Podcast Host / Interviewer (3:41)

Not just a single point of contact.

Will Smith (3:44)

Visit pioneercap.com or click the link in the notes.

Podcast Host / Interviewer (3:49)

Joe Solberg, welcome to Acquiring Minds.

Joe Solberg (3:53)

Thank you very much for having me. Will. Great to be here Joe.

Will Smith (3:58)

You've acquired two businesses.

Podcast Host / Interviewer (4:00)

We're going to spend most of this conversation on the most recent, but there.

Will Smith (4:05)

Is much to be learned from acquisition.

Podcast Host / Interviewer (4:07)

Number one as well. You yourself learned a lot from it and then that informed how you went about acquisition number two. We'll get there. Let's begin with some background on you first, please, Joe.

Joe Solberg (4:18)

Yeah, absolutely. So growing up in Seattle, my dad owned a cabinet shop. So owning a small business seemed like the most normal thing in the world to me from day one when I went off to school at byu, came to ways for looking to make money. Kind of defaulted to what I knew. I started a marketing agency with a friend of mine. We sold oil change cards door to door. So at first we were doing the selling and eventually we hired a team. But that got me through school without any debt. After graduating, had a short W2 stint and then did sole proprietorship slash independent contractor work in medical equipment sales for a bit. That lasted until I went to business school at iu. Kelly's school. Went through the full time MBA program with an emphasis actually in entrepreneurship. Learned from the legendary Don Karatko there. That was great. Loved it. Directly out of school though, I went full corporate. I joined GE in a two year management training program. Can't get much more corporate than that. I then worked at GE Healthcare for another two years after the rotational program. So four years total. GE then transitioned to another corporate gig at a company called Dover for three years. All seven years in corporate was very functional roles at Dover. However, I finally got up the courage to ask, hey, you know, I went to ask my manager one day, I remember, hey, what, what do you think is my path to managing a P L? Or how, how soon could that happen possibly? And when the answer was like, you know, decades, maybe never, you know, the.

Podcast Host / Interviewer (6:11)

Answer was laughing in your face.

Joe Solberg (6:13)

Exactly, exactly. Yeah, that was, that was kind of my sign that like maybe I'm not in the right spot, maybe I have to go. So that was like 2017, 2018. Knew absolutely nothing about buying a business at that point, but my, my headspace. I had a lot of friends who were dentists. They had gone to dental school and bought A dental practice. And so I was like, well, I went to business school, maybe I could buy a business. Started searching online fairly quickly, ran across search funds, read everything I can get my hands on, the HBR Guide, the Stanford studies, all that actually ended up talking to Irv Grossbeck on the phone, kind of the granddaddy of search.

Podcast Host / Interviewer (6:54)

Again, tell us who Irv Groesbeck is for the uninitiated.

Joe Solberg (6:58)

Yeah, so this is a long time ago. Like, like back in the kind of 90s, early 2000s, Irv Grossbeck sitting at Stanford, really initiated the whole model of search fund. The idea that, you know, you could, you could have a skilled individual go out and search for something to buy, but that, that process could be kind of helped along by investors essentially and, and launched the first search funds. Been super successful in that space as well as from an academic perspective. He is a professor at Stanford and so from an academic perspective laying the foundations of all of that. And, and then in the years since has added study upon study upon study. He's now retired, but there are many, many years of study. So Stanford has the longest list of, hey, here's what search funds looks like. Here's what has happened to search funds from a financial perspective and all that. So.

Podcast Host / Interviewer (8:06)

Yes, and he's also, I think, associate. I mean, I think it's fair to assume, I don't know this for fact, but that he was kind of, you know, part of the, the center of the search fund ecosystem there at Stanley for years. So he's associated with Assuri and I think he might even be one of the investors in assuring in a lot of the kind of the big names that you'll hear out of. Yeah. Early search fund days. You know, it's funny. Well, I'm stealing your thunder here a little bit, Joe. You're going to tell us how you called him and he picked up. You're actually not my first guest who had that experience with Irv. I think Mike Curry, early episode. This would have been back in 2021 or early 22 that we talked.

