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- [00:00]
Podcast Host 1
In June we published an interview with JD Hasley who bought an upscale frame shop in Dallas and in one year grew revenue 50% and returned to himself all the equity he put into the deal. Well, JD mentions a family friend who had had great success buying a business and inspired JD down the path. Today we get to hear directly from this family friend of JD's, entrepreneur Jeff Horn, and how he bought and grew a Xerox sales and service business called Benchmark Business solutions. Jeff was 35 and doing very well for himself at his job, but wanted to lead his own business. Despite having a busy family life with three boys and a valuable amount of equity with his then employer that he'd have to walk away from, Jeff took the leap. When he bought benchmark in 2012, it was doing about 5 million in revenue. When he sold it five years later it was doing over 30 million in revenue and growing. The exit was of course life changing for Jeff who today works as founder and General Partner in the first institutional capital provider in his native Lubbock, Texas. CF Jeff's story inspires you the way it did JD He Here he is Jeff Horn, former owner of Benchmark Business Solutions There are sticking points that are common in searcher deals, often relating to due diligence, findings, non competes, indemnification and of course working capital. Attorneys James David Williams and Bill Barlow return for an office hours to walk you through these sticking points and how to overcome them. That is this Thursday, August 21st, noon Eastern. The webinar is Overcoming Common Deal Sticking Points. Link to register for the webinar is right at the top of this episode's show notes or on the Acquiring Minds homepage. Acquiringminds Co. See you Thursday. Welcome to Acquiring Minds, a podcast about buying businesses.
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Will Smith
My name is Will Smith. Acquiring an existing business is an awesome.
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Podcast Host 1
Opportunity for many entrepreneurs and on this podcast I talk to the people who do it. The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human Resources. It lays out the key items you should be thinking about as you transition.
- [02:50]
Will Smith
Into CEO and owner of the business you bought. The link to download it is in the show notes.
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Podcast Host 1
Aspen is a professional employer organization or peo run by a searcher for searchers. Search fund veteran Mark Sinatra runs the company which provides HR compliance, flawless payroll, Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for.
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Will Smith
A fraction of the cost.
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Podcast Host 1
Go to aspenhr.com or contact Mark directly@markspenhr.com.
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Will Smith
Jeff Horn welcome to Acquiring minds.
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Jeff Horn
Yeah, it's great to be here. Thanks for having me, Will.
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Podcast Host 1
Jeff, your story inspired another recent guest of the podcast, JD Hasley. JD Put us together. And today we're going to spread this.
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Will Smith
Story of yours further.
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Podcast Host 1
So let's begin, Jeff, with a little background on you. What was your professional path that led.
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Will Smith
You to want to buy a business?
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Jeff Horn
Well, that's a great question, Will. My, my path started early. My wife and I, you know, had kids at an early age at 21. And so while she was completing her schooling and getting her doctorate of pharmacy, I was out in the business world working. My first position was as a sales executive for a company back a technology company that worked with community banks back when the Check21 legislation came about prior to Y2000, where banks could exchange checks electronically instead of having to exchange the physical check, which everybody does it today. You might even be able to do remote deposit from your cell phone even today. But when those systems first came out, you know, I was, I was young, I understood technology and grasped, you know, what we were doing, and so started off doing that and had a successful endeavor at that for six, seven years. And then when my wife finally finished pharmacy school and we moved back to Lubbock, Texas, I then did what I had gone to school for, which was finance, worked in a family specialty finance company for the next seven years. And we did all sorts of things from equipment finance, equipment leasing, to accounts receivable, finance, and, and factoring. And so those were the two, two, you know, positions that I held prior to, you know, buying my first business.
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Will Smith
And so what was it then that led you to go down the path of buying a business?
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Jeff Horn
Yeah, I think after 15 years working with people and for organizations, back to my playing days as an athlete and playing in high school and college, I just felt a strong sense to lead and wanting to be the leader of an organization. I felt that, I guess, entrepreneurial itch to do something for myself and my family and to control my own future and felt like I could do it and, I don't know, just felt led to that decision over a period of time and something that as further time went on, I felt compelled to try to make that happen sooner rather than later.
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Will Smith
Why buy a business as opposed to some other path? Was that always the plan when you got the entrepreneurial itch that you'd buy an existing business, or did you consider other paths?
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Jeff Horn
I considered other paths. I, I, that's a great question. I, you know, I think, I think that in my mind, you know, I Think the path that seemed most likely was always to buy a business. You know, maybe what business or what industry of a business to buy. I don't know that I really had that defined, but I always felt like the path to do that was most likely through buying a business or, you know, if you wanted to take even more risk starting up a business. And so, you know, I chose the path of buying an existing business.
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Will Smith
And when you made this decision, give us a snapshot of your personal life, family, etc. Responsibilities and kind of professional life, meaning success or not or what you were walking away from.
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Jeff Horn
Yeah, well, we're talking about the, you know, right around the 2011, 2012, you know, time frame. We had had, we had three young boys at that period in time. My wife had a blossoming, you know, pharmacy career working for Walmart and managing a lot of their stores out in the West Texas area. Life was really busy. You know, that was one of the, maybe the, the check marks in the column of, you know, stay put where you're at. All of my boys were playing sports and you know, baseball, basketball, football at the time. Gosh, I think we had a 13 year old, 9 year old and 6 year old at the time. And so, you know, it was, it was a busy time and, and there was a, there was a lot, you know, going on professionally. I was doing very well. I matter of fact I was making more money than I ever really thought I would ever make, you know, to be honest. And, and I think that a path, you know, for a long term career, you know, there was definitely possible. But again, I just felt this urging or, or you know, passion to want to lead an organization of my own someday. And so, you know, ultimately decided to leave and to try to find something.
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Will Smith
Was this one of these where you really had to convince your wife or where your colleagues or people at, at the business where you were, were all scratching their heads because, you know, you have all these responsibilities, as you said, know, three boys in the throws of sports and you know, needing, you know, you're just, your family life is just really cranking. So it does seem like, it seemed like not the most opportune time to, to go out on your own and you're doing so well at work as it, as it was. So did it take convincing of either yourself or, or the people around you?
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Jeff Horn
Well, my, I'll say this, my wife said, hey, if this goes bad, I'm, you know, this was 100% your decision. But my wife was, my wife was very supportive. I mean, you Know, to the point of, of, you know, being so loyal and supportive. I think, I think she felt, you know, for me, supporting her going through pharmacy school and all of that and then her having a very stable career and being excited about that, you know, she was, she was excited to try to help me, I think. And so she was always extremely supportive. Her having a stable, you know, professional, you know, career as a pharmacist really played a big role in our ability to be able to, to try something new and to take a risk and buy a business. And so, you know, I would say largely, you know, it was a lot of support. She understood, you know, the situation where I was and that that could be a, you know, a fine career. But she, she was, you know, thinking that, you know, it'd be great if we controlled our own path moving forward and, and, you know, to go out and do it. So I would say she was right there with me.
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Will Smith
Great. Well, that support is, is really a blessing. And so what did your search to buy business look like? Did you just kind of leave your employer and start looking or did you have a lead on a business that looked like a good candidate? What did that look like? What was this transition from employee to business owner? What was your plan there?
