Podcast Host / Interviewer (3:06)

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Will Smith (3:08)

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Podcast Host / Interviewer (3:09)

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Will Smith (3:11)

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Podcast Host / Interviewer (3:26)

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Will Smith (3:27)

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Podcast Host / Interviewer (4:22)

Kyle Paul welcome to Acquiring Minds.

Kyle Paul (4:25)

Thank you Will. Thrilled to be here.

Podcast Host / Interviewer (4:28)

Kyle, you're CEO and part owner of.

Will Smith (4:31)

Get out, which actually represents the merger of two acquired businesses, get outpass and Pogo Pass.

Podcast Host / Interviewer (4:39)

The deal behind all of that is a little involved but fascinating and you're going to unpack it for us. But now get out, the combined entity has tons of market share, much more to grab, and not really much in.

Will Smith (4:56)

The way of competition. So you're in a good place. The you're eight months into ownership.

Podcast Host / Interviewer (5:01)

Of course the transition has been challenging.

Will Smith (5:04)

Not least because you're merging two rivals.

Podcast Host / Interviewer (5:07)

The J Curve is real, you're in it. But the future sure seems bright. Let's get into it. Kyle, start us off with some background on you, please.

Kyle Paul (5:16)

Yeah, sure thing. Thanks so much Will. I'm really excited to be here. Listen to hundreds of your podcasts and so it's kind of a dream come true to be sitting here with you.

Podcast Host / Interviewer (5:26)

Wow. But thank you.

Kyle Paul (5:28)

I so grew up in a place called Layton, Utah. We're about a half an hour north of Salt Lake City in a very much kind of lower middle income family. Dad was a teacher, five kids in the family. Not a lot of extra cash floating around the household. So hey, if I wanted money I had to work. So I started when I was 8 years old. I was a paper boy and worked pretty much from then until now. I've been working ever since. I had tons of jobs all through high school. Everything from cleaning carpets to to painting addresses on curbs to selling siding in Lowe's. You name it, I did it. But I needed to because I needed to pay for school. I needed to pay for the things that I need. And out of high School, though, I decided to go on a mission for my church. I went to Chile for two years down there as a missionary. One of those guys in the white shirts and ties and the black name tag. But learned some incredible things during that time, not the least of which was how to work hard. I mean, we were going 12, 13 hours a day, seven days a week for two years. And also how to be rejected. You know, you get rejected thousands of times in two years of doing that. And learn to get rejected and not let it ruin my day.

Podcast Host / Interviewer (6:31)

Of course, I'm not the first person to make this connection, but the, the experience of doing missions is one explanation why. For why Mormons are overrepresented in the world of business. Right. The kind of door to door sales that you're doing effectively, that I know that that kind of belittles what a mission is.

Kyle Paul (6:52)

No, it's fine.

Podcast Host / Interviewer (6:53)

It is a similar emotion. Do you think that there is something to that connection?

Kyle Paul (6:59)

Oh, 100%, yeah. I mean, look, the lessons that you learn in that time, you know, religion aside for business and for life, to build resilience to, you know, go and talk to people who are totally outside your comfort zone, sometimes learn a new language, talk to them about something that many times they're uncomfortable talking about, they don't want to talk about. Like, like that's business, that's life. Right. And being able to confront those things when you're, you know, 18, 19 years old and learn those kind of lessons, like, it's tremendous experience. And yeah, there's a book called the Mormon Way of Doing Business that talks about a lot of these examples of people who have gone through these experiences and how it's helped them in their lives. And yeah, there's been a lot of written about it, but ultimately, like, you know, the. One of the biggest things I learned too is like, you know, if you're selling something you truly believe in and you're passionate about, you can sell anything. But if you're not, you know, and I've done this before, tried to sell things I didn't really care much about, then it's a very different motion. So for me at least, there needs to be belief and conviction. But yeah, it was a great experience.

Podcast Host / Interviewer (7:58)

Perfect for you and the business you find yourself in because you are very excited about the product. It's a great product. I'm skipping way ahead, please, back to the plot, back to your backstory.

Kyle Paul (8:08)

No worries. Thanks, Will. So came back, went to a place called Weber State. Weber State. A lot of people outside of Utah, haven't heard of it, but it's a big college, 25,000 kids, and I love my experience there. I got to serve as student body president and so I probably have more Wildcat spirit than a lot of other people do, but just amazing lessons learned there. Lots of opportunities to interact with faculty, staff, administrators, et cetera. And that set me up with a lot of opportunities coming out of school. Out of school though I went to Morgan Stanley, was a financial advisor. So back knocking doors, right? So I was back smiling and dialing, trying to convince people who were three or four decades older than me to invest their life savings with me. And that was a tough job. But I built a business, you know, I built a sustainable business that I could have stayed in for my entire career. In fact, my brother still does it. I passed all my clients off to him when I went off to business school, but decided I want to go back to business school and do an MBA and went to BYU and had an amazing experience there. Just a phenomenal education for tremendous value. Was thinking about going back into business with my brother in a financial advisory. But I had a professor who just said, hey, you've got to go experience the world. Like get outside of Utah. And so I took his advice and went to New York City. I got a job with American Express and one of these job rotation leadership development programs and headed out there. Four years at American Express, amazing experience, loved it there. But then had a friend from business school who went to LinkedIn and called me up and said, hey, you should look at what we're doing at LinkedIn. And the more I read and the more I learned, this is early days of LinkedIn. I mean, it was like 2012. They didn't even have a newsfeed at that time. It was just kind of like people posting their profiles. But the more I learned and saw the vision and caught the purpose and vision of this business to connect the world's professionals and make them more productive and successful. I thought, man, this is something I could really get behind. And I loved it. I was there nine years, worked in a variety of sales leadership roles for the most part. The last five years, I worked in a group called LinkedIn Learning that came from the acquisition of Lynda.com which is an online platform. That's right. I think you've heard of that. But when we acquired them, they were mostly selling B2C and also academic. We saw opportunity to take it to corporate. We thought, this is a corporate learning platform. And so I think they were doing maybe $8 million in mostly inbound revenue in corporate. And when I left five years later, I think we were over 500 million. And so it was a phenomenal trajectory, had a lot of fun. And when I left then I was leading the North American business for LinkedIn learning. We had about a hundred people on that team and. And it was just an amazing experience. I'll never in my life say a negative thing about LinkedIn. It's the best company I ever worked for.

Podcast Host / Interviewer (10:42)

Oh, phenomenal. Well, that's quite a career trajectory to step off of, Kyle. Hundred people under you leading North America. LinkedIn learning is half a billion dollar business.

Kyle Paul (10:55)

Yeah, that half a billion wasn't all in North America. That was kind of the global business. But when I started, it was like 8 million. Right. So it's like, you know, to go to 8 to 500, like it was phenomenal trajectory. Now I can't take credit for just like a tiny sliver of that. Right. There's an enormous team and we had resources from Microsoft, et cetera. But seeing that type of trajectory and seeing what it takes to build that type of business taught me all types of lessons. I think the biggest thing that I'm learning now is, look, merging two companies, right? Like, we had acquired Lynda and we had this whole culture that had been created there, and we were bringing them into LinkedIn. And that's very similar to a lot of the things that I'm, you know, in engaging with now on a daily basis with two companies coming together, very different cultures.

Podcast Host / Interviewer (11:35)

And for that whole run at LinkedIn, you were still in New York?

Kyle Paul (11:39)

I was, yeah. The entire time, except for, I would say, the last couple of months. When Covid happened and my family fled New York City, we were having our fifth baby in July 2020, which is not a fun time to have a baby in New York City. So we ended up coming out to New York or to Utah to have a baby here in 2025. And we're still here. So that's what you.

Podcast Host / Interviewer (11:57)

So you had four kids, you and your wife packed into an apartment, as I recall, on the Upper west side?

Kyle Paul (12:03)

We did. You got it. Yeah. There was four kids, tiny little apartment. We're under a thousand square feet, and we loved it.

Podcast Host / Interviewer (12:10)

And you. And you'd lived that way for a while. I mean, this was. That wasn't temporary. That had been the status quo for your. I mean, as you had, as you were building your family there, I mean, it was, I mean, very striking. Most people living by themselves in New York eventually complain about space constraints and leave the city. But there you guys were.

Kyle Paul (12:29)

My wife is the hero of this whole story. I mean, she's the one who was out there taking on adventures every day. And that was the great thing. Like, you know, you didn't spend much of your time besides sleeping in the apartment. You got out and adventured. And that was the biggest challenge with COVID right Is all of a sudden you couldn't take the kids out. And so I was working from home in that apartment and we had four kids trying to, you know, take care of them and do school at home. It was just, it was more than we could handle in that tiny little space. So that's, yeah, that's what got us out. But yeah.

Podcast Host / Interviewer (12:56)

And so baby number five was on the way and you moved back to Utah. And then this is when your interest is piqued or you learn about eta. Take us from there.

Kyle Paul (13:05)

So at this point is when I joined gympass. So gympass came calling and I'd been talking with them while in New York. They're a New York based company even though they started in Brazil and a friend of mine from LinkedIn had gone to Jim Pass and you know, it was kind of a startup in Brazil. They were growing like crazy down there. They had launched in the US but had a couple of false starts. And so this friend put me in touch with the CEO and was like, hey, this guy's, you know, helped build the North American business for LinkedIn. You should talk to him. And I talked to him several times. They convinced me to come, to come join their team. And so that's why I left LinkedIn to go join Gympass and Gympass, really cool companies. So corporate well being. They sell B2B2C essentially they've amassed a know a network of 60,000 gym studios and well being apps. Then they provide that to employers to provide to their employees as a company benefits. You have a single pass, you can go to a bunch of different gyms and have all these apps. Great product, great idea and concept. And so I led the US business for Gym Pass for three years from Utah, even though I, you know, was traveling quite a bit out to New York and other places. And so I think we were 10 million when I started and when I left we were about 100 million that could. Business continues to grow and super excited like I'm a shareholder so I'm cheering for them from the sidelines and there's also amazing people there so I wish them all the best. But it's a, it's an amazing business.

Podcast Host / Interviewer (14:22)

Wow, Kyle. So. So you've seen a business go be. You've been at the front lines, directly involved with a business. Gym Pass going from. Or Gym pass us going from 10 to 100 million and then LinkedIn learning going from 8 to 500 globally. And you were, you were running sales in the North American. That's really two great runs. Okay, carry on.

Kyle Paul (14:44)

So one morning I'm out riding my mountain bike, as I do almost every morning, and listening to books or podcasts, and I come across this book called Buy Then Build. Listen to it while I'm riding, and as I'm writing, I'm like, huh, this is interesting. And before I knew it, I found myself listening to dozens, and then soon hundreds of podcasts from this guy named Will Smith. And as they say, the rest is history.

Podcast Host / Interviewer (15:08)

Thank you for that, California. I appreciate it. But ETA was not on your radar. How did Buy Then Build get into your. Into your queue at some point? You must have heard something.

Kyle Paul (15:19)

Yeah, I mean, I'd listen to business books all the time of different things we're looking at. I think as I was building that business in Gym Pass and I'd listen to, you know, books on marketing, on building a smaller business, like, how do you. How to scale, how to. You know, how to. I think there was probably like the E myth or something like that that I'd listen to. And it's like, hey, if you listen to this, you might like this. And so it really wasn't on the radar. Now I knew about private capital markets, like at byu, that I've been part of this group called Cougar Capital, where we were actually out there running a student run venture fund. We were making investments alongside venture capitalism, private equity. And so I understood how these markets work and I knew that they were there, but I had never really considered it as a path for me to actually go out and buy a business. You know, most of the things I'd looked at had been larger scale. You know, it wasn't like, oh, I can go buy a smaller business and run that myself. And then I listened to it and I was like, wow, this could be an amazing path.

