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- [00:00]
Will Smith
Lots of great details in today's interview. Digipod, a print on demand service for self publishers, is a bigger business than is typical and self funded Search Our hero anika John paid 7.6 million, which means she needed 2.6 million of parapassu debt on top of the SBA loan that maxes out at 5 million. We'll hear how she structured that. Also, Digipod is far from Anika. She lives in Palo Alto while it is based in Tecumseh, Michigan. The business has two other attributes which would scare off many searchers, it is declining and it is capex heavy. Anika addresses both of these points. You'll learn about the self publishing industry, which is surging and a great fit for Anika's background in working in products for creators. Finally, listen for Anika's why she's a mom and wanted to control her schedule in a way that life at Amazon her employer just wouldn't accommodate. And she wants to spread the awareness of ETA to other women frustrated by the mom unfriendliness of high paced corporate life. So if you know such a mom, forward her this episode please. Okay, here is Anika John, owner of Digipod. If you haven't checked out Smithlist for a while, there are some great opportunities listed there right now. These are leadership positions within entrepreneurial small businesses including from a small manufacturer of an iconic American product, a 45 person design and build firm, and an ABA center for children looking to expand to multiple sites. Head to smithlist.com to check out these new roles for entrepreneurial operators and GMs and CEOs. And while you're there, sign up for the alerts so that you're notified as we post yet more opportunities from the SMB and ETA ecosystem. Smithlist.com Smithlist.com 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 are who do it. If you ask owners in the ETA and search community which insurance broker provides highest quality work, great outcomes and has a practice dedicated to searchers and acquisition entrepreneurs, one name comes up again and again. Oberle Oberly Risk Strategies has worked with hundreds of searchers over nearly a decade and is in fact led by a two time successful searcher, August Felker, which makes Oberle, a specialty insurance brokerage for searchers by a former searcher. And if you've got a business under loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. An easy, no risk way to get to know August and the team at Oberle to take advantage. Check out oberly risk.com that's o b e r l e-risk.com link in the notes. Anika John, welcome to Acquiring Minds.
- [03:41]
Anika John
Thank you. Thanks for having me. I'm really excited about this.
- [03:45]
Will Smith
Anika, you bought a business in the self publishing space you just closed June 24th. Today we're recording on July 2nd. So you are in the very earliest moments of transition. First of all, thank you for taking time out in, in this moment to do this interview. And in the spirit of drinking from the fire hose, which you no doubt are, let's get going. Start us off with a little background on you first please.
- [04:14]
Anika John
Anika Absolutely. And you can tell I'm still, I haven't even decorated my office yet. So this is very, very new. But as for, you know, how I got into this space, it's an interesting story and it really starts with my family background. My family are immigrants from India. They are small business owners. My parents have a larger CPA firm but all through growing up they had invested in and bought and operated themselves different types of businesses. So hotels I worked, you know, coordinating the maids and as a cashier. And also the one that you know is closest to my heart is I helped to robe women in saris at the India Sari palace in Philadelphia when I was younger. And so you know, I come from this just really, really scrappy background. And since then I went to law school and you know, sold a legal outsourcing company and then I went into tech both in my own startups and you know, had some entrepreneurship in the venture backed space but then also in larger technology companies. And what I realized is that you know, with AI, what's happening is that the really the power dynamic is shifting from labor and capital having kind of both having negotiating power to with AI I think what the trend I see is that labor has less negotiating power and it's really capital that is getting all the negotiating power at least for now, right until some people say I will create a bunch of jobs. And hopefully that's true. So when I was really thinking about what my next step in life is, I was thinking about my background where my heart is, you know, either being a small business owner or helping small business owners. And then I was thinking about the shift towards, you know, from, from labor having some negotiating power to really capital having most of the negotiating power and, and how difficult it is and especially in the tech industry right now. And so I kind of, you know, really, really tied all those threads together by this small business purchase.
- [06:31]
Will Smith
And when you say you were considering your next step, was that because you were ready to leave corporate or, or. I mean what I, I understand the. When you know, you want to take a next step, like really thinking through what that should be. But you, you were at, at Amazon, you'd been at in product. So why, why did you not just carry on there or go to a different company or another W2 with the spirit of what you just said, why was it buying your business?
- [07:03]
Anika John
Yeah, so, you know, I have always been an entrepreneur at heart and I had, you know, already built and sold a company and I ran a venture backed startup and then I had my first child and that is what prompted me to go into big tech. And so I always saw it as a season in life where I'm really looking for more stability for my family. I'm looking to take on less risk. And then I'm also really looking to learn how to implement technology at huge scales. The sky scale that you can only find at a place like Walmart Labs where we have a hundred million users to the site every single day, or Amazon which is one of the largest companies in the world. Disney streaming also I did a stint with them. So it was really this season of my life. My daughter is 3 years old now and we went through Covid, you know, she was a Covid baby. And as returned to office with being implemented, my daughter was becoming more and more independent from me. And there were these, you know, series of massive layoffs throughout tech. And really I saw that my friends who were mothers were being impacted the most, you know, nothing to do with performance, it was just the, the trend in technology was to give less flexibility for just life first of all, and specifically for parents, you know, and I had just a couple of requirements. I had the requirement that I needed to be there when my children woke up. I absolutely had to be there when they came home from school and I had to be there to put them to bed. I could even skip dinner with them if my husband was going to have dinner with them. But those three things were really important to me and it became less and less compatible with these return to office policies. And, and so as I really considered, you know, is it viable to stay here or even in the tech industry, what do I truly love, what my passion is and you know, what is a viable next step for me that I think will be successful if all roads led to this SMB purchase. And I am not the only person who's making that calculation. There are so many women especially but tech workers who are thinking about what their next step is. Over the past two years, there have been over 150,000 layoffs in the tech industry. These are people who know how to run businesses, who know how to lead teams and a lot of time people who are very qualified buyers because they have stock from big tech companies sitting there ready to be deployed. And so for all these reasons, I felt it was important to make the leap myself and then also to have this interview with you and get out there so that more people know that this is one option that they can consider as they're navigating all these changes in the industry.
- [10:08]
Will Smith
Well, it's funny, Anika, that theme that you just described and actually specifically as it pertains to Amazon, so I'm here in Arlington, Virginia where, as you know, Amazon HQ2 is. So I know a mom who works at Amazon and was recently talking, slash complaining about the return to office policies of Amazon and how that's going to affect her family life. So couldn't be more relevant even in my own circle. How did you hear about buying a small business? Because you were not somebody who, you know, was at business school and took the class or something.
- [10:44]
Anika John
Yes, I have had to learn a lot of things in my career just on the fly by just being a curious person. And that has really steered me my own innate curiosity. And so what led me to this particular world is that I had been advising some startups and through that I met this search fund partner and he introduced me to the idea of non private equity purchasers who are buying companies that perhaps are too low EBITDA for private equity firms to consider. And so they're really filling in that gap. So at first I was evaluating whether I wanted to have a search fund and that is a path that would have been a harder road. I think that the ideal search fund candidate is someone probably out of business school. That's traditionally who has had the best shot of getting funded in that way. And I looked at my own profile and the options available to me and I would be very qualified for SBA financing. And it's something, it's a risk that I was willing to take. And then I also would have more control if I did it this way. And so I put all those factors together and I decided that I wanted to be self funded.