Will Smith (8:52)

He also, I think it was Irv.

Podcast Host / Interviewer (8:56)

Whatever when he was researching this, picked up the phone and called and got Irv and had her and had this very encouraging conversation with Irv. So it's so kind of pretty incredible. But that's, I jumped ahead.

Joe Solberg (9:10)

No, no, you're, you're good. I mean that was, yeah, so that was what, 2018 and, and yeah, exactly like you said, picked up the phone. Great guy, more than happy to help again at that moment, I really had no idea. In the years since, people being like, what, you talked to Irv? That's crazy. You know, so very fun. I ended up visiting a few investors here in Chicago, out in the Bay Area as well, and ultimately decided to.

Podcast Host / Interviewer (9:40)

Do a traditional search.

Joe Solberg (9:41)

So you were a traditional search? Yeah, yeah. But just decided for various reasons that that model wasn't exactly for me. I think retaining control and a large chunk of the ownership was, even despite the fact that I had to look at something that was much smaller, was really where I wanted to land. And so I ended up going self funded.

Podcast Host / Interviewer (10:08)

Why, why there, Joe? Why bigger slice of smaller pie was more appealing to you than smaller slice, Bigger pie?

Joe Solberg (10:16)

Yeah. So initial search, I just felt like, okay, I'm not, I'm not raising any funds. I don't want to put anybody else's dollars at risk or anything like that. I'm going to put my own dollars at risk. So that was part of it. I felt confident, but at the same time, I just, I just kind of didn't want to have that additional layer of, of of worrying about somebody else's money. And then also it was just really kind of the ownership thing. I knew that, you know, you max out at about 25% is of. Of ownership at the end of the day with the traditional model. And it just felt like that wasn't enough. The reason I was kind of risking it all to get out of corporate was to own something. And so that was, that was really something I was after.

Podcast Host / Interviewer (11:06)

Thank you. Carry on.

Joe Solberg (11:09)

Yeah, so really, that was, that was how I got into it. I mean, I reached out to a whole bunch of brokers, started receiving sims pretty quickly and, and became apparent that I needed to dedicate 100, kind of all of my time to searching rather than the corporate job. And so after a challenging, crucial conversation with my wife, walked away from, from the corporate gig and. And shortly thereafter, kind of ran across Sonny and Ash that we'll chat about. And that was. That was kind of the genesis of the first acquisition.

Podcast Host / Interviewer (11:45)

Well, I think I might be more interested in this, quote, challenging conversation with your wife.

Joe Solberg (11:51)

Oh, my gosh. Well, I mean, you know, she, she brought up so many good points, you know, that, that, hey, how are you sure that you're gonna find something in a time? We didn't, we didn't have, you know, a million bucks in the background. Plus I needed to use some of that money to buy the business. I was self funded. Right. So it's not like we had unlimited funds. She's like, how quickly are you gonna find something and how are you sure that what you're going to find is going to work for us? And how, you know, all of these questions of what about, you know, what what's this going to require of us? And then I had to tell her that it was probably going to require a personal guarantee. That was rough, you know. And so it's like. You mean everything is getting tossed into this one bucket. I was like, yeah, pretty much. It's like isn't that exactly the opposite of everything that they taught you a business scores like again? Yeah, pretty much, you know.

Podcast Host / Interviewer (12:49)

So was there something that you said that ultimately persuaded her or was was she just basically going on, ultimately going on her trust and your ability to pull this off?

Joe Solberg (13:00)

She kind of was. I, I think what she saw was that, that bit about hey look I'm never going to get to manage something if I stay in corporate or it's like not likely. And she saw how ultimately we're a team, you know and, and so she saw to her credit, she just saw how kind of frustrated or sad that made me and was like well that's not going to work either. So you know, is it is a more stable or at least has the mirage of being more stable. Yes, but is that where we're going to find happiness like pretty. Probably not. And so, you know, I'm just lucky, I'm lucky to have a partner that I have, you know.

