Awakening to Entrepreneurship to Buy a Not-Boring Business

Summary

Acquiring Minds Podcast Summary: "Awakening to Entrepreneurship to Buy a Not-Boring Business"

Release Date: January 30, 2025
Host: Will Smith
Guest: Shell Zhang, Owner of Nada's Italy

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Introduction

In the January 30, 2025 episode of Acquiring Minds, host Will Smith engages in a profound conversation with Shell Zhang, an entrepreneur who transitioned from a conventional corporate career to owning a unique travel business, Nada's Italy. This episode delves into Shell's personal awakening, her strategic approach to acquiring a business, and the intricacies of running a high-end guided tour company.

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Shell's Background and Awakening to Entrepreneurship

Shell Zhang's journey to entrepreneurship is rooted in a conventional and risk-averse upbringing in China. She pursued a linear career path, earning a finance degree and working in management consulting and corporate strategy before venturing into a technology startup.

Shell Zhang [06:15]: "I've always followed a linear path, studying hard, getting good grades, and pursuing roles in investment banking, private equity, and management consulting."

However, an awakening occurred when she immigrated to Texas, exposing her to significant risks and new experiences. This realization shattered her self-perception as non-entrepreneurial and ignited her confidence to pursue business ownership.

Shell Zhang [07:51]: "I realized I am the kind of person that's a little bit more entrepreneurial than I previously thought."

This shift was gradual, influenced by personal readiness, increased exposure to acquisition entrepreneurship (ETA) through platforms like social media and podcasts, and a deeper self-understanding after years in varied corporate roles.

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Decision to Buy a Business

Shell's decision to acquire a business was not instantaneous but rather the culmination of her evolving mindset and professional experiences. Her interest in ETA was rekindled after witnessing a friend's successful acquisition, prompting her to delve deeper into resources like Walker Deibel's Buy Then Build.

Shell Zhang [07:33]: "When I saw my friend's success in acquisition entrepreneurship, it sort of occurred to me to look into this search thing again."

Her approach was methodical, balancing her professional aspirations with personal life considerations, especially valuing flexibility to spend time with her family overseas.

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Acquisition Strategy and Criteria

Embarking on a part-time search while still employed, Shell meticulously defined her acquisition criteria to ensure alignment with her passion and lifestyle goals:

1. Industry Preference: Passionate about travel, she focused on businesses she would enjoy managing, eliminating sectors like home services and E-commerce.
2. Geographical Flexibility: Initially constrained to Houston, she expanded her search to include remote and digital businesses, thereby increasing her deal flow.
3. Financial Parameters: Targeting businesses with a Seller's Discretionary Earnings (SDE) of $300k and above, ideally above $500k, she sought stable and scalable operations.
4. Operational Control: Preferring businesses where she could work on the business rather than in it, she looked for established teams and scalable structures.

Shell Zhang [25:30]: "Life is too short. I'm willing to trade money or the size of the business if I get to do something that I can really enjoy."

Her disciplined approach yielded a consistent pace of offers, averaging one per month, ultimately leading her to acquire Nada's Italy.

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About Nada's Italy

Nada's Italy is a boutique tour operator specializing in high-end guided tours to Italy. Founded 20 years ago by Nada, the business emphasizes personalized experiences with small group sizes, primarily catering to couples. Key highlights of Nada's Italy include:

• Financials: Approximately $3 million in revenue and close to $600k in SDE.
• Business Model: High-ticket tours averaging $8–$9k per person, often booked by couples at $16–$18k per booking.
• Operational Structure: Fully remote with a dedicated team based in Italy, handling day-to-day operations.
• Reputation: Outstanding reviews across platforms like Google and TripAdvisor, with a strong emphasis on customer satisfaction and personalized itineraries.
• Team: Comprises about six full-time employees and ten local guides in Italy, fostering strong relationships and consistent service quality.

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Acquisition Process and Deal Structure

Shell identified Nada's Italy on BizBuySell, focusing on remote businesses to align with her geographical flexibility. Her acquisition process was thorough:

1. Deal Flow Management: Over six months, she evaluated numerous opportunities, making six offers—only one successful acquisition.
2. Due Diligence: Shell scrutinized five years of financials, ensuring transparency and stability.
3. Valuation and Pricing: Priced below a 3x multiple on SDE, she negotiated a deal just under $2 million, including project costs and fees.
4. Cash Structure: Retained all deposits held by the business, enhancing working capital.

Shell Zhang [88:50]: "We have subscriptions and no inventory, which provides a negative cash cycle—collecting money before delivering services."

Her proactive measures included renegotiating payment processing fees from 6–7% to just above 3%, significantly improving the bottom line.

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Business Operations and Team

Upon acquisition, Shell discovered that Nada had cultivated a highly competent and passionate team. The existing staff managed daily operations seamlessly, allowing Shell to transition smoothly without immediate oversight.

Shell Zhang [79:00]: "The team is passionate, dedicated, and treats this business as if it were their own."

This strong team foundation mitigated the Key Person Risk, as the business no longer heavily depended on Nada's direct involvement. Shell's hands-off transition strategy ensured continuity and maintained customer satisfaction.

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Challenges and Risks

One of the primary challenges in acquiring Nada's Italy was the Key Person Risk associated with Nada's departure. However, this risk was effectively managed through:

1. Established Team: The proficient team in Italy upheld operational excellence.
2. Strong Vendor Relationships: Existing relationships with Italian vendors and contractors were leveraged to maintain service quality.
3. Reputation and Reviews: The exceptional online reputation served as a robust moat against competition.

Additionally, Shell addressed operational risks by enhancing payment processing security, eliminating stored credit card information to mitigate security vulnerabilities.

Shell Zhang [97:16]: "We reduced our payment processing fees from 6–7% to just above 3%, greatly improving our financial health."

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Growth Strategies and Future Plans

With a solid foundation, Shell outlined strategic growth initiatives for Nada's Italy:

1. Digital Transformation: Revamping the website to improve online presence and conversion rates.
2. Marketing Enhancement: Implementing robust digital marketing strategies to tap into a broader national and international clientele.
3. Service Diversification: Introducing niche offerings, such as sustainability-focused tours, to attract varied demographics.
4. Geographical Expansion: Exploring tours in adjacent countries like Greece, leveraging the expertise gained from the Italian market.

Shell Zhang [84:46]: "Once we've unlocked a good online presence, the sky is the limit in terms of growth."

Her tailored approach ensures that growth remains manageable, allowing flexibility to scale operations based on personal and market dynamics.

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Conclusion and Insights

Shell Zhang's acquisition of Nada's Italy exemplifies a successful transition from a conventional corporate career to entrepreneurship. Her strategic approach, underpinned by a clear set of criteria and thorough due diligence, enabled her to acquire a resilient and high-potential business. Key takeaways from this episode include:

• Self-Awareness: Recognizing innate entrepreneurial traits can open new career pathways.
• Strategic Acquisition Criteria: Aligning business acquisitions with personal passions and lifestyle goals enhances long-term satisfaction.
• Operational Excellence: A strong, passionate team is crucial for mitigating risks associated with business ownership transitions.
• Growth Potential: Identifying and capitalizing on under-leveraged opportunities, such as digital marketing, can significantly amplify business growth.

Shell's journey underscores the transformative power of acquisition entrepreneurship, offering valuable lessons for aspiring entrepreneurs seeking to own not just any business, but one that is both rewarding and aligned with their personal values.

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Notable Quotes:

• Shell Zhang [07:22]: "I am the kind of person that's a little bit more entrepreneurial than I previously thought."
• Shell Zhang [25:30]: "Life is too short. I'm willing to trade money or the size of the business if I get to do something that I can really enjoy."
• Shell Zhang [84:46]: "Once we've unlocked a good online presence, the sky is the limit in terms of growth."
• Shell Zhang [97:16]: "We reduced our payment processing fees from 6–7% to just above 3%, greatly improving our financial health."

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For those interested in acquiring a business or learning from Shell's experience, Nada's Italy offers a compelling case study of strategic acquisition and effective business management in the travel industry.