- [12:22]
Will Smith
Great. And so give us some more detail then on how the search took shape, what your search looked like, yeah, so.
- [12:30]
Anika John
I actually had partnered with a good friend of mine who is just, you know, incredible and still a great friend. And together we set out to buy a business that would be large enough that we could both work in the business together. And so my friend, he actually grew up in Ann Arbor and so he was looking in this area because he felt like it was someplace that he could relocate to often. And so I continued to look mostly on the west coast. And so we kind of split, split our, our focus and, and you know.
- [13:12]
Will Smith
Did it that way And Anika, where are you based?
- [13:15]
Anika John
I am based in Palo Alto, California.
- [13:19]
Will Smith
Okay.
- [13:20]
Anika John
At the moment I am in Tecumseh where the company is, where the business is, right? Yes. Okay. So yeah, so that's how I started out. We ended up signing for this, signing up on this platform called Rejig, which is a platform that sources off market deals. And so that's how we got introduced to the company. It was in our original area and as we progressed, my partner decided, you know what, he wants to actually focus on products. So he's now running a very successful product consultancy. But I still was very interested in this business. I had run AI projects for spoken word at Amazon and so part of that was audiobooks. It was mainly podcasts, but some audiobooks. And so I really got a view of the creator economy and I really view self publishing, which is what Digipod caters to. It's a print on demand shop for self published authors. I really viewed it as a chance to serve the same type of person, a creator who has thoughts and wants to get those thoughts out into the world, whether in a podcast or book form. And so for me it was a good continuity of that career and that's why I settled on this business.
- [14:44]
Will Smith
That's great. And just tell us a little bit more about Rejig. I don't think I had heard of it before you and I connected. Although when I went to the website it looked vaguely familiar. Is it a. So it's a. It's kind of a biz Buy sell, but for off market businesses and probably a younger marketplace. I'm assuming nothing is as old as biz Buy Sell, so just tell us more about it. I'm just looking at the site here.
- [15:12]
Anika John
Yeah. So I don't know a ton about the site itself, but I can tell you that they are very good people. I had a very good experience on the site. I. This was the only business I really looked at on it because it met my criteria for the size of the Business that I wanted to acquire and I, you know, had my interactions with the seller, but Rejig was in touch. They were a good source of advice and just very supportive, just very supportive throughout the process. So. So I give them a lot of credit. They earned their fee.
- [15:52]
Will Smith
Great. Okay, great. And what is the fee structure, percentage of enterprise of sale value?
- [15:59]
Anika John
So it is 2.5% if you're not subscribed. I believe that it's 1.5% if you are subscribed. And then there's some other details that I'm not remembering right now.
- [16:13]
Will Smith
Looking for an SBA loan to buy a business. Then meet Pioneer Capital Advisory, your team for getting an SBA 7A loan quickly and at great terms. The team at Pioneer has closed 81 SBA loans in just the last two and a half years, with an average close time well under the industry standard. Founder Matthias Smith and general manager Valerie stash both have 10 years of SBA experience and, and know the process cold. There are three analysts at Pioneer who build you a lending presentation that speaks the language of the bank's underwriters and gets them to. Yes. Two account managers to guide you from underwriting to close as fast and smoothly as possible, and two sales associates ready to walk you through the Pioneer Capital advisory process. That's nine people at Pioneer. A real team to get you where you're trying to go. New owner of a business. Go to pioneer capitaladvisory.com or click the link in the notes. Okay, Anika, so tell us more then about Digipod. You've kind of given us the headline, but say again what it does in more detail and then we'll get into kind of the numbers and the. More bullet points.
- [17:36]
Anika John
Yeah, absolutely. So at the current moment, it's a print on demand shop. Right. So self published authors come to our site. They're looking for print books. So we might get the professional author who is, you know, looking to keep all their revenue. We don't take any of the revenue they prepay for printing and then we ship it out to wherever they want, whether it's Amazon or their own. Sometimes it's their own home address. Sometime it is a 3PL service. You know, we do that for them. And sometimes it's a company that is, you know, constantly reordering their manual for a certain product or a guide for their customers. Sometimes it is the matriarch of a family that wants to put a cookbook together and order maybe 25 copies for friends and family. So we get, you know, all different types of people and we really just guide them through the process to create their own bespoke, high quality book, print and run it and get it out to them so that they can get it to their customers or their family members or you know, whoever is finally receiving the product.
- [19:04]
Will Smith
And the way this business is differentiated, or maybe I should say it's, it's niche again is, is self publishing. So the, it's a niche within printing. Effectively this is a printing business, but there's printing and binding, which is a whole other thing. Right. That's about the limit of my knowledge of creating, of creating a book. But there's printing and then binding. You do them both, which I guess is, is a niche or a part of the differentiation. And then on top of that you provide the services to, to kind of hold their hand through this process.
- [19:39]
Anika John
Yes, our customer service is award winning and I have been getting to know the customer service agents and I clearly understand why they, they know the industry, they know the design process, they know what's called the pre flight process, they know all of that very well and they're really very, very good advisors to our customers throughout the process. So that's the point of differentiation, I would say. Also what customers have told me I'm going through, my initial stage of doing customer interviews is that the quality is better than any of the other solutions out there, both for paperback and for hardcover. And also our speed. We're able to get author proofs, for example, within just a few days. Whereas I've heard Amazon KDP will take weeks. And Amazon's a big company and having worked there, your bias for action and speed is one of their strong points. So I'm not sure why that is. But we move fast even with very small runs. And so that is what our customers have told us. That even though right now it's solely a print company, that the quality and the speed bring them to us rather than to our competitors. And over time that status of just being a print company is going to change what I want to do. Being a product person is really understand our customers and understand their journey from deciding that they want to be a self published author to holding that author proof in their hand and even perhaps helping them market their book after. I want to create products and services all along the way to help our.
- [21:25]
Will Smith
Customers and to the customer again. And maybe the broader market you described, I guess the top customer would be somebody who wants to put out their own work of fiction. And then, but then you also gave examples of companies who might want to publish Some sort of guide or manual matriarch and the cookbook and so on. Can you segment that for us? Is this, is this, you know, 80, 20, 80%. Are the people who want to put out their own book of fiction or is it pretty diversified across those different use cases or customer segments?
- [21:59]
Anika John
It's pretty diversified. One of our top examples is actually not. Not a novel. It is a adult coloring book.
- [22:07]
Will Smith
You're kidding.
- [22:08]
Anika John
And those, those are trending. And I have to say that if you haven't tried out an adult coloring book in your more stressful moments in life, I highly recommend it. I heard about this from the seller and then I went and bought one from Target. And after a particularly stressful call, I sat there with my daughter and, and colored in the adult coloring book. And it was, it's cool, quite relaxing. So I can understand why we're getting orders of 40, 50,000 copies of those.