Podcast Host / Interviewer (16:07)

And why, Kyle? Cause you were having so much success in corporate, why not continue doing more of that? What resonated so much with becoming an entrepreneur, frankly, whether or not you bought a business as your way in?

Kyle Paul (16:21)

That's a great question, Will. And to be honest, there was a combination of things. I think one of them is I had always thought I was going to be an Entrepreneur, right. Like when I came out of school, the plan wasn't to have a 20 year career in corporate America or 40 year career, whatever. It was like I thought I'd do something smaller and even financial advising. Like, you're basically an entrepreneur, you're starting your own thing. And so I'd done that from the get go. It's just that I went to business school and then got this job in New York and we kind of thought, hey, we'll go out there for a few years and then move back. And one thing led to another, one opportunity led to another and all of a sudden I found myself 15 years in, was like, well, here I am. And it was almost like, well, I don't know if I can go start a business because I've got five kids and a family to support. And so I just kind of thought like, this is what I'll continue to do. But then when that door opened in terms of like, as an opportunity, it got me thinking and it also coincided with a really challenging boss that I had at the time. And I'm really grateful to her and the experience that I had because what it did is it made me realize like, hey, anywhere I go and there was a bunch of other, you know, recruiters would always reach out and there's other opportunities that I was looking at. But I kind of thought like, you never know what you're going to get when you, when you step into an opportunity like that. And I guess nor do you when you buy a business. But at the same time it just felt like I'd have more control of my destiny than, you know, another 20 years in corporate America. So it felt like it felt like the right thing to do.

Will Smith (17:43)

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Podcast Host / Interviewer (17:57)

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Will Smith (18:00)

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Podcast Host / Interviewer (18:13)

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Podcast Host / Interviewer (18:24)

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Will Smith (18:26)

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Podcast Host / Interviewer (18:35)

How did your search take shape? At least kind of version one of your search? It evolved a lot.

Kyle Paul (18:41)

Yeah. So version one was just kind of learning as much as I could and that's why, you know, And I'll continue to give credit to you in this podcast because I'm, you know, if you think about how I learn, I learn by talking to people. I love asking for advice. I love people to tell me about their experiences, what they've done. And, and so I started doing that. I reached out to all the people I knew who had bought businesses and I started to learn from them. And I found out, well, there's a way I can listen to hundreds of people who have bought businesses. And so as I heard these stories, I started to think like, hey, I could do this. Like, these guys have done this. There's a path. Like, I can do this. And so as I learned more, I just kind of thought like, if I'm going to do this, I need to go all in. And there was a moment when I realized that when I was getting close to, I was doing kind of a part time search and I found this company. It was pretty interesting. It was a construction equipment rental business. I went and met with them. They were excited about me, I about them. They had several other offers. They're like, hey, are you going to put in an offer? And I was ready to, but then I realized, geez, if I put it in an Lloyd, I've got to do diligence. I'm working, you know, 50 plus hours a week at this job. I've got five kids. Like, when am I going to do diligence? Either I'm going to walk away from this deal and that's a terrible situation for everyone, or I'm going to buy a business with red flags that I didn't properly diligence. And so I just kind of came to this moment where it's like, hey, if I'm going to do this, I've got to go all in. And that was a challenging conversation with my wife, who is, you know, by nature very conservative with good reason. But what I was able to do is have a whole bunch of conversations with her about like, you know, she'd bring up these great questions about what if this happens? What about what's a personal guarantee? How does this all work? And I could reference the conversation that I listened to on Acquiring Minds. And you know, I ended up going into acquisition lab and learning so much there and, you know, reading every book I could find on the topic. And so I was able to answer the questions in a way that, you know, showed that this wasn't just something I was going to, you know, on a lark, try out. This is something that I truly wanted to do. And so, so yeah.

Podcast Host / Interviewer (20:35)

Kyle, what do you think? Her, her, like, primary objection was probably just kind of financial risk, kind of the blob of financial risk, be that the business doesn't work out or your salary is going to go down at least for a while, very likely. Or the personal guarantee kind of all of that. Or is there one central one? I guess I'm asking on behalf of people who might also be trying to arm themselves for a conversation with their workers, their partners.

Kyle Paul (21:01)

Yeah, it's just, I think it's just what you know and what you don't know. Right. I mean, we, we got married when we lived in New York and she was working at the time, but when we had our first child, then she stopped working, was full time mom. And so by that point we were, you know, 12 years in to her being a full time mom out of the workforce and me being the sole breadwinner. And so it was like she knew what that looked like, she knew what my income looked like, she knew what to expect. Whereas all of a sudden I leave. And we also have had many friends who have started businesses, been entrepreneurs, and they didn't work out. And she, you know, I was talking with the husband about like, how are things going? She'd be talking with the wife about all the stress they were feeling at home and she's like, I don't, I don't want to live in that world, you know, and so I helped. It was, there's a lot of education for both of us about the difference between starting a business and buying a business. And ultimately, you know, what, what helped is that we kind of put a timeline on it and said, hey, let's, let's try it for a year. Right? Like, we've got enough savings for sure to get us through, you know, easily for a year. And if it doesn't work out, like, I'm relatively marketable, you know, human that I can go find in our job. So it's kind of like, let's, let's give it a shot and if it doesn't work out, I'll go back and find a job and we'll keep on doing it. And, and so that's, that's kind of what we gave ourselves.

Podcast Host / Interviewer (22:09)

Yeah, yeah. And the salary that you would have been making probably was pretty full. So there was a lot of opportunity cost simply in, in leaving that to the side, let alone whatever happens with the business that you buy. Can you share kind of what kind of range of salary you were earning? And, and what. Because the bigger the number the harder to walk away, the harder that conversation becomes.

Kyle Paul (22:32)

Yeah. Yeah. I mean, I thought you might ask this, so I actually went back to some W2s and kind of check what it had been because, you know, in. In the sales world, it's pretty variable. But I was, you know, last six or seven years, average of, you know, kind of the six to 700 range is kind of where I'd been for six or seven years. Probably. That's.

Podcast Host / Interviewer (22:49)

That's a lot of money to leave on the table. That makes the decision that much harder.

Kyle Paul (22:53)

It was. But at the same time, you know, my wife and I both came from, you know, families where our fathers were teachers. We didn't have a lot, and so it's more than we'd ever earned. And so we saved a lot. Right. And so we had a cushion to where it's like we had a safety net to where, you know, it's not like we were putting that all on the line.

Podcast Host / Interviewer (23:09)

Right.

Kyle Paul (23:10)

It was basically like, hey, there's an opportunity cost of one year of foregoing that, and then if it works, great. If it doesn't, then you can go back and find another job. So that. That was kind of the. The thesis going in.

Podcast Host / Interviewer (23:22)

And, Kyle, the business that you would set out to buy, were you going to try to replace that salary? Probably not. That would be nearly impossible to do right out of the gate. But how did you think about that, what your compensation would need to be or what you would want it to be in a business that you buy?

Kyle Paul (23:39)

Yeah, we. We didn't need to. We weren't looking to do that. And what we kind of agreed on is that, you know, if we. If we sat down and really evaluated our lives and said, what do we need? You know, it wasn't that salary. What. What we wanted is for me to spend as much time as I could with my family and to do something that I enjoyed. Someone once defined happiness to me as being happy to go to work in the morning, then be happy to come home at night. And I had had that for most of my career, but currently I didn't have that. And that was kind of the first time in a long time that I didn't have that. And so the idea was like, I'm going to go find that. You know, by the way, it was the work piece, not the home piece. I was always happy to come home, but. So that was. That was a piece of. It was like, hey, we don't need to replace it, but if we can get a portion of that to where we can live on it then, you know, how much, how much do we actually need?

Podcast Host / Interviewer (24:27)

Great. Thank you for, for all of that. Going back to this equipment rental business that you got excited about. So where you were there is that you'd found this business and had good conversations with the sellers, but not yet put it in an alloy. But it was, it was at the brink of putting in an LOI that you really thought through. Wow. If this LOI is accepted, the ball is gonna start moving very quickly and I'm just not in a position, I don't have the bandwidth to actually support that transaction process.

Kyle Paul (24:54)

Exactly. As I go back and think about all the podcasts of yours that I listened to, there were very few people who were successful in a part time search. Right. Almost everyone at some point had to go all in on it. There are exceptions for sure, but from, from the way I viewed it, and also the amount of hours that my job just required, as well as the family responsibilities I had, I couldn't see a path to where I could go and close on a business and feel comfortable with it doing that part time. And so I made the decision, either I'm going to go all in or I'm not going to do this. And so that's where, at least for me, it felt like that's what needed to be done.

Podcast Host / Interviewer (25:31)

And then when you went from part time to full time going all in on your search, what changed with all those extra hours in the day?

Kyle Paul (25:40)

Yeah, so the, the first thing I did is, and it would be interesting if you did this, I don't know if you have stats on this, Will, but I, I, as I thought about all the podcasts that I listened to and all the people that I talked to, so many people said they were going to do proprietary search, but so few people actually bought a business through proprietary search.

Podcast Host / Interviewer (26:00)

Yeah.

Kyle Paul (26:00)

And so in my mind I thought, well, then I'm going to start with brokers. And because when I looked at my criteria, you know, I wanted to stay in Utah. And so kind of big three, then it was like, hey, I want to stay within an hour of where I live in Utah. I want to be over. Call it 700k and cash flow or SDE. And then because of those two, then I couldn't afford to be really picky with number three. So with industry, I kind of said, look, you know, anything that's not convenience stores, food service or cannabis, and I'll look at it. And so I started work, look, reaching out to brokers, thinking like, hey, these guys are going to be thrilled to talk to me. Like, I naively was like, hey, I'm like walking onto a car lot with money saying I want to buy. As anyone who's searching knows, that's absolutely not the case. And I found that very quickly. Like, even brokers had no interest in talking to me. And as I started to get to know brokers and build relationships with, over time, I understood why. Right. They post a decent, you know, listing and they've got several hundred people who ping them asking for a sim within a day. And so they're just trying to sift through and filter out all the people who are just tire kickers and find the people who are legitimate potential buyers. And so I realized that I really needed to show them that I was a legitimate buyer. And so my, my initial time was spent, you know, building my buyer profile. Acquisition lab did a great job helping me learn how to build that buyer profile. You know, know, getting, you know, pre qual letters from the, the sba, even though they don't really mean anything. It was also saying like, here's a lender who says they would lend to me if I found the right business. And then every time I'd reach out to a broker, it was like, hey, really interested, Tell me more about this. They'd come back to me if I wasn't interested, I would follow up with them immediately and be like, hey, thanks so much. I'm not interested for XYZ reasons. But keep me in mind, this is what I'm looking for. And I found that over time I was able to build relationships that they could see. Like, no, this is a legit buyer, left his business to do this. He's done a bunch of other stuff. He's got capital, he's got investors if he needs them, like, this is someone who's going to transact. And then over time, I started to build those relationships that would start to bring me opportunities. But that, that took some time. So my first couple months, it was all about building the relationships with brokers. And it was reviewing sims, right? I was getting comfortable with the financials, with the types of businesses I'd be interested in, kind of disqualifying those that weren't. It was just, it was, I was in learning mode.

Podcast Host / Interviewer (28:12)

And so just to kind of distill what you did, the best practices that you eventually started doing that you hadn't been doing initially, you were, you'd see us, you'd see something online, a listing, you'd reach out to the broker with, you know, via the form or with an email or whatever and ask for more information later. You were doing the same but attaching a one page buyer profile, an SBA pre quality qualification letter and being very interactive with the broker. They respond, they send you the sim and if you're not interested you respond back and say why? And then you develop kind of a follow up cadence with them. Do you kind of have a CRM that you're managing and constantly reaching out to same folks to keep top of mind sort of thing?