Transcript

[Will Smith]

My favorite part of today's interview is when our guest realizes something about herself that gives her the confidence to pursue entrepreneurship. Shell Zhang was raised in China and absorbed there the notion that risk is bad, that a conventional profession is the appropriate career path. And much of her career has had the markers of safety and prudence. She studied finance, got a job in consulting, later corporate. So she did not see herself as a risk taker. But eventually she had what she calls her awakening. She had immigrated to another country and there is huge risk. In that Shell's words, if you think of packing up your bags and moving to another country where you don't know anybody, going out there and doing these things that none of my family or my friends have done before. So I realized I am the kind of person that's a little bit more entrepreneurial than I previously thought. That awakening, plus a few other factors led her to decide to buy a business. Probably my second favorite part of the interview is the business she bought a provider of guided tours to Italy. Now, to be clear, it's not all Chianti sipping and taking in the Tuscan sun. Matter of fact, there's exceedingly little of that. Shell emphasized to me offline that her day to day as owner of NADA's Italy is not unlike that of any business owner, communication and project management behind a screen at her home in Texas. Still, I'm choosing to celebrate the magic of owning an Italy tour company. See if you agree. Here's Shell zhang, owner of NADA's Italy. Announcements Upcoming webinars today, Thursday, January 30 Everything legal you need to start your search Attorneys Bill Barlow and James David Williams return for a legal office hours to cover how to set up your search from a legal perspective, including preparing your LOI template to be able to submit offers. And they'll actually be handing out an LOI template for you to use in your deals. That is today, January 30th at noon Eastern. Register at the link in today's show notes or on the Acquiring Minds homepage Acquiringminds co. Then next week, Heather Anderson will host an SBA in Lending Office hours. Heather is a prolific SBA loan broker, a name many of you will recognize, and she's going to lay out the process of getting an SBA loan step by step, stage by stage. There are so many moving pieces, so many stakeholders in an acquisition, and Heather will show you how to fit them all together to successfully close your deal. That's next Thursday, February 6th at noon Eastern. Register at the link in today's show notes or on the Acquiring Minds homepage. Acquiring Minds Code 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. What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam they all went through the Acquisition Lab, the accelerator in 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 an active community of serious searchers. Check out acquisitionlab.com, link in the notes or email the lab's co founder, Chelsea Wood Chelseieu, then build.com Shell Zhang welcome to Acquiring Minds.

[Shell Zhang]

Well, glad to be here.

[Will Smith]

Will Shel we often refer to the businesses that many searchers buy as boring. We mean it affectionately, beautiful in their boringness. But you resisted boring, beautiful or otherwise. And you found something that is glamorous. I might even say a travel business that does tours to Italy. This is going to be fun. Start us off with some background on you, please. Shel Sure.

[Shell Zhang]

I am Shel. I was actually born and raised in China. I came over here to Texas to study about 20 years ago. So professionally, my career. I did a couple of different things in my career. I had a finance degree first of all. So after graduating from college I did management consulting for about four to five years. After that, followed the path of going to the corporate, did a bit of corporate strategy and corporate M and A for a couple of years and then in the same company because of a large acquisition that we made, I got to manage a product line. So I became a commercial manager, which is a great role. I learned a whole lot. And then about eight to nine years in corporate America, I came out again. I joined a technology startup for about three years and now I'm a small business owner. So that's in a nutshell.

[Will Smith]

Okay, and where did the notion of buying a business enter your journey?

[Shell Zhang]

I guess I've always known that people have small businesses and you can buy small businesses. I didn't really know about Search or ETA until a year ago. Well, I would correct myself. I know about the notion of search and ETA quite a few years back. I have a friend who was searching a few years ago and I heard about it. I thought, okay, that's pretty interesting. But back then, I didn't really look into it. They did recommend the book Buy Them built to me. I did not read it. Unfortunately, back then, a few years later, the friend of mine who was searching, they actually found the business, they bought it, they've been running it, and it's doing really great. That's when it sort of occurred to me to look into this search thing again. So at this time, I did buy the book, I did read it. It instantly made so much sense to me. And then I decided to pursue it myself. So that was about a year ago.

[Will Smith]

And so was it your friend actually having success a few years into, I think you said it was a she into her journey that opened your mind to it? Or was. Or was there something else between your first introduction to the book and a year ago that that changed?

[Shell Zhang]

I think on one hand, for myself, I think I became ready. So when I first heard about it, I was probably not ready to jump in myself, both from a career perspective and maybe mentally. I wasn't prepared to do something like that at that point. And then a couple years later, I think I was more ready last year to just jump in and pursue it. On the other hand, I do think I see a little bit more out there in social media, on LinkedIn, from podcasts like you. So I think it is becoming a little bit more mainstream compared to, you know, six, seven years ago.

[Will Smith]

And what about you is more ready, just more experience or different phase of life or what changed internally?

[Shell Zhang]

Yeah, I think it's a combination of things. Up until this point, my life was very linear, and I have a very linear perspective growing up because there was only one path to follow, right? So you're supposed to study very hard, you're supposed to get good grades, and I did all of that. And then you go to a good school, and then you're supposed to. Supposed to get into, you know, investment banking, private equity, or management consulting. So I sort of followed that path, which is a great path, and led me to learn great things, and I don't regret that at all. But the idea of, you know, what. What do I want to do for the rest of my career and life, that didn't occur until, I guess, when I was in my 30s, a little bit later than many of your other guests. So internally, I think there was a shift in me. And also after so many years working in consulting and then working in a Fortune 500 company and then also working in a tech startup, I feel like one, I have a better perspective on things. And so when I said last year, okay, I think I'm really ready to do this, I felt I really am ready. And also from a skill set perspective, I feel more confident at this point to do it.

[Will Smith]

And did you feel like for somebody who had been following a conventional linear path, kind of doing what was prescribed, stepping off that path is, Is a pretty big deal. So you talked about this shift. Was it a big deal? Did it, did it feel scary? Was there something that pushed you? Was it gradual? Was it sudden? I'm just trying to understand because there will be other people. Because for so many people, they hear about eta, they saw themselves as entrepreneurs. They were looking for a way to become an entrepreneur. And this provided the way, you know, rather than sending rockets to Mars, it's like, oh, this is, there's this other. And so in some ways you're a little bit unusual because many people who do go down this path, it's love at first sight. They, they read Buy, then Build, and the next day they're telling their partner, I'm doing it. But for you, it was, it was kind of gradual than all at once, if you will. I don't know. So that, that's why I'm picking at this. What shifted?

[Shell Zhang]

Right, right. I put Buy, then View on the shelf for years. Exactly. Without even opening it. I think, I guess there really wasn't a big life changing event that occurred. If there were one, maybe it was Covid. It made us all reflect on life and what were we doing and what do we want to be doing. So Covid made everybody pause and look back and reflect on, wait, I've been doing this and is that really the right thing I want to do? So there was a little bit of that. I think there was also a sort of realization and awakening for me, realizing that I have been taking a lot of risks. I have had this entrepreneurial spirit in me. If you think of packing up your bags and moving to another country where you don't know anybody, you know, going out there and doing these things that, that none of my family or my friends have done before. So I realized, you know, I am the kind of person that are a little bit more, you know, entrepreneurial than, than I previously thought. And I just realized I couldn't sit there and do the same thing for Years and decades. That's just not me at all. So at that point I was looking at other career options and trying to sort of get out of the corporate America machine, if you would call it and see if, oh, maybe I can go to a startup and that will be different. And it was very different. And so along the way, I think it was a gradual shift, but there's some, I don't know, there's some certainty in it as well.

[Will Smith]

I remember you mentioning to me in our pre call about the corporate machine and you had one of those moments, sort of, that's similar to that. I'll hear other guests say, where you looked forward, if you continued on the path you were on or within the corporate structure that you were in, that it. And it was actually not enticing. Say more about that.

[Shell Zhang]

Right, right. And I think I'm already very, very fortunate because the roles I had in a very traditional Fortune 500 company has been already some of the most exciting roles. So I was doing many different things. I was doing M and A projects. That's very exciting. I was doing strategic planning. So I think, you know, even as some of the most exciting roles out there, I still felt like it wasn't enough or it was a little bit repetitive at times. And then looking ahead, like you said, I think you can see other people's career paths ahead of me. And that just didn't inspire me very much. Looking at the VPs and the other executives I was interacting with, I look at them and I just couldn't see myself doing that.

[Will Smith]

Doing what? What was the lifestyle? Just like working constantly and a lot of money, little time sort of thing?

[Shell Zhang]

Yeah, sort of that. But also I also see how they also don't have control a lot of times of what they do. A lot of times they're, they're doing things even though they think it should be the other way. But there are so many constraints to what they can do in their position. So there are also some frustration that I've seen. A lot of people maybe at one point felt like, okay, they're going to go out there and change things and do things. But after many years, maybe some of them realize, hey, that's just the way it is. They can't really change as much as they thought they wanted to change, and that's fine. I still see a lot of executives pushing in whatever way they can, but I also see many of them being limited because they're part of this larger organization. And there are other things that prevents them from doing more.

[Will Smith]

I'M reminded actually of one other thing that you said in the pre call speaking of this larger organization that you actually liked and that you eventually your mindset had to shift around this, which was the impact. So at. In corporate you're working on big things, whereas in small business, at least ostensibly you're. I mean it's right there in the, in the title. Small. You're working on small things. What tell us about that evolution and how you thought about the world.