- [22:38]
Will Smith
So those folks would be entrepreneurs. They're people who are probably going to, you might argue that any sort of author who wants somebody to buy their book is an entrepreneur, but with a coloring book, it's much more so going to be kind of business oriented. People who are looking to sell these, I assume.
- [22:53]
Anika John
Absolutely. And these people are, they're entrepreneurs. We have small publishing houses where it started out with one author publishing their book and they realized that, oh, I know the process now and I can help other authors. And so they have these tiny micro publishing houses with perhaps five to 10 authors and they use us for all their printing and then they manage the rest of the process. So it's very, very diverse. Actually, I. No Customer is over 5% of our revenue. And no type of customer, like no customer segment is over 15%.
- [23:39]
Will Smith
Oh, wow.
- [23:39]
Anika John
So we really, yes, we really serve a wide variety of these types of customers.
- [23:47]
Will Smith
Well, that's encouraging because I would have guessed as a total outsider that one of the weaknesses, if you will, for the business would be that it was capitalizing on a trend of, you know, some type of customer writing some type of book fiction. And that that was sort of a trend you were writing. And of course, you know, there's nothing wrong with tailwinds and riding those tailwinds, but it, it might feel a little bit less enduring than, than having a very diversified set of type of customer.
- [24:21]
Anika John
It is so divi. Diversified. We have people who sell planners who make bespoke journals. We have professionals who have maybe their, you know, course and then their book and then their private coaching. You know, we have pastors who want to write about Their theological perspective. And then when new congregants come to their churches, their ushers have physical copies of their book that they can give. It's endless. It's really endless. The interesting things, interesting orders we get.
- [25:03]
Will Smith
But, but do connect this Anika to. There is some something of a trend around people self publishing books. Right. And you had mentioned Amazon, I guess kdp. I don't know that world either, so indulge me.
- [25:19]
Anika John
I'll give you a quick stat to help you understand the growth. Over the last five years the industry has grown 264% and in 2023 there were 2.3 million self published titles in the United States alone.
- [25:38]
Will Smith
Wow.
- [25:39]
Anika John
And I think that it's because I'm not a veteran of the publishing industry, but this, this was my research that I did, you know, as I was doing commercial due diligence on this company. Publishing contracts are getting harder and harder to get. It's getting harder to land an agent and AI is again disrupting the publishing industry. And when you do get a contract, they do a lot for you, but they also take a large cut. And self publishing offers authors the ability to keep all their profits and also maintain control. It's completely up to them what they want to say, the way they want to format it and the way they want to brand it, the way they want to market it to their audience. And authors know their audience best and so they're okay with that small investment upfront to really develop that themselves.
- [26:37]
Will Smith
Yeah. That said, a lot of what you just said might have also been true 10 and 20 and 30 years ago that getting, getting a contract was always very difficult. Although maybe it's even more difficult today.
- [26:51]
Anika John
I think it's harder now.
- [26:52]
Will Smith
But I also think that things like Amazon kdp or maybe I'm using the wrong. But whatever Amazon's products are in the self publishing world have kind of democratized it and exposed people to this possibility, even if they don't end up using Amazon for their provider. So say, say more about that. Right, there's, there's a tech component to this. In other words, the tech has kind of put this on the radar of many people who otherwise maybe never even would have considered it.
- [27:20]
Anika John
Yes, it's true. I think that Amazon KDP most likely played a very important role in that explosive growth. However, Amazon does have its limitations. You know, they, they always take a cut of their profit. So that's probably the number one reason why people use other services like Digipod and they're not the best at BESPOKE solutions, for example, all our journals and anything spiral bound is something that they just don't do. If you want a certain quality of gloss or color on a hardback, that's not something that they do. And so this type of print on demand really gives you ultimate control over the quality that your customers experience or your readers experience.
- [28:15]
Will Smith
Great. And then on the point of competition. So we've, you've explained why the differentiation from Amazon kdp? What does the rest of the industry look like the, the non Amazon competitors to, to Digipod?
- [28:29]
Anika John
Yeah. So there are several smaller shops that do only print and then there are these shops that help to market your book in its entirety. I should say produce and market your book in, in all its forms, meaning ebooks and audiobooks. So there's really a lot of space for Digipod to grow in different media, for the books themselves. Marketing and distribution. Integration into Amazon? No, there's, it's just a matter of finding out what is the most important thing to our customers now and then building those out. So it's, it's really a great playground.
- [29:19]
Will Smith
Anika, let's pivot a little bit to the business of this business. What, what is the revenue? What can you tell us about the numbers?
- [29:30]
Anika John
So we are in a greater than 5 million revenue SP space and I only see that increasing first because of the tailwinds of the self publishing market and then also because speaking to our customers, they already love the company, they love the employees and they want more services for them, for, for, from, from us. Right. And so it's just a matter of how fast can I expand to the customer, to the services that our customers most want.
- [30:10]
Will Smith
Okay.
- [30:11]
Anika John
And so I see that doubling in the next couple of years very, very quickly and continuing to grow from there.
- [30:19]
Will Smith
So to be clear, Anika, you said above 5 million. So does that mean a lot above 5 million? Around 5 million. Can you give us any more specificity?
- [30:28]
Anika John
Yeah, it's around 5 million.
- [30:30]
Will Smith
Okay. Okay, great. And what do margins look like in a print on demand business?
- [30:37]
Anika John
So on the COGS, we have about a 45% margin, which is really good for, you know, I've looked at a bunch of these businesses, so that's, that's very, very healthy. And then when you put on the general expenses on top of that were about 35% on an EBITDA basis.
- [31:00]
Will Smith
Oh, wow. So 35% net EBITDA. Yeah, on a $5 million business. Great. So we're talking about a business that is well north of a million in ebitda. Or sde.
- [31:10]
Anika John
Yes.
- [31:11]
Will Smith
Great.
- [31:11]
Anika John
Yes.
- [31:12]
Will Smith
Well, well, you found the, the self funded unicorn. Yes. Good stuff. And a little bit more in the business, the history. How old is this business?
- [31:24]
Anika John
The business itself is about 36 years old. The seller bought the business for $125,000 in, I believe it was 2001. And he bought more land and he bought all this equipment. We have millions of dollars worth of equipment here. And he did all the general contracting himself. He educated himself on Google SEO. This is in, I would say 2005. And for a long time they were the number one ranking print shop for books on Google SEO.
- [32:03]
Will Smith
Wow. And yeah, he really, he taught himself well.
- [32:06]
Anika John
He did, he did. He's, he's very smart and he's also very aware of needing to sell the business to take it to the next level. And so it just, it just worked out really well. Right. So he, he did a really great job. But when I got into the business, you know, I started meeting the employees and they are a great team and they work really well together and they all are hungry for growth. And so I had someone say, you know, I want to take over this function. I see it and I really want to take over. And so how can I do that, you know, and so I'm working with them. We're developing a training program and so it's just, it's so great to come into this business where everybody is competent and they want to take on more. So it's been, it's just been really fun.
