. The consulting I was doing was all on M and A, so almost like an M and A advisory role. And Brought somebody into that world that I've known for 25 years. So the three of us kind of said, all right. At one point the partner in the manufacturing company and I looked at each other and we said, all right, it's time, let's, let's like go to the next level.

[Interviewer/Host]

I'm sorry, Joe, wasn't the next level just more, more assets in the portfolio?

[Joe Wexler]

Absolutely, yeah, it was more assets in the portfolio. But what, what we needed was a structure that made, that made them cohesive instead of just like adding them on. And part of that is going to be, you know, you heard me say I'm working on exits on some of these. It's okay. Anything that was kind of before the, this structure was created, any legacy things like let's clear the slate so that we're all focusing on, on this one thing. So we ended up Blueline Ventures became more of what you stated at the beginning of the show, more like a private equity company. I would say we try to stay a little less traditional, more like a searcher model that you mentioned. But we said, okay, let's do it in a fund after exploring all those different options. So Blueline Ventures now has five partners, including myself. The gaps that we filled in were the things that we didn't have, like investor relations.

[Interviewer/Host]

Joe, let me pause you just because some follow up questions before we get into Blue Line. What it looks like today, which we do want to spend time on first. You know, it's already been said, but it just bears repeating that your skill set was just great for this because you basically you were not only did you have good experience of making, as I said earlier, prescriptions and then motivating teams to implement those prescriptions, but you were also kind of at home parachuting in to a completely foreign business and quickly getting up to speed, feeling comfortable in this environment where you're this foreign agent and you know, you know, wearing that comfortably.

[Joe Wexler]

Like.

[Interviewer/Host]

And, yeah. And, and so because, and I, I guess kind of what I'm driving at is not just your hard experience or your, your like, your particular skill set, but the kind of emotional personality piece of this that you're just very comfortable in that environment. And one of the things in this world of buying businesses that first time acquisition entrepreneurs probably that we don't talk about directly very often, but it's behind everything is just like rolling into a business as the new guy.

[Joe Wexler]

Yeah.

[Interviewer/Host]

As the new owner and boss and how uncomfortable that is and all the many ways that that can unravel and be interesting. And so on. I, that's, that's really the meat of this podcast. So that whole, that whole element for you was what you'd been doing for 15 years, rolling in, understanding things quickly carrying the authority and credibility or projecting authority and credibility anyway. So I don't know if you want to add to that. I was just mostly making an observation.

[Joe Wexler]

No, I appreciate that and honestly, I haven't said this for a while, but probably 90% of my time and energy spent with the companies is a hundred is all on the. Just the people and the credibility and the relationships. And I think it's a unique superpower that I don't give myself enough credit for. But I think having all those 15 plus years of doing that and having to walk into a room knowing I know nothing and still be the expert or learn enough to be able to be valuable in that room and get the people to follow or be inspired not only to trust that I know what I'm talking about, but also that they want to listen to me. And that was what makes a good consultant in my mind. And I absolutely agree that that is one of the things that allowed me to go into these otherwise pretty tough settings to penetrate and, and have the teams feel, feel comforted and feel like they're in good hands and that it's a safe place for them to, to continue their, their journey and get excited about where it's going. So I appreciate you bringing it up because it's something we talk about a lot still. And yeah, it's, it's, it's the most important thing for sure.

[Interviewer/Host]

Well and it so many listeners and would be acquisition entrepreneurs if they don't come from a financial background, feel intimidated by their lack of knowledge when it comes to finance. And so everyone is always like I haven't done private equity before. I haven't done, I didn't come from investment banking. And so that, that's really what intimidates more people. But it's almost sounding like a consulting background is, is more valuable than a straight financial background based on you you a data point of one you.

[Joe Wexler]

I think so. I mean the financials as table stakes, it feels like to be honest. I mean yeah, I have an MBA and I had to do a bunch of financial stuff in consulting. So I was, was and continue to be comfortable with the financials. But that's not the thing I'm best at by any stretch where I've heard somebody say there's more lie, more, more lies have been told with Excel than with Word. You can make the numbers do it. I feel like I've heard that.