[Shell Zhang]

Yeah, I guess when I first heard about, okay, owning a small business, it wasn't, I wasn't extremely excited about that because instantly, like you said, it sounded small. So if you're part of a large organization, you get to do deals. So the M and A deals we were doing were a couple hundred million. Those were small deals and we're looking at several billion dollar worth of deals. So you felt like that was a huge thing and you get to be part of that. So the sense of impact you were making. And then you look at small business, I think of there's this subway down the street. The contrast, it's pretty big. But of course now I have a different view. Even if you're doing those large deals, you're one small piece of that deal team and it's great to put on your resume. But really, how much is your impact on that gigantic deal? Whereas if you are the owner of a small business, you actually, everything you do, you can see the result of that and you can see the impact of that and it is impacting. I mean, I don't know how many employees or whatever number of customers you're serving, like you can immediately see a impact on those people. So it's smaller, but it's much, much more direct in terms of impact.

[Will Smith]

You know that one of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper. But tech is complicated with tons of solutions out there. So choosing the right cloud platform, CRM, telephony, compliance and cybersecurity, not to mention implementing all that is a job in itself. Acquiring Minds Guest Nick Akers knows this firsthand. As a former searcher who now owns Inso Technologies, Nick has seen the tech challenges searchers face when acquiring businesses. His team at Inzo regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients. Drawing from his own experience in the search phase. Enzo dates back to 1989. So this is a company that has managed the tech for hundreds of small businesses over decades. And one last thing, no long term contracts with Enzo. A big differentiator. Check out enzotechnologies.com I N Z O or email Nick [e-mail] and don't forget to tell him you're a searcher. And now I just want to circle back to something you said a couple minutes ago that I let through, but was actually my kind of favorite thing of all about your shift here, which is that as an immigrant from China, your self identity was somebody who is fine, who was following the linear, conventional path, doing all the right things. And that's kind of the, the superficial interpretation of your path. But actually you did move, pick up and move countries twice, Right. Once to Singapore, then Singapore to the States.

[Shell Zhang]

Yeah.

[Will Smith]

And, and so there that feature of your life is, demonstrates a huge appetite or willingness to absorb risk and an adventurous spirit and comfort with uncertainty. And when you realize that about yourself, that, that maybe your resume kind of looks linear and conventional, but your, your life story actually already had a lot. You demonstrated a lot of willingness to take risk. That was like eye opening to you about yourself, right?

[Shell Zhang]

Yeah, eye opening and empowering as well. Give me a lot of confidence.

[Will Smith]

Yeah, yeah. Any. Are your parents back in China? Are they still around?

[Shell Zhang]

Yeah, all of my family is still back in China.

[Will Smith]

And did you run this decision by them or are you too old for that?

[Shell Zhang]

Not really.

[Will Smith]

Okay, well have they given you their reaction to your decision to step off the linear path? Just curious.

[Shell Zhang]

The surface. Sure. You know, they're like, okay, do whatever you think it's right. But I think just between them, they're worried. Right. Because they didn't do anything entrepreneur in there. They worked for the same employer their entire life. So they thought that the stable job I had with the traditional Fortune 500, they were like, why would you leave that? Yeah. So even my stepping off of that to a startup to them was. It doesn't make any sense. But I guess they trusted me enough and I'm old enough. They didn't say anything, but I know, I know they were worried.

[Will Smith]

Yeah. Congratulations Shell on taking life by the horns. All right, so you decide to do this. What does your search look like? Tell us a little bit about the mechanics of how you approach this.

[Shell Zhang]

Yeah, so at the time I was still working, so it was a part time search for me. I started looking at Houston. That's where I'm based at. I started looking at Houston. I realized If I am so geographically constrained, there aren't a whole lot out there. And I was pretty picky. So the first thing I said is I am going to get into something that I will enjoy doing. So that right away eliminated a lot of businesses out there. So I wasn't going to look at home services, for example. I wasn't going to look at any of the blue collar, the plumbing and the H Vac and that sort of business, which I know were very popular. I was not going to look into E Commerce, for example. So that narrowed it down for me just within my region. And then I decided, okay, I actually feel quite comfortable with remote businesses and digital businesses. So that opened me up to a lot of businesses that are not based in Houston or businesses that don't have a physical location. So at that point I was okay with the amount of deals I'm looking at. Again, I was doing a part time search, so only a couple hours a week. If I were doing a full time search, there probably wasn't enough deals that I was looking at each week. But given it's part time and I felt pretty comfortable for the amount of deal flow.

[Will Smith]

And what were your financial constraints?

[Shell Zhang]

I started off, I think the typical 500k to a million SDE lowered it to 300k SD after realizing again it's the amount of deal flow and putting too much constraint on my search. So generally 300k SD and above, ideally above 500k, it has to be a solid business. It has to be a business in an industry where I can see myself working in and then ideally again something that I can work on instead of working. So having a team or having some sort of structure in it where I don't have to step in on day one and be, you know, 100% doing, doing a job?

[Will Smith]

Yeah, well, a business at 300,000 of SDE, you're, you're, you're unlikely to be able to work on rather than in. Of course, you know, on the other hand, maybe that SDE is a little lower than it could otherwise be because the seller has put in a manager and they're investing in having a management layer. So you gotta, you gotta consider that at 300,000 of SDE, if you were willing to go that low shell, that tells me that you are willing to, to pay yourself out of the business. Assuming you were going to go an SBA loan somewhere between 100 and call it 125 and 150. Is that what you imagine for yourself? And was that, was that a step down from what you were earning in.

[Shell Zhang]

Corporate, it would be a step down. I was okay with it if I put in less time. So I think we can talk about this. I think every business is a lifestyle business. When people say lifestyle, they think, oh, you're just going to be passive and sit there. I don't think it that way. So I'm getting to a point. I'm 40, so looking into my next decade and the next two decades, I also have to think about, okay, what kind of how much do I want to work, how much freedom in terms of time and flexibility do I want to have, how much time do I want to spend with my kids? So it's a balancing act. I'm not looking necessarily to putting as much time as I can to buy as big a business as I can. So I'm less aggressive in terms of the size of the business, how much money I want to make. I want to sell it to private equity within five years. I didn't have any of those goals. For me, it's more important to have the flexibility, especially in terms of time and physical location because I do have all of my family overseas. As my parents get older, I think I would love to be able to travel back and forth a little bit more often. If things come up, I would love to be able to just go back and help. So for me, it's lifestyle in terms of, okay, I really value more flexibility and I'm willing to trade for, you know, the size of the business or, or the amount of how much I pay myself.

[Will Smith]

Yeah, well, shell it sound. It sounded like you zeroed in on like you'd be comfortable with a digital business. You. You realized. But the more you talk, the more it sounds like actually a digital business would be the ideal that you. You'd really want to get something, especially with. Based on what you just said, something completely location independent. Yeah. Yeah. Okay, great. Carry on. So. So. So is there anything more to say about your search before you. Before we hear about the business that you found?

[Shell Zhang]

Not really. I mean, I think I searched for about six months before signing a li. I had a pretty disciplined deal flow, volume and making sure I am evaluating a certain amount of sims and talking to a certain number of either owners or brokers each week and each month. So I think on average, so I put out total six offers. So it's on average about one per month. And I think that's a good pace to maintain. And I knew even though I wasn't closing those offers and signing allies, I knew if I, I keep at, at this pace I will eventually find something. So I think that's important to know that, that you know, I know I was on the right path and, and if I keep executing that will lead to a signed LOI in a couple of months.

[Will Smith]

So did. Were any of those Lois, other than the one for the business you bought signed, that then fell apart during diligence or they were all rejected except for your Fine. Except for Nadis.

[Shell Zhang]

Yeah, I think there was one where I pulled out and then the other four were rejected.

[Will Smith]

And where were you looking?

[Shell Zhang]

Just websites I was looking at. Yeah. Online. I'm only looking at brokered deals because I was a part time searcher and that was giving me enough deal flow. So I was looking at BIS by Sell. I was looking at a couple more brokered websites that were focused on digital and remote businesses. So Quiet Light was one of them. Quiet Light, I think Website Closers was another one. I've worked with brokers on both of those platforms and I was really impressed by how professional they are. So I paid particular attention to these two. I know there are a whole bunch of other platforms and websites out there especially for digital businesses, but those are the two that, that I found just the quality of listing and quality of brokers were really top notch.

[Will Smith]

Yeah. Yep. Quiet Light and Website Closers.

[Shell Zhang]

Yeah.

[Will Smith]

And you said that you don't want kind of a blue collar, greasy, sweaty business, home services, etc. But you also. Is that the same thing as resisting boring? Because you did also tell me that I don't want boring. Maybe that's one and the same, but I think you meant something even broader. Speak to us about that criterion.