Kyle Paul (28:56)

Yeah, I ended up just using a spreadsheet. I didn't have a CRM, but, but essentially I just approached it different. I approached it as like, hey, these. And there's about 70 brokers in Utah, right that were legitimate brokers that I found. And I said these 70 people are basically my like my 70 most important important clients. I need to get to know them, I need to help them understand what I'm trying to do. And, and I'm going to build a relationship with these guys. And so that's, that's how I approach it. As opposed to just like looking at their sims. I was focused on those individuals. Great, great.

Podcast Host / Interviewer (29:29)

There was one deal in between the equipment rental business and get out. Is there anything to say about that business, Kyle?

Kyle Paul (29:36)

Yeah, I got, I mean after, you know, I've been doing this for three or four months and seen a whole bunch of deals that weren't that interesting or just kind of, you know, weren't what they, you know, were spun up to be on a sim. But I hadn't really been looking at online businesses. But one came across my, my, my desk that was really interesting to me. It was, it was called the non clinical pt and what they did is they helped physical therapists, occupational therapists and others who were trying to get out of the clinical work into something else. They'd spent all this money on school, realized it wasn't for them, but they were like I've done this, I've learned this. How can I translate that to something else? Whether it's a corporate job in software sales or whether that's working at a hospital doing something other than clinical work. And they created all this content was basically an online learning platform. And I knew that, right. I worked@lynda.com and LinkedIn learning and it was doing something really cool. I, you know, I have a brother in law who was in a similar situation, you know, a pt looking for something else. So I could see the need they were growing. But it was also like it was smaller than I was looking for but it felt like such a good fit and I had a really good rapport with the sellers. And so I got really excited about it and then ended up not getting it because I got outbid by like 50k. And I was devastated. I was just like, I can't believe this. Like, this felt like the right one. And it kind of taught me, like, can't get too married to one deal. And looking back, it was one week later, after that deal died that I met the guys at get outpass. And so, I don't know, things happen for a reason. But it also. There's not just one deal out there.

Podcast Host / Interviewer (31:10)

Now take us into the deal that if you thought that the, the online learning business was a fit, maybe this one is even more so. So also kind of a things happen for a reason take away. Maybe tell us a story, which is a kind of a wild coincidence of how you finally found Get Out Pass.

Kyle Paul (31:29)

Yeah, it's pretty wild. I mean, look, I was a. I was a customer Get Out Pass. So we had a pass. For my family, it's a phenomenal value, and our family used it all the time. They loved it. We loved it. But I went to this ETA conference at byu. They, they have an annual ETA conference. And of course I was going to go to that, right? And there was a guy on one of the panels that I listened to who, you know, owned a bunch of franchises that acquired them, and that's why he was on the panel. But he also was one of the founders of get outpass. And he had mentioned that in the panel. I was like, oh, that's interesting.

Podcast Host / Interviewer (31:56)

But.

Kyle Paul (31:57)

But I didn't, like, he wasn't there talking about Get Out Pass. Well, we went to a Utah Jazz game later that night. I invited some of the people to go to this event, and a friend of mine, the guy who actually organized the event was like, hey, Kyle, you should meet tc. TC is the founder of Get Out Pass, and Kyle worked for Gym Pass. Like, they sound similar. You guys should meet. So we start talking and he's just peppering me with questions about how do we. Because he didn't realize how big gympass was. You know, I had told him, like, yeah, our last valuation was like two and a half billion dollars. He's like, wait, what? I had no idea. I was like, yeah. I mean, it's. It's grown really fast. And so he started asking me all these questions about how we ran it, how we operated. You know, what do we do to acquire venues, how do we retain the venues, what we do for member acquisition, like all these things. I just thought it was helping an entrepreneur who's trying to figure out how to grow his business. And we, we talked there until they kicked us out of the, out of the stadium. And as we're walking out, he said, look, you know, I know you're here looking to buy a business. We're not necessarily for sale, but there's three owners. We're all looking to go different directions and I'm interested in finding somebody, finding somebody who could take us to the next level and, and that would acquire this business and I'd be willing to roll equity if I found the right person. He's like, I think I might've just found the right person. And I was like, holy moly, you're for sale. And anyway, so that's, that's how it started. So even though it wasn't necessarily on the market, they had, you know, been exploring, you know, a little bit, dipping their toes in the water. They had a few offers actually. And so that's, that's how it all began.

Podcast Host / Interviewer (33:24)

Well, the, just to make clear to the audience what a coincidence how like on how many levels this is a coincidence, they're not that many businesses out there that have this kind of pass model, the gym pass model to get out pass model. So that alone that you have two professionals next to each other who are in similar business models. A coincidence that you were looking to buy a business right as he was looking for somebody to come kind of buy, buy in, run whatever we want to call it, and that you would be kind of capable enough to be an executive and actually probably, you know, h know what to do in that role. Even if you were interested in buying a business and that you were, you know, that you, you both are local, I mean, get outpass is a, is a Utah based business close to you.

Kyle Paul (34:12)

Remind me 10 minutes from my house. Yeah, it was remarkable.

Podcast Host / Interviewer (34:17)

So, so really remarkable coincidence. I imagine, though you didn't initially, it didn't initially occur to you where this conversation might go when he said that to you. It must have been very exciting, you know, just completely overwhelming. The other second business that you'd lost that you've been so disappointed about. I mean, this one, this one is, is such an alignment of the stars. It must have been that much more exciting. How did you feel when he said that?

Kyle Paul (34:42)

I mean, absolutely, you know, I was thrilled about it. It sounded too good to be true and too many things were aligning for this to work out. And so there's a part of Me that was just kind of like, ah, this will probably never happen. But the other part was like, man, but if it did, what a cool company, what an amazing business. And you know, if there's a way to make this happen, I want to make it happen. And so I was stoked about it, but also cautiously optimistic and still looking at other things.

Podcast Host / Interviewer (35:07)

Right.

Kyle Paul (35:07)

It wasn't like I was going to throw everything on the back burner for this immediately, but yes it was. There was so many things that lined up that kind of made it feel like, whoa, this, this could be it.

Podcast Host / Interviewer (35:16)

Yeah. Well, the other thing is probably on the heels of the disappointment with the second business, the online learning business, you had developed wisely not get too excited about any particular lead sort of mentality. Although as a guy in sales, you probably already had, had learned that long ago, it doesn't count until the money's in the bank sort of thing. But yeah, but in a search and going through some broken deals, one also learns like to not get too excited about any deal. How does it progress?

Kyle Paul (35:53)

So we got together with his, his two partners, right? So there are three owners, founders of this, of this business. And we got a meeting together and I sat down with them and you know, they were evaluating me as much as I was them and you know, we, we sit down and kind of talk about it and I think that there was a little sense in the room of like, oh my gosh, we've talked to several other people who are interested, but nobody understands our business. Like it is a pretty obscure type of business that not many businesses like that exist. And the fact that I understood how it operated, how it worked, how you acquire, you know, customers as well as acquiring the venue partners, then there was kind of an immediate recognition, I think from all of us of like, okay, we're talking with someone here who, you know, understands and is excited about our business. But you've got three different human beings, right, with very different goals and very different outlooks and perspectives on things. One of the guys, one of the partners is running the business. The other two were very much kind of on the, on the outside doing other things. And so they were, you know, they were not in the day to day operations of it. And so yeah, they all had different perspectives about what should be done. But you know, coming out of that meeting then they shared, you know, their version of a SIM with me which was not, you know, a well prepared, documented simages. Kind of like, here's some financials, here's a few things that we have and so, yeah, we. We kind of started the diligence process from there, which was very rudimentary and very, you know, convoluted in terms of trying to figure out where everything went and how it actually synced up. But it became apparent very early that this was not going to be this type of deal that I had anticipated. Right. It was not going to be me and the sba and I was going to be the only owner. And then I get a loan from the sba because it was growing fast, the revenues were quite high. Um, but the margins were very. Were very confusing in terms of how much are they paying out to venues and how much do they keep and how much they keep. At the end of the year, they were keeping cash basis books when it's really an accrual basis business. And so there was a lot that we needed to untangle. But it also became clear that kind of where they were looking from a valuation standpoint. You know, I didn't. I didn't have the capital to do that myself. And so if I was going to do this, I needed to find some investors.

Podcast Host / Interviewer (37:53)

Yeah, great. Well, let's turn our attention to the numbers. Whatever you can share here in a minute, but first, let's hear exactly what the business. The business model is or was.

Kyle Paul (38:02)

Yeah. So it's an amazing business model. Essentially, they have cobbled together a network of this just get out pass of 2,000 venues. Okay. When you see, when you say venues, think amusement parks, water parks, museums, family entertainment centers, zoos. Anything you take your family to do for fun sporting events. Right. Then they've got it on a single pass. And it's a local pass. You may have heard of like a city pass or a go city, where you go as a tourist to one city and do a bunch of stuff is similar, except for this one is specific to an area where you live. Right. So it's like I buy this pass. It's an annual pass. I get it for the entire year. And I can go to, you know, in Utah, we have over 100 different venues. So I can go to the big amusement park here. I can go to, you know, a ball, like the, a hockey game at the Grizzlies. I can go to real Salt Lake and watch them play. I can go skiing, you know, night skiing at Bright Night. So there's all these different things I could do. Most of the things you can just do one time during the year. Right. And for the venue, it's really exciting because it's customer acquisition. Right. They come one time to the climbing gym. They've never been to a climbing gym. And the kids are like, this is so much fun, Dad, I want to come back. Well, guess what? If your dad, it's like, well, we already used our get out pass. Next time I got to go pay full price. So for the venue, it's much better than a Groupon or some other coupon system where they come and pay a discounted price and always expect to pay a discount. They come once and the next time they're expecting to pay full price. And the other thing it gives them is it's just, it's just foot traffic. Right? You walk into the trampoline house and you're like, oh man, this is so much fun, dad, I'm hungry, Can we get some pizza? And then all of a sudden, dad, can I play the arcade? And so you get incremental revenue from the other things that happen while you're there. So the way the model works is the majority of the venues actually don't get paid from us. Right. Their payment is the marketing that we're giving them by advertising to a captive audience and sending people to their venues. Now, there are some of the larger venues. Think of an amusement park that charges $100 a day for entrance. And we give you a full day. Yeah, we're going to pay something for that admission. But even with them, we can ask for a significantly discounted admission because of those same points I made earlier. We're doing the marketing, we're sending people, we do surveys afterward to see how many people are truly incremental. Would you have gone to this place without the pass? It's Generally more than 70% of people wouldn't have gone without the pass. We can show them, hey, we, we're driving you incremental traffic and potential customers. And by the way, after they go, here's their email. You go ahead and market them and see if you can get them to come back. And so great deal for them, great deal for us and for the consumer. The biggest feedback we get is this feels too good to be true. This sounds like it's probably a scam. Right? And so it's more about convincing consumers that, no, this is legitimate and you're going to be able to use it at all these places for one low price.

Podcast Host / Interviewer (40:39)

And so, Kyle, to be clear, from the consumer's perspective, I pay for a pass, an annual pass, a flat fee for the year, and I have access, one time access to all these venues. So I, I go into the, the rock climbing place and I Can go in for free with my pass having, having spent the money on the pass. And then if I want to go back, then I start paying. But it's kind of a, it's kind of a free trial of all these different venues one time over the course of a year.