[Interviewer/Host]

Yeah.

[Joe Wexler]

But yeah, I appreciate you bringing it up because it's the most important thing. And I think you were getting to this point where, okay, I've got these, this kind of small number of businesses that I want to go do more. How, why, like how do you feel comfortable doing that is because I felt great about this, about the teams and where the things were headed and my time requirements there.

[Interviewer/Host]

So, so, so Joe, and maybe the answer is what we're talking about, that you just kind of know how to do this and it's hard to condense your knowledge into, you know, a one minute sound bite. But what, what, what do other acquisition entrepreneurs get wrong if they aspire to do what you're doing? They don't want to be the owner, operator. They want to be working on the business or on multiple businesses and they just can't figure it out.

[Joe Wexler]

The probably the most common thing I see or hear is that they be. Because when you own the company, obviously you want to protect your interest in it. And the easiest thing to do is go into the weeds and kind of micromanage the thing so that you feel like you're protected. Whereas my experience has been the longer leash you give or the more opportunity you give people to operate at their highest potential, that's when you're going to get the most benefit. So it's hard. You kind of have to let go and trust or let people fail. And as long as you have the, the right understanding of the business and the right insight into it, that's where you have to get comfortable with. But I see most people kind of falling back into the weeds and maybe leaning too much on the weekly financials to, to drive hard rather than let the process work and trust the people that you have in place to do their role.

[Interviewer/Host]

And a key part of this formula working is, is finding good leadership for your businesses, gms or whatever the, whatever the business calls for. Maybe it's more than a gm, it's an executive. And so finding those people is notoriously hard. Is there anything that you can share about how you've been able to recruit or find talent to run these, your businesses for you?

[Joe Wexler]

Yeah, I mean that's something that we're always working on getting better. We've done a number of things on that front. I can tell you where we are now and the journey to get from just throwing something out indeed to now is big. But we've got a whole process of a, how we define the role there's a great book called who I think I probably even have it. Yeah, right here that just has a fairly simple, straightforward process for how to identify the person for the role. But it starts with really identifying the role and creating a scorecard for what you, what you'd want that role to do. Then there's the, now the search process which leverages our network. We have some search firms that we'll use that we'll work with or independent folks, but mostly the network and how we get the word out there. We use Culture Index pretty heavily, so we're, we're identifying what attributes of a leader we need for each role and then matching the candidates against that and pretty strict about threshold there. And then we do a very rigorous interview process that's usually over a couple of days, full day in person. But that's something that's taken time. Sometimes it's like we need a warm body or early on it was I need a warm body that can spell the thing that we're doing and hopefully we get them there. But now it's, you know, we have a little bit more resources to do that really well. But that's as you mentioned, the probably the most important decision we can make in any of our companies is who we hire to run it if it's not already there. So.

[Interviewer/Host]

Okay, great Joe. And then two more questions before we get into Blueline Today. The Holdco model of multiple disparate businesses, as I said, is popular. People like the sound of it. They look at Warren, Warren Buffett or whomever. But I think the, the strongest rationale for it is really just the argument of diversification that you have a port just like any portfolio. You have assets that, that hedge each other, not doing it for doing its sake. And I think that actually gets lost that the whole reason to have a Holdco is is, is people aren't making that are the diversification argument. Of course they do sometimes, but often it's just the sexy sound of it that makes people want to go do it. So in your case, how did you decide on, on that model either when you went into it or maybe more specifically like after you'd done a few of these, maybe after that third one y that continuing to buy disparate ass assets was the best use of your time versus let's say doing a home care roll up and going all in on home care, which as we know is a, as you said, fragmented, growing and huge industry.