[Shell Zhang]

Yeah, no, I mean, like, look at me. Like it's just a little bit harder for me to lead a, you know, like a blue collar, sweaty business. I mean I probably still could, but it would just not be as natural and it would just take longer to build that relationship with the team. I came out of manufacturing, so pretty much my own career. I walk into a room and everybody, it's all guys older than me. It was difficult. It can still be done, but it was going to be challenging and I know that. And I'm just not particularly interested in plumbing or H vac or any of that. I let my husband handle all of that. So it's going to be difficult and I'm not interested in. So I decided to let those go.

[Will Smith]

Yeah, but it was also kind of like the idea that a business that you buy would be, would be boring. I got the sense that you Kind of rejected. It was kind of one of these like, well, why does it have to be boring? Home services or otherwise? Why can't it be stimulating? Right. Or is that. Am I. Yeah, yeah, absolutely.

[Shell Zhang]

I think it should be stimulating. Right. If you love what you do, you never work a day. So. Yes. So that's very important to me. Also something that I realized through the years and I guess I'm a little bit older so I'm a little bit more insistent on this. I mean, life is too short. I'm willing to again trade money or the size of business if I get to do something that I can really enjoy.

[Will Smith]

Yeah, I was going to say that you have a lot of criteria there and that it gets pretty narrow, but $300,000 SDE for a business that could be digital. There's actually quite a bit of deal flow around that. But that last criterion, the, you know, life's too short, find something that really kind of turns you on, that one can be hard. But it doesn't sound like you found it to be that hard because you were putting out an LOI a month. So you there were, you found a lot of. Really, you found, you found a good amount of stuff that was stimulating enough. Right, Fair to say.

[Shell Zhang]

Right, right. I have, I have a broad interest, I guess and I wasn't just looking at one particular industry. I was completely industry agnostic. I had to cross out a few, you know, big categories. But there are still quite a lot of, you know, different industries and sectors out there. I actually found looking at businesses like really interesting the process of learning all of these different business out there that you would never know. Before I started my search that was really fun and each of the lis I gave out, I think they were all different businesses, but there was something or a aspect of it where I felt a strong connection. Many of them are women owned businesses, to be honest, where I had a strong connection with the founder or with the mission they're trying to pursue. But they're all different businesses.

[Will Smith]

Can you give us an example of one or two that piqued your interest that you put an LOI on that you didn't get?

[Shell Zhang]

Yeah. So I think one of them was a career transition training businesses for, for. I think it was physical therapists and 90% of the customers were women. A lot of them were mid career. They were trying to transition out of being a therapist into many, many different things. So that one I felt a great connection with because I was going through some career transition stuff myself. I understood, you know, they have family considerations. They're wanting to be more flexible, maybe making a bigger impact. And it was an entirely, you know, digital remote business. So that's. That's an example.

[Will Smith]

Yeah, that great, great example. And in fact, the business that you bought also is. Is a perfect example, which we're going to turn our attention to after this final question. You have a partner, you have a family. What was the internal conversation like with him about this decision?

[Shell Zhang]

My husband, he was just completely supportive. Well, he's supportive of me on everything, including this. But we have double career, and I think that was very difficult, especially when we were having kids, Meaning both of us wants to have meaningful careers, meaningful jobs. We couldn't have it at the same time sometimes. So there are periods of time where one of us was going out and taking a little bit more risk or going for a new job while the other one had to remain stable. And then a couple of years later, when one of us gets more stable, then the other one can go out there and do a switch. So I guess because I was doing search and pursuing entrepreneurship, he had to stay put for at least a couple of years and be the stable person in the family. But that's also the beauty of having a dual career, because I'm not worried about bringing home a certain amount of money each year from year one. He's still making decent money so we can live by his income. I don't have to worry about health insurance because I get onto his plan. And just mentally, I think it gives me a lot of freedom and flexibility to really go after what I wanted to do and not having to have this other pressure on. I have to feed my family, you know, by the state or. Or anything like that.

[Will Smith]

And so the conversation was there needed to be confirmation, obviously, that he supports this path. But like husband, this does mean that the job you're in, you're going to need. We both agree you're. You're going to need to stay in.

[Shell Zhang]

Right.

[Will Smith]

Until.

[Shell Zhang]

Don't quit.

[Will Smith]

Don't quit until. Until my entrepreneurial adventure here stabilizes somewhat. Yeah, yeah, yeah, yeah. Fantastic. Now, please shell tell us about Nada's Italy.

[Shell Zhang]

Okay, so Nada's Italy, I actually found it on Bis by Sell was a. It's a broker deal. I was pretty passionate about travel, so if I had to pick one industry at the beginning of my search, I probably would have picked the travel industry, but there just weren't a lot of deals in that sector. So when Nadas came on, obviously I was very interested. It was a tour Operator. So it's not a travel agency. A tour operator actually operates the tour instead of just making the bookings and have someone else deliver. So they were founded about 20 years ago by Nada, hence her name is in the brand. She grew it for about 20 years. It was a decent sized business and at that point they were fully remote, which is why I even found it because it was listed as a remote business. And we can get into more of that. It wasn't a remote business a couple of years ago, but now it is, which is why it came up in my search.

[Will Smith]

And first of all, give us some numbers around the business, if you will.

[Shell Zhang]

Okay. Yes. So revenue wise, and I put we can talk about that, but I would say roughly 3 million in revenue and a little bit less than 600k in SDE. So it's actually a really good size. I would say it's the perfect size based on what I was looking for.

[Will Smith]

So $3 million in revenue and how much is a ticket on one of the trips? And I'm sure it varies and there's all sorts of offerings. But in other words, what I'm really trying to get at is how many sales a year, individual trips do you sell? Not 3 million to get to $3 million. It seems like a lot for a very specific guided tour business.

[Shell Zhang]

Yeah, I mean they offer pretty high end luxury tours. So each tour I think the average price is 8 to $9,000 per person. And because most of people book as a couple, so that doubles the 8 to 9,000 into 16 to 18,000 per booking. So it's a high ticket value product that they were selling. They were very small, to be fair. Very, very small compared to some of their tool operators that are much, much bigger, like real global companies. So they're very small, very boutique. They mostly only do Italy with just a few tours in other countries, but 95% it's in Italy. So they, they do know what they're doing. Very, very well with 20 years of experience, you know, mostly just focused on one country.

[Will Smith]

We presume that Nada is an Italian immigrant.

[Shell Zhang]

Yes, yes, she is. And that's also where we had a really good connection. You know, she came over here when she was in her early 20s. I came over here around the same age. So we both knew, you know, we both had to start here from nothing. And she figured out and she had her own business. So I mean, she's, she's really fantastic.

[Will Smith]

Well, let's address the screaming question here. The, the kind of key woman risk. It's got her name on the business, which happens a lot. No big deal there. But she's Italian. Tours to Italy. You imagine that a lot of her ability to build this business and fun and operate this business is based on her herself being Italian. You are not. How did you think about the key woman risk? And then we'll get into to more about what you liked and the risks of this business. But that one first, since that one seems kind of the most obvious.

[Shell Zhang]

Yeah, so sorry. At the beginning, Nada was obviously she was a one woman operation. She was talking to the customers here in the US she was taking them over to Italy. She was leading the tour, she was doing everything. And then over the years, because she was able to grow her business, she started hiring people. So after 20 years, the business, by the time I saw it, she really wasn't doing much. She has a team that does all of the day to day jobs that is needed. And I think she estimated she was working maybe 10 to 20 hours a week mostly on things, you know, a business owner would do. She wasn't involved in any of the reservations. She's clearly not doing any of the tours. She knew the earlier customers and she has personal relationships with those. But as the year progressed, I mean she doesn't speak to customers anymore. They obviously know that Nada was the one behind the whole operation, but nobody has met her or knew her personally. So. Yes. So she has a dedicated team. Obviously it's still quite risky for me to get in because obviously there are lots of. The team is based in Italy and obviously Nada has relationships with all the vendors and contractors over there. So that was a risk for me to get in there. And you know, am I able to build or maintain the same kind of relationship with, with the people in Italy?

[Will Smith]

Yeah, I imagine however that, I mean certainly a risk and I was going to ask about it. And it's not just with her customers, her relationships, but maybe even more so with the team in Italy and with vendors and so on. On the other hand, you do have the, the great advantage that you are bringing business to all these vendors in Italy. They are incentivized to want to work with you.

[Shell Zhang]

Right.

[Will Smith]

Travel, this sort of travel hospitality is by definition an internationalist, globalist business. So people are used to speaking with people across cultures and in, in de facto English. Everybody who works in travel, I assume particularly in a, in a country that with as much tourism as Italy speaks English. So in fact, you know, you're, you know, this is, it probably is much, much less of an issue than it seems at first glance, you not being Italian, but dealing with the folks in Italy.

[Shell Zhang]

Yeah, at the beginning it felt like a big issue. But as I get to know her, as I get to know her operations and her teams and of course now that I'm in it, it's really not an issue anymore. But before I weigh in, it's exactly like you were saying. Well, I figured travel, it's a big industry in Italy. A good portion of the population work in travel. So if we had to hire new people or if we had to hire more people, we have a established brand, we have a good reputation there if we pay fairly and it's again not something that is super technical or super difficult to hire, I assume that we will be able to be able to hire either people or vendors over there.