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Jeff Horn
Yeah, no, I mean, basically, you know, we, we, you know, separated and moved on and decided to, you know, try to find some. Something, Something else. I took quite a bit of time off after, after leaving, you know, close to four months or so. And you know, I had an inkling of several businesses in the Lubbock area that that might be available. I was really trying to find a good fit for, for me personally, of like, you know, what fits me and that would be a company that, you know, is a sales oriented business. Something that had a lot of potential for growth that was also important, but also maybe had some technology, you know, based upon the, my, the, the first position that I, I held if it had, you know, something to do with technology and, and then also if it had a large finance component. I've always loved math, love finance, love accounting. And so I was really, really curious to try to find something like that. And you know, you. The timing's got to work for a seller too, and, and so really started down the path of, you know, what would be a really good fit for me.
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Will Smith
Well, boy did you find it, as we're about to hear. So, so tell us about the business that you bought, Benchmark, and how did it come on your radar? Tell us that first and then tell us about the Business, please.
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Jeff Horn
Yeah, well, I had met, you know, the owner of that business, you know, probably five to seven years prior and real successful, you know, businessman in the. In the Lubbock in West Texas area. Benchmark was a. Was one of the leading Xerox agents and dealers in the country. You know, that there's a robust network of. Of Xerox partners that. That represent them all over the country. And Benchmark got its start in 1994 after their owner had had a successful career, you know, as a salesman. Salesman for the Xerox Corporation. And so, you know, he had almost. Benchmark was nearly 20 years in business, had really established itself in Lubbock and some of the other surrounding communities. And, you know, with it being a technology company, being a company that uses finance, a lot of people when they buy, you know, a Xerox printer or. Or some other printer or copier, you know, oftentimes those are. Those are leased or financed, you know, out there. And then there's a service component as well, an ongoing service component and supply component and all those types of things. And so, you know, found out about that business, which is ultimately the business that we decided to purchase, but looked at a couple of others as well.
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Will Smith
And tell us more about Benchmark. Tell us, if you could, the numbers around the business. What size are we talking here?
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Jeff Horn
Yeah, at the time, Benchmark was largely an agent of Xerox, more than they were a dealer of Benchmark. And so what I mean by that is, is that they would represent Xerox in equipment sales, you know, to school districts, counties, city governments, you know, commercial businesses, what have you, and they would get a commission. But at when you total up to the total revenues that Benchmark had at the time of acquisition was, you know, somewhere right between a 5 and $6 million revenue business performing at about a 20% EBITDA clip, you know, at that point in time. Well, Jeff, that.
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Will Smith
So that's about a million dollars in ste. Maybe a little bit more. And that is really what so many people in. In this audience would love to find a business that's. That's already of that size where with an SBA loan, there's still a lot of cash flow left over to pay themselves a respectable salary and reinvest into the business. How did you think about the size of this business and did it meet the criteria that you either had or didn't have?
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Jeff Horn
Yeah, I think it was a great fit from a size standpoint. I tell you, I was most excited really, about the potential opportunities that, that I found out through the due diligence process that would be available. Namely that, you know, there were a lot of agents in the Xerox program that didn't want to make the investments necessary to become dealers, which is where the world was headed. Less centralized within Xerox to become more of an independent, you know, dealer out there in the world. But that means investment in your back office staff and systems that you use, an investment in your service techs, you know, adding service vehicles. You know, it meant a lot of growth and a lot of investing in the business. But for me, you know, being only 35 at the time, you know, that really excited me about what I felt like. The potential was not only to buy that business but to bolt on other companies like Benchmark in, in geographic locations that maybe were adjacent to Benchmark at the time to go on this agent to dealer transformation, you know, together. And then, you know, I always had felt like in the, you know, if the business made a successful transition from agent to dealer, that there would be a lot of financing opportunities as well to be able to come up, become a complete one stop shop for people's document management needs.
- [16:45]
Podcast Host 1
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Will Smith
You'Re trying to go.
- [17:45]
Podcast Host 1
New owner of a business. Go to pioneerCapitalAdvisory.com or click the link in the notes.
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Will Smith
And did you have that whole vision before you even got into the business or was this a vision that started to emerge emerge after you were already owner and you really got a lay of the land?
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Jeff Horn
I think original, I think early on I just knew that Benchmark was a company that, that had, you know, was, was really well ran and that it had a lot of potential to keep going and moving forward. No, the vision was, was painted over a period of time after do doing a lot of due Diligence. A lot of talks with the, with the owner, you know, and, and, and creating that vision together, quite honestly, that the company would go over or through over the next couple of years as we transition the business from one, you know, CEO and owner to the next in B and me. And so, you know, I, that was built over about a 6 to 12 month period. But we're really proud of the fact that, you know, he and I developed all of that together and, and it was important to do that together because it kept him having a vested interest in moving forward in, in the success of Benchmark. And we're still friends today. Matter of fact, I'm having, I'm going to see him later today and have lunch, so we're excited.
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Will Smith
Oh, how great. But wait, sorry, did you say that all of that working with him to develop the strategic direction was pre close or post close?
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Jeff Horn
Well, it was, it was a little of both. Um, you know, it was, I mean, I certainly had a vision to enhance or speed up the transformation between agent being an agent to a dealer, you know, creating a captive finance company. But, but he's really the one that had all the relationships with the adjacent companies and adjacent territories and stuff like that. And so we worked together really to come up with that strategy. And we, you know, after we closed on our transaction, then we really started working on a process for how Benchmark could do other acquisitions over the coming years and building those relationships with the other owners of the other businesses.
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Will Smith
Well, the reason I ask, Jeff, is because one of the features of our world is the trust that you have in the seller, or lack of trust in some cases. And if you don't know the seller, of course, you know, getting to the point where you're comfortable that they're telling you the truth is a key part of the negotiation and you know, deal, deal journey. It sounds like you just, that that wasn't really an issue. You guys were almost working as partners even before the deal closed. Say more about why this relationship feel, the way you're telling it seems so seamless.
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Jeff Horn
Well, you know, it's quite the opposite really. We, I mean we weren't, we, we knew of each other, but we didn't know a whole lot about each other prior to, you know, entering into a LOI and then going through the due diligence process. But you know, we ran, ran, I ran a thorough due diligence process when we were acquiring that. And you know, the, that seller ran a, did a great job of going through all of that due diligence process with me. And I would just say it was a, a seller that was really committed to not only selling his business but but also committed to ensuring that Benchmark would be a viable company for years to come. That was really important to him. And so I would really say, will, the biggest thing to, you know, for people that are looking at businesses to buy is like the very first box you have to check is that character box. And if you're, if you're doing a deal with somebody, you know, their character is as important as anything because there's so many steps that you go through in buying a business and closing a transaction. And then the transition afterward is like you're not always going to agree. And so you really better have a lot of confidence in that person to, to be fair, to be able to talk through things and work through things. And you know, that was something that I was fortunate to, to have and, and during this process. And I think that gentleman would tell you the same thing, that he was pleased with the way his people were taken care of and the, and the attention to detail on the business.