[Joe Wexler]

Yeah, I mean honestly, I think it came down to the fact that during the search and once we got into the structure. There's just so many great businesses out there. Now if we get too far away from, if, if we're in industries that have different customer types and doing software and retail and, and construction, I mean that gets really hard. So we try to, we've, we've narrowed it in. But I think the diversion, the diversification argument is real. You know, Hold. I use the word holdco. That was the. I, I again, I didn't have those words when my, when my vision was on paper the first time. It didn't say Holdco at the top of the paper. Just said when I own a bunch of great companies and give people great places to work. So, so when we went out to do that next set of acquisitions into a structure, Holdco, whatever it was, we got a little bit specific. So only B2B companies that can't be upset by Amazon or AI at least not in the immediate foreseeable future. And a couple of other characteristics like that size wise and all that, which has. So we, we ended up looking at a lot of different companies across what was a sort of general and vague thesis or set of criteria. But as we got into it we've identified I would say maybe four to six verticals that we really gravitate towards. So it's diverse. Yes, it's diverse between market segments geographically, but they're all, they parallel to each other in terms of like their, their business models. So the things we'll get very good at that specific industry and that specific business. But we get, what we get really good at is how to run those types of businesses that we can repeat and stretch out over all the assets. If that makes sense.

[Interviewer/Host]

Yeah, it makes sense. But then why just again to go back to kind of an extreme other end of the spectrum, I guess maybe you answered it in saying that diversification was important to you. Why. But why not? I'll ask you directly, just go like all in on home care.

[Joe Wexler]

I think we like a roll up.

[Interviewer/Host]

Why not do a roll up? If you're, if you're going to be doing the motion of M A and integration and, and motivating new teams and implementing improvements, why not do that all in a single industry?

[Joe Wexler]

No, we still might. You know, I think one thing that as Blue Line has evolved and this all again started from the original idea in 2019 and has carried through as the team has grown. But Rollup has some traditional private equity constructs that don't necessarily match with what we want this thing to be. Big picture. Um, so we are not going in with a lot of leverage right now. We're, we're absolutely people first and a lot of people say that, but we spend a lot of time to make sure that the way we're doing things aligns with basically our motto, awesome stuff with awesome people. We want to create the biggest positive weight we can. It sounds altruistic, but really it's self serving in that if you really take care of the people, they're going to propel that business further than if you don't. We firmly believe that and have seen that. So we underwrite for long term holds, buy a business for, you know, we underwrite as a 10 year hold. Obviously we can do things sooner or later, depending on how that goes. But, but that's the, that's the idea so that we can be patient and not have a traditional private equity pressure of returning investor capital and having to make kind of short term decisions to do that. And a roll up in its traditional sense, high leverage, high speed, you're getting in and out as quickly as you can. There will be cases where we buy a business, it becomes a platform because we love that industry. There's opportunities to buy more of them and we put them together and maybe those will evolve into something that looks closer to a traditional rollup as you said it, but not while sacrificing the other things we said, the people first, the relatively low leverage. We want to create a safe, safe bus for all of the people to be on, if you will. Also, the reason I didn't do a home care roll up directly to your point was because it was with a partner that wasn't going to be part of the, of the new thing. So it was kind of clear in the deck and let's move forward with the skill sets that we have over here.

[Interviewer/Host]

Okay, Joe, you, you've already started to answer it, but when you looked at for Blue line Ventures version 2.0, what it now is and considered the models which you, you just described a big part of it. What other things did you consider? Like what were you trying to solve for and how did you arrive at where you have arrived? So let's get right into that.

[Joe Wexler]

Yeah, so again, we wanted to go buy more assets and we recognized a couple of things that were going to be important. One, we were going to use investor dollars for the first time. Everything I had done previously was me or me and a buddy at a bank. So we were going to use investor dollars for the first time and we knew there were different ways to do it. You could Do a fund which. A blind fund traditionally by saying we're going to go raise some dollars from people that know and trust us even though we have limited track record. And then we're going to go find the businesses to acquire that generally match what we told them we were going to buy. Or we can go find a target acquisition and say, all right, we have this deal. Who from our network wants to participate in this specific deal and do as much of those as we could. Or the traditional Holdco or the Holdco model, which is a little bit different where you might be raising deal by deal, but people would have access to everything different than a fund. Evergreen. You kind of have to keep liquidity things in there. And there's maybe some variations of each of those. And from advice from everybody saying any one of those is better, we decided to go the fund route. And so BLV Fund 1 was Blue Line Ventures. First investment vehicle is a $25 million equity fund. So we raise, raising, almost done raising $25 million. And then the key underwriting elements are businesses with 1 to $3 million of EBITDA in those, in that kind of B2B services type of world I just explained will pair that equity with another 25 million or so of debt. So 50% debt, 50% equity, not higher than that in any situation. And great businesses and help help them grow. So.

[Interviewer/Host]

So that's $50 million of enterprise value you can acquire.

[Joe Wexler]

Correct? Yeah, so we've, we started that in 2024.

[Interviewer/Host]

Joe, let me pause you. So. So this is a traditional fund structure, although where it, where it deviates somewhat from traditional PE is that you're buying smaller businesses 1 to $3 million of EBITDA, which is in searcher territory, of course. We've been hearing forever that private equity is going down market and you'll bump into private equity. This range of businesses and independent sponsors which are. I would consider private equity also are active down there for sure anyway. So that's maybe not so such a deviation the long term hold of. Or the ten year hold. Let's not. I mean long, long term is. Everybody has a different definition of what that is. So let's call it 10 year to be precise. But that is still a longer time horizon than your typical five, seven year. Well a, A fund life cycle in total is I think conventionally 10 years.

[Joe Wexler]

Yeah, right.

[Interviewer/Host]

But they talk about the, the hold period of a particular portco or business with it business asset within as five.

[Joe Wexler]

Yeah.

[Interviewer/Host]

And you guys are talking about your hold periods being 10 actually.

[Joe Wexler]

Yeah. Okay, right.

[Interviewer/Host]

All right, so that's a deviation. Anything else and the kind of being the people first. But as you said, that one's tricky because a lot of, a lot of folks in private equity claim to be

[Joe Wexler]

saying the same people first. We just had. That's one. You just have to live and then you get, you know, one of the best things that we do. My favorite part of the job is talking to sellers early in the process, just hearing their stories. But then when they want to hear our story, we obviously tell that. But then we actually have them talk to companies, the owners of companies that we've bought and hear directly from them. And when that gets validated, that's, that's a, a good way for that people first thing to actually manifest in the eyes of the seller, because that's one of the most important stakeholders in our cycle to be able to have that conversation with. I'd say the other different structural element of the fund is that it's a cash flow fund rather than we take the money and investors don't get their money back until the end. The businesses we're buying are generating cash distributions every quarter. So maybe closer to like a traditional real estate model where you're getting those rents and getting paid out. We just a little bit higher cash on cash return because the purchase price relative to other asset classes are low. So unlike traditional, I'm using air quotes for those that can't see the traditional private equity model is you give them whatever a million bucks. You don't see that million bucks until they sell everything in five to seven years. Whereas our investors are seeing quarterly cash. Cash flow from their investment.

[Interviewer/Host]

So, yeah, which, which sounds great, but just to press on this because I'm sure you, you know, had to sit down and sketch all this out. There's always the argument of if cash is returned to an investor, is that the, that is implying that that's the best use of that cash as opposed to reinvesting in the business that generated said cash. And so sometimes it can be either considered a bad capital allocation decision to make a distribution as opposed to reinvestment, or it, it says of the business that it doesn't have a lot of reinvestment potential. And so that, that, that's kind of a. It doesn't speak highly of the business's potential.

[Joe Wexler]

Yeah, good, good point. I mean, we, what we do in every acquisition is underwrite a level of reinvestment in the first couple of years of ownership above and beyond what that, what that company has historically invested in itself. And that is built into the return projections for the investors. And then the the idea is after those first two or three years of curing it within our ownership, that investments are coming off of that company's balance sheet or out of its operations. But we have obviously the discretion not to do distributions if we believe that there's a better use for it within our portfolio companies. So far we've been able to make distributions to at least pay our preferred return current, which is I think a pretty unique thing.