- [33:07]
Will Smith
And what was his reason for selling? Now.
- [33:11]
Anika John
He has two other businesses and I think, and, and they happen to be super fun. They happen to be golf courses. And I get the impression that he could have been a golf pro if he wanted. I mean, he's obsessed with golf and he's won some competitions and you know, he, he tells me about them every once in a while in between our meetings. And so I think that that's where his passion is and it was just time. He also has a six month old grandson, so I think that a great life as he sees it would be playing with his grandson and attending to his golf horses and playing as much golf as possible.
- [33:50]
Will Smith
That's lovely. And the employees, how many are they?
- [33:54]
Anika John
So there are about 15 that will be left after this transition period.
- [34:01]
Will Smith
Now, are they all there in. It's pronounced Tecumseh.
- [34:07]
Anika John
Tecumseh. Eleven of them are in production here on site and then the rest are remote.
- [34:14]
Will Smith
Okay, so there are 11 people there and then the rest are remote. And you are there now. How did you think about that question? You're not moving there forever. Walk us through how you wrapped your head around that and then kind of what the plan is to be running a business that's in Michigan while you're in California.
- [34:34]
Anika John
Yeah. So like I said, you know, the person who found this was my good friend, and. And he was planning to come out to Ann Arbor all the time because he grew up here. I have a very different situation. I'm married to a professor at Stanford. We live in faculty housing. If you know anything about tenure, we're never leaving. So you can find me there when I'm 80 years old. Right. We're. We're never moving anywhere. So I really had to figure out how to bridge that gap. And as I learned more about the business, I realized that the production is just so smoothly run. There's a gm, there's two supervisors under him. They've been in the printing industry from anywhere from 20 to 40 years, depending on who you're talking to. And then the seller is maintaining 10%, and he lives just down the street. And so I got a very good sense that these people are experts and they have it under control. And they are also very, very. They index very highly on ownership. You know, they really take a lot of ownership and pride on the quality of books they. That go out. That was very clear from my early conversations. So that made me comfortable that I don't have to be an expert in that. I don't have to be here all the time for that. Where I need to really dig in deep is building out products and services and marketing. That's where I'm. That's where my expertise lie, and that's where I'm going to spend my time and grow the team. Now, I do have a production standup every day, so I'm very plugged in to what's going on. 9:00am Every day for 15 minutes, we all, you know, get together, talk about what happened in the last 24 hours. What are you looking forward to for the next 24 hours, and what are your blockers? And that will continue when I'm remote. And then when I'm in Palo Alto, I will come back for one week every month to make sure that they have what they need from me and to have them feel like I'm here for them. I'm present in the business and. And I care very much about that part of the business. But I also rely on these very, very competent team that's already here.
- [37:00]
Will Smith
Yeah, you. You seem Very confident in. In this picture. Was there any doubt about it? Did you?
- [37:09]
Anika John
Okay, absolutely. I mean, for me not having any experience in print, there's a million dollar color printing machine and it fritz this morning and I had no idea how to fix it. And I knew going into this I would have no idea how to fix it. So my assessment was very much on the people and I had conversations with the gm, I had conversations with the seller about this. And that was really the greatest leap that I had to make in this business purchase is the nature of the business and my expertise for such a huge area of the business, which is the print production. Every other area of the business, I am either already very competent or I can get those expertise. I doubt no matter how much time I spend there, I can really be as good as these people. Right. And so that took a lot of trust. And so I had to really, you know, get comfortable with that myself. And a big part of it is that the seller is staying on 10% and he's here every day. He's actually still using these offices to run his golf courses. So he's here. It's still partially his company and that is his area of expertise. So that made me quite comfortable with buying it.
- [38:35]
Will Smith
And you were able to meet the g. This GM before you closed after loi? Before close?
- [38:41]
Anika John
Yes, we closed on the loi in the middle of December and I met the GM in March and I met the marketer, I met a few other people. So he took me through the production facility, introduced me as the buyer. I shook hands with a bunch of the people. So yeah, that's unusual.
- [39:02]
Will Smith
So, so why. Why was he so comfortable introducing you to. Introducing you to his employees, introducing you as the buyer, no less, when that is actually quite a rarity? Why do you think that he was comfort comfortable doing that?
- [39:15]
Anika John
I think it's because I was very serious and very methodical. He. I think he saw how much work I put in to, you know, getting to that point. I think a big step is that we had gotten past the quality of earnings. So when that came in within 1% variance, which is really good, he ran a tight shop with very clean books. I think that gave us both confidence that, wow, this is going to go through.
- [39:47]
Will Smith
And as we'll hear, it actually almost didn't. So. So the risk that he was taking by introducing you around almost bit him. Happily. It did not. The you just said, or a minute ago you said something to the effect of, you know, the print production is not something I really think I can learn or, or come close to learning well enough to be as effective as the existing team. But everything else, I really think I can, if I don't, if I'm not, not already competent. Yeah, that's, that's. I think a lot of business buyers have less confidence in, in, in all of the facets of the business. So often they definitely can't do the service itself. Buying an H vac business, you know, you don't know the first thing about air conditioners, but you also business buyer don't know. There's a lot more that you don't know and have to learn. You know, you, maybe you've never hired or fired somebody, for example. Not uncommon at all. What, what skills do you have, Anika, that, that, what other are these other skills that you have that make you feel like aside from the delivery of the product itself, you basically already know or can learn pretty quickly?
- [40:59]
Anika John
Yeah, absolutely. So on the team leading, you know, I started out, out of law school. I, I worked for a law firm for I believe it was a year and a half and then I built my own company and that one was acquired. And so I have, you know, from very, very early in my career been leading teams and been hiring the right people and you know, laying off or firing people that are not a good fit. So I was very confident of like leading the team and you know, being able to run the day to day, that, that was fine. The specific areas of the company that are very important are the marketing. You know, I've been in customer discovery for over 10 years now, so I felt like I had a good handle on that. And customer service is an area where I am not yet competent because the customer service agents here, it's award winning. The team is award winning. And the reason is they are very technical. They know every part of how to make sure book cover and the content of the book itself is formatted. Whether you're getting a hardcover, paperback, spiral bound, a journal, calendar, whatever it is they know how to get you from, hey, you know, here's my manuscript. But I can't figure out the formatting to it's ready for print. That that's process is called pre flight. We do have a pre flight team, but anytime you have questions, customer service is what, what you know, deals with that. So that'll take me time to learn pre flight again, it'll take me time to learn. But those are also aspects of the business that have to do with learning software and process and all of that I can figure out with the equipment. You Know I did found I co founded a hardware startup so I have welded my own equipment together. You know, I do have that experience, I do have some hardware manufacturing in my background, but the nuts and bolts of these million dollar machines that can do several pages of high quality color printing in one second and you know, when it goes down, figuring out what's wrong and being able to debug it myself, I think I'm quite far away from that level of expertise.