Kyle Paul (41:08)

Yep, more or less. And that's the majority of the venues. There are some that allow multiple visits. Right. Like we'll have a family entertainment center who's like, yeah, you come play mini golf every week. If you want, we'll give that to you for free because they know you're going to spend other money while you're there. So they're okay with people, you know, doing repeat visits just to get them in the door. But most of the venues, it's one time, one time visit a year and.

Podcast Host / Interviewer (41:28)

Your family were customers of this. You guys already use it, so that's amazing.

Kyle Paul (41:33)

Yeah, we loved it. Yeah, it was, it was like, oh my gosh. Yeah, we definitely need to buy this because, you know, the way the economics work is generally if you go to two or three places, it's paid itself off. So as long as I can go to two or three places, I don't need to go to a hundred places. It's like, well, geez, it costs, you know, $80 to go there, $20 to go here and $30 to go there. And I paid 100 bucks for this thing. Yeah, everything else is gravy.

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Podcast Host / Interviewer (42:57)

And then just to underline what you said earlier, really the venues see it as a marketing expense. You're bringing them customers, although they may, they may be ROI positive even on that. Positive even on that first visit because of all the incidentals, the food or whatever that is not included in the past. But that the family is likely to buy. So they may even, they may even make money on that on, on, on the first visit or on the only visit in some cases if they don't convert the customer. But they're building their list, they're building the brand.

Kyle Paul (43:24)

Great.

Podcast Host / Interviewer (43:24)

So yeah, it's a great value prop all the way around. And then your, so, so your economics are really strong because as you said, and for many of the smaller venues, which is probably the majority of them, you don't even have to pay them for the fee. It's only the big amusement parks or whoever that you have to charge pay a little bit. So fantastic unit economics from your perspective, right?

Kyle Paul (43:49)

Yeah, yeah. In general. Right. That said, you have to be careful with it.

Will Smith (43:54)

How so?

Kyle Paul (43:55)

Well, if you're committing to pay, even though the minority of the venues you don't pay, if you commit to pay too much and charge too little for the pass, all of a sudden you could sell a pass for $50. And if they go to five different places and you had to pay each one of those $20, all of a sudden you're paying out $100 for a $50 pass. Right. And so you've got to understand very closely what your breakage is. How many people are buying this thing and actually not using it, where are they using it, which venues do they go to and use it for? Because there are definitely pass holders that we have that we're negative on. Right. That we have paid more out to the venues than what they've, than what they paid us for the pass. And so understanding how that model works, which by the way was no different from Gympass and any other service like this where you're aggregating a number of different services. But yeah, if you do it right, the unit economics can be fantastic.

Podcast Host / Interviewer (44:47)

But actually to the point that you just made, I would imagine there's, there's a bit of an 80, 20 thing in the venues where you have some real standout venues that everybody knows. You know, the, the Disneyland, of course, not Disney, but you know, the Disney. The local equivalent of a big name brand venue that all the kids want to go to.

Kyle Paul (45:05)

Yep.

Podcast Host / Interviewer (45:06)

And families think that they can buy the pass to just, you know, get a great deal and going to that, that place and then the long tail of venues that you're not paying for might not actually see, might not actually really be the drivers anyway. It's, it's these marquee venues that are really, you know, kind of pulling through demand for get out pass.

Kyle Paul (45:26)

Yeah, yeah, for sure. I Mean those, those anchor venues or marquee venues as you call them, they drive the majority of past sales. Right. Because the economics you do, you're going to say like, hey, where am I going to go? How much will it cost to go there? And so how much will I save? And if, as long as you can simply say like, hey, if I go to these three places, it'll work now. So, so then what we've got to do is make sure that when you go to those three places, we don't lose money on those three places.

Podcast Host / Interviewer (45:48)

Yeah, yeah, yeah, great. And so, and it was a Utah based business, but it was in multiple markets. What did that look like?

Kyle Paul (45:57)

Yeah, so they started in 2017 with just a pass in Utah and they, they then subsequently grew to many other markets. And so when, when the acquisition happened and currently we have 32 different markets. And so, you know, those, those markets, the size of the market in terms of how many passholders they have varies pretty significantly. Utah is the largest market we have. But, but yeah, they were in 32. And then Pogo pass that we can talk about here in a Moment was in 10.

Podcast Host / Interviewer (46:22)

Great. Returning to the transaction, the deal and the numbers. Kyle, so you said this was a bigger business than you had set out to buy. This was not going to be an SBA self funded search style acquisition. What can you share about the size of the business?

Kyle Paul (46:38)

Yeah, so you know, our partners, investors, you know, don't want me to share all the details of the, of the deal, obviously. And I know your listeners love that and I love that. So I wish I could, I'll share what I can. What I can share is the business itself was doing around to get outpass close to $15 million of revenue. And margins on that were strong, I would say, for this type of business. And so we were looking at EBITDA in the kind of seven figure, kind of low seven figure range. And so, and look in terms of the size of the business and the membership base that they had, you know, around 200,000 members, you know, spread across all these markets. And these members in general love the past. Right. Like I knew a lot of people who had the pass. And so, you know, while it's not a SaaS business, not like a need to have business where you're talking about like 90% retention rate, but in terms of like people loving the past and wanting it again, like that, that looks strong from what we were seeing. And so those were some of the economics that we looked at, you know, and then a network of 2,000 of 2,000 venues. You can't build that overnight. Right. So when you think about a moat, like, that's maybe one of the biggest moats, is like someone wants to come in and do this themselves, or someone listening is like, wow, that sounds a great, great business. I'm going to go start that myself. Like, that's the real challenge is 2000 venues and starting up these passes in each. In each market. And then the last thing I'll say is the affiliate network. So, you know, we're talking a couple thousand affiliates who are out there selling this pass. And so these are mostly moms, but other folks who have a following on social media or who have some sort of an outlet to, you know, to sell the pass will, you know, post, hey, I love this thing. It's a great thing for my family. If you want to buy it, use the code. You know, Jill is awesome, and you'll save five bucks. So that's. Those are some of the things that they had that we really, really liked.

Podcast Host / Interviewer (48:41)

And because it'll come back up later in the story, give us a picture of the competitive landscape here, namely this other player, Pogo Pass.

Kyle Paul (48:51)

Yeah, so really, as we looked at it, there wasn't really anyone else doing this. So there was Pogo Pass, and Pogo Pass was in 10 markets, and every market that Pogo Pass was in, Get Out Pass was also in that market. But in Utah and Idaho and Colorado, the three biggest markets, Pogo Pass wasn't in that market. So Utah or Get Out Pass was kind of the only player in these markets. And then basically any market outside of those 10 that Pogo Pass was in, then get out was the only player. There were a few tiny ones, you know, that were. That were out there. Kind of some local things. There's also sometimes, like a tourism bureau will create some sort of a pass, you know, local, like, hey, come visit Salt Lake City and do these different things. So there were a few other players in there, but there. There's not anyone who's really kind of attacking this at scale, which was also super attractive from our perspective.

Podcast Host / Interviewer (49:37)

Right. Great, Kyle. So then how, given the size, SBA loan isn't going to do it, Given that there are these three owners who kind of want to go in different directions. How are you. How do you navigate this? How do you think about taking this deal down?

Kyle Paul (49:57)

Yeah, so one of the things they wanted to know first for me was like, they were impressed that I had industry expertise and understood the business. But their next question is like, are you going to get an investor. Can you actually make this deal happen? Because their concern is that they go under LOI with us, with. With me, go through all of the process, and then I wouldn't have an investor, and then it would look bad on them because it's like, oh, wait, everyone who ever asked if they wanted to buy the business again, didn't you go under loi? Like, what happened? Why didn't they transact? Right. Which is a.

Podcast Host / Interviewer (50:27)

Going back to the reason that brokers don't like tire kickers. I mean, it's all about the, you know, the ability to close is. Is anybody who's on the sell side of a transaction is always asking themselves, is this character on the other side of the table for me able to actually close this?

Kyle Paul (50:42)

Exactly. And so my first job was to go talk to investors, which I hadn't planned to do. Right, right. Like, when I started this, it was all about talking to SBA lenders. And, you know, but I wasn't really thinking about investors, so I went out and started hitting the phones and I was back in, you know, missionary mode, knocking doors and making calls. But, you know, at this point, then, you know, through my career, I had enough contacts kind of in. In the industry who were in investing spaces that were, you know, looking for deals. You know, talk to a bunch of search funds, talk to a bunch of family offices, talk to a bunch of private investors, angel types. Like, I talked to probably, you know, I don't know, over 60, 70 different potential investors. And it was great. I found some amazing investors that I had lined up that were stoked about the deal. I actually had one, that one group that was based out of Denver. I really like these guys, still stay in touch with them. And they were in the space, so they had acquired a bunch of family entertainment centers and knew very well about the space. They understood the value that this would bring, and they were stoked about the deal. And so I had them. And then I had some local investors here that, you know, were pretty notable in terms of kind of their brand name and people knowing them who were excited about as well, and so was able to go to them and be like, hey, I've got investors. Like, let's make this happen. And so we were ready to go under loi, had the LOI all hashed out, you know, negotiated with their lawyers. And I had a fantastic friend who I will owe for the rest of my life who's a, you know, corporate M and A in Turi who just did it all for free for me, which I Forever am in debt to him. But we got to the point where we had the loi.

Podcast Host / Interviewer (52:08)

And.

Kyle Paul (52:09)

And on the night or the day that they were supposed to sign, they all went to get the three together. And one of the three came to the air, too, and said, I'm not going to sign. I want to buy it from you guys. And they were devastated. I was devastated. And so they had to come back to me and be like, hey, we're not. We're not ready to sell.

Podcast Host / Interviewer (52:27)

One of the three partners said to the other two, actually, I don't. I want to continue ownership. I want to not only not exit. I want to buy you guys out and be the principal owner and presumably CEO of it.

Kyle Paul (52:39)

He basically said, I want to do what Kyle's doing, right? It was like, hey, this is an exciting business. And. And I. I love it. And I want to keep on. I want to keep on running this business. And so. And so that was. That was a heartbreak, right? By that time, we'd been through a few months of trying to get this loi across the line. You know, there were other offers that they had that I was kind of competing against. And so that was the night I went home to my kids and told them, like, think about that. Like, they've been watching dad go out looking for businesses and talking about construction equipment rental businesses or, you know, online education businesses, or all these things that they didn't really care about or understand, and they hear about Get Out Pass, and they're like, this is amazing. So they were all so stoked, and I went home, and I was like, guys, it's not going to happen. And there were tears at the dinner table that night.

Podcast Host / Interviewer (53:28)

Yeah. Oh, man, I'm so sorry.

Kyle Paul (53:30)

Well, it was all part of the road.

Podcast Host / Interviewer (53:32)

Well, all part of the road.

Kyle Paul (53:33)

And.

Podcast Host / Interviewer (53:33)

And so then, you know, obviously not the end of the story. So how do things pick back up?

Kyle Paul (53:39)

Well, you know, I think there's a really important lesson that I learned, and also, I was able to teach my kids. My kids are. I teach my kids to ski, and I love skiing, but when I take them and teach them to ski, then I tell them, I said, you know what? Skiing's hard. You're going to fall down, you're going to get cold, you're probably going to get hurt. But it's worth it because once you learn, it's so much fun. So we have a mantra in our family that we say, if something goes wrong, you're sad about something, you get down. I say, hey, what do skiers do? My kids go, I know, dad, we get back up. And I told them. I was like, guys, this is a skier moment for me. Like, I just had a yard sale. I just fell down on the slopes, and I'm really bummed about it. I'm bummed like you guys are, but what do I got to do? And they're like, yeah, dad, you got to get back up. So the next morning, I hit the phones. You know, I started, I went back and I sent an email to those 70 brokers. And I said, guys, you haven't heard from me for a while, but I'm back. Let me tell you what happened. Like, you know, I was at the finish line of getting an LOI signed. I was ready to move, I've got investors. And they decided that, you know, one of the owners wanted to buy it themselves. I didn't think about this, but it actually gave me a ton of credibility with brokers because even though they knew me and we've been building relationship, they realized, like, oh, this guy was ready to transact. He had, you know, investors, like, he was ready to go. And so I got a bunch of them call me back and be like, hey, sorry to hear it, man. That sucks. I've been there before. We've all been there. Let's figure out, let's find you the next deal, right?