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Will Smith
That's great, Jeff. Okay, tell us more please, about this, this vision that you and the owner kind of co developed and this, in this trend that was happening from agent to dealer and, and maybe really just the definition of those. Let me take a stab. So, so by agent, the model historically had been that you were effectively contracted sales teams for Xerox. You'd sell into your local, whatever school systems, etc, like you said, and then be paid by Xerox a commission. And that was the core of the relationship. And this dealer, this shift to a dealership model was, was, was much more. There was much more. We'll say more please, about what it means to be a dealer versus just an agent.
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Jeff Horn
Yeah, so the agent model. Yeah, I mean, you said it correctly. It was a. Almost like you're a salesperson for Xerox and you sell it and then the company gets the commission and you know, that comes as revenue to the company, the post seller, the service revenue that would follow up an equipment sale to say a school district or something like that. All of that post sale revenue would go to Xerox and then Xerox would also pay us a commission of that post sale revenue. A dealer model might be, would be the same situation occurring except instead of us representing Xerox, we benchmark would buy the equipment wholesale from Xerox and then re. And then sell it to that same school district. But instead of signing them up on Xerox Service, we would sign them up on benchmark service with our own technicians and own support team there. And so by doing that, you know, if you sold $100,000 piece of equipment, you might make 15 to 20,000 as an agent. But selling the same $100,000 piece of equipment, you might buy that piece of equipment for 50 to 60,000 wholesale, then you would sell it for 100,000. So you would make a $40,000 margin and then you'd get all the post sale revenue as well, you know, off of prints. And so had a great, yeah, had a chance to make a really, you know, terrific financial impact on the, on the business from a revenue growth standpoint and margin growth standpoint. But it did require other investments in other parts of the business as well. Hope that all makes sense to you.
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Will Smith
That was great. And so, so the, the catch, if you will, of, because it just sounds like basically more, more revenue. What can you complain about there is that you are going to have to build out infrastructure. And so just a lot of weren't, didn't have the appetite for that. And so a younger but just generally hungrier agent is going to be somebody who's going to pursue that. But a lot of the agents would just rather not.
- [25:28]
Jeff Horn
Yeah, that's fair. Yeah. I mean, because there was, you know, you're talking about a lot of people that had already in that, in the Xerox eco sphere, you know, that had spent 20 to 30 years, I would say a little bit more set in their ways. You know, I come along, I, I don't know come, I, I don't know that much about, you know, how that business is working and I'm, I'm learning in it every single day. But I did, I did bring a fresh perspective to it and saw the benefits financially and, and you know, on a, you know, potential exit someday on what that type of revenue growth would bring to the table and knew that the investments in the back office and infrastructure needs and you know, let's call it what it is, an increased amount of working capital that would be required would, would pay dividends in, in, you know, in an exit for the business someday. And so yeah, I think that's one of the things that excited me most about the business was, you know, being able to be a part of that transformational, you know, next chapter for, for, for benchmark and, and then also by being a dealer, you know, having a lot of opportunities to provide financing, you know, for all of those customers as well.
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Will Smith
Well, and we're definitely going to want to Hear about that. But just to understand again, this, this sh. Shift in model that was happening, driven, I guess, by Xerox itself. Xerox. Xerox's motivation here, because it's now losing revenue, it's basically shifting that revenue to you all, I guess, is because it wasn't a core competency for Xerox. They wanted to just focus on the manufacturing and not have to deal with service essentially. And they were willing to let that revenue go to, to you, all the dealers.
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Jeff Horn
Yeah, I would say, you know, I'm not, I wasn't privy to the inner workings at Xerox, but, but what I would say is like. And Xerox was a great partner, by the way. I, you know, what I would say is that, you know, you're talking about a mammoth organization that had been around for, you know, a long period of time, and their business from a macro level was really changing to where it was getting harder and harder for them to be able to effectively generate the return they wanted to by having all of that infrastructure in house on the agent side where they were deploying and installing this gear and all of that and then servicing it. You know, when you get that big and become that and you're in a period of time where there's, in the document management space where there's really, you know, as technology increases every day, there was a lot of consolidation going on. And so it was really hard for them to keep Jeff's opinion, keep their costs contained, to deliver the margin. So I think their thought process was decentralize all of our processes, let's encourage more authority locally, let's give them the tools to run their own businesses and let's slim up the mothership to be able to be a good partner and provide support to our partners instead of providing support to the end customer. And I felt, I think they also felt like that by doing so you had a real chance for, you know, customer satisfaction to improve even more by getting more local people, you know, involved in the decisioning. You know, I compare it a lot of times, you know, when I was back at Benchmark to education, you know, making choices for our kids locally, you know, rather than making them nationally and having national programs. Oftentimes different pockets of the country are going to want to do different things and. Sure, you know, and I feel like not trying to be political, but I'm just saying I felt like that was a good move on Xerox's part.
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Will Smith
And Jeff, this. So on this podcast we encounter franchising a lot, people who Will buy an existing franchise business with. There's all sorts of strategies that. That could flow from that. I feel like a dealership is maybe a cousin to franchising, but we don't see a lot of dealership businesses, acquisition entrepreneurs who buy existing dealership businesses. So we're. So it's not a model that we talk about hardly ever really. Is what you described here kind of the typical dealership model that you'd see from, I don't know, a tractor company or a machinery company or whatever other industries where, I guess a dealership model is most common? Where the product is machinery, from everything from cars to copiers to tractors.
- [30:24]
Jeff Horn
Yeah, I would agree with that. I mean, anything that's equipment centric, where you're gonna, you know, have an ongoing support need or something along those lines. I do think there's differences. I don't want to. I mean, I don't think Xerox's dealer program is the same as GMC's dealer program, you know, out there for a automobile dealer. But I do think that there's a lot of similarities into how, how, you know, the, the programs work and the, and the, and the, you know, the rev. The. The economic model, you know, for those dealers and what that means and, you know, stuff like that.
- [31:00]
Will Smith
Yeah. And is it typically. Or I know you can generalize, but to your. The extent of your knowledge, is it typically that there are. There's no sort of equivalent to licensing fees like there is in franchise land. Right. You're basically buying wholesale and I guess and then re. Reselling and becoming the service provider are there. And then there's, I'm sure, rules and regulations around how, of course you use the brand and what you can do with the, the equipment, how you can sell it at what price point. I'm sure there's all kinds of stuff there. What, what else are kind of the. Are kind of the key points that somebody would. Would evaluate whether or not a dealer relationship with the manufacturer is, you know, is. Is. Is good. Is profitable to them.
- [31:48]
Jeff Horn
Yeah, well, I think. And I'm in. I'm involved in a franchise business today, so I can speak a little bit to the differences between dealerships and franchising. You know, I think in a dealership you have a lot more autonomy on what pricing you want to go into your customers with. You're certainly going to buy your product from your supplier, which in this case is Xerox, for, you know, a certain price. But then, you know, if you're in a competitive situation and back to the hundred thousand dollar example I gave while ago, if you need to be at $87,000 to win the business, then you, as the, you know, control person in that business, you can make the decision on do I want to accept this sale at $87,000 or not and move forward. You know, with that. It really reduces the need to be able to, or reduces the ability to go to Xerox and say, hey, you know, will you help us do that? And all that. There, there's no interaction there between that. On the franchising side, you know, a lot of the pricing is controlled by the franchisor. You know, you, your, your, your royalty payments are built in as a percentage up front. And so it's a, it's a much more programmatical, I would say, less control type of deal that can be good or bad. If you have a really good, great franchisor.