- [43:27]
Will Smith
What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursum. They all went through the Acquisition Lab, the accelerator and community for people serious about buying a business. But they represent just a sliver of the Lab's success stories. The number of deals across the lab's cohorts now stands at over 120 with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The lab offers a month long, intensive, almost daily Q and A sessions with advisors, live deal reviews with Walker, Deal team introductions and in an active community of serious searchers, check out acquisition lab.com link in the notes or email the lab's co founder, Chelsea Wood. Chelsea buy, then build.com and let's actually hear a little bit more about these machines. So this is a business with serious capex.
- [44:38]
Anika John
Yes.
- [44:39]
Will Smith
Interestingly, you liked that. Yeah, yeah, that was that. That's, you know, not the kind of canonical search business where you're looking for, for low capex. Why did you like it?
- [44:51]
Anika John
I liked it first and foremost because there's a moat around the business. Right. So if somebody hears about this and says, hey, this is a great business with great margins, why don't I start it up? It's not a matter of helping, you know, of AI, helping you create some no code solution and finding a couple of customers and tech, you know, testing it out and iterating. You have to have, you know, at least a million dollars to even get started.
- [45:21]
Will Smith
Right.
- [45:22]
Anika John
And, and that's on the secondhand market where there might be used machines and you know, service levels might not be as they are here. It is an investment and so by nature there is a moat around it. And as we talked about the machines also you need to have some training to operate them right. You just, you can't get started. So that is fantastic. The real estate aspect gives greater amortization on the loan. So that was, was great. And then Also if the worst were to happen, there's real estate and equipment to liquidate. So the SBA loan is not all on my personal assets. Right. There is a personal guarantee here. So that entered into my calculation also. So I think, I think I would say those are the three reasons.
- [46:20]
Will Smith
Great. You found comfort in this million dollar asset plus this real estate which we'll get to in a minute. As, as something that in the, in the worst case could be, could help pay back the bank.
- [46:37]
Anika John
Yes.
- [46:38]
Will Smith
Or, or be sold to pay back the bank.
- [46:40]
Anika John
Yes.
- [46:43]
Will Smith
The reason that we don't like Capex or that they're less liked is that, that they required that they're big expenses to keep the business going. Now that just came with in this case. But there will be a day that you have to buy another million dollar machine yourself or presumably the, the million dollar machine you have requires some thousands of dollars every year to keep going. How did you diligence this piece of equipment and like how much it's going to cost you on an annual basis and then when the time comes to buy a new one, how did you think you'll approach that?
- [47:19]
Anika John
So the seller provided me with 20 years worth of capex acquisition data. So when he bought equipment we generally it's not in the spreadsheet but we went around and he explained why he bought each piece of equipment, the redundancies that are already in the equipment that I bought and the, the price right. Of at which he bought those pieces of equipment over 20 years. So I averaged it. I just took the last 10 years because of inflation and you know, things like that. There's an extra $178,000 a year that I put aside just for CapEx. So that's the first thing. The second thing is that there is also already a lot of redundancy built in. For example, there's a couple of black and white printers. And so if one goes down, the other one is running and we'll continue to opportunistically with this money set aside by when we see, you know, one of those great color printers I was telling you about, when we see one on the market that's reasonable and that will be an adequate backup solution that then we'll buy one more of those. And that also is another reason, you know, the seller's here, he can advise on, you know, what's a good deal, what's not, what brands are going to really stand the test of time. And so given I would say really like the data that I had and preparing for it and Then the fact that the seller's expertise are remaining with the company until I can get a handle on that and perhaps in the future I can buy him out. I think those are the things that made me comfortable with this arrangement.
- [49:21]
Will Smith
Well, that's great, Anika. That was just very thorough. And that $178,000 you put aside every year. So in your own mind, as you calculated the. The real EBITDA here or the adjusted ebitda, you knocked that down a little bit to account for that?
- [49:41]
Anika John
Yes.
- [49:42]
Will Smith
Yeah. Great. The real estate. Say more about that because that will end up being. Playing a big role in the negotiation and the structure of the deal, which will then turn our attention to.
- [49:56]
Anika John
Yeah, and so the real estate is a lot here in Tecumseh, and it has the building with the equipment. One attractive thing is that the equipment that we have, we just run the day shift. Right. But we can go up to three times the capacity just with this equipment. So there's that room for growth.
- [50:22]
Will Smith
Yeah.
- [50:23]
Anika John
Which is, I think, when people think Capex, there's also that view that, hey, if you want to grow, then you have these massive investments to make in Capex.
- [50:31]
Will Smith
Exactly.
- [50:32]
Anika John
But in this case, I can grow 3x and, you know, still have the same equipment with that extra investment, you know, that we've set aside. And then we can maybe buy another print shop or expand and buy more land and equipment here. You know, really the world is our oyster at that point.
- [50:52]
Will Smith
Great. And so the real estate is, you said, the one big building that houses the equipment in the. In the company. Okay.
- [50:59]
Anika John
Yes.
- [50:59]
Will Smith
Great. All right, so let's now hear about how you structured this deal. Because it's got real estate, it's got this. All this equipment. And as we're going to hear, the Q of E came back with not good news. So it gets sticky. Where did the initial deal begin? What did that look like?
- [51:21]
Anika John
Yeah, so the initial reason that I looked at it and, you know, I had my business partner and we were both looking at it, was it, you know, it was over 2 million. And when the QVC.
- [51:34]
Will Smith
I'm sorry, what was over 2 million?
- [51:36]
Anika John
The EBITDA, it was over 2 million.
- [51:38]
Will Smith
Okay.
- [51:39]
Anika John
And so it had gone down slightly and to the point where we understood that, you know, two people can't acquire this company. It's only one person. Right. And so that. That's the point at which I had to decide, do I still want to buy this company and do I want to, you know, do I want to take this on myself? So that was Really a thought process for me. And so really, you know, looked at the marketing and I realized that a lot of the underpinnings of marketing are not there. So for me, it was, you know, I can renegotiate down to reflect that, you know, you know, we, we don't have the marketing processes and systems and the market presence we want, but it's also an opportunity, right, Because I can really take the company and grow it from there. And so with the lowered ebitda, basically we had to renegotiate. And that's. I think that's what you were referring to, right? We had, we had to renegotiate. I brought it up and basically, I think, you know, in, in the seller's mind, he was all set with the original number we had settled on, and we, he had introduced me as the buyer. We had really done a lot of work together, you know, a lot of data transfer, a lot of me understanding the business. And then in that process of really understanding the business, I also understood that there was a lot of this marketing that was missing. And so as I started those renegotiation conversations, we really crashed. And he said, no, I can't do this. The deal's off. I think I can get a better deal elsewhere. Maybe I'll look at private equity companies. And so we were off for a while. Completely off, you know, terminated our, our purchase agreement. And we just, you know, I, I looked at other businesses and that went on for a couple of weeks. And then it was an interesting turn of events in the process of trying to close this deal. I had given the bank the seller's information, and, and so I got a call from my loan officer at the bank who said, hey, you know what? I had contacted the seller a couple of weeks ago for something else. And he called me back and he asked me, you know, do you know if, you know, do you know that the deal is dead and do you know why? And they started talking and it turned out that, you know, he actually was okay with a seller note. And so we added a pretty large seller note and we brought the, the enterprise value down a little bit. We brought my percentage up. My percentage that I was going to purchase was 81% to 90%. So basically I got more for my money.