Podcast Host / Interviewer (54:54)

Wow, that.

Kyle Paul (54:55)

That was tremendous. And what ended up happening is, you know, within a month, I found another deal I was stoked about and, you know, I was ready to move forward. It was actually a staffing business. I have experience from LinkedIn in the staffing world, and the guy I had great rapport with, the seller, he had a few other offers, but he told me, like, I'd really like you to buy this. Like, are you going to put an offer in? And I said, at this point, these guys who come back to me from get out paths been like, hey, it looks like it's probably not going to work out. Are you still interested? And I was like, I am, but I've got a timeline, right? Like, I'm going to put an offer in on this other business. And once I'm in it under loi, I'm going all in on that. And so I gave him a timeline. I said, hey, Friday's the day, and we got assigned on Friday.

Podcast Host / Interviewer (55:40)

Wow. And so. And that wasn't just negotiating my leverage on your part. I mean, it was, but that's not why you were saying it. It was legitimate. You didn't want. You.

Kyle Paul (55:48)

You.

Podcast Host / Interviewer (55:49)

You love the staffing business and you didn't want to lose that opportunity. And so they needed to really put up or shut up. And obviously they had demonstrated themselves as a group to not necessarily be firm on what they wanted. Having lost. Having the. Lost the deal the last time. Great. And so they come back to you by Friday and you sign the LOI according to the orig. The original, all terms, more or less.

Kyle Paul (56:13)

Yeah, yeah, it was pretty much. There were a few minor modifications, but yeah, it's more or less the original deal that we had in place.

Podcast Host / Interviewer (56:20)

And so how is, how are your emotions at this point, Kyle?

Kyle Paul (56:25)

Well, I mean, it's.

Podcast Host / Interviewer (56:26)

You're excited, but you, you're probably, you're probably a little bit. A little bit less excited because you're, you know, you're, you're. You've just been beaten up a little bit, so it's hard to, it's hard to keep. Keep that energy up. Yeah.

Kyle Paul (56:39)

I will say, like, we were. This, this whole, you know, kind of setback gave us the ability to put in some kind of modifications to the LOI that said, like, hey, you guys aren't going to walk away again. And because we'd seen that before, then we put in some terms there that made it much less attractive to them to walk away from the deal, which, which actually the owners appreciated and they liked it kind of committed all three of them to actually seeing it through and doing it where they were all worried that, you know, one of the three might get cold feet again. And so I think that walking back into it, seeing that, hey, we're committed, you're committed, let's make this happen, made me a lot more comfortable, even though the deal would die three more times after that, but still, it made me a lot more comfortable and was definitely on the top of that roller coaster.

Podcast Host / Interviewer (57:28)

But. And sorry, what are the, what were these terms? Was it some sort of good faith deposit or something?

Kyle Paul (57:34)

It basically just said that if, you know, if, if they walked away from the deal, they're going to have to pay a bunch of my diligence and legal fees and they just have to pay that out of their own pockets. And so it was an. It was enough to where. And they kind of agreed internally, like, hey, whoever it is that walks away, that's who's going to pay this stuff. Yeah, right. So it was enough to. Where they looked at it were like, yeah, I'm not going to walk away from this thing, like, if I wasn't legitimately going to do this. And that actually helped me a lot with investors too, because Able to show them, like, look, this, this is a committed seller who's committed to selling. And this is kind of what we went through before, and this is where we are now.

Podcast Host / Interviewer (58:09)

So anything about, can you say anything about the change of heart or change of mind of the. The third one who decided he wanted to buy the business and then apparently changed his mind back to being willing to sell?

Kyle Paul (58:21)

Yeah, I don't know all the details. I think, I do think a part of it was, you know, he'd been the one operating the business. Right. So he knew it better than anyone. And I think as he looked at it and thought about what's next for me, and they'd gone this far and gotten this close. I think it was a part of him that was excited to kind of turn over a new leaf. Like he'd been running the thing for six years or so and was like, you know what? This could be nice to do something new. And so I think as he realized what it was actually going to take to transact and get the deal done and also, you know, negotiating. There was some family involved there. And so there's some tricky aspects of like he'd be kind of negotiating against his own brother. Like, I think it just became something where he was like, you know what? I think this is a better path for me to go turn a page, you know, get, get a payout obviously, and, and move on. So I don't know all the details. Like he hasn't, you know, had a heart to heart. By the way, these guys are wonderful. Like all three of them, fantastic. And you know, we'll get into the other owners. Like we're still, you know, still very much keep in touch with all of them. They're. They're great people just trying to do what's best for them and their families. And so I, I understand, like, even though there's a lot of back and forth and challenges as in any of these situations, like.

Podcast Host / Interviewer (59:24)

Yep.

Kyle Paul (59:25)

No will. Will people all just trying to do what's best.

Podcast Host / Interviewer (59:28)

Yeah. Yeah. Great. Okay, Kyle, so the deal's back on. You just said would go on to die a few more times. Anything to learn from any of those near death experiences?

Kyle Paul (59:37)

Yeah. What I would say, I mean the, the biggest thing that happened and this is. Maybe this makes sense to introduce Pogo Pass at this point because that was, that was really where the near death experience came is we got into diligence, right. We went under Loi. I had investors who were excited. So the investors are kind of all waiting for this quality of Earnings to come back. Right. And so I go engage the Q of E I paid out of my own pocket, where I'm paying this accounting firm to go. And actually, interestingly enough, I found the same accounting firm that had done the diligence for Pogo Pass a year earlier. So Pogo Pass had sold a year earlier. So I kind of, you know, what am I looking at here? Like what should I expect? And so they kind of gave me an idea of what they were going to expect in terms of kind of going from cash basis to accrual basis. That was the big question here, right? Like when you go from cash basis to accrual basis, how will that impact your ebitda?

Podcast Host / Interviewer (60:22)

And, and, and to be clear for the audience, many small business owners run their businesses as cash businesses. But to kind of properly professionalize the accounting, accrual is the, is the proper way to run books. And so during a diligence process, a Q of E process, often what the accountants will do is, or maybe always what the accountants will do will is convert a cash based business to an accrual based business. And that's going to have some serious implications on what the true SDE or cash flow of the business is. And you were anticipating that.

Kyle Paul (60:55)

Exactly. And I'd say the thing that made it even more impactful for this business, if you think about how our business runs versus most businesses, most businesses you've got cost of goods sold because you have to build something, you've got labor to build that thing and then you go and sell it and that all happens up front. So you don't get the cash until you've spent all that money. Right. And so cash basis is a little bit easier to understand. Where it's like, yeah, I spent this, spent this, sold this, kept this. Whereas with our business, you may give me $100 for a pass in December because you bought it for holiday, you know, for a Christmas present. Well, you haven't used that pass at all. But I just got $100 in cash in December. If I put that $100 for 2024, well, I have to go and take that money and pay it out to venues over the next 12 months. Because you own that pass for 12 months. Well, that hits in 2025. Right. And so the difference between cash basis and accrual basis in this type of business is tremendous. And no one really knew what it was going to look like. And they didn't know either. They weren't trying to hide anything. They were very clear like, hey, we've Never run accrual books. Like, and there's a. I won't get into it. There's a lot of nuance. It's not straightforward. Like, there's different ways to do it. You can do it based on when the passes actually get redeemed. You could just do a straight line. Like, every month I take, you know, a 12th of that $120, and so it's like $10 a month. Like, there's different ways to do this. And so those were the question marks when we went into the Q of.

Podcast Host / Interviewer (62:17)

E. But that, that doing it kind of.

Kyle Paul (62:19)

The 12th.

Podcast Host / Interviewer (62:19)

The 12th. The 12rd. The 12th is. Is imperfect because the other challenge in your business is you don't know how much somebody's going to actually use the pass. So this unlike, say, a SaaS business where, you know, an annual payment, you collect payment for the next 12 months at the top of the 12 months, but you know exactly the service that you're due to deliver over the coming 12 months. So it's all very linear and predictable. Not so here. Every. That's where I guess the data comes in. And you guys really have to look at your data set and make predictions on, you know, your, your kind of average behavior and average consumption patterns of, of your 200, 000, you know, member pay, member base. Yeah, hard, Hard.

Kyle Paul (62:58)

That's exactly it. And so what, what happened was they did that diligence, and it came out much lower than expected. And so the, the EBITDA went down significantly. It was maybe a third of what we thought it was. And what that meant was the business was worth much less than we thought it was. Yeah, right. And so I was devastated when that happened because when I saw those numbers, then I knew we didn't have a deal. This wasn't like I was going to go retrade and try and get them to come down, you know, a few million bucks or something. This was like, hey, you guys are never going to accept the valuation that I'm going to put on this business, and I know that right now, and I'm never gonna give.

Podcast Host / Interviewer (63:37)

Even though they knew, even though they were prepared for it to come down, because you said that they all knew.

Kyle Paul (63:42)

Yeah, they were prepared for it to come down, but not as much as it was going to come down. So none of them had any idea that it was going to come down as much as it did. And to be honest, like, we should have had an idea. But the biggest reason that it came down so much more than the POGO pass was growth they were growing a lot faster. When you think about it and step back, it kind of makes sense. It's like, oh, well, that's because they had these big sales and this big growth. And if you're not, you know, pushing that forward into the next year, it makes it look like you're keeping a lot more than you are. Whereas if you're more steady state than accrual is a little bit more close to what cash basis looks like. And, and so that was, that was the biggest thing. So on one side it's like, well, growth is a good thing. Like, hey, we've got this great trajectory and we can keep on growing and there's all kinds of expansion to be had. And so then you start to look at like, well, is this a different type of valuation? Are we evaluating based on, you know, almost like a SaaS business growth as a venture deal or a growth equity deal, or do we base it on EBITDA and a cash flow valuation? And so there's inherently value in the business. It's just we've got to figure out what that value is. And what I was seeing made it so the deal wasn't going to happen.

Podcast Host / Interviewer (64:48)

Yeah, a lot to follow up on there. Kyle first did it. Aside from the fact that the valuation was going to need to be a third of the price or, you know, EBITDA came down by effectively 66%. Did that give you pause about the business itself, the fundamentals of the business?

Kyle Paul (65:06)

To be. To be honest, it didn't Will. And the reason was because I saw the value. I was a customer, I understood the value of the past. I could see the fundamental economics of the business and how it worked. And I also saw a lot of optimization opportunities where it felt like, hey, I could go make some improvements here that would help us improve margins, also increase sales, and there wasn't really anything stopping our ability to grow and to sell more. Right. So it's like I saw all of this upside and all of these things that seemed really attractive about the business. And at the end of the day, it wasn't negative, Right. They weren't losing money. It was just less than what we thought it was. And so I was still excited about the business itself. It was just a matter of like, can we get to a valuation that's attractive enough to them to actually want to exit? Or are they going to say, you know what, we'll just keep operating, right? Like, we know it can grow and we've been growing it, so we'll just keep on doing that. And that's what I thought they were going to say.