[Interviewer/Host]

And can we get into the exact structure here that you had walked me through the pref, the split, the waterfall and how all of that plays Sal?

[Joe Wexler]

Sure, yeah. So there's a couple of different ways that the investor earns money back. One of them, there's a 10% preferred return, meaning that the first dollars that get distributed out of the fund, which is a collection of the performance of those each individual portfolio companies go to paying the preferred return for the investors. So 10%. So if you put a 100 grand in, we owe you $10,000 on that hundred thousand dollars every year. So the first 10% that comes out goes towards paying that pref. After that it goes to 80, 20 split 80% to the investor that pays down their capital contribution, 20% to the GP. Once all capital and pref is returned on the initial investment, which we forecast to be somewhere in the year five timeline. So you've been getting quarterly distributions. By the time the end of year five comes along, we expect you've gotten all of your pref plus your principal back. Then that's that split goes to 60, 40, 60% to the investor, 40% to the GP. So you've been de risked as an investor the whole way through because you've been getting your money back. And then at the end of it you still own 60% of the portfolio as a as just getting that those distributions or if we sell it the dispositions there are a couple of different share classes so that it could be it's anywhere from 60% to 70%. So larger checks get a little bit better split on the backside. But you know, when we designed it we wanted it to be a investor friendly so that there was, you know, good cash flow and the returns over the projected, that projected time were really positive. But also just have people be part of that. That same theory of being able to do awesome stuff with awesome people and just be long term owners of these portfolios. So great.

[Interviewer/Host]

And the after paying the pref every year the remaining distributions are split 80, 20, 80 to the investors 20 to you, the GPS. And that 20% is where does that

[Joe Wexler]

go to your pocket, to the operating company for, for us to continue to run the, the businesses. So someday we hope that goes into our pocket. But for now that's really what keeps, keeps the engine of the fund going, if you will. You know, outside of the investments that we've made ourselves as LPs, we've also invested in kind of the, the management of the company, Blue Line Ventures now. So yeah, ultimately that could go to our pockets. But for now it go, it goes to basically running the fund and all the operations.

[Interviewer/Host]

And so to contrast this with an, with private equity funds. So, so this is a big difference from traditional private equity, your structure here. So the traditional structure in a blind pool of private equity is 2 and 20. 20% carry 2% management of the size of on annual management fees on the amount raised in the fund. So in that 2% is supposed to go to operations. If it's a, if it's a fund of $25 million, that would be half a million bucks a year which is for five guys, not a lot of salary. Right. And doesn't go, it wouldn't afford any operation, you know, any of the additional overhead. But anyway that 2 and 20 is a typical model. You guys are this, you're not taking any management fee from the raised capital. Instead it's all coming from profits from the businesses that you've acquired. 20% of the profits every year that's distributed. Okay. And it's not. And for now you're not, you're not pocketing any of it. It's really just going to operate back into it.

[Joe Wexler]

Yeah. And we, we do get some fees, acquisition fees. There are some things that the portfolio companies will pay Blue Line to provide that otherwise they'd have to go by themselves. Like we'll do HR and finance kind of back office things and kind of charge them back for that work. But to your point, we're investing those dollars into the team that we bring on board or the technology that we bring to bear or things like that. But the idea is that we align ourselves to be able to give the investors their money back as quickly as we can because the real upside for us comes on the backside of that waterfall split, if you will. So. Yeah, yeah.

[Interviewer/Host]

Which of course,

[Joe Wexler]

yeah.

[Interviewer/Host]

In, in small, smaller sized funds that carry the, your piece of the waterfall is going to be where you're, you're going to make money here in larger. As funds get larger and larger and larger, the management fees themselves that 2% can become enough incentive, which is why people don't like that 2% number. But it really applies more to larger funds where you can just get rich off having a billion dollars under management and you don't actually have to. You're not that you care less about whether or not it performs.

[Joe Wexler]

Yeah.

[Will Smith]

Okay, now this is.

[Interviewer/Host]

So this is because it's a slightly different structure. Did you have a hard time raising

[Will Smith]

money from, from LPs?

[Interviewer/Host]

Because when, when we went out with Mines Capital and tried to do things that were just a little bit unconventional, we saying huh?

[Will Smith]

What? Huh?

[Interviewer/Host]

Yeah, and it was just like easier to go with the conventional 2 and 20 that everybody can, everybody already knows.

[Joe Wexler]

Yeah, we're getting better at the storytelling part of it to be able to make it clear, because if you're, if you're used to seeing one thing and then you see something that looks different, you're going to dismiss it out of hand. So we definitely have met some resistance when we're talking to folks that are, I won't say more sophisticated, but are used to looking at traditional private equity deals. Right. Because there's other, like the fee structure and all that's a little bit different, but so is the payback period. Our return projections are better than what? Like, you know, if a private equity company is happy with a 2.3 multiple uninvested capital, like for us, that would be. That we didn't do our job very well. So, yes, we've, we've had to do some more education on the capital raising side than if we had just a traditional model for sure. So there's, and we've definitely lost some folks that are like, it just. I don't, I don't want to, it doesn't fit in my box amount. But to be honest, like most people, you know, love to hear from the investors too, but it's, it's a little bit different in a good way for them. You know, we only guarantee we can provide anybody is transparency and, and partnership performance. Obviously, we'll do our best, but we really stick to that one, that transparency part and have gotten great feedback from the people that have been with us from the beginning. So we've made mistakes, you know, and I'm not saying the structure is perfect. And I'm sure once we get done with Fund one, the next vehicle we put together will look a little bit different from the lessons we learned both on the capital raising. You know, what are some of the structural elements that we put in place that had unintended consequences somewhere else? Right. So we'll get better at all that. But, but it's been very, very well received, if not hard to explain sometimes. For sure. Yeah, yeah, yeah.

[Interviewer/Host]

Great. And okay, so you said 25 million raised plus 25 million of debt gives you 50 million of buying power. You said you're targeting businesses of a million to three of EBITDA, let's call it two, let's say conservatively, those trade for 5X. So that's $10 million of enterprise value per acquisition. So five, you'll make five acquisitions, roughly, with this first fund. Does that sound right?

[Joe Wexler]

Yeah, a little bit more. So we, we actually have already done five. So we have five companies in the fund already. We've got two more under contract. And then with those seven, I think we'll, we can decide to stop there. We'll probably do one more. So I think it's going to be about eight total companies in Fund 1. And some of them were smaller, some of them were bigger, to your point. So I would say the average enterprise value has been about six, somewhere in that range.

[Interviewer/Host]

Great.

[Will Smith]

And your partner, let's hear about the

[Interviewer/Host]

partner aspect of this. I, I, you had started to talk about it. I met not you first, but Paresh. I'd seen his post on LinkedIn about acquiring businesses. And so he and I talked, and then he put me with you. He put us together. Really impressive guy. And he is just one of your four other partners. So you're, it's five of you guys doing this? Yeah, we're not, we don't have time to hear the bios of all four of your other partners, but just a big picture. What, you know, what were you thinking there? Why those guys? Not too many cooks in the kitchen, etc.

[Joe Wexler]

Yeah, yeah. Sometimes five's a lot, right? It's a lot. A lot of opinions, but I'll say I told you about the first, the three of us that started first. So one of them was working with me in the consulting side of my attempt to keep food on the table at home. I'd known him for 25 years. We went to college together. Our families know each other. High amount of trust. This guy's super sharp. His background is in corporate finance, so that's a background I don't have. The other one was my partner in, in the manufacturing company, so we'd been working together. Super impressive guy. He did primarily real estate development prior to this. And he was a police officer and FBI hostage negotiation training. And he was on like. He was the hostage negotiation.

[Interviewer/Host]

Wow. How about that? Sellers.

[Joe Wexler]

So that was kind of the beginning of it. Bo and I. Who's the hostage guy? The cop? Real estate development. He owned a construction company. Met through a mastermind that we were both part of, that we'd both been part of since 2019. And as when he and I decided, kind of looked at each other and said it's time I kind of, we, we try to do it first, just the three of us. And had some glaring gaps in our capabilities very early on. One of them was the, the capital raising side. And serendipitously there was another member of our mastermind group that was, had been doing investor relations and capital raising and private equity for 10 years prior. And at an event I was telling him what we were doing and he was sort of thinking about making a change too and just the timing really worked out there. And the same thing happened with Paresh, who was a physician, longtime physician, Cleveland Clinic. Ended up getting into a gastro practice that did go through that private equity, traditional private equity roll up model bought by Apollo and then Cardinal Health. He was the president of that group. So he had done a kind of big boy M and A stuff. He was getting out of that and going to acquire his own small business. So we were just collaborating, helping each other out. And at some point we just said let's just do this together. So that's how the five of us came together. I would say the skill sets that we each bring are unique. For sure. There's a little bit of overlap, but for the most part we've got pretty clear roles. And then the time that we have spent making sure we are aligned on direction, vision, culture, values, our operating agreement, it's, it's crazy. Super important. Glad we've done it. But we always check ourselves and make sure everything's feeling good in the right direction. Economics in a small 25 million dollar fund like you said, aren't life changing for any one of us. But the vision's bigger than just the fund one. So we're all invested in that. We've all kind of had the fortune to have been successful in prior careers and know how to do that part of our lives. So we're not counting on this first year, first two years or whatever to be the thing that keeps us going. We've got a little bit of, a little bit of a Runway to work with which I know it's, it's a unique position for us.

[Interviewer/Host]

And are you guys just to the very day to day paying yourselves, going back to the fees that you generate? I mean, five guys. Is anybody taking home anything or is this basically all bootstrapped? Not really expecting to take.

[Joe Wexler]

Being invested.

[Interviewer/Host]

We're being reinvested.

[Joe Wexler]

We're technically charging for our time, but we're not taking the money yet. So we hope, we hope someday that once, once that flips, that we'll, we'll be able to be made whole on some of those things, but it's, it's essentially bootstrapped.

[Interviewer/Host]

And are you all full time on the fund?

[Joe Wexler]

Yep.

[Interviewer/Host]

All. All five of you full time on this fund?

[Joe Wexler]

Yep. Wow.

[Interviewer/Host]

And does that mean being operationally involved like we heard you were in your first number of acquisitions? All right, I guess everybody's got a different skill set, so.

[Joe Wexler]

They've got different skill sets. But yeah, when we buy a, when we close on a business, we, we identify one of us to be the, I'll say the steward of that asset, if you will, which requires kind of the same thing that I talked about doing with those first acquisitions. It's kind of active, active presence and engagement, not taking on any responsibilities, but being there, getting the people part right, understanding the processes and core processes and workflows, the nuts and bolts of the industry and the community, the business. 100%. We're very, very active on that stuff. And then making sure that the general manager or president or CEO or whatever, that position's solid. And most of our time is built, is focused on building the systems and processes to support the companies themselves, but not, and we're, we're there, but we're not in the business. Same same way I talked about earlier. So. And we've got a small team now. We've got an acquisitions team of a couple folks. We, we hired our first portfolio operations manager to be that a little bit maybe more ingrained in the conduit between what's happening at the portfolio companies and up to us now. So.

[Interviewer/Host]

And if you're approaching full deployment, then are you going to be raising again soon? And if so, what fund size?

[Joe Wexler]

Yep, we've just started talking about that. Well, we've been talking about it for a while, but the next, the next vehicle for us will probably be a slightly larger version of what fund was meaning same types of businesses, maybe a little bit higher enterprise value or, or, or enables us to do a few more. But we really love the businesses we've been able to see. We look at probably 350 to 400 deals, a quarter of those, a small percentage, get to loi phase. But we see so many things that just like really love these this space that we're looking at, and we know there's great businesses out there, could also be. In addition to that, some of the acquisitions we've done in Fund 1 are in the same vertical in a space that we didn't know we liked until we got into it, but that might be. That might transition into a more traditional rollup, as you mentioned earlier. So we're defining the parameters of that as well right now. But Sometime later in 2026, we expect to open the next vehicle, whatever that looks like.