- [54:56]
Will Smith
Anika, it was previously going to be that he rolled 19% equity and now he's going to roll 10% equity. Exactly, but you're basically paying.
- [55:04]
Anika John
So I'm buying more of the company. Right.
- [55:06]
Will Smith
For the same or for actually a little bit less.
- [55:09]
Anika John
Yes. For a little bit less. But his cash at close remains similar. Right. And so, you know, we were, you and I were talking about this earlier and I said it's so complicated because there were so many iterations and you know, it went from different percentage of the business. And then we, you know, we, we valued the real estate at a certain value and then we rejiggered it and you would, we, we optimized for amortization and then his taxes and my taxes. And at the end of the day, what I had to really think about was my monthly payments are going to be a certain amount for a $7.6 million loan, 5 million SBA and then 2.6 in parapet P SU so, you know, as we had discussed before, the, the multiple can change depending on how you value the real estate. And you know, then the percentage changes and, and it gets really, really confusing. Now multiples can be very important. And I'll tell you when they're important. They're important if you have investors because investors have a very, very clear picture of I want to go in at this multiple, I want the operator to grow the business, I want them to sell at this multiple and then I get this irr, right? So that's extremely important. And then if you're going to sell, right, if you're not a long term hold, if you're going to sell, then it's also very, very important because you want to buy low and sell high and you want to do that within the timeframe that you prescribed. And you know that that's your goal. For me, I was looking at this as a long term hold. I really want to, I see this as the first acquisition in a portfolio of businesses, hopefully in the creator economy that I will buy and grow and then maybe even someday give to my children. Right. I'm really looking at these as long term investments in the companies themselves, in the teams that support the companies, in the customers. That makes me happy, that gives me a lot of fulfillment. And so for me, the multiple was less important. It was the monthly payment on this huge loan that, that carries a personal guarantee. Am I okay with that? Am I comfortably going to be able to make that and have funds to reinvest and grow this company? And the answer was a resounding yes for the seller. He was really stuck on a multiple which at least I not provide given the state of the business. However, cash at close was important to him. So when we were able to get close, close to a cash at close number that he was okay with, then he Got comfortable with a larger seller's note, lower enterprise value, etc. So that's really my takeaway to people who are, you know, considering this is don't focus on one metric. Look at your situation and look at your stakeholders. If you have investors, then it's one set of metrics that really matters. But you know, we got it to a point where I no longer needed to have investors. So it was really what's best for me. And where can I be comfortable that I can make this a successful company long term?
- [58:47]
Will Smith
Yeah, that was great, Anika. That was a, it's a, it's a holistic way to look at it. Not only your own long term view but also of course considering really what the seller wants and teasing out what the seller is optimizing for is part of the art of negotiation. Something that first time buyers often overlook. They think it's all about the multiple or all about the purchase price which probably podcasts like this plant in their heads. We, we and I can certainly over, over index on that or overemphasize that. That said, you know, I've, I've, I've gone back and forth on this and, and I've, I've been had my wrists slapped when I've said things like you know, a couple more, you know, going from 3.4 to 3.7x is you know, just a couple more months really of value here. So, so what's the big deal? And of course the monthly payments that you are optimizing for in your own case are do directly correlate to the purchase price of the business, the multiple you pay for the business. So in some sense we're talking about the same thing when we're talking about monthly payments and multiples. So anyway, on that back and forth with him in the deal dying, you had said that the deal died in, in dramatic fashion when it died. Is there any more to that story? You hadn't actually given me more color in, in our pre call but I'm curious.
- [60:15]
Anika John
I, I think it was just wasn't dramatic in the sense that no one was yelling each at each other. I mean the seller is a very nice person person. He's like, he's just a wonderful person. He's, his team loves him. He's on the school board here at Tecumseh, which is something I would never do. It's just, it's, it's, it's, it's a terrible plight in my opinion. It's, it's just too political and, and it's not productive. At least in Palo Alto it doesn't seem very productive. And nobody was yelling each other. I, I have a very calm temperament. I think it was the suddenness. Right. So we were doing this over email, which in some cases I think it is a great idea because there's a record of everything everybody said. In some cases, you want to be in a room and look at cues. In this case, I was in Palo Alto, he was here. We were stuck over email. And so he said, look, I'm not willing to do a seller's note. And I believe that I can get more from private equity. And so I'm just not willing to do a seller's note. And I said, well, he already had a seller's note, but I needed a larger seller note to make it work. And he said no. And I said, well, then it's not going to work because a seller's note is the way to really share that risk. And there is a risk. You don't have the underlying marketing processes. I'm going to have to make those investments. And so this isn't going to work. And then he wrote back and said, okay, then please erase all the data on your computer. Which is a very reasonable ask. But it's very, it's very jarring to get that immediately when you spent the last, say, you know, four or five months of your life working towards this deal. Right?
- [62:10]
Will Smith
Yeah. So, well, it's like, it's like, it's like him saying, you know, the deal's dead. And, and I wanted to just, I just want you to erate. Like this never happened. Like, yes, it's so, so the finality of it is like, wow, man. Slamming the door.
- [62:24]
Anika John
Yeah, yeah. And so, you know, it, it and it, it just took a week or two. And this was a non brokered deal. I think a lot of times people face a lot of pressure to go off market. I want our listeners to understand that these are the problems with off market. In, in some cases the seller's just not ready. That was not the case for me. You know, the, the seller was very ready, but sometimes a third person provides kind of a lubrication to the conversation. You know what I mean? Sure. It's you. It's easier to talk to a third party and say, hey, you know, I just can't do this. I know that this is what the buyer wants, but this is what I believe and you know, it's better like this is what I'm willing to do and you can convey that message. So rejig to their credit, they attempted to be in that role, but at the end of the day, it was actually the loan officer at Northwest Bank. I have to give a shout out to Northwest bank too. They went absolutely above and beyond in their part in this negotiation. The loan officer really kind of took ownership of those communications. He gave me a call and then I had a counteroffer. We went back, he. He went back to the seller and then the seller and I started emailing and then we very quickly came to a deal. We had to work out some more details over the next few weeks over the purchase agreement. Another point of drama in this is that all of this happened at the end of April. June 1st was the new SOP that was no longer allowing f reorgs. And so all of this had to be done so that they pulled the PLP number before May 30th. So they needed about a week. So I think the PLP number, the PLB number for the SBA loan. So once you have that, you can close later than that sop. So we were down to the wire because it takes a few days. So I think we got our PLP number in hand end of May and we closed it then took us another month to close. So June 24th was the close date.
- [64:54]
Will Smith
And so the F reorg is what would have been compromised here by the new rules.
- [64:58]
Anika John
Yes, yes. Because it's a stock sale and there are tax benefits to an f. Re. Org and so it really would not have worked without the F reorg transaction. Yeah, so, yeah, it was under the wire, but we managed to do it.
- [65:18]
Will Smith
Great. Good for you. Well, a bunch of things to react to there, Anika. First of all, your point about the risk in unbrokered or. Yeah, basically on. On off market and unbroker deals. Certainly. Yes. If. If a broker is good, part of their role is as lubricant, as you put it, as therapist, as go between.
- [65:39]
Anika John
That's a bad word.
- [65:40]
Will Smith
As buffer. All of these things and certain. And as deal savor. When the deal is dead, they're the ones who hopefully, if the deal is destined to happen, they can resurrect it. And so, yeah, very interesting in this case that your loan officer of all people was the one to get the call. It feels like your. Your seller was just. Just looking for somebody other than you who, who had touched this deal to interface with.
- [66:08]
Anika John
Yes.
- [66:09]
Will Smith
So the loan broker was the closest thing and then they. And then they made it happen. And a perfect time here to mention Matthias Smith, who is of course a Sponsor on acquiring minds full disclosure. But I actually found your story, Anika, because he posted about it closing on LinkedIn and that's why I reached out. Matthias was introduced you to, to Northwest. He's a lone broker.
- [66:32]
Anika John
He did, he did, yes.
- [66:34]
Will Smith
Great.
- [66:34]
Anika John
Yes.
- [66:37]
Will Smith
Excellent. And the peripassu nature of this. So reminder to the audience what that means is if a business, if a purchase price goes beyond the 5 million, which is the cap for an SBA loan, the lender can bring in additional debt, conventional style debt, into the deal at their discretion to in your case, get you to the addition to that additional 2.6 million to do a 7.6 million deal. Anything to say about using Peripassu or were there extra requirements or what's that look like, if anything?
- [67:19]
Anika John
Yeah, so Peripissu, in my experience, it's only up to 3 million extra. So total is 8 million.
- [67:28]
Will Smith
Yes, I think that's. I think I've heard that too. Yep.
- [67:31]
Anika John
Yes. Now, I have seen advertising for up to 5 million in purposes. So total loan amount to be 10 million. I have not talked to anyone who has achieved that. I've only talked to up to 8 million. Mine was 7.6 and I have a 400,000 line of credit if I need it. I'm hoping to never touch it. The pari P SU makes the loan more complicated and it makes the underwriting longer. So I got my term sheet after the Q of E. I would say end of January, actually. So I got my initial term sheet, you know, with the loi. Right. Based. Just based on my finances. They gave me the term sheet. The one for the, the, I would say more serious one. Right, the, the one after the Q of E. They really sent it to underwriting in end of January and then we closed last week. Now, part of that was, you know, the deal was off and then it was on, but a big part of it was really them underwriting that extra conventional loan. And the other thing to mention there is that usually the amortization is a straight formula on the, the part of the purchase price that is the real estate. But with, with parapisu, they were not willing to. It's not unlimited. Right. So. So for example, if this were 51% real estate deal, I don't think they would have given me a full 25 years on a blended rate because there is a little bit of nuance to that that still makes the bank want to keep a shorter amortization period. So if you take my precise numbers and put them in an SBA calculator for the amortization. Mine will come out a little bit shorter due to the parapisu.
- [69:48]
Will Smith
Okay, yeah, I think I followed that. But, but to tie this in to the real estate, reminder to the audience that if the real estate is 51 over 50% of the full purchase price of the business, you can spread the amortization over 25 years as opposed to the, to the typical 10. If it's not, if it's something less than 50%, you can blend it so it still stretches the amortization more than 10 years, but not all the way to 25. And what you're saying is that might have, you know, if it landed at a 17 year loan with the Perry Pursuit, it actually would have then compressed it back to 15 years, something like that.
- [70:35]
Anika John
Yeah, it's, it's no longer the straight formula that applies with the parapisu loan. They tend to go a little bit shorter just because the loan amounts are so big that they, they want to do shorter amortization.
- [70:49]
Will Smith
Okay, Ana, we're getting toward the end. I, I need to bring in one plot point that I have let us drift away from, but it is important just going back to the Q of E. When the Q of E came back, it was not just that revenue was less than he thought, which is not uncommon at all. It was actually that revenue was declining or, or maybe it had already been declining and you knew that, but it was, it was showing even further decline. So you were buying a business with not just a year off, but a trend of decline. Maybe I'm overstating it. How did you think about that? And why did you get comfortable that you could turn it around? We understood that. We understand that you renegotiated and that you structured around that, but more, more deeply in terms of, you know, getting involved with this business at all. How did you get comfortable with it?
- [71:42]
Anika John
Yeah, so I knew that it was going to be a little bit lower. The seller was very open with us and he said, you know, I'm giving you the 20, 23 numbers, but I know because of my experience and I'm in the business, so I know that it's going to be a little bit lower. So just, you know, be prepared for the fact that it'll be a little bit lower. So I knew that it was lower than what the number that he had stated as his forecast. That caused me to really do a deep dive. Right. And so when I did this deep dive, I realized that a lot of the marketing that we take for granted now as table stakes Especially coming from the tech industry for, for, you know, customer discovery, for these direct to consumer and direct to consumer adjacent marketing strategies. A lot of the tools, the dashboards, the, you know, tech stack were not in place. You cannot, I'll give you an example of that. So normally I would look to see a Google Analytics dashboard with all the orders and where everything came from, the split between desktop and mobile, and be able to just really easily do a deep dive into the data of the business. When I started this inquiry, everything had to be a SQL query from the dev in the business. And so, you know, that's just one example. None of the other processes were there. So my thought on it was, okay, I am not buying a machine that will continue to do its thing, continue to grow, and then I can build products and services over it. For that kind of business, I negotiated one price. But this revenue decline, it wasn't terribly steep. To me what it represented was more important. I have to fix this machine, I have to turn this around, I have to update it and then I can build those products and services. And so that's why I renegotiated the final deal.
- [73:54]
Will Smith
But on the more optimistic side, you felt that you could because that, that trend line might have scared off any number of buyers from the deal at all.
- [74:04]
Anika John
Absolutely. I really went and took the time to match my skills not just to do things myself, but my skills in hiring the right people to this problem. And to the seller's credit, he gave me a lot of access. So I was talking to the marketer, I had weekly meetings, I was talking to the dev, I had access to the Google Analytics dashboard. So I really got to know the business. And not all sellers give that kind of access. But because of that, when I was able to start on day one, I already had a plan. These are the contractors I would hire. These are the pieces of software that I'm going to integrate with. And now I'm executing on that plan. Usually when people come in, they take 60 to 90 days to get to know the business. And on the marketing side, I didn't have to do that for the rest of the business. That's what I'm doing.
- [75:02]
Will Smith
Great. Anika, let's. One more just question in the weeds and then we'll, we'll kind of zoom out to close us out on this point of the levers that you're pulling to kind of arrest the decline and stabilize the business and then further layering in more tech, bringing AI to bear. You mentioned that at the top. Talk to us a Little bit about the, the near term plans here. Not the big, the big picture moving into adjacent services and the kind of medium and longer term, but the immediate tech upgrade that you're going to do for this business and specifically with AI, because of course you come from AI at Amazon and layering in AI to small businesses is going to be more, more and more a lever that we hear everybody pull. So let's learn from you.
- [75:51]
Anika John
Yeah, absolutely. I think that the first thing before we talk about AI is really the team. So really, you know, getting to know the team, getting to know their strengths and weaknesses and providing them the training that they need and what they need. So for example, none of the customer service reps have video or microphones. They all have physical phones that they answer and they talk to on the phone and we need to communicate. So I put everybody on Google Workplace and I have them installing cameras and microphones so we can talk to each other and then eventually they're going to talk to our customers that way. So really figuring out what they need, what their strengths and weaknesses are as a team, getting them to be more cohesive together. And once we do that, then we put the AI in. Because if you don't have team cohesiveness, the business processes running and then you try to insert something so new to people who have never used it before or are completely unfamiliar, that is too much of a shock and ultimately that's going to affect our customers. And so this is the first thing I'm working on now. I am personally very capable of going through the business and saying, hey, we can build an AI agent for this. We can create cover design with a diffusion model. There's so many different ways that I can do this myself. What I'm doing is I'm actually hiring a contractor to come in and do that while I focus on the marketing. So what I'm looking for is, is for them to go in and do the in depth interviews of every, every aspect, right? The, the general manager, the customer service agents and really come up with the list of products. So some things that, you know, come to top of mind are marketing just, you know, really understanding when we should be sending emails to who we should be sending emails and how are we best serving our customers by the emails that we send. Right. That can be one AI agent. We can have a customer service agent for the less in depth customer service requests. The production has no demand generation software. It's just basically that team's experience when they're ordering supplies. So we can connect the marketing to demand generation and give them a good view, a good forecast of what's coming in the door. So those are just a few examples, but I am relying on contractors, even though I myself have the expertise, because the business needs me in a higher priority area.
- [78:38]
Will Smith
Fascinating. And so important for the listener, many of whom will not have the same AI skills that you have. So even so, they would be forced to use a contractor not by choice or by strategy, but because they don't have the skills themselves. This contractor then is somebody is what's the title for this contractor or contractors? Are there sort of AI solutions provide? There must be, there must be a whole universe of AI solutions providers that go into small businesses and say here are the low hanging fruit for what you can do with AI right now and then implement it.
- [79:11]
Anika John
There are, and I have interviewed a ton of them who don't know what they're talking about. So you have to be very, very careful. I think everybody puts AI in their resume and on their business website now, but you, you have to be really careful. And I think what would be really useful for the average listener with no experience building AI products is to don't be shy and ask for client referrals. Don't sign anything unless you've talked to other clients of that company. And when they give you case studies, it's not, not with all the information redacted. There are clients who are willing to stand up and say, hey, I built this for them and it improved my, you know, x function by Y percent. Right. And so that's the, probably the top piece of advice that I can, I can give is, is ask for those references. And those references have to be kind of similar to your business and the problems that you're solving. And I would also say don't rely too much on the web presence of people, whether that's, you know, they're really active on Twitter or they have great email marketing separate out like, wow, these people are really, really well known with can they actually solve my problem? And have I personally spoken to people and ask them very, very blunt questions about the effectiveness of this agency and then make your decision based on that. There's some great, fantastic marketers marketing their AI expertise. But then when I go in depth and ask them questions, they just don't know basic things. So I would say watch out for that in 2025.
- [81:03]
Will Smith
And do you recommend using an agency or using an individual? It depends on this, I guess the scale of your, of your needs, I guess.
- [81:11]
Anika John
Yeah, in, in my experience, if you don't Know what you're doing managing one individual, they could tell you anything, and you just have to believe them. If you don't have the expertise yourself, if you go with an agency and you do your due diligence, it's. You're not going to get that one person who is trying to just minimize their hours spent with you and just, you know, shove you something that may or may not work well and then be off to their next client. Right. You're going to get some systems and some process, and then if you check client references and they did a good job, chances are you'll be successful.
- [81:53]
Will Smith
Okay.
- [81:54]
Anika John
And then the other thing is ask for documentation on everything. Make sure you have complete documentation so you're not stuck with them. You can, you know, move around to a different agency if you need to.
- [82:06]
Will Smith
Right. Fantastic. Anika, let's close by. Just revisiting your whole reason for doing this. More freedom, more agency. That doesn't necessarily mean more time. Maybe you've lost some time, but the hard demands of when they wake up, when they go to bed, and when they get home from school, that is now you can make that happen. Do you feel like that vision is coming to fruition? I mean, you're. You're in Tecumseh for months and you're in the throes of transition. So maybe this isn't the moment to ask, but does it already feel like you have more freedom, more agency?
- [82:47]
Anika John
I absolutely can. Right now, my children are up in Ann Arbor because, you know, that's where, just where everything is. There's, like, camps and really fun things up there for them to come see kind of a little bit in the middle of nowhere. So it takes me almost an hour to go back and forth, so I definitely see them less now. I have really amazing, supportive parents. My mom, who had her own businesses for several years and is my role model for this, is helping me take care of my kids. My husband's here helping me take care of the kids. So, you know, right now I'm more focused on just the time spent because it's short here and, and I'm getting to know people. I'm spending long hours at the office. But when I go back, I really do see the opportunity to really organize my time around my family, and that is probably the driving force for all this. And there have been, as I mentioned before in the intro, over 150,000 people laid off in the tech industry, and it's disproportionately affected women and also moms. When I was at Amazon. There were almost no other moms in Amazon Music. And it really sent the message that, you know what? You're not welcome. It doesn't matter what your skills are, you're just not welcome. And we don't really care about your priorities. And for anyone who's feeling that way in tech or has been impacted by the layoffs and is just looking for that next position, I want to be the voice that gives another option that there is this other option. If you know it comes with its challenges, it comes with its risk, but there is another option. And for me, entrepreneurship has been that way out.
- [84:42]
Will Smith
Beautifully said, Anika. Thank you for that. And if such a mom or any other person wants to reach out and speak with you, is LinkedIn the best way.
- [84:52]
Anika John
You can just email me? It's very easy. It's Anika. AnikaJohn.com so I'm, I'm very responsive over email.
- [85:00]
Will Smith
Great. As I experienced when Matthias connected us.
- [85:03]
Anika John
Yes.
- [85:04]
Will Smith
Anika. John, wonderful interview. What a great story. Congratulations. Thanks again for taking time to do this in, in day eight.
- [85:14]
Anika John
It's day eight. Yes.
- [85:16]
Will Smith
Really appreciate it. Very meaty, very transparent. So thank you so much for, for coming on Acquiring Minds.
- [85:23]
Anika John
Absolutely. Thank you for having me. It's been a wonderful experience.
- [85:27]
Will Smith
Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode with an introduction to the interview, a link to the video version on YouTube, and soon key takeaways, numbers and more essentials from the interview. For those of you who, who don't have time to listen or watch it, subscribe at acquiringminds.co. you'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars. At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business. Acquiring Minds Co.