Podcast Host / Interviewer (66:04)

To underline your point too, Kyle, is that part of the reason why the EBITDA was less was because it was a growing business.

Kyle Paul (66:12)

Yeah.

Podcast Host / Interviewer (66:12)

So if so, and you knew from the Pogo Pass story that a similar business that's not growing in its more steady state could generate great cash. That business was actually on a margin perspective, more profitable because the owners of that business choose to. Chose to kind of just take dividends as opposed to grow. So you also. Is that. Was that part of the calculus here?

Kyle Paul (66:35)

So I didn't actually know that yet. I had an indication of that because I hadn't seen the Pogo books yet. Right. This is pre Pogo, but I knew that that transaction had happened. And so the, the accountants didn't divulge any, you know, non public information. But in terms of the indication they gave me of what they expected to see, it helped me understand, like this is what I should expect. And so I extrapolated from that, like, oh, this is what must have happened with Pogo.

Podcast Host / Interviewer (67:02)

Gotcha.

Kyle Paul (67:03)

And so that's why this is happening, because this one's. And I knew that Pogo wasn't growing at the same rate. Like I just knew that from watching him like understanding the industry and talking about the other guys. So I was able to extrapolate like, no, there's value, there's cash flow to be had. These guys are cash flow positive, right? Like they're making, they're, they're generating free cash flow. It's just not as much as we thought. But most of that is because if you think about the way that that cash flow works, if you take in a whole bunch of cash at the end of the year, which by the way, about 50% of our business comes between Black Friday and Christmas.

Podcast Host / Interviewer (67:32)

Oh, wow.

Kyle Paul (67:33)

Then all of that money looks like cash that's just sitting there. And if every year that's bigger that that big sell at the end of the year, it just looks like there's this major influx of cash when really that cash is being pushed into the next year and much of it's being used for cost of goods sold. Right. So that's where that growth was exacerbated is also the way that it came right at the end of the year.

Podcast Host / Interviewer (67:53)

Yeah, yeah, exactly, exactly. And just to repeat something you said about your, the diligence firm, right, they did not disclose things with. About what they do from Pogo Pass. But the information that I had there that I just said was because you later of Course learned a lot about Pogo Pass, but only when the time was appropriate. So that's. That's what.

Kyle Paul (68:12)

Exactly.

Podcast Host / Interviewer (68:13)

Getting things a little out of order there. But I will also say, Kyle, we looked, or I'll say this for the audience's benefit, we looked at this. You brought this to Mind's Capital. And while we loved you, of course, and while we really, we were really close to your point about you trying to wrap your head around is this a growth story, Is this a growthy business or is this, you know, kind of a traditional LBO friendly business where you're buying off of predictable cash flows and predictable ebitda? That's where we could, we just couldn't quite get there because it felt to us more like a more entrepreneurial story. A growth, A growth concept. And also because the market, precisely because it's such an exciting opportunity that there's so much market share to grab and that now you're really the leader. It felt like a more novel concept. It's not super novel. It's been around for a decade or in Pogo Pass as well, I should say. But. So that's why we couldn't quite get there. But so. And it sounds like kind of internally it was even in your own minds, hard to figure out where this business kind of slotted.

Kyle Paul (69:25)

It was, it was. And that's okay. Right. And loved having the conversation with you and the team and really enjoyed those conversations and understood. And that's where several other investors fell. Was like, hey, I love this business. It feels like you're the right person to run it. Wish you all the best. I'm here to help talk to these people because they invest in businesses like this.

Podcast Host / Interviewer (69:45)

Right.

Kyle Paul (69:45)

And so that's a lot of what I got. And ultimately the folks that we did have that were ready to invest, you know, they understood that and they, they were taking a bet on the growth more than they were on the cash flow.

Podcast Host / Interviewer (69:57)

Exactly, exactly. And then finally, Kyle, before we pick back up with the plot, when you. So even before the diligence and you saw the effects of the conversion from cash to accrual basis, when you were just looking at what you thought the EBITDA was and it wasn't going to be an SBA style acquisition and everyone was like, how are you going to be able to take this know business down and you've had the investors, how were you going to structure this? By the way, what was the format if not an SBA deal?

Kyle Paul (70:25)

Yes, it was, it was almost all equity. Right. It was almost all equity with, with a seller note in there. And so, you know, we were, we were basically saying, like, hey, we need to get the majority of this equity to the table. We're going to put, you know, around 15% of it in seller note, and then the rest of it's going to be equity that we need to bring to the table. And so part of it was going to be mine, but it was a small portion. So I was going to bring some of my own skin into the game and my own equity. Then the rest, we just had to go raise equity on it. And so again, they were not betting on a traditional LBO model. Right. It wasn't on the cash flow. It's like, hey, this thing is poised to grow and we believe in the growth story of it. So that's essentially how we had initially structure it and more or less how we ended up doing it.

Podcast Host / Interviewer (71:13)

Yeah. So it sounds like by the deal structure there and the fact that there was no debt other than the seller note.

Kyle Paul (71:19)

Correct.

Podcast Host / Interviewer (71:21)

There was no, you know, capital lender, formal capital lender on it. Did you try to take it around to lenders and they said, this is kind of too, too much of a growth story for us, or did you not even try because you made the determination, you know, as you, as you thought about it, that that wasn't going to be that type of deal.

Kyle Paul (71:40)

I, I talked to a few as we went through the process, and I had several investors that I talked to, you know, equity investors who were like, why don't you put more debt on this? Like, it doesn't make sense that you're not putting more debt on this. And so as a result, I talked to several. But there were a couple of things. One was it was, it was really going to elongate the deal, because as tricky as this business was to understand, you know, a lender was going to do even more diligence and get even more confused. And that would have been a massive project to undertake with a lot of different vendors to find lenders, to find the right one who is willing to lend on a business like this because there's no underlying assets. Right. It's like there's no real collateral that they'd have.

Podcast Host / Interviewer (72:19)

Right.

Kyle Paul (72:19)

And so that was going to be tricky. And I just realized, like, that road was not going to help. And also I'd communicated with the sellers that that's not the route we were going to go. And so, because they also knew, like, hey, this is going to be tough and that's going to require a lot from us. And, you know, we haven't been keeping accrual basis books. And so we all. We all kind of knew if it was going to happen, it needed to be equity.

Podcast Host / Interviewer (72:39)

All right, so after the, the conversion to accrual EBITDA goes down, how do you. How do you figure out to actually make the deal happen?

Kyle Paul (72:48)

So I actually met separately with all three owners, you know, in person, and just sat down with them and said, look, I'm sorry, it's not going to happen. I'm. I'm as disappointed as you are, you know, but here's why. And I broke it down and explained it to him, and they saw it and they were all disappointed, to be honest. But then one of them, the original one that I talked with, you know, guy TC that I mentioned, who's now our partner, he ended up rolling all of his equity, came back to me and said, we've got to figure out how to make this happen. Like, there's too many things that are lined up here that feel like the right fit for all of us, for you, for us. Like, we've got to make this deal happen. And so we started to talk about different options. One of them was that I was just going to invest some of my own capital and put it at a valuation that was much lower. That kind of, we agreed to. And I wasn't going to buy the entire business. I was just going to buy my way in and then operate the business. So that's one of the things we were talking about then. The other thing he said is like, that's an option. Let's look at it. But what about. I should. He said, I should probably introduce you to Grable. Now, I had known about Grable. Grable was the investment firm, private equity group, small group out of Wyoming that had bought Pogo Pass a year earlier. They had been pursuing Get Out Pass all along. I was competing against them, right? They were the. You know, I was basically, basically bidding against them for the business. And when they had bought Pogo Pass and found out about Get Out Pass, they're like, we need both of these. Like, it makes no sense not to put these together. So they were actively pursuing them, but part of the reason that they didn't go with them was, you know, this guy tc, he really wanted to roll equity. He really wanted an operator in there that he, you know, he could trust, and that felt like he was going to take the business to the next level. And he wasn't sure if he was going to get that at Grable. And he Also wasn't sure about the whole merger with Pogo, and then a variety of other reasons. But it occurred to both of us that this company, whatever it's worth, is worth more to Grable than anyone else in the world. As an unattached investor who just invests in this business, you've got to compete against pogopass. And then there's this whole valuation thing. But if you're Pogo, Pass and you can combine forces, these two businesses have no real competitors. This is a very valuable business to you. And so that was part of why we approached them. And so we sat down at lunch. He was in town from Wyoming. We went down to lunch, the three of us, the CEO of Greybull, TC and myself, and we sat down and talked about the opportunity, about the, you know, what it could look like with the two together. It turns out Grebel was looking for an operator. You know, they had this business they had bought. There were three owners who had sold the business, but still owned 30% between the three of them. And they were still operating the business. It wasn't a CEO, it was kind of three people operating. They knew they needed to find someone. They had hired someone that wasn't working out. So they were kind of trying to figure out how to, you know, help him exit. And so it wasn't going the way they had hoped. And they really needed an operator. So for them, they needed an operator and they loved the business for tc, he wanted, you know, to have the right operator, want to roll his. His equity. The other two investors, or in the other two founders at this point had decided they wanted to sell, right? So they both wanted the cash out and wanted to walk away. And I love this business. I was in love with it. Like, I really believed in the future of it. All of the stars seemed to be aligning, and so we all wanted it to happen. So we just agreed at that lunch, we're like, we're going to make this happen. We're going to, whatever it takes, like, we're going to see this through and get this deal done. And so there were several times after that that the deal fell apart. And I wouldn't say fell all the way apart, but the deal was at risk, as is the case in many of these situations. But the three of us always kind of came back together and said, hey, we agreed at lunch, we're going to make this happen. Like, let's go through it. And so concessions were made on all three sides throughout that process. And I think at the end, we all Walked away feeling like we had given some pretty significant things for us. But I don't know. I've heard that, you know, when everyone feels like they walked away and they didn't get the best deal ever, that's probably a sign. You did a pretty good deal. Because if one person walks away, like, oh, man, I. I made out like a bandit, then someone probably didn't, so.

Podcast Host / Interviewer (76:50)

Exactly. Exactly. And you all were all three going into business together. This is not a deal where you're going to go your separate ways.

Kyle Paul (76:58)

So you.

Podcast Host / Interviewer (76:58)

You need to be aligned. Meeting Grable must have been kind of an event for you, Kyle, because you had heard about them and you had. You known you were competing against them. They owned the other big competitor in the market. So. Interesting how things can shift so quickly from. From your foe to your deep ally. You guys are now in the business together. In fact. Yeah, they. They put you in as their CEO. So the other thing just to call out here is we keep talking about what a great fit this business is for you, Kyle, but they. They're on. From their perspective, they're probably all seeing you and saying to themselves, God, we. We cannot let this Kyle guy get away. He is the perfect match. I'll look at his resume, look at his track record in. In gym pass. In a business that's analogous to ours. So. So you had leverage that. That there wasn't going to be another operator out there probably or easy to come by that was such a strong fit. And they. So they probably really wanted you. And we're going to. So that gave you some. Some leverage. I point that out only because it's. It's so often that we. Buyers think about how badly we want something and not how. Not how badly we may be wanted. But you were probably very desirable for them.

Kyle Paul (78:12)

Yeah. And that's kind of you to say, Will. It was. There were so many things that aligned that were kind of uncanny how. How well all these things aligned and. And so. But there was. It was interesting because there was a very real moment where both TC and Mason, you know, Mason's the CEO of, Of Grable, realized if this deal falls apart, we don't want Kyle to go run the other company. Right. Like, TC was worried, like, hey, I just introduced Pogo class. Like, if this doesn't work out, they're just going to hire him. And now he's going to compete against us. And he knows everything about us. He just did diligence on us and. And vice versa. So, yeah, we. We made a really interesting agreement where we agreed that they were, they were both going to pay me to essentially make the deal happen. And so I was on salary from both of them as kind of a joint representative to try and make the deal happen with the agreement that, you know, if the deal didn't work out, you know, I wasn't going to, I wasn't going to jump ship and go to one or the other.