[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 it is in the show notes. Aspen is a professional employer organization or peo, run by a searcher for searchers. Search fund veteran Mark Sinatra runs the company which provides HR compliance, flawless payroll, Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for a fraction of the cost. Go to AspenHR.com or contact Mark directly at Mark Aspen HR.com you have a connection with NADA. You love the business. Travel was. If you, if you had been pressed, that would have been your first choice Industry. Amazing, right? Italy speaks for itself. Don't need to sell anybody on that concept. What, what else though did you like about it? Maybe some of the business fundamentals. Travel, of course, is a notoriously cyclical business. The quality of revenue and travel is maybe not the highest. The high ticket items to consumers hard. Which maybe that, that's why travel is cyclical. So I may have just been redundant there. But, but so, so what did you like about it?

[Shell Zhang]

Yeah, so I looked at their business. I really liked. They have really, really amazing reviews online. I mean all five stars on every single platform. Most of the reviews were like little essays people would write about their experience. People would write about how good the tour guides are, how good the hotels and the restaurants were. I mean it was phenomenal. I've never seen a business with such good reviews. To a point I thought, wait, is it fake? Like are they paying people to write these essays? But I mean it seems pretty, you know, it seems Sincere. And a lot of customers will mention, oh, I was on this tour on this time. And you know who. And who was my tour guide, so. And so was my driver. I mean, it tells me that, you know, they have a very, very strong product offering. And I can see that. Right. You know, she's from Italy. She's been doing this for 20 years. They didn't really expand to other countries. So it's 20 years of refining the itineraries, refining the vendors, and making change and adjustments based on customers feedback. So they've really developed something that is very strong in the market. So that's one thing. I'll tell you a couple others. I like that it's a simple business that I can understand. So that's actually one of my criteria is I have to be able to understand the business. I'm not a technical person, so it has to be something that I feel comfortable understanding, even the smaller details of it. Not that I want to be working in the business, but it should be something that's easy for me to make sense of. They have no asset, no inventory to deal with. So from a business model standpoint, it's a very simple business. Negative cash flow, because we always collect deposits and then the full amount first before we had to deliver services. So that's great in terms of risk protection as well as you're always sitting on a pile of cash. And that's a very nice thing to have in the business. High ticket price, which means we can afford to do marketing and a lot of other things. I think those are the top things that I liked about the business.

[Will Smith]

What are the margins? I guess the margins. Can you say like gross margins and net margins? Can you break it down that way? However, you can give it to us.

[Shell Zhang]

So based on the financials I saw at the time of due diligence, I think gross margin was about 40 to 50% and then net was high teens.

[Will Smith]

High teens. Okay. So just to double click on a few things there, for those who haven't heard me already beat this to death. Well, the first is not something that comes up a lot, but it's. It's worth attend spent giving some attention. The high ticket price means that you can. Yeah, it means that you can really spend a lot of money, a lot of marketing dollars relative to other services.

[Shell Zhang]

Right.

[Will Smith]

To acquire a customer. Right. I mean, high ticket cost with, you know, good gross margins means that you can. The customer acquisition cost is also likely to be high, but that you can play with it. And if you're not a super Technical person in this business is simple and it's not really doesn't have to do with technology so much. I suspect that a lot of the. A lot of this business is in the marketing. And so here I'm. You. Correct me if I'm wrong, Shell. But so here you have. And the execution. Of course, this business comes down to marketing. Acquiring customers, consumers, high ticket prices, which can be tricky. Of course, you don't need to make that many sales per year. And kind of flawless execution of these trips where there are a lot of moving pieces and moving personalities but you get. But they have systems for. Anyway, so. So I think the high ticket price and that that. That allows you to spend money on marketing and spend. And really kind of be creative there is worth mentioning. Secondly, the net negative. Actually. Do you want to respond to that, Shell? Do I have that right?

[Shell Zhang]

Yeah. No, I think you're absolutely right.

[Will Smith]

Okay. And in fact, marketing, redoing the website is one of the very first projects you're working on. As we said.

[Shell Zhang]

Out of those two things, I think flawless execution has to come first.

[Will Smith]

Yeah.

[Shell Zhang]

And then marketing.

[Will Smith]

Yeah.

[Shell Zhang]

And we can talk about why in this particular business where they have one and then not the other actually makes it a really good fit.

[Will Smith]

Oh, go well. So I'll say my second thing and then I want to. I do want you to speak to that, please. Second thing is just the. The negative cash cycle. I always get that phrase wrong. Negative working capital net negative cash collection cycle. Anyway, there's. There's some official terminology for that. Point is you. You collect money before you have to spend it. Which is.

[Shell Zhang]

Right.

[Will Smith]

Which is a wonderful feature I have. I. Before acquiring minds, I underestimated just what a great feature that is. But now having heard so many countless stories.

[Shell Zhang]

Right.

[Will Smith]

How difficult it is to manage cash. Cash flow. Right. It's a really, really strong feature to have in a business that you collect first and then spend on your expenses later, rather than the reverse, which is probably the case for 90% of businesses. So a very. You're never in a cash crunch position because you get it all up front.

[Shell Zhang]

Right.

[Will Smith]

Okay. So that just really is. Is a feature to. If you can get it, seize it. Okay. What were you going to say about the two. The execution versus the marketing? Execution comes first.

[Shell Zhang]

Yeah. I think. I think you have to have a good product and service offering first. And that's the foundation of having any good business in my mind. And I think Nadas has that. So for me, that's absolutely the priority. The marketing piece is equally important. But I think that comes after. So it's a slightly lower priority than having a good product offering. And when you look at a small business, I think we all realize none of them is perfect. Most of them are strong in one of them and a little bit weaker on the other. So if I had to pick, I would absolutely pick a business where it has a good product, it has a good execution and a little bit weaker on marketing. And that's also based on my own I think experience and strengths and weaknesses. If someone comes in with super strong operational background, then maybe they pick one where they have the marketing and the sales funnel but they need to fix the product and the service delivery. So in this case, I think nada's is exactly what I was looking for. It has a very strong product and service delivering but it was very weak in marketing. There are reasons why. But when I looked at this business, they had almost a no marketing spend. There was no marketing.

[Will Smith]

You're kidding.

[Shell Zhang]

Yeah, you couldn't. It was very hard to find them online in Google search. They were spending almost nothing on digital marketing at all. And it has a lot to do with COVID and how the business changed. But we can get into that a little bit later. But what I saw was a business with super strong product but it was not being discovered by customers. So there's an opportunity, if I can go in there and fix the marketing that should allow me to grow the business significantly.

[Will Smith]

Absolutely. I mean now some of what you just described is a pattern in this world that you know, a small business hasn't been property properly marketed. So there's a great opportunity there. But I would imagine especially so in, in this business because I mean travel, fantasy travel ideas. What I'm going to do with my wife, researching online, where I'm going to go, what I'm going to do when I get that is just such an online activity for people now where you shop for anything travel, you do it online. And I'm just. I would just imagine a business like this would have gotten 100% of its customers from digital funnels. And it. So it strikes me as just a screaming opportunity. Just 70, you can move the needle just a little bit.

[Shell Zhang]

Yeah. So at the time when I bought it, 70 to 80% of the customers were either return customers or referrals. So word of mouth or I mean they're actually I was really surprised to see customers traveling with us, you know, five times, six, seven, eight times. And I think the record was 11 times. Wow. In the last 20 years. Yeah.

[Will Smith]

And the other 20 to 25%. Where did they come from?

[Shell Zhang]

That's either they read the reviews or they somehow found us on Google. There was a little bit of social media. There was a Facebook group. So it's a mix of all the other channels.

[Will Smith]

That's really exciting, Shel. Now, Covid, you mentioned it. Covid, we would imagine, would have just decimated this business. You've already said how it was the point where there was a lot of transition in the business. I guess that's when she went virtual. So tell us about COVID how things have changed in recent years and what, you know. Yeah, tell us that first, and then we'll get into kind of the stress test that it was.

[Shell Zhang]

Yeah. So before COVID Solnara has grown the business to a decent size. She actually had physical locations. She, before COVID had two locations. One was in Charlotte, North Carolina, the other one's in Florida. So they had two stores where people would actually walk in and inquire about the tours. She also has a lot of sort of physical marketing. So before COVID they did a lot of events, you know, workshops, you know, wine tasting. So they were doing marketing. It was just. It was very heavy on physical aspect because they had these locations. And before COVID she had a team of about, I would say, 15 to 20 people in the US alone.

[Will Smith]

So she had the physical locations. She had 15 to 20 people here working. Where? And how did that change with COVID.

[Shell Zhang]

So they had the two locations. So her team and the customers actually were. Were both local. So after Covid, they had to close the physical locations. She had to let a lot of people go. But the good thing is that they also became a national or even international business. Right. So before COVID they were a local, if not regional business. Most of the customers were living the two states that she had a location in. Now customers are coming in from all the states. Occasionally we get even other countries. So I think Covid was really, I mean, it was, of course, devastating for the entire industry and for this company as well. They had to scale down a lot, but it also opened up or it forced it to transform into a more remote and more digital business. And I think that's where really the opportunity is. They haven't really finished transformation into a digital business. And I think that's where Inada, she said it. She's like, I've brought this business to as far as I could. And she knew the business is strong and we could do so much better. But she just didn't have the combination. I Guess of the right skill set and the passion to bring it to the next level. And that's why she was selling.

[Will Smith]

How old is nada?

[Shell Zhang]

I think she's a couple years older than me, so she's maybe late 40s at this point.

[Will Smith]

Ah, okay. So she's not a boomer.

[Shell Zhang]

No.

[Will Smith]

Ah, interesting. And so with that transition to essentially a virtual remote business and one with a. With a completely national clientele, by the way, frankly, bizarre that she could build a business with retail selling just her tours in just two states. Anyway, good for her to be bigger than today. Oh, it did used to be bigger.

[Shell Zhang]

Yeah.

[Will Smith]

Okay. So. So what was the upshot of all this? This change? Revenue actually declined. Yes, interesting. So revenue decline. Even though that she. Even though her TAM is now the entire US and occasionally even people from outside the US I. Yeah, I'm just. I guess because she wasn't marketing on marketing online, I'm just confused by this. So she wasn't marketing online, so all the advantage of having the entire country be her market. She really didn't. She really wasn't captured yet. Yeah, yeah. Okay. All right. So what? So. So actually this reminds me, one of the things about this business that was a criticism, a reason not to like it, a reason to go let it pass, was that it was declining in revenue. It was a business seemingly in decline. So finish out the story there. Fill in the holes there on that.

[Shell Zhang]

Yeah, yeah. So they were doing, I think, the highest in terms of revenue that they've done before. COVID was between 4 to 5 million. So they were even bigger than today. When Covid hit, it was obviously very, very difficult. There were a lot of cancellations, and they had to try to postpone all of the tours booked for 2020 and 2021. So they actually, I think they lost money for those two years. And then 2022, when travel restarted, it was a very good year because all of the tours that were supposed to happen in the previous two years, a lot of it actually did happen in 2022. So they didn't have to do marketing. They were just sort of delivering on what they sold for those Covid years. So 2022 was a very good year for them. I would say that's. Yeah, totally because of COVID And then 2023 was a decline, if you compare it to 2022, because they've used up a lot of the tours that they sold during COVID in 2022. And then 2023 was a combination of what was being postponed and the new bookings. So compared to 22, that was a decline. And then if you look at the past three years, it was losing money and then did super well for a year and then coming down a little bit. So, I mean, I know in the search world we look for very consistent revenue. We look for recurring revenue, we look for maybe B2B. So it was a lot of red flags if you, you know, use that lens to evaluate this business.

[Will Smith]

And so how did you get. Get comfortable with where revenue and sales would settle out? Because even if you believe that this business can survive, which I clearly do, if it was, if it was doing really well based on a retail strategy in just two states, again, I can't shake how curious that is to me. Even if you believe that this, this business will. Will make the transition post Covid, how do you pinpoint where to, you know, where sd, like what SDE number to use for multiple, for example.

[Shell Zhang]

Right. So I looked at a couple of things. So instead of just the three year back, I asked for, I think five years looking back to pre Covid, and they showed they were very transparent and gave me all the financials and all the tax returns. So there's validation that they were actually doing 4 to 5 million before COVID So I know especially because they have a good product and service offering, so I have confidence that they can deliver that level of revenue again. The second thing was, I think because they book ahead of time. So when I was doing my due diligence, I asked for their salesforce reports and I can see how much they're booking for 2025 already. So because it's quite a large travel expense, people book six to 12 months ahead. And the beauty of that is you have visibility in terms of how you will do next year.

[Will Smith]

Totally.

[Shell Zhang]

So 2025, it was doing okay, at least from what I can tell, 2425, it's doing about the same as 23. So I'm like, okay, I can probably use 2023 as a baseline in terms of revenue and SDE. So that gave me a little bit more comfort. And I think the last thing I should mention is I think it's priced right just based on given that how volatile the STE has been, it didn't have a crazy multiple on it. So it gave me a little bit of buffer to buy it at a low multiple. It provided a little bit of. Yeah, it provided a little bit of buffer. Even if it continued to decline a little bit, it would still be okay, great.

[Will Smith]

Well, I think that that makes sense. It hits a number in 2023, after a Covid. Crazy Covid bump in 2022 hits a number in 23, 24 is about flat. It looks like 25 is on track again to get there. So that would give one confidence that this is where it's going to settle out. And then again, this is a business that, you know, can get to 5 million. There was a time in the past with no digital strategy, just this retail, local, regional retail strategy where it got to 5 million. And she never really, she never really properly started marketing this across the country, which she is now unable to do, being digital. Yeah. I'm starting to get really, really confident that, you know, this is, this is easily, this is, this is easily back to a $5 million business. And then who knows what the ceiling is? And. Okay, so great. And so what was the multiple. What was it being sold for?

[Shell Zhang]

So it was. I think I actually paid a little bit above 3x, so I went above asking price because I think there was a lot of interest given that it's a glamorous business as you would describe. So I really wanted to make sure that I get this one because I liked it. So I went above asking price to make sure I get it. So in the end, I think the deal price was a little bit under 2 million. But with all of the project costs and everything, all the fees, it was about 2 million to close this deal. So just above 3x.

[Will Smith]

Just above 3x reminding the audience that that SDE was 600ish or approaching 600. Yeah, yeah. Okay. And how did you structure the cash that was sitting in the business? For deposits for, for trips, did you get to keep all that or what?

[Shell Zhang]

Yes. So that came over to me, which is, which is very helpful.

[Will Smith]

Great. So you just basically got all the working capital that you needed in the form of her just giving you the keys to the bank account, all the deposits that were in there. Yeah. Any. Anything more to say about that structure or the deal structure overall? But also the kind of deposit structure, it can be tricky in, you know, in SaaS businesses, for example, where you have customers on annual plans and.

[Shell Zhang]

Yeah.

[Will Smith]

And, and, and so, yeah. Was there anything more to say about that or.

[Shell Zhang]

No, No. I mean, I think in this case it was pretty, pretty clear because, you know, she hasn't delivered any of the tours that, that she's been collecting deposits for. So it was a pretty clear decision that that should come with the business.

[Will Smith]

Anything more to say about the deal itself? I want to learn about the business a little bit. Anything more to say about the deal?

[Shell Zhang]

No, it was a pretty standard deal. I think we had a good relationship. I had a good relationship with the seller, Nada. And I think that's very important. From the beginning, she saw that I would be a good fit to take the business to the next level, and I felt like I could trust her with the things that she's providing me. So from the beginning, it was a great partnership to get this down together rather than, you know, picking on things and, you know, sort of suspecting that someone's trying to trick someone. I think it was a really good working relationship with a very good, very professional broker. So, yeah, the whole process was very smooth.

[Will Smith]

And where is she based, did you say? Is she Florida?

[Shell Zhang]

Yeah. Yeah. Right now she lives in Florida.

[Will Smith]

Okay. And out of curiosity, so I assume that was the. The reason for her retail location there. Why Charlotte, North Carolina?

[Shell Zhang]

Was there some personal reason she used to live there? Yeah.

[Will Smith]

Ah. So. So there you have. What you can learn from that is, is not that she basically opened these retail locations wherever she happened to be living. And you have two test cases where in both markets it worked. I would have thought that she strategically picked Charlotte and strategically picked Florida for some reason. And, you know, that maybe not every market would support this business. Of course, not every market will. But it really was pretty arbitrary. And happily, in both cases, it worked great. And how do you think about the moat in this business? If. If any? Because there isn't, you know, it's very asset light. There are no assets, effectively. Right. Like you said, one of the. One of the. One of the strengths about the kind of the travel business and the vendors is if you happen to lose the vendors because nada's gone and they don't like you, you can probably find vendors, replacement vendors pretty quickly. Of course, that works both ways, though, because it also means that those relationships aren't. There's not a lot of intrinsic value necessarily in those relationships. So another nada could come along and, you know, to get this business going, you just kind of need an Internet connection and a lot of hustle. Right. So how did you think about that?

[Shell Zhang]

So it is a little bit of a risk, I think, and that's sort of like a trade off. If you want a business that is easy to understand, not highly technical, then I see that as the trade off is, you know, there is a little bit more competition compared to other businesses where, yes, the mold is very deep, but that also means it's probably very hard to hire someone that understands business that are technical. So I'm Okay. With that level of risk, I mean, there is a good track record, there is a strong brand. You cannot buy or replace all of those amazing five star reviews. So it is a moat. And at the same time, travel is a huge market. And even if we double the business or triple the business, it's still a teeny tiny piece of that market. So I mean, I think there's enough to feed this small company in a very large pond.

[Will Smith]

Two other things about a travel business like this, a guided travel business, that would give me pause. You're dealing with consumers. Now, obviously we deal with consumers a lot in the businesses that we talk about. Home services is that in a big way, you're going into people's homes. But this is all, you know, this is dealing with consumers in another way. But you can just imagine people spent a lot of money on this. You know, if they have that money to spend, they're probably people who are, have disposable income and have an expectation of perfection. You know, I mean there's just, it would seem like a very high maintenance customer and there are just so many things that could go wrong in a trip. It just seemed, you know, I think I'm stating the obvious here. It seems like guided tours. Executing guided tours well to and making all of these consumers content after they've just spent eight grand a pop would be really hard. So what's it like inside a travel, a guided tour travel business?

[Shell Zhang]

I think that's part of the profession or the technical part of it. Not everybody can just jump in and straight away deliver these perfectly executed trips. That's why they've been doing it for 20 years only in one country, build all these relationships, refine all the itineraries, and assembled a really good team in Italy of local guides, of tour guides who has been with nada for 10 years, 20 years, and they're still having a really good relationship with the company after Nada left. Why? I think part of it is because they like small groups, they like the customers we bring, they like our itineraries. So then the tour guides become sticky to us because they can obviously make more money with some of the very large companies with huge, 40 people group tours. But they prefer to work with us because we allow them to build this personal connection with the customers. Many of them stay in touch with the customers after the tour. And many customers will go back to a tour because of this particular tour leader. So there's something really special, I think about Nada's Italy. It's this personal connection that is Enabled by the very small group size. I think we're probably one of the smallest group size out there for group tours. Enabled by that and enabled by all of the execution and itinerary and attention to detail that makes it a strong. I think it's a strong competitive edge that is difficult to quantify, but I think it's there.

[Will Smith]

Yeah. And how many tour leaders are there on the ground in Italy right now?

[Shell Zhang]

We have about 10.

[Will Smith]

Oh wow. Fantastic.

[Shell Zhang]

Yeah.

[Will Smith]

Now that you're inside the business, shell, was there anything about running a travel business? Well, a two part question. Anything about running a travel business that you underestimated and that it's a lot harder. How the sausage is made is a lot harder. We, I think we all understand that the logistics of this business is, is what makes it hard and that's why it's a business. But is it more or less hard than you thought? Question and then sub question to that is, was she really only working 10 or 20 hours? This is what we always hear from sellers, that they underestimate the hours they're putting in. So what'd you find?

[Shell Zhang]

Yes, so that's exactly true. I think nada has gone very hands off. One other very strong thing I think about the business I forgot to mention earlier is the team that came with it. After meeting the team and seeing them, I just feel like I won the jackpot of being so lucky to have a team that is just passionate about what we do both in Italy and in the us Just really believes in the business, really dedicated, really treating this business as if, as if it was their own business and very competent in doing what they do. So the first week it was funny, like after the first day meeting with the team, we announced the transition, everybody was crying. And then for the rest of the week it was so quiet for me because nobody came to me for anything. I was a little. It was unexpected because I thought it's mostly a good thing but at the same time I was like, I have no idea what's going on in this business. These people are just running it. They didn't need me to be here at all. And that's a really strong point about the business is every single day to day task is being handled by people who are passionate and responsible and have been doing this for many years. And they know all the customers and know all the vendors and are always acting to the best interest of the business. So it's. Yeah, it's. I have an easy job. What?

[Will Smith]

What? Amazing. Just amazing to find that shell. Congratulations. Was there Anybody at the top of the pyramid other than Nada, did she have kind of a president or somebody? I mean, who reports to you?

[Shell Zhang]

So by the time she sold the business, there were only six full time employees. So she went from, you know, 15 to 20 to six. Obviously we still have a lot of contractors in Italy, but in terms of, you know, people working full time for Nada's Italy, it was only six. So it was, it was a very small team.

[Will Smith]

Yeah. And so given that those contractors, you're not carrying a lot of payroll, which is, which is also a good thing in terms of when, when there will be an inevitably cycles in this business. And, and how do you think about that? The next recession that hits, travel will go down. Are you. It's probably far out. We hope that's far out. But how are you thinking about that? I mean, is the business prepared for that the way it's already structured, or do you need to have a cash hoard to get through? Or what do you think?

[Shell Zhang]

I mean, it is a volatile industry and a seasonal one. Very aware of that.

[Will Smith]

And seasonal too. Yeah, cyclical and seasonal.

[Shell Zhang]

The fact that they survived Covid give me a lot of confidence in their ability to be resilient. I think right now the business the way it is is very light. So it's well positioned to go through another test, if you may say it. I mean, we just mostly have payroll. Right. And subscriptions. We don't have any inventory, we don't have heavy assets. We have a negative cash cycle. I mean, all of that are positive things to prepare for another Covid. And of course I don't think another Covid is going to hit us. So I mean, even if it's smaller things, a recession, a downturn, I think we'll still survive. If we didn't sink during COVID I don't think we're going to sink with a recession.

[Will Smith]

Turning to growth now, Shel, this. What are your marketing initiatives? I already teased that you're redoing the website, but how are you thinking about this very exciting prospect that you can just sink your teeth into growing this brand online where you have a country of 350 million people to target.

[Shell Zhang]

Yeah. So the near term there are quite a lot of, you know, low hanging fruit levers to pull. So that's what I'm going to focus on for the, you know, at least the first year. So we have a very good customer segment demographic that we know how to serve well. So we're gonna stay in that demographic mostly for next year. We Have a country, Italy, that we know very well how to deliver. So we're gonna stay there in the same demographic, in the same service and product we serve. But just the first step is to make sure we have a good online presence and so that people can discover us. So that's step one. Once we've unlocked that, I mean, like you said, I think sky is the limit in terms of growth. We can potentially target a slightly younger demographic. That means we may have to tweak some of the services and products we offer. And that's fine. We can also grow into other countries, adjacent countries, not far away. But if we know Italy so well, we can probably do Greece as well. It's very similar and that would probably fill my plate for the next two to three years. And then again, this is a lifestyle business. So if I want to press harder on this, we could expand more aggressively. But if something happens at home or I need to spend more time at home, I could grow at a slower pace, but still growing. So I think that's really the ideal situation for me is, you know, I can, I can choose how fast I want to go. It has the potential to grow very big. But if I want to take it slow, I can also do that. And the business doing fine just the way it is. After I fixed, you know, the, the first year, fixing the low hanging fruit stuff.

[Will Smith]

Wonderful optionality that you have with this shell. Give me an example of some low hanging fruit though on the marketing. Just basically like wine tour Italy, start, start bidding on that on those terms, sort of thing like as simple as.

[Shell Zhang]

That, redoing the website, rebuilding the website. Right. So right now we do have traffic, for example, in our old website, but none of that is converting into inquiries or leads. So the first thing we want to fix is to make sure the website is converting. Then we can spend money to bring in more leads to bringing more traffic which then would convert to leads. I want to be careful and not grow too fast at first either because we have our existing infrastructure that I want my team to handle. A gradual increase in volume, but not to shock the system. The good thing I talked about booking earlier in terms of growth. It's also a little bit of the other side of the coin is we have a ceiling, for example, for 2025. The dates of the tours were released in spring 2024. So there really isn't much I can add in terms of dates and schedule for 2025. So if I want to grow, I'm looking at 2026, which we will release the dates for 2026, probably in February or March 2025. So there is a little bit of delay and planning needed to realize that growth.

[Will Smith]

Yeah. And so hearing you say that, the way this business works is you all decide on X number of tours, what those tours are, what the itineraries are, and then you sell tickets to these tours.

[Shell Zhang]

Right.

[Will Smith]

As a product and then you try to feel it and then you. And then you fill it. Which I guess is obvious but for some reason I was thinking like that everything is custom. Of course it wouldn't be, but. But you also do offer custom.

[Shell Zhang]

Yeah. So about two thirds of the business today it's pre planned small group tours. We kept it at 12 people, which is quite rare in the industry. And then there's a third of the business which is custom. So if you have a larger group, you can do your own custom tour. Or sometimes people have kids, multi generational thing or they're having a honeymoon, they would ask us to customize. Basically we will book everything for them and then they would just be by themselves.