- [33:10]
Will Smith
And, and we're, you as the franchisee have less control.
- [33:13]
Jeff Horn
You as the franchisee have less control in that situation. But most of the times those economic models are very well put together and make a lot of sense. And you're, and you're trying to do something repetitive across a many different, you know, locations across, you know, across the country, like at a, you know, whether it's oil change places or fast food restaurants, stuff like that. And so the thing, the thing that I really enjoyed about the dealer model is that it gave, it gave me, the business owner a lot of control. Your, your perks or your, or your special pricing or the ability to earn or make more money. You know, Xerox, you know, you would be given a quota of equipment to purchase. And let's just for example, purposes say, hey, you're, you know, benchmark, you're supposed to buy a million dollars of equipment per year. You know, if you bought a million dollars, then Xerox might give you a rebate or you know, a discount on your next 500,000 or a million dollars of equipment to lower that price even more. And so when times were really good and you were close to hitting those thresholds, you might make another investment into the business to, you know, buy a bunch of equipment in advance of future sales or something like that to lower your cost of goods sold, you know, in the business. And so again, it's that control mechanism of a dealership that I really like the most.
- [34:44]
Will Smith
Well, and I think emblematic of having more autonomy is that the company has its own name Benchmark, as opposed to in a franchisee model. Yeah, the holding company of the units might have Its own name, but it's not front and center. It's not out there. It's just on the LLC documentation. In this case, you're out there marketing benchmarks services.
- [35:09]
Jeff Horn
Yeah.
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Will Smith
You're selling under the Benchmark name.
- [35:10]
Jeff Horn
Yeah, yeah, that's correct. And so, yeah, I mean, not only do you control the front end aspects, but you control the back end aspects of. Well, of, you know, do you. Does Benchmark have high customer satisfaction with its customers? And, you know, are we providing good service? Are there things we can do different now as a dealership to differentiate us from other dealers with other manufacturers? And the answer to all that was yes, just a matter of, you know, how you wanted to package it up and, and, and how good of a job did you want to do taking care of your customer base?
- [35:44]
Will Smith
And another feature of franchise networks and being a franchisee is controls around territory or, you know, location density, so that the franchisor should be protecting franchisees from stepping on each other's toes, competing in the same market against one another. I'm sure, I'm sure there are. There. There's a spectrum there, but in general, there's this concept of kind of territories. Is it the same in dealer relationships generally, or. Or might Xerox have five dealers, all in your market, who are all kind of competing with each other and beating each other up?
- [36:25]
Jeff Horn
I think it depends manufacturer to manufacturer. But I think that was one of the things that you really, as an owner, had to get your head around, because Xerox in the agent world, they had very defined geographies and territories. Whereas, you know, if Benchmark was the agent in Lubbock County, Texas, there was no other agent in Lubbock County, Texas. And you had dedicated accounts to you, and nobody else would be given any sort of ability to come in and compete with you on that. As it migrated from agent to dealer, you did have to get used to there being other competitors at maybe the low end of the, you know, your smallest products, or perhaps at the highest, or the, or the. Or the most sophisticated and advanced products that did take time to get used to. And so what ended up happening is that the lines really kind of blurred or have disappeared. I think now, some 13 years later, there's. There's oftentimes two or three dealers in a, you know, covering a specific geography or whatnot. And really, you know, the company that can compete and do the best, you know, with the business wins. And so that was probably a little bit of a drawback. But again, when you're wrestling with, hey, I want to control our future and I want to be able to make whatever decisions are best for this particular company, then the dealer model was the only way to go. And that just was something that you had to get used to.
- [38:02]
Will Smith
Another appealing aspect of franchises for this audience who's acquisition minded is that you can, let's say, buy into an existing franchise system and then programmatically acquire other units within, within that system without all of the difficulties and friction of integration. So of course acquiring businesses and trying to integrate them into the acquire ring business is a big difficult task. And it's, it's one of the giant friction points in this, in this world of buying businesses. If I buy a few Midas's and then I want to add on other Midases, they're already using the same systems, they've already got the same menu of, you know, all the SOPs are the same, everything's the same. And so the integration can be, you know, seamless or even non existent kind of. It's already all there. Is that, is there any analog to that in, in buying other dealers or. No, these are all autonomous businesses with their own backends, their own, you know, SOPs. And, and it's just the integration, there's no real economy there in integration in a dealership model.
- [39:15]
Jeff Horn
Yeah, you know, that was, I was a little bit naive on the first acquisition that we did, thinking that well, everybody did it like Benchmark did it in the Xerox world. And there was a lot of similarities, but there was quite a few differences too that had to get used to. And so it was a little bit different than franchising. There was, you know, each one of these dealerships had a little bit more individualism to each one of them and that you really had to, had to work through that after I did the first acquisition and figured out, hey there, you know, Company B here that we're acquiring, they're, they've got a lot different comp plan than what we have. And, and you know, are we going to merge them into our comp plan? Are we going to keep their comp plan? They do, they respond to service calls differently than we do, they do this differently than we do. And so, you know, I learned through that process of, you know, going through all of that of like identifying all the things that we were different on and then really creating a plan around, you know, are we going to continue to support that methodology or are we going to move them into, you know, the way we do that? And you know, and I would, I would Say, you know, our first acquisition went great, but I would say too, that I learned a lot through that process and figured out a few things not to do again and a few things that you absolutely needed to do and maybe even do them a little bit quicker. And so, yeah, it's not, it's not a perfect bag. Every time it was something different on each one.
- [40:48]
Will Smith
Do you recall any of those?
- [40:50]
Jeff Horn
Yeah.
- [40:51]
Will Smith
Biggest lessons on what to do or what not to do?
- [40:53]
Jeff Horn
Well, I think, you know, on the, you know, specifically with comp plans, you know, these are, you know, these dealers are largely very entrepreneurial, very sales oriented. Your salespeople feel like they own their own business within their geography. You know, changing comp plans was a big, was a big deal. I was probably a little bit naive to that the first time we did it, thinking, hey, they'll love our, you know, comp plan that, that we created because ours is the best and, and all of that. But, you know, I, I, it really helped me after the first time to do that, seeing the reaction that people had and, and all that. Not that we were trying to do something bad, but it was really to be learned to be more purposeful and methodical when, you know, dealing with somebody's pay and stuff like that, you know, the second and third times through is like to, you know, you know, let's, we'll, we'll create the best instead of, hey, we're going to use benchmarks, comp plan and we're going to eliminate this comp plan. Maybe we merge components of that together and let that happen over the next, you know, the next year. Do it, you know, down the road or something like that. But other things like how to handle a support call, there was a lot of synergies gained by having one call desk, you know, the same being consistent and people answering the phone. Don't try to delay a name change. Everybody knows the business is, is selling anyway. Let's be upfront about that and, and move forward with that and get past that and, and get everybody, you know, pulling together in one culture. So, you know, there was things that I learned to say, hey, slow play this, but let's move fast in this general direction. And I think every time our staff did an acquisition, you know, we would get better and better, you know, as.