Podcast Host / Interviewer (13:47)

Well, it's also yes, great she ultimately supported you but also great great that she stress tested you. You know, it's, it's good to have this idea, this crazy notion put through the ringer and, and have somebody push back on all, all of your crazy notions. So yeah, so good honor in both ways.

Joe Solberg (14:08)

Great.

Podcast Host / Interviewer (14:09)

Sunny and Ash, you were about to tell us about business number one.

Joe Solberg (14:13)

Yeah. So the way that we, that I, that I found Sunny and Ash, it was a broker deal. They sent me that sim. I saw that come across because I'd reached out to about 100 different brokers was looking through a lot of different sims and investigate a lot of different businesses. This one, the, this first acquisition was primarily a financial decision. I mean it was, it had to meet certain financial characteristics. The owner had to be willing to the way that I knew I had to structure it. The only owner had to be willing to do some a seller note. I was going to do the, the pretty standard SBA 7A and so it had to be of a certain size.

Podcast Host / Interviewer (15:04)

I wasn't give us, give us those criteria. More specifically, what could you afford. What were the numbers you were looking for?

Joe Solberg (15:10)

Yeah, so it had to be kind of top line between 1 to 2 million and then, and then bottom between, you know, probably low end, maybe 250, all the way up to maybe 4ish somewhere in there 4 or 500,000. And geographically I was not constrained. I happened to find something in Chicago which is great because we love it here, but, but I, I realized I had to kind of leave that wide open. If I was pretty specific around the financial side, I had also left in large part the industry fairly wide open as well.

Will Smith (15:56)

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Podcast Host / Interviewer (16:57)

So on the geograph, geography, the geographic constraints or lack thereof. So you, you were willing to move?

Joe Solberg (17:06)

Yeah, we would have moved. We would have moved.

Podcast Host / Interviewer (17:09)

Okay. Oh, so that was, yeah, one more thing in that conversation with your wife. I'm doing this and oh by the way, we might move to do it. Right. And interesting too because that's one of the reasons people often don't want to do a traditional search. And you, they, they like the geographic freedom which usually means staying where they are of doing a self funded search. But in your case, actually you, that flexibility remained open to you. What I just heard you describe by the way, reminds me of Sam Rosati's big three little two. So we think about the big three are industry, size of business and location of business. And if you're really committed to one of those, and in your case it was size, you gotta, you gotta be looser on the other two. So you were committed to a certain size. So therefore you had to loosen up on industry and on geography. I will say Joe though that the size, your size was small. So actually I guess you're, I guess really what your size was, was small. You didn't Want to go too big? Like, you wouldn't have gone. You were, you had the kind of opposite of what most people, which is they have a floor. You kind of had a ceiling.

Joe Solberg (18:18)

I kind of had a ceiling, yeah. Oh, absolutely. Yeah. Yeah. Just because I was, I was resource constrained, you know, I mean, I just, I just didn't have it to both fund living, you know, for, for the time during my search and also then at the end of the search, I got to acquire this thing. I didn't bring on investors. So. Yeah, yeah, we were limited for sure.

Podcast Host / Interviewer (18:44)

And you weren't open or didn't know you could bring on investors for a s. For an SBA style deal? Or does this go back to the ownership thing where you really wanted 100%?

Joe Solberg (18:55)

No, that's a good point because I would, I would have been fine, you know, settle for like 80, 80 or higher, even 75 or higher. But yeah, I don't think that I, I don't think I understood that 100 at first. We did, you know, we'll get to it. But for the second exit, we did do it. Some investors and yeah, just. I was not aware that that was even an option. It's not traditional or bust, you know, like that it's all going to be me or, or, or not. So. Yeah. Yeah, I just kind of didn't even look into it.

Podcast Host / Interviewer (19:32)

Okay, back to Sunny and ash. A 3D rendering business. Tell us about it.