[Will Smith]

Okay. So it is fully a third of the business. And then going back to your target demographic, should I assume that this means it's more kind of retirement age couples sort of thing? Yeah, it sounds like a great business shell. It sounds like really. I mean it sounds like it's as opposed to a lot of kind of remote virtual businesses which are going to, are. Are going to be E Commerce or some sort of digital service like an agency that can be delivered by anybody in the world. And so that's going to drive cost to zero. It's going to be pretty cutthroat. This is a ver. This is just a business that is delivered virtually because you just don't need office space. But you're delivering something extremely physical, a trip. So you kind of benefit from remote physical business super asset light dynamics. But you're delivering something that is really high value to people that they. Where you have pricing power where at least you're not, you're not in some, you're not in some race to the bottom on pricing. Right. And especially the demographic that you're targeting. We can assume that this is also. Yours is kind of a premium. You're positioned as a premium offering.

[Shell Zhang]

Right?

[Will Smith]

Yeah.

[Shell Zhang]

So hopefully also a little bit resilient to recessions, I would assume.

[Will Smith]

Ah, great point. Yeah. So maybe a little less cyclical than, than another travel. Than the travel industry overall. So I'm really. I mean of course you have, you collect the money up front, huge feature. So I'm really liking it. And I'm thinking about travel, guided travel tour businesses in general as a category. Should I be. Is that something that people should be excited about and should run to biz, buy, sell and, and look for one? I mean, and I guess, you know, the other question is like, where would this work? I mean Italy is such a big travel destination. There are a few that compete with it. Maybe France, but you could imagine, I don't know, you could imagine wine. I'm sure there's guided wine tour businesses just here domestically where you just bring people over to Napa all year long.

[Shell Zhang]

You can really just.

[Will Smith]

That sounds like a great, sounds like a lot of fun.

[Shell Zhang]

You can focus on our niche. You know, I came from sustainability startup, so a lot of people I was talking to, they would love to go on a tour for visiting all the organic farms in Italy, for example. So you can really develop a lot of niche in this space as well. If you love travel and you love organic farming, why don't you go to Italy and scout out all the organic farms there and organize a tour and.

[Will Smith]

Then sell to you? You'll buy that. So this is a business model for people to consider. You think that this is a pretty sturdy, pretty sturdy category of businesses?

[Shell Zhang]

Yeah, I mean I think there just aren't a lot of these out there. I've only seen nadas through my six months of search. So that's one challenge is if you want to target this industry, they're just on a lot for sale. And then two, I think it really need to be at a certain scale. There are a lot of mom and pop shops where the founder or the owner still are the person going out there scouting and doing the tours. And that's a little bit difficult to buy. It has to be a certain scale, but not maybe not too big. So there's that middle ground where I think nada falls in nicely.

[Will Smith]

And agreed. It's great point. And the way you found it was on biz by sell. There's a, like a, a checkbox for remote or something.

[Shell Zhang]

Right, right.

[Will Smith]

And it was just you check that and set your SDE floor and up it came. Because I assume it was had. Yes, I was. It was it. It was being marketed as a remote business or was it being marketed as a Florida based business?

[Shell Zhang]

It was being marketed as a remote business.

[Will Smith]

You don't want to buy an agency that's too small that the owner is out there doing the tours. On the other hand, Shel, like the great benefit of owning a business with Tourists to Italy is that, you know, you can go to Italy and call it work. Have you gone yet? And if not, when do you plan to?

[Shell Zhang]

I have. So I went in October. So maybe we can talk a little bit about the transition and the business so far. Yeah. So as we said, this is a very seasonal business. So out of the 12 months of the year, we only really run tours mostly in May, June, September and October. There are a few maybe in April and in August, but, like, 90% of the tours run in May, June, September, and October. So it was very, very busy during those four months. So I went in October and tagged with one of the tours for, I think, about a week. I would say I am really impressed now, seeing it in action and actually experiencing it. I'm relatively young, so I've never done this small group escorted tour before. I've always done my own research. I make my own bookings. And there are just so much logistically you have to handle and book and research and keep in touch with the vendor. So it was very nice to have all of that taken care for you. So you just land there, and there's a tour director who will tell you each day, hey, we're meeting at 9am tomorrow at the lobby, and here's what we're going to do. So that's just very nice. A huge part of mental burden taken off me. So I would say I'm quite spoiled. Another thing I did not expect was I really, really enjoyed meeting the people there. So that's something that sometimes people say, oh, I don't know if I'm going to get along with the group. I don't like traveling with other people. But in my experience, everybody I met was just so nice and fascinating to hear their stories from their life, their career. And it's maximum 12 people, right. And if you are a couple, you're meeting maybe like three other couples about the same age and have the same interest. So a lot of the travelers actually develop a strong bond and friendship in these tours, and sometimes they'll travel again together. So that was unexpected for me. I really loved all the people I met. And then of course, all the tour guides, all the local guides, the drivers. I mean, they really, really love what they do. And they're so proud to show everybody this is their country, this is their region, and to have that special personal touch, it just makes your trip very special. I would say it's much better than if I would have gone by myself.

[Will Smith]

Yeah, that's so great, Shel. Anything I didn't Ask you any topic we didn't get to.

[Shell Zhang]

I guess I mentioned when I closed the deal, it was the beginning of September. So it was just a few days before peak season. I think the transition meeting was Tuesday and Friday. We have three or four groups starting off their tours. So it was very nerve wracking week for me. So obviously I decided to not touch everything, just keep everything, everything the same. And once I go through the September and October high season, I'm going to sit down and review the vendors and the subscriptions and everything and do that. So the two things that I touched, which I think were tremendously impactful, at least in my mind. One was before I even closed the business, I started looking for a different vendor for payment processing. During due diligence, looking at the P and L, I realized the seller, nada. They were paying a very high fee to payment processors. So I decided to look for a alternative before I even closed the deal. So by the time I close the deal, I've talked to six or seven processors and I have applied to three of them. So I was able to right away use a payment processor that are charging much less. So just to give you an idea, I think they were paying 6 to 7% of revenue for payment processing, where I knew the normal range was 3%.

[Will Smith]

Yeah.

[Shell Zhang]

So what I learned is that the negative cash cycle we talked about, which was such a great thing, but in terms of payment processing, it was a really bad thing because we were collecting money so far ahead of us delivering the service. It's actually considered really high risk because the payment processing companies, they're looking at your risk of having chargebacks or having customers regretting of what they bought. So as a result, I learned that travel is a high risk industry in the payment processing world. So it took me some time and talking to multiple providers to find one, but right away we reduced the 6 to 7% to a little bit above 3%. So if you think about 3% of revenue in terms of savings right away, I think that was the really important thing.

[Will Smith]

That's amazing. Shel, Congratulations. That's a huge win. Yeah, it just. Yeah, a lot of money. Right to the bottom line. 1.

[Shell Zhang]

Right to the bottom line.

[Will Smith]

Good for you.

[Shell Zhang]

That's so cool. And then the other thing I think has to do with security and how they were handling customers credit card information. So once I realized that we were actually holding on to credit card numbers, I just deleted all of them. So that was a huge security risk eliminated right away.

[Will Smith]

Excellent shell. And if people listening want to do A trip. We've talked about Nada, as we've said her name. It's called Nada's Italy. But what exactly is the URL?

[Shell Zhang]

Yeah, so it's just nadasitaly.com. if you search that, we will definitely come up. We are on Google, we're on TripAdvisor, we're on Facebook with amazing reviews you can go read. And if the audience are interested in using us for a tour, I will give a code. So use ETA2024 as a code to get a discount.

[Will Smith]

Awesome. ETA 2024 is the code. And Nada's is spelled N A D A D A apostrophe S Nada. Nada. So Nada's Italy. What a cool business, Shell. It's funny, I just. I just. I guess this has happened a lot with Acquiring minds, where the conventional wisdom is that is that a business is unappealing for X, Y and Z reason, but really when you push against it and see inside it, there's. There's actually a lot. There's really a lot there. I've always thought of travel businesses as really difficult businesses, but this seems like it has some really strong features. It'll no doubt hit some cycles.

[Shell Zhang]

Yeah.

[Will Smith]

But like you said, you're in. You're in a niche where maybe that those swings will be dampened somewhat because you're at a kind of high end of the market. So really cool. And how can they reach you, Shel?

[Shell Zhang]

Yeah, I'm on LinkedIn, so that's probably the best place to message me. Well, I also wanted to thank you for your podcast. It's one of the biggest reasons I was able to do my search and push it to the finish line is because of this amazing community that you've built. And I'm just so grateful to be part of this.

[Will Smith]

Well, thank you for saying that, Shell. As you can imagine, that's moving to me and I'm so glad. It's just, it's thrilling that you know somebody who's listening actually really does it. I mean, what, what a. What a pivot to take your career. You're doing the thing. You bought a business. It's extremely exciting.

[Shell Zhang]

Yeah.

[Will Smith]

So we'll leave it on that. Shell Zhang, thank you so much for coming on and congratulations.

[Shell Zhang]

Thank you.