- [42:48]
Podcast Host 1
They went by, you know, that one of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper, but tech is complicated with tons of solutions out there. So choosing the right cloud platform, CRM, telephony, compliance and cybersecurity, not to mention implementing all that is a job in itself. Acquiring Minds Guest Nick Akers knows this firsthand. As a former searcher who now owns Inzo Technologies, Nick has seen the tech challenges searchers face when acquiring businesses. His team at Inzo regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients, drawing from his own experience in the search phase. Enzo dates back to 1989. So this is a company that has managed the tech for hundreds of small businesses over decades. And one last thing, no long term contracts with Enzo. A big differentiator. Check out enzotechnologies.com I N Z O or email Nick directly@nicknzotechnologies.com and don't forget to tell them you're a searcher.
- [44:14]
Will Smith
I'm going to want to hear a little bit more about what these acquisitions kind of all amounted to because that's a big part of how you grew the business. But let's do actually now return to the story but we're not there yet the structure of the deal. Do you recall how you put this together? And what year are we in now?
- [44:32]
Jeff Horn
We're in 20, we're in late 2012. Very, at the very end of the year in 2012, business was about a $5 million business doing about a million dollars of EBITDA a year. We did a 4 to 5x. We felt that was market, you know, for that type of business. You know, so we largely put that purchase price. We did it, we did it as a stock purchase which was.
- [44:59]
Will Smith
What was that about?
- [45:00]
Jeff Horn
Well, that was, I mean I, you know, we originally wanted to purchase the assets but for the tax effect for the seller to try to make it work for the seller. You know, we did a stock purchase agreement which obviously, you know, involves a lot more reps and warranties and indemnifications and you know, makes it oftentimes makes the agreement a little bit more complicated and more risk on the buyer because you're assuming, you know, some unknown obligations, you know, at the time. But, but we did a stock purchase and got past all of that and did a, I would say kind of write down the fairway deal where we paid 80% of that transaction, you know, transacted amount up front to the, to the, to the seller and then had an earn out over the next three to four years for him as the company meet met certain Metrics, you know, making those additional payments. And so that was largely the, the structure of the deal. And then it also included he had, he owned the main building, we in, in Lubbock, and we signed up a, a, a long term lease for that facility as well, which was a great facility. So it was a, that was a smart move on the business to make.
- [46:18]
Will Smith
And Jeff, the first of all, the 20% of the sellers, was that, was that an earnout or was that a forgivable seller note?
- [46:28]
Jeff Horn
It was an earn out.
- [46:30]
Will Smith
Okay, because, because there was also an SBA loan involved, right?
- [46:33]
Jeff Horn
Yeah, that's correct. Yeah. So that was what the seller got. But how we, how I finance that transaction is, you know, went to a community bank that I had an established relationship for a long period of time. Matter of fact, I worked there between high school and college as a teller long back in the day. But yeah, I took, I took the equity proceeds that I had received in my prior position and really put those as a, as a down payment or pledge against a note against the, the business there at Benchmark and set up a 10 year note on the business and, and just monthly payments. Pretty straightforward. I remember how nervous I was whenever, you know, for all those other owners. I mean, that's when the moment becomes real when you're calling your wife to meet you at the bank and say, hey, we're, we're signing personal guarantees, you know, on these loans. And you know, it, it is this, it becomes very real for you in that moment that you are stepping out of your comfort zone and, and getting into, getting into a, an owner mentality for the first time.
- [47:44]
Will Smith
Yeah, well, especially. Right. With a personal guarantee, which of course is an understandable, if unfortunate feature of the SBA loan. Yeah. These days, Jeff, SBA doesn't permit earnouts forgivable seller notes. Yes. So, you know, a business not meeting past performance, you can have some of that seller note forgiven. But technically these days you can't incentivize a seller and pay them above and beyond the purchase price over time based on performance. The 80% which was the SBA loan, you pledged equity that you had from your previous employer, does that mean you, that was a deposit that you put in or it was just assets that you had that they were going to come after if you didn't pay your loan, did you have to put equity yourself into the actual transaction?
- [48:37]
Jeff Horn
Well, it was that, that equity that I had was in the form of both cash and a receivable from that prior business that I was involved in. So all of that was pledged. And yes, they could come after that if, if, you know, we weren't performing on our benchmark loan with the bank.
- [48:57]
Will Smith
Yeah, a detail actually that from our pre. Call, Jeff, about that equity from the previous employer was that you. That the amount that you had potential, the potential to earn was a lot higher when you walked away to go buy a business. To go out on your own and buy a business that they, they, they knock that number down. Yeah, say, say more about that because I think it, it demonstrates how really badly you wanted to go be an entrepreneur. You walked away from a lot of money.
- [49:35]
Jeff Horn
Yeah, no, I did. I took, I took a 70 to 80% discount on my stock value to, to want to leave and do my own thing, which was something that I was, you know, that I really, really wanted to do. And so I, it came at a tremendous financial cost, but, you know, still, still did well, you know, there and was something that, you know, that I wanted to do. And that remaining 20 to 30% that I, I had was, was enough to be able to, you know, get the job done with the bank and make them feel comfortable with the, with the business that they were now financing.
- [50:13]
Will Smith
Yeah. Well, I maybe should have underlined this point back when we were talking about the timing of your decision to go do this with the busyness of your family life and all of the responsibilities and swirl of life of your life at that particular moment that you also walked away from a significant amount of money. You're leaving 80 to 70% of the equity on the table to go off and do this. Really, I can see why JD was inspired. Jeff, thank you for explaining the deal to us. Okay, so you become owner of this $5 billion business that you paid about the same amount for. It's doing about a million of ebitda. We've touched on a lot already of what your vision was for it transitioning from agent to dealer. You have mentioned that you did a number of acquisitions.
- [51:10]
Podcast Host 1
Maybe.
- [51:11]
Will Smith
Why don't we do this? Why don't you tell us where you exited, what the business looked like when you exited. So we can understand where this is all going, and then we'll unpack a little bit of exactly what you did to get it there. What was revenue when you exited?
- [51:24]
Jeff Horn
Yeah, so we exited. Revenue was right at 30 million with a $30 million annual in, in revenue, with a projected next 12 months of really close to 35 million in revenue as that full agent to dealer. Migration and growth and all the acquisitions had, had kicked in. And, and at that Point in time at 30 million, you know, we were a 3 to 4 million dollar a year EBITDA business as well. And so probably a little harder as the business became a dealer, you know, the expectation to have a 20%, you know, bottom line became a little bit more, you know, difficult to achieve. But you know, there was so much more revenue there and you know, it ended up, you know, ended up being a good deal.
- [52:20]
Will Smith
Yeah. And how long did it take you to grow from 5 to 30 million?
- [52:24]
Jeff Horn
Well, that took us, let's see, that took us five years, so five.
- [52:30]
Will Smith
Are you saying that as a, that's a long time or not a long time? Because to me that doesn't seem like so long to build a business to $30 million with 35 coming the next year.
- [52:40]
Jeff Horn
Yeah, I don't know.
- [52:42]
Will Smith
That's a great run.
- [52:43]
Jeff Horn
Yeah, no, it is, it is a great run. We, you know, we, we did five acquisitions during that time. So.
- [52:49]
Will Smith
Yeah, tell us what you did here.
- [52:50]
Jeff Horn
Yes, so we acquired for other Xerox businesses that were really close to what we, we did day in, day out. Some larger, some smaller. That, that helped us grow into new geographies and really expand our footprint across Texas into Mexico even more. And then we bought one business that was a little bit different than what we did. We, we, we bought a competitive dealership that had a big relationship with hp, was more of a supply and technology type business. As we started to turn our attention to, you know, doing more managed services and getting into IT services a little bit more, you know, in the last part of my tenure there at Benchmark. And so, yeah, that was the last, last acquisition that we did. But I, you know, I would say largely I kind of put it into three different buckets. I think our lead, our lead bucket of growth over those five years was, was definitely the agent to dealer, you know, transformation. And then I think our second bucket, you know, of growth would, would have been our acquisitional growth. And then our third bucket was the ancillary services that we added, like the finance component or the IT services or managed services component as well, you know, that we added, added to that. So those are the three really main drivers of all the growth that the, that the business experienced.
- [54:25]
Will Smith
And did you just rank them in terms of how much impact they had?
- [54:30]
Jeff Horn
Yes, that's what I was doing is, you know, yeah, I would say that was the rank of the, you know, of the impact to the revenue growth of the bottom line growth that the company experienced.
- [54:41]
Will Smith
And when you talk about this shift from agent to dealer Was that something that you were then layering into all your acquisitions? So it was not just, not just Benchmark, the first platform, but these other ones you were also, these other acquisitions, you were also then bringing that benefit to all of them. So there was this kind of double dipping. You were growing through acquisition and then each of these acquisitions you were transitioning from agent to dealer so that they would all also improve that way.
- [55:09]
Jeff Horn
Yes, that is correct. And so that's a good way to, I don't know, you know. Yeah, I guess double dipping is a little bit correct in the sense that, you know, you are acquiring these businesses and by merging them in with, you know, with Benchmark, the main company, you would achieve some synergies with the business. But, but it also gave you fresh territory or, or ground, if you will, to be able to go execute on more agent to dealer, you know, growth and adding to your, you know, post sale revenue, which was the coveted component of our financials, was to get as much recurring revenue going as we could possibly do, you know, in, in the business.
- [55:51]
Will Smith
And so of that 30 million, how much of it was this really high quality, great recurring revenue when at the.
- [55:58]
Jeff Horn
$30 million mark, a little less than half of it. So I'd say about 45% of it was recurring revenue, which was great because again, if you'll remember back to early in our conversation, had to invest heavily in our back office and infrastructure and those types of things. And our employee count had swollen and grown. And so, you know, having that recurring revenue made it a lot easier as the business owner to be able to forecast, you know, what we're doing, where we're headed, what, you know, what objectives do we want to try to accomplish in that particular year? And so but that, yeah, that the recurring revenue was the, was pretty much the golden goose of the business.
- [56:42]
Will Smith
Sure. We'll assume that that's also what a private equity was interested in when they came knocking. We're about to get there. How many employees did you, were you at at this, at the, when you exited?
- [56:53]
Jeff Horn
That's a great question. I think we were right around the 90 mark, so around 90 or so employees. And, and of those 90, about a third in sales, about a third in the back office or operations and then about a third in service. That's ultimately how that broke down most often times.
- [57:13]
Will Smith
Tell us a little bit about this financing business line. That was the, in the third bucket because this was, this was pretty interesting and, and goes to your kind of good business buyer fit because you were somebody who yeah, had the sales background, had. The tech background, also had this. This kind of affinity for financing businesses.
- [57:37]
Jeff Horn
Yeah, it's, you know, really, you know, a lot of copier dealers or document management. You know, companies, when they're selling equipment, you know, they. They use an equipment lease all the time. I mean, a lot of businesses lease that equipment because at the end of four or five years, they're going to want to change it out and get the newest technology. So doesn't really make sense for them to own it. And so in doing so, you know, instead of just sending that business to a national finance company or national leasing company with the background that I had been able to develop, felt like it would be a really great marketing tool for our salespeople to be able to walk in there and say, hey, you're gonna. You are only ever gonna call one number. We're gonna sell it to you, we're gonna service it for you, and we're gonna finance it, and you're gonna make one payment. It'll all be on one bill every month to us. Your lease payment, your. Your service payment, and your. Your lease payment will all be on the same bill. And that. That really worked. That was a. That was something that resonated, you know, whenever I call on businesses or deal with other businesses, I mean, it's amazing to me the number of business partners you have to have in today's day and age. And so to be able to simplify that for a lot of the customers that we had, I think, meant a great deal to them and was a strategy that really worked well for us.
- [59:02]
Will Smith
Yeah, I can totally see that being a successful pitch and value proposition. I will say, Jeff, that it seems like the business of financing is a very different business. So you're. You really are spinning up a completely different business unit that doesn't have any of the same motion of your existing businesses of sales and service. Correct. Say. Say more about having this finance arm effectively.
- [59:28]
Jeff Horn
That's a great observation. Yeah, we had to have a separate business, so we had a separate entity name for that business, and I had different people that were running that business than I did, you know, in the main business benchmark. Because you're right, it's a totally different business. You're in a finance business. You're, you know, making credit decisions. If somebody was past due on a payment, you. You had that unfortunate reality of having to call them and put pressure on them to collect the payment. You didn't want to do that inside of the dealership. You would want to do that. You know, in an outside entity. And so, yeah, there were, there were, there were enough differences to where, you know, I had one to three people always running that particular business unit and really have nothing to do with the, with the main line of business. But they did work together and by having that finance company there did help Benchmark be able to sell more equipment and build deeper relationships with their customers.
- [60:28]
Will Smith
And did you ever have one of those uncomfortable situations where your financing team is now having to lean on somebody who's not, who's not paying their loan payment? Yeah, whereas, whereas the, on the other side, the sales and service people don't want you to beat up on that customer.
- [60:44]
Jeff Horn
We did, yeah, we had to go pick up a few, we had to repossess a few and, and had a great, we had a very low default rate, less than 1%. But, you know, sometimes, you know, yeah, you would have to go get it. But we would turn those into a win for Benchmark as well. We'd go pick up that equipment, would sell it back to Benchmark at a discount, then Benchmark would be able to go, you know, remarket, a slightly used or maybe, you know, average use, you know, you know, middle of the term that was only two years old to be able to go market that asset and put kind of a bounty on it for the salesperson or something like that to, you know, take a bad situation and make it good again, you know, and so the reality is, is that if they weren't paying their lease payment, they're probably not paying their service payment either. So not a huge deal there. But, but, you know, you, you couldn't, you had to apply the principles of, you know, collections there in the finance company and stick, Stick to what? Sticks to what you have to do there.
- [61:44]
Will Smith
So anything more to say, Jeff, about the, your acquisition strategy?
- [61:50]
Jeff Horn
I would think, I think something that's important for your listeners will would be, you know, I, I really encourage, you know, when you're buying a business, oftentimes the person buying the business really wants to, you know, step up and be in charge sooner rather than later. I had some really good advice given to me by some of the mentors in my life to not go fast with that. And so when I bought the business, I waited a whole year before I became CEO and I bought the business. And I have these, you know, new financial pressures that were on me, but because of how good of a business that I purchased that I had learned through the due diligence process, I took the first 90 days of being there to not have any specific duty. And my sole goal was I went and rode with every employee on one day or half a day each to get to know them personally and to develop a relationship. And I think that was the single greatest decision that I made in buying a business, was to. To not just buy the business and start leading, but I bought the business and I developed relationships so that I could lead. And so I think that is an important aspect to anybody that is buying a business is that hopefully when you buy a business, you can put yourself into a scenario to where you can have a very thoughtful transition and, and something that goes well, because ultimately not every business is going to go great. And there's going to be tough challenges that all business owners face. And the better your relationship is with each one of your employees, the better you're going to be able to deal with those circumstances or scenarios that come about. So felt like that that would be important to share.
- [63:40]
Will Smith
That's wonderful advice, Jeff. How did you have the bandwidth to do that? Because we often hear that, you know, it's drinking from a fire hose, as you learn during that transition. And I guess it very much, of course, depends on the size of business. If the business is very small, you're going to need to get in there and lead whether or not you like it. Just because it. There aren't. There's not enough capacity for. For there not to be leadership. Maybe, maybe your business was of a size where you could ease into that role and take the time to learn to take everybody out and spend hours with them and meet them. But anyway, how do you address that, that at that point?
- [64:18]
Jeff Horn
Well, it certainly does take. Does take bandwidth and it does take a commitment to learning the business. You know, you got to remember, I just come off three to four months of due diligence where I learned incredible amount about the business. And so what worked for me was to take, you know, maybe get, you know, get there an hour early, spend the first two hours of every day, you know, working on the business and learning and, and, you know, whatever I needed to take care of. And then the next six hours being with people out in the field or something like that, and then maybe staying an hour after work or something like that to work on the business again. And so, you know, I would love to tell business owners that when you jump in, yeah, you buy the business and you're playing golf every Wednesday and Friday afternoon, but that's not really the case. If you want to, you know, do it correctly, it oftentimes, you know, requires not just 40 hour weeks, but 50 and 60 hour weeks to, you know, set the stage or lay the foundation to be able to, sure, you know, achieve more time off in the future or whatnot, but that's, that's how it worked, you know, best for me in my scenario.
- [65:28]
Will Smith
And, and how did you treat your acquisitions? You didn't do the same program with the, the subsequent acquisitions where, yeah, as we did you.
- [65:38]
Jeff Horn
Well, I, I, I, I still spent quality time with them. Maybe I couldn't spend a whole day, but try to spend a, you know, go on two or three appointments with them or, or whatnot. I did, I tried to, tried to do that as much as I could. It became harder. And I think that's the thing that you really have to be mindful of as you grow. You know, any business is that, you know, the business you have at 10 people is not going to be the same business you have at 80 and 90, 100 people versus thousand people. And again, back to what I was talking about, Xerox, you know, how hard it became for them to run an agent program and do all that on a national scale. You know, you, you have to continue to reinvent ways to push decision making down to your, to your people within your organization. And I had to learn to rely on other great leaders, you know, within our organization to lead the way I would want to lead whenever I, you know, we, it became, you know, big enough to where I was not able to touch all parts of the business. And what I found through that process was that, hey, there's people, there's a lot of people out there better than what you are, and then hire them for their core competency and man, then you can really achieve some great things. And so some really good lessons, you know, through all of that.
- [67:01]
Will Smith
That was great, Jeff. And so five, six years later, the year was, you said, what, 2017.
- [67:10]
Jeff Horn
Yeah, at the end of 2017, you.
- [67:13]
Will Smith
Start getting interest from private equity. Tell us the story of Exit, if you would.
- [67:18]
Jeff Horn
Yeah, so really in the, towards the start of the second half of the year, I got really a call out of nowhere that said, hey, we've acquired two other, I mean, I knew that this private equity firm existed because they had bought two other large Xerox agent dealers that I had attended meetings with and stuff like that. But I get a call out of nowhere that, hey, we'd like to acquire you. And, and it's like, I'm not really interested. You know, I'd only own this business for five years and, and said, well, we'd like for you to, you know, we'd like to come out and, and you know, do our dog and pony show for you and show you what, you know, what we're able to do and, and what we want to do with the business. And, and I told them to come on. And so we met. And yeah, I mean, I, I never, I remember that being a really difficult decision, but ultimately one is like, you know, for what we had invested in the business over those five years and the amount of work we had done, I felt like that there was still a lot of room for the company to grow. But I also felt like it was a, A, you know, another life changing opportunity for my family. And, and so I, I needed to listen and so ultimately did listen. And you know, we were able to, we executed a, a loi. And then closed at the very end of the year as my son, my oldest son was now in his senior year and in the football playoffs. And I remember that the right before their third playoff game that same day, we closed on the transaction and remember all those emotions.
- [69:03]
Will Smith
So did he win his game?
- [69:04]
Jeff Horn
He did win the game. Yeah, they scored.
- [69:06]
Will Smith
Oh, man, what a day.
- [69:07]
Jeff Horn
Yeah, it was a, it was an unbelievable day. I won 45, 24 and, and yeah, it was a culmination of a lot of hard work.
- [69:16]
Will Smith
Oh, man, Congratulations. What a wonderful day and story. And Jeff, can you put some numbers around this for us? So just reminder, you were at 30 million in revenue, looking at getting to 35 the next year. So businesses growth is continuing, if not accelerating. Ebitda, you had grown from about a million bucks to. What did you say? Between three and four.
- [69:36]
Jeff Horn
Between three and four, yeah. And, you know, with the enhanced scale of the business that we now had, you know, it was a, it was a 6 to 7x, you know, exit.
- [69:50]
Will Smith
Over the, about 5x that you paid.
- [69:53]
Jeff Horn
Yeah, over the 5x that I had paid. So got another turn or two on, on EBITDA, obviously, on all the revenue and, and, and you know, and even our growth. One thing that they didn't want was the finance company. Not because it was performing bad, it just wasn't something that they did or could hold, though their charter was set up to hold those assets. So I ended up selling that separately, you know, to a, to a national leasing company and that, you know, that provided some cash as well in a good way. And so, but yeah, exited the business and then ultimately, you know, I got, I got a lot of stock options and, and I still have those stock options today, eight years later. That business is still doing well. They've done a lot of things to, you know, grow that business really from 35 individual businesses into one business today, but doing well. And, and yeah, here we are today.
- [70:55]
Will Smith
When you say stock options, you mean you rolled equity?
- [70:58]
Jeff Horn
I didn't roll any equity. Yeah, it was additional incentives to stay, stay with the organization. I ended up, I ended up staying there three years and ran a third of the company for them. I ran the southwest region for them.
- [71:12]
Will Smith
And just to, to underline the numbers here to a 6, 6 or 7 multiple on 3 to 4 of EBITDA, sounds like it's. That could be anywhere from high teens to mid-20s. Does that sound.