Joe Solberg (19:37)

Yes. So 3D rendering is our, you know, most of our clients are like interior designers, developers, architects, anybody that needs to show what something is going to look like, but it's not built yet. So in that case, even, even product folks will need renderings of products, things like that. So it's just this photorealistic image of a product or a building or kind of anything that they need to show to, you know, investors, a zoning committee, you know, owners, in the, in the case of designers that are going in to design something, they need to show the owner what it's eventually going to look like, that type of thing. So you see renderings sitting on the outside of like construction sites a lot.

Podcast Host / Interviewer (20:35)

Real estate really is the classic use case. Or, or I should say develop real estate development where it's like, this is what the building is going to look like. Yeah, but the interior as well. And go ahead.

Joe Solberg (20:46)

Yeah, yeah, absolutely. Yeah, yeah. Interior, exterior. You can do walkthroughs of the space. You know, the idea being, hey, if we have this, you know, if we don't have to wait to show people what it's going to look like until it's built, then we can pre lease, we can get the money to do the project in the first place. You know, all sorts of reasons why renderings are necessary.

Podcast Host / Interviewer (21:15)

Great. Okay, so that was the service offering. And so give us a picture of the business itself. Yeah.

Joe Solberg (21:20)

So this had been run by two cousins, which is the reason for the name of the company, Sonny and Ash. I tell people it's. It's not a 70s cop show. These are actual people. So Sunny Sultani, Ash Muhammad. Awesome guys. Still talk with them. Sunny more, more than Ash, but probably, oh, I don't know, every couple months or so, still talk to them. And the acquisition was like six years ago, so. So just awesome guys then. They had done a good job setting up this business. Sonny Ash had founded the business. He called it Studio Rendering. It eventually became Sonny and Ash, but he called it Studio rendering because he would sit in, he was going to architecture school and he would sit in the architecture studio and do renderings because he was. All his classmates were like, you're awesome at this. Will you do mine? And, and he was starting to like, collect some architecture clients and stuff like that. And so instead of, instead of going to be an architect, he was like, you know what? This is my gig. And so he started that company. He later brought on his cousin Sonny, who has some more business experience, and Sonny was able to grow it. And they, they really then started focusing a whole lot on hospitality design, which was a really successful direction for them to take the company. And so that's, you know, a few years on. Then that's when I acquired it and was a large part of what the company was.

Podcast Host / Interviewer (22:54)

And, and so what were revenues at that point and headcount and kind of, you know, behind the curtain of the business.

Joe Solberg (23:02)

Yeah, yeah. So I, I bought that business for about one and a half million. The structure was 20% seller notes, 10% down. And then the rest on the SBA 7A, the revenues for the business. The top line was about the same, a little under. It was about 1.3 million. The bottom line was about 400,000. And the headcount at that time was, let's see, we had eight, I believe. One sales guy, Ash stayed on. Sunny stayed on for a transition of a couple months. But then he rode off into the sunset. And then, and then the rest were artists, 3D artists.

Podcast Host / Interviewer (24:05)

And those three artists were in a studio. They were distributed around the world. Virtual.

Joe Solberg (24:10)

What they were a little bit of a combination. So, so the, the seven or eight that I. I should say there were additional freelance artists that worked over in Sunny and Ash have a family history in Bangladesh. They didn't ever live there, but that's their. Their ancestry. And so. So they had opened an office in Bangladesh. And so they have. There were at that time probably a dozen artists over there as well that were helping out with some of the work. And we did have a physical studio in Irving park neighborhood in Chicago at that time. This was March 2019.

Podcast Host / Interviewer (25:00)

Okay. All right, well, as I said, we're not going to spend a ton of time on this acquisition, so I just want to pluck out some key features. You. You ran the business. So March 2019. So we. We know it's around the corner. Yes, it did really well during COVID Right.

Joe Solberg (25:20)

Well, eventually, so. So as I mentioned, it was based on. Or a lot of the business was hospitality design. And so when Covid happened, what happened with hospitality? You know, it cratered. So the business absolutely cratered as well. I mean, everybody was like, you know, we were halfway through projects and they were like, cut it. No, never mind, