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

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.

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.

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.

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.

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.

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.

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.

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."

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.

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.

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."

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.