- [71:26]
Jeff Horn
Yeah, yep. You're right in the ballpark there.
- [71:29]
Will Smith
Okay. Okay. On an investment that was, you didn't give us the exact number of equity put in, but we have a sense. So this was in a, an incredible, really return and of course a life changing exit for you.
- [71:42]
Jeff Horn
Yeah, not only me, but you know, I, when I bought the business, you know, there was some partners that I assumed. I should have mentioned that earlier but you know, you know, the, the seller didn't have a hundred percent. He had almost, you know, 85 to 90%. And I tell you, of all the things that I've done in my business career, you know, when I bought that business and assumed those, I think it was three partners at the time, you know, looking those partners in there and said, hey, we're going to achieve something. I mean they don't know you at all. But to do that for them and to see the smile on their face when we exited in 2017, that was, yeah, that, that felt really good, you know, to be able to help them do that as well. And so I was excited about that.
- [72:30]
Will Smith
Well, we're going to close in just a minute here. Hearing about what you're doing today, which is as a, as an investor, basically a professional investor. And so now you have a lot of your own LPs and investors. So I guess you really liked the feeling of deploying other people's money successfully because here you are doing that full time. Tell us just before we move into that why you think you, you were able to knock it out of the park on the first try. Know, you take all this risk, you buy a business with this vision and lo and behold, the vision comes to pass basically. And, and I don't mean to simplify or make it sound like those five years were easy, but you really did knock it out of the park on your first try. What, what do you, ascribe that success to Will?
- [73:16]
Jeff Horn
I don't know. I mean, I, I think several things. Number one, we worked hard. I mean, I worked hard. I mean, it was a, you know, when you're out proving yourself for the first time, you know, I was definitely in an uncomfortable zone. And, you know, I had a lot of desire to achieve and, and, and, and to prove not only to myself, but to others that I was fully capable of doing that. You know, number two, I, I bought a good business. I mean, I, I can't stress that enough, you know, it. I didn't let, hey, I want to be in business for myself. Overshadow the fact that, hey, I need to start with a really good business, you know, and, and, and to, you know, I need to work with a business owner that is a good person and has great character and all that. And, you know, I think, I think sometimes people can overcomplicate things and they, you know, you know, lose sight of, hey, I just want to be in business for myself. I'll take any business or whatnot, or I'll do this or, you know, I'll do that. And I just, I think you really need to, I think you really need to think long and hard and be willing to be disciplined on, you know, what you may enter, what, what you don't enter. Sometimes your best decisions are what you don't enter. And then I picked a business that fit my skill set. You know, I didn't try to go, you know, you know, do something, you know, be a plumbing service, which I couldn't do anything, you know, and so I, you know, pick something that matched my skill set. And, and so, and then to, you know, have the support of your family as well, and all of that, I think played a part. So I think it's a little bit of all of that.
- [74:55]
Will Smith
Well, to close us out, tell us a little bit about Masked Rider.
- [74:58]
Jeff Horn
Yeah. So Masked Rider Capital is a firm that proud to be partnered with two other individuals, Dusty Womble and Brooke Hopgood. Mass. Rider is. Is a very unique business. We are a hybrid between a family office, a private equity firm, and an investment firm. We, we're in business to help companies grow and to be there strategically whenever they need growth capital. Take a, you know, some. Somebody that's grown a business and has a long, you know, has a, Has a, A lot more upward mobility that they can still take with their business, but maybe they don't have the capital where we can be there to, to help support them and help them grow their company. We're really Lubbock's first, I would say institutional capital company that's available to the, to Lubbock in the West Texas area. A lot of times businesses that grew up in Lubbock would have to go to Dallas or Houston or Austin, you know, to find a private equity firm to, to help their companies grow. But you know, we, we are right here in Lubbock and, and get to see a lot of great businesses that come up through this area as well. And then I think the thing that separates us from others is that me and my other two partners have bona fide legitimate operational experience as well to not only from the investor mindset, but from a operational mindset. And that's really played well with some of the people that, that we've partnered with early on. We're involved in about 25 to 30 different businesses today, ranging from an oil and gas company to our 7 brew drive through coffee concept and then multifamily apartments or what have you, but evolved in a lot of different things and have about a half a billion dollars of assets under management today.
- [76:57]
Will Smith
That's great, Jeff. That's a sizable assets under management. Especially for being the, the only one in Lubbock or the first one in Lubbock. You, you know, you went pretty big for being the first one in the neighborhood.
- [77:13]
Jeff Horn
Well, we've never, we haven't ever not gone bold. And so yeah, we, we were worried about deal flow when we first started this business. And I would just tell you Will, we're not, we're not worried about deal flow anymore. We're worried about making great investment decisions and, and growing those companies. And you know, we've had the fortunate, we've been very fortunate to get involved in some really nice sized businesses with their own management teams. And so but the skills I learned, you know, at Benchmark and, and learning how to operate a business, we use those each and every day here I do at Mass Rider Capital. And then we've surrounded ourselves with a, with a great team as well. Got about 15 individuals but all, you know, in the C suite ranging from accountants to attorneys that are all self motivated and self driven people to that, that make this organization run. So yeah, it's a, it's a lot of work but it's a lot of fun too. So really enjoy it.
- [78:14]
Will Smith
And, and tell us Jeff, about why become an investor as, as opposed to having another chapter as an operator and how or you can answer why that decision but also just compare and contrast those. It seems like a path that most successful operators take. They eventually become investors rather than doing operations forever. But not everybody. So how did you think about that?
- [78:41]
Jeff Horn
I just look at it as like it gives you an opportunity to be involved in other different types of businesses. I mean, and to get, get more diversification across multiple concepts rather than just one. You know, the thing you have to remember is that what made you successful at Benchmark is that you really knew everything about that particular company and what made it tick. And so, you know, if you own five businesses now, you better, you better spend the time to learn what makes each one of those five tick. You can't cut corners. And so that's the thing I would encourage everybody is like, don't, don't go be an investor just to say, hey, I'm an investor. If you're going to invest in a business and, and, or several businesses, you, you, you've still got to spend the time to learn what makes each one of them tick and how they operate and what opportunities or challenges could be there for each one of those particular investments, what they might face.
- [79:39]
Will Smith
Jeff, we appreciate the time, we appreciate the story. Congratulations on, on that run with Benchmark and of course, what you're doing now. But, but Benchmark is what we were here to talk about and it was just a smashing success. You've already, as we said, at the top, JD was inspired by it. So I'm sure others will be today as well. So thank you also for all the transparency and, and really giving us the numbers through that journey. Yeah, we'll put a linked it. We'll put your LinkedIn in the show notes. Is there anywhere else you'd like to send people?
- [80:09]
Jeff Horn
I think LinkedIn would be good, but appreciate your time, Will. Thank you. It's been fun.
- [80:15]
Will Smith
Jeff Horn, thank you very much.
- [80:16]
Jeff Horn
All right, thank you.
- [80:17]
Will Smith
Hope you enjoyed that interview.
- [80:19]
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- [80:23]
Will Smith
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Will Smith
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- [80:37]
Will Smith
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- [80:51]
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- [80:59]
Will Smith
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