Podcast Host / Interviewer (79:08)

Interesting. So they both salaried you to represent the deal, to get the deal across the line. Almost like what we say brokers do. You're not the broker, you're invested. And, and with the, you had to agree that if they were going to pay you, compensate you for doing that, if it did fall apart, you weren't just going to go with A or B, you were going to walk away from the entire, the entire project.

Kyle Paul (79:31)

Yeah. And to be honest, I don't, now that I think about, I don't think that last part was explicit. That wasn't part of the agreement. Like I could have gone to one or the other, but I basically had helped them understand that this is not my intention. Like now that we've done this, if this doesn't work out, I'm going to go do something. I'm going to go buy a different business. Right. Because made a lot of sense for me to be, for it to be together. And we kind of had an agreement between the three of us that we were going to make it happen. So. Yeah, but, but essentially that's what we agreed to.

Podcast Host / Interviewer (80:02)

Yeah, yeah.

Will Smith (80:03)

And then Kyle, paint a picture of.

Podcast Host / Interviewer (80:06)

The, of the possibilities here because bringing these two leaders in the market. You've talked about how there were a little, kind of like little, little players here and there, but really Pogo together with get out will be, I don't want to say monopoly, but, but just the, the dominant player in this whole. It is the category. So say more about that. If, I mean, it's kind of self evident, but that's pretty enticing.

Kyle Paul (80:33)

Yeah, it's super exciting. And the great thing is like we're not trying to prove product market fit here. Right. Like, we clearly have that in several markets. You know, we have several markets now. I think we have four or five different markets that have over 20,000 members in them. And so when you get that kind of, that, that kind of critical mass, then it'd be really difficult for a competitor to come in that into that market because you have the venues and you also have the members who love the product. And so it became apparent to us that if we could do that in 10 more markets. And if we could grow, you know, even some of those markets at the size that Utah is right now. And by the way, Utah is not that big of a market. Right. When you compare it to some of the other markets we're in, like Dallas or Houston or, you know, even Denver, then there's. There's clearly larger markets that have families that want to save money and make memories together. We've just got to do what we've already done in another market. And so our focus right now is actually not on expanding to more. We have plenty of markets. It's on expanding in the markets that we have, and it's kind of executing a similar playbook to what's been executed in these markets that we have right now. Now, a really cool thing about these two businesses, as similar as they are, their go to market is actually very different. Pogo Pass has been pretty much all an army of moms who are out there selling this, almost like a direct sales force who go out there and they put it on their Instagram, they get other people involved with it. It's not multilevel marketing. There's not like a downline they can get, but it is something where it's like they can get friends to come on and sell the Pass as well. And they all put it out to their Instagram or their followings and make a few dollars from selling it. So that's how they've done almost all of it. It's been next to no digital marketing, whereas Get Out Pass has been all digital. It's been Facebook, it's been meta. You know, it's been a little bit of Google and then it's been influencers and affiliates, but not focused on this local aspect. And so, so they've been built differently, but there's an opportunity to combine forces of what. And that's what we've been doing over the last eight months is combining the forces and the best practices from these two different businesses and figuring out what's the best way to attack a market in a way that exemplifies the strengths of both sides.

Podcast Host / Interviewer (82:42)

Yeah. Yeah. Well, we're going to close out, we're going to hear about what all the operations have been like for these last eight months in the merger of these two rivals. Right. I mean, you're, you're essentially merging two rivals together. Each. Each company was very well aware of. Of the other. Just your point about the, you know, deepening your presence in your existing markets and how hard it is to, to un would be for a would be competitor to unseat you.

Will Smith (83:10)

This is essentially kind of a marketplace business.

Podcast Host / Interviewer (83:12)

I mean you're bringing together two sides. We're bringing together the families with the venues and marketplace businesses are hard. They've got the cold start problem. But once you bring two sides together, have a two sided marketplace, it's, it's a wonderful moat because any would be competitor has to go to all the venues that you've already signed up and say sign up with me. And they'll say yeah but you don't have the, you don't have the customers. The Get Out Pass guys have the customers and vice versa. Of course they'd have to. Anybody who wants to compete with you is going to have to go get the venues first. You can't have customers without venues. So that's how they would have. They would attack it. And, and you, you're already there because you have the customer. So, so it's just, it's just wonderful. And I, I guess I'd say the only, the, the only thing better than a marketplace business is like a business that is a bunch of small marketplace businesses. You've basically got these marketplace business dynamics in all your markets. In all your. How many markets are you in now? 20, 25, 30.

Kyle Paul (84:09)

We're in 32, 32 and 32.

Podcast Host / Interviewer (84:13)

So some competitor would have to go market by market by market and in each one have the cold start problem and trying to be unseat and established marketplace business which is you guys. So pretty valuable. And by the way you mentioned Groupon earlier and how you mentioned in the context of venues not really liking it because it brings all these people who came in from a discount and then kind of anchors their pricing expectations. All the reasons that anybody who has followed the, the trajectory of that company know that that venues ultimately and retailers ultimately didn't really like Groupon. But it is kind of a Groupon like dynamic where Groupon built these big lists of in local markets and they went market by market by market, established all these relationships with retailers and venues and what and service providers in a local market and a big list in a local market. And then it became very difficult to. So it was kind of a winner take all Dynamic like so many tech businesses. I don't know if I'm overstating it here but this, this business. But get out feels similar. And I guess the question to you would be from what you saw in Jim Pass is that, is this an analogy? The analogy I'm drawing is it. Does it work?

Kyle Paul (85:29)

Yeah, yeah. It's very analogous. I think that, you know, the. The. At the end of the day, if you're a venue, you don't want to work with five different partners like us. Right, right. You want the best partner that is going to continually bring you new potential customers. And because you do have to train your front, your frontline staff to accept these different passes and to understand how to interact with them. And so. And so, yeah, that. That network effect and that marketplace dynamic. Exactly. Is what, 100% in play here. And so, you know, the. The great thing about it, though, is that the value we're bringing to these venues is tremendous. You know, I've spent a good part of my first eight months. You'll actually be next week in Kansas City and Nashville meeting with our venue partners, listening to them, understanding, what do you think about our partnership? How's it going so far? And by and large, they love it. Like, this is fantastic. You're bringing us incremental customers that you know that. That we're interacting with. And so when you're bringing value to them and you're doing it in a way that helps their business, then it's easy to see why they'd want to stay with us long term.

Podcast Host / Interviewer (86:35)

What powerful dynamics. All right, Kyle, so just before we close out and hear what it's actually been like in the business, can you say anything more about the final deal and structure and your ownership of the combined entity?

Kyle Paul (86:51)

Yeah, so the final structure ended up being. I mean, it was interesting because we were combining two companies. So what we ended up doing is we basically took pogo, that had just been acquired a year earlier, and we combined it with get outpass. So we put. We ended up putting the same valuation, essentially on both companies. And then my. My equity that I brought to the table, as well as TC's equity that he rolled, just became part of this new combined entity at the valuation of kind of, hey, two companies at the same valuation. And so now he owns less of a larger company, the same way that my equity is now a smaller percentage of a larger company that's now about two times the size that it was. And in terms of the economics, for me, then what I would say is, like, you know, if you. If you look at what the search fund numbers are and kind of the economics for a search funder and then those of an independent sponsor model, my economics kind of falls somewhere in that range. And so there's tremendous upside for me. I earned that equity over time. The, you know, the amount that I put in was. Was Pretty insignificant relative to the potential upside if I'm able to, you know, hit the benchmarks that we put in place to, to, to gain more ownership. And so, you know, economically, for me, it'll really depend on how well we do. Sure. And yeah, so I guess, does that answer the question? Follow ups on how it looks?

Podcast Host / Interviewer (88:11)

No. That's great, Kyle. And you started this journey thinking that you would be an SBA style buyer and own, you know, 100% or, or a significant majority of the business. The structure that you ended up with is quite a bit different than that. How does that feel different? Or was there an evolution in how you had it, like, getting comfortable with it?

Kyle Paul (88:33)

Yeah, it's a great question and one I've thought about quite a bit. And you know, ultimately, when you go into this, at least when I went into this, you make a list of all the things you're looking for. And it's not too dissimilar from, you know, being a single guy or girl out there looking for your, you know, for your spouse and making a list of all the qualities that you want. But let's be honest, Will, like, if I found someone who is a 10 out of 10 on every one of those qualities, what's the chances she'd be interested in a guy like me? Right. So I think it's a similar situation. Right. Like I made this list of all these things that I was looking for and I was like, hey, I'd to love, love something with subscription model, like a loyal customer base, like a business model that, you know, that's like a flywheel. It's something, if I had industry experience in it, that would be amazing. Something that's purpose driven. That's huge to me that I really struggled with some of these other companies that I was having a tough time getting the purpose of renting out a bobcat to someone to drive around, dig holes. Right. So it was like it had all these things and by the way, tons of financial upside. But then the one thing that I was giving up was complete ownership and control. And for me, all of these things on the pro side outweighed that one thing on the con side. And to be honest, now that I'm eight months into it, you know, I, I, I'm thrilled with the partners that I have. I'm super grateful for them. There's been so many challenges that I've faced that I've been able to pick up the phone, talk with them. They've either helped me through it with either resources, expertise, or even just, you know, someone to talk to. And not to say I wouldn't love doing something on my own, but I've really been grateful to have the partnership of, you know, both TC And Mason Grable through this whole process. And so it ended up working out fantastic for me. Even though it's not the structure I originally planned on, it's the perfect structure for me.

Podcast Host / Interviewer (90:21)

And if I had to apply a label to you, Kyle, would it be fair to say that it's maybe not owner, which is what you thought it would be? It's more CEO with. With equity. Is that. Is that how you feel?

Kyle Paul (90:34)

Yeah, I mean, I. I would say I feel more ownership than I think I would if I was a hired CEO where they just like, hey, we found this business, we bought it, we went and hired a CEO to come in. Like, I was very much a part of the acquisition. Like, to be honest, like, the acquisition very likely wouldn't have happened with. Without my involvement. Right. And so being a part of that and then putting my own equity into it, I definitely feel more ownership than I would had I been hired. And by the way, through this process with several of the investors, I was offered different positions as CEOs. They're like, hey, one of them was like, we actually hate this deal, but we love you. We have another deal.

Podcast Host / Interviewer (91:11)

Will you be CEO of this business?

Kyle Paul (91:12)

Right. And so it's like, had I done that, I'd feel like a CEO that was hired in this situation, at least. My feeling is I feel like an owner, even though I'm not even close to majority owner.

Podcast Host / Interviewer (91:24)

Yeah, it's great. Kyle. What. What. What an outcome. I mean, this is. This is really quite the story. Okay, let's hear what these last eight months have been like. Start with emotional challenges or the culture challenges of merging to rivals. I think it's fair to say.

Kyle Paul (91:43)

Yeah. I'll tell you what, that first day was fun. I mean, imagine. And so many of your guests have talked about this. That first day you walk in, you're like, hey, the business has been acquired. And everyone just like, oh, my gosh, it's been acquired. Like, how has this happened? Like, both companies have been run in their entirety by the same founders, right? And so this is a shocking moment for the folks that get outpass. Hey, it's been seven years now. I'm here, new ownership. And then they all catch their breath from that. And I said, and were merging with Pogo. Pass. And when I said that, you should have seen the faces. They were just like, merging with Pogo, like, how could we. It was just like, they're the enemy. Like, they're the worst. How could we? And the same thing. So, like, a few hours later, I have a call because most of the folks here at get outpass are here in Utah. So that was in the office. And then Pogo Pass, they're spread all over the US and so that was just a phone call or, you know, a video conference. And the same type of thing was like, hey, this is Kyle, he's the new owner. He's going to, you know, the new CEO and he's taking it from here. And, and by the way, we're merging with Get Out Pass. And it was just like their faces were unbelievable. So it was tough, right? Like, helping them come to grips with this new reality of like, hey, your. Your. Your mortal enemy is now your best friend. It's now your brother, and we need to get along. And I think the, the first thing that we did that was super important is I assembled a leadership team and it ended up being three people from the Pogo Pass side and three people from the get outpass side. And really quickly we got an off site together where we all went together and, you know, went to a cabin in the woods type of thing and sat down and talked about. The first thing we talked about was purpose, mission and values. So we spent an entire day just aligning on what our purpose, mission and values were. And the really cool thing about it is that both companies had a very similar purpose, even though they hadn't necessarily defined it the way that we did. And what we came up with was our purpose is to unite families by creating forever memories. And then we had a bunch of values that went along with that and a mission statement and everything. And when we went back to the team and shared that with everyone, then it made a massive impact because people all of a sudden saw like, oh, these people on the other side that we thought were terrible, like, they're trying to do the same thing we are, and that's ultimately a really good thing. And then as they started working together and understanding each other's business and understanding why people had made certain decisions, then all of a sudden it was like, oh, I get that. Oh, I understand when you guys did that. I thought, I thought you guys were just being jerks or I thought that you guys didn't care about your customers at all. I didn't thought you didn't care about venues. Oh, now I understand. Like, okay. And so over time, they've started to understand each other a lot better and but to me, that's been the most important thing in this whole thing is culture, is people. Right? At the end of the day at LinkedIn, we'd always say talent is our top priority. And here it's the same thing, right? This team that we have, it's over 100 strong team members. They're the top priority. And if they get it right, then we'll get it right as a business. So that's been the number one focus. But then after that, there's a lot to figure out. I mean, if you think about what we're dealing with with now, 2,300 combined venues, over 300,000 members across 32 different markets. In any of these markets where you have two passes, you know, for example, in Phoenix, you have a Get out pass and a Pogo pass, there are two competing passes. Well, if we bring those together, instead of, you know, 30 on one, 60 on another, now you have 90 venues. Well, how do you do that? What does that pass cost? Who gets what? And then, by the way, some of these venues are shared and some of them have different agreements where it's like, hey, you know, the stratosphere in Vegas, like, one lets you go up to the top and the other pass that you go up to the top and ride a ride. It was like, you've got to figure out every nuance of this and then come off with a clear picture to members of what this new business looks like. And so that's what. That's taken way longer than I thought it would. You know, we're eight months in. We still have a lot of decisions to make. We've made a ton of progress. We have a new brand name which we're really excited about. We haven't launched that with all of our customers yet, but, you know, I'm happy to share it with you, Will, and the audience here. We're going to be called get out. And so in market, then it'll be like Get Out Utah, Get Out Arizona, Get Out Kentucky. So each market will feel more like a a local pass. But we love the name Get Out. We love what it connotates. The idea of getting out, getting away from screens, going out and making memories with your family. And so that that's the new brand that will launch to everyone. But for right now, we're focused on figuring out operationally, how do you bring these two companies together? And I haven't even mentioned the technology. Right. We've got to build a brand new app that brings all of these members together on a single platform. So that's what we've been doing. It's been fun, though.

Podcast Host / Interviewer (96:18)

Yeah. And what of the merging the rivals? Is that basically done and everybody's, you know, on the same page and. And that's in the rearview mirror, or are there still kind of cultural issues? I mean, how long does it take for people to digest this merger?

Kyle Paul (96:35)

Yeah, I mean, that's a good question. It's different for everyone. Every individual is a little bit different. Right. And some people embraced it immediately and were like, I love these people, like these, these guys. It's like, it feels like we've been working together forever. And there's other things that I'll hear here and there that are a bit concerning to me about, like, I'm not sure if I want to share that with them. I'm like, what do you mean them? Who's them? Like, oh, you're talking about your teammates, like us. Right. So it's like things like that have taken time to help everyone. And our first value of our six core values is one team. And the idea, like, hey, we're all one team. And so it's been great. We created a culture council where, you know, they're doing events, you know, most of them virtually, but, like, having people share about themselves and talk about one team. You know, in all of our all hands, we have people talk about our values. So we're making progress, but it's not perfect. Right. I do think it'll help once we're all on a single pass. Right now, it's challenging because you have these, you know, mostly moms who are out there in markets selling these passes, but they've been selling Pogo pass, and they've been selling against get out pass for years now. Yeah. And so once they have a single pass that they can sell, it'll be so much easier because right now people might say, well, what about the get out pass? Is that better? And it's like, oh, yeah, you could buy that one too. Yeah, they're part of us. So we're trying to get the economics right. So it's fine for them to sell either pass, which we've done. But at the same time, like, old habits die hard, you know, 10 years of selling one thing. So there's nuances we're still trying to work through, but I'm really excited for 20, 26. In 26, then we'll have the passes together. You know, what we'll end up doing is in markets, we'll have multiple level, levels of passes, like a gold, silver, bronze, and so you can still get the element of having, you know, picking some different, you know, high value attractions. If you want those or if you wanted a more inexpensive pass, you get a lower pass. And so we're doing things to try and make it as seamless as possible. But yeah, talk to me in a year and we'll, I'll let you know how, how everyone's feeling then.

Podcast Host / Interviewer (98:32)

And now that you're on the inside, Kyle, do you feel that this is, it's a business that's analogous to Gym Pass, that, that all of that, those learnings from Gym Pass are going to be able to apply here?

Kyle Paul (98:43)

So many, so many learnings are super relevant and been super helpful and have really helped me as I've worked with our team to think about things in a little bit different light. You know, it's not a radical change, but it's like, hey, you've got you. We've got to realize how much value we're bringing to these venues. And so let's go into this with a lot more confidence of like, hey, we're bringing them a ton of value. How much would they spend on marketing to go and get the same type of value? Like what's the click through rate on any of the things that they're putting out there and what's the actual conversion rate of people that we're sending to them? And it's like they would never find that. And so it's like helping them understand that has been pretty key. And then working with our venues like that, the thing that the biggest difference is the Go to market model. Right. Gympass was exclusively B2B2C. Right. So they acquired customers through acquiring employers. We have that. Right. We'll sell. We've got a number of different employers who use this as a benefit that they give to their employees. But that will never be our core. Right. The reason that worked at gympass is because you know you could reduce your healthcare expenses by having a healthier population. Right. We don't have that same sales pitch here. Well, having a happier family and more memories certainly will increase your mental health and you could make a case. But there's not a lot of people who are going to be like, hey, that hits the bottom line immediately, like saving someone from having a heart attack would. And so that's probably the biggest nuance that's different. But other than that, so many similarities.

Podcast Host / Interviewer (100:04)

And Kyle, you earlier had mentioned the Go to market and how Pogo Pass was kind of the mom channel and Go to Go get outpass was more the social marketing, digital pay per click. What do you think is the, the right strategy going forward? Which of those channels do you do you like?

Kyle Paul (100:22)

I love them both. It's a hybrid approach, right? It's like the more that we can get the message out there, whether it's through, you know, meta ads or whether it's some above the line advertising. We even do some data billboards, like if you can get people aware of it, it's going to make it so much easier when you see, you know, your friend who's out there using it and posted something on Instagram or when someone talks to you at a barbecue is like, hey, I've got this get out pass. It's fantastic. You should try it out, right? And so it's going to be a combination of both. We'll still have this network of moms who are out there advocating for us and selling and we'll also still do some level of digital, digital advertising. And so it's really about figuring out the right mix of each and figuring out the right CAC and you know, how much can we afford to spend for every customer that we acquire, which has been an adventure in and of itself getting a hold of those numbers.

Podcast Host / Interviewer (101:14)

How did your family feel when you actually got the deal done, Kyle?

Kyle Paul (101:18)

Oh man, they're thrilled.

Podcast Host / Interviewer (101:19)

They love tears of joy as opposed to tears of disappointment perhaps.

Kyle Paul (101:22)

It's, it's so much fun, I gotta tell you. Like, you know, that's, that's maybe been the best thing part of this whole situation is my, my kids absolutely love it and I'm happier at work than I ever have been. I'm having so much fun. I love the people I work with. We've got this purpose that's so inspiring to me. And you know, seeing the people post on, you know, Google or wherever it is, like on, you know, the Google reviews of hey, this is us with our family out making some great memories. Thanks so much to get out pass for all you're doing. Like, it's really inspiring what's been built here and that I have the opportunity to kind of build on the foundation that's been built by both of these companies. And so I love it for the families we're serving and I love it for my family. And so every chance we get, we pull out our pass and go and go and check in at a new adventure and make some forever memories together.

Podcast Host / Interviewer (102:07)

Kyle, anything that we didn't get to that you wanted to make sure the audience heard?

Kyle Paul (102:13)

I think the last thing that I'll say And again, I'll kick this over to you with some gratitude. Will, is this process for me has been the best thing that could have ever happened to me in my career, but it was incredibly hard. 2024 was so, so hard in so many ways. And. And it was an emotional roller coaster. And I'm very well aware that it doesn't end the way it ended for me, for everyone. And that certainly could have been the case. Right. But ultimately, I think the most important thing for me was that I understood what I was getting into. And so if anyone's thinking about this, what I would tell you is do as much research as you can before you jump all in. Right. Like, I was about a year of researching before I decided to leave my business. Now, it wasn't like I was spending 40 hours a week doing this, but I was learning as much as I could so that when I went in, I went in with a plan, understanding exactly what the risks were, exactly what hopefully the potential upside was. And also, I had an out where it was like, if this doesn't work, I'm going to go back and get a job. And so I've talked to a lot of people who get excited about this, and they hear about it because obviously people see what I did, and they're like, hey, let's talk. And I'm always going to take that call, but it feels like a lot of people are jumping into it without doing the proper due diligence. And I would say learn what it is. Get excited about it, but learn as much as you can before you cut ties with the other options that are out there.

Will Smith (103:42)

Yeah.

Podcast Host / Interviewer (103:42)

Yeah.

Will Smith (103:43)

Well, the other thing, Kyle, is just.

Podcast Host / Interviewer (103:44)

Like, listening to you right now. You're so positive, you're so excited, and even hearing about the hard times when the deal died and so forth, you know, the. How devastating that was. Frankly, it doesn't come across either with you or in many of my guests. You can just kind of state that it happened, but it's very hard to make that felt. But, but in fact, I mean, as you said, tears around your. Your table, with your kids. I mean, in fact, it was a very, very wrenching disappointment. And there were multiple of them. So it's, you know, it's. It's hard to capture that and, and impress upon people that even though they hear it in stories like yours, so just needs to be reminded to the audience, well, no one.

Kyle Paul (104:29)

No one does a better job of it than. Than you do. Helping us. Helping us understand that. I seriously learned more listening to these podcasts than I did for many of the other things that I did. So thanks for all that you're doing Will.

Podcast Host / Interviewer (104:39)

Well Kyle, what an interview. What a story. Congratulations. You're a really impressive guy and you've got a really exciting business to to go build now. So congratulations and thank you for coming on.

Kyle Paul (104:51)

Thank you so much Will.

Podcast Host / Interviewer (104:53)

Hope you enjoyed that interview.

Will Smith (104:55)

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