[Interviewer/Host]

Okay. And as an aside, Joe, I. I feel like I've heard you say a couple times now that there's a lot of good deals out there, good businesses in this range to be acquired. What we hear a lot in ETA Searchland is that such businesses are scarcer and scarcer. Finding a business to buy was always hard, and it's harder in 2026, noticeably, than even just a few years ago. I guess the point there is, thanks largely to the growth in popularity and search. Are you so respond to that, please.

[Joe Wexler]

Yeah, no, we see the same thing, right, where there's more folks interested in this world. So who we come up against now, compared to what I did when I was starting it out, and it was just a twinkle in our eye, is a different group of people, including independent searchers. Family offices. We lost a deal to a family office, which was interesting. So. But. But I would say we've spent so much energy in getting our acquisition process dialed in that we feel great about the fact that we get. We do get a look at almost every opportunity that's publicly listed, for sure, and have a good kind of proprietary process. So we don't see, you know, maybe. Maybe we'll have a slow month or two. But for the most part, we have our deal pipeline full with opportunities that right now, you know, we can only afford to do one or two more in that. In the fund, we're having to have the chance to be selective on that. So, yeah, they're still out there, for sure.

[Interviewer/Host]

Yeah. Well, and certainly, as regular listeners will know, deal flow gets a lot easier when you're on the inside as opposed to being out on the outside, never having done a single deal. And you guys now with, you know, a lot of experience to point to and a fund and so on, you. Yeah, I'm sure you get a lot of inbound.

[Joe Wexler]

Yeah, a lot. A lot more inbound than we had. It's exciting. It's. We're. We're having a really great time. We feel like we're doing it the right way, the way we wanted to and, and taking care of the people. Not every, you know, make mistakes at every turn. Right. But it's all about how you respond to those and how you communicate those.

[Interviewer/Host]

So the mastermind you mentioned.

[Joe Wexler]

Yeah, Gobundance.

[Interviewer/Host]

It's called gobundance. You're. You're not the first gobundance guest I've had. Well, Joe, I've kept you over. Final question would be what can searchers take away or people earlier in their journey? Maybe they've already acquired a business, but you know, they haven't. They're not seven years in and haven't bought multiple like you have. What can people learn from it? Is. Is yours the inevitable ideal? If you can do it, do it. Joe Wexler's done or not. This was, you know, this is. But again, but one path of many that this, this ETA model can open to you.

[Joe Wexler]

Yeah, I mean, I'm just thinking back to my early days. I think there was no substitute for taking action. The things that propelled me further along down the path than anything else were actually getting into conversations with sellers and just, just trying to get out there and, and learn it by doing it. I don't know how to overstate that, but that's real. All the books and podcasts and all that are helpful, but there's no substitute for out there and getting out there and taking action. And then I think the other thing is not to lose sight of the fact that the people are the most important part of the equation. It's easy to financial engineer your way into a decision if you do that without the lens of understanding who's going to be around you, whether it's the one owning your company and running your company or the one a key hire there or your support team, that that's a decision that will make or break it, no matter what the financials say.

[Interviewer/Host]

Great show. Well, we'll provide a link to your LinkedIn in the show notes. The fund is Blue Line Ventures and we'll provide a link to that as well. So, Joe Wexler, thank you very much for coming on Acquiring Minds and sharing so transparently how you're building this.

[Joe Wexler]

I really appreciate it. Consummate professional man. Been listening for a long time. It's an honor to be here.

[Interviewer/Host]

Oh, great. Oh, thank you for saying that. Thanks, Joe.

[Joe Wexler]

All right, thank you.

[Interviewer/Host]

Hope you enjoyed that interview.

[Will Smith]

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[Interviewer/Host]

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[Will Smith]

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[Interviewer/Host]

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[Will Smith]

both those we have coming up and recordings of past webinars. At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business.

[Interviewer/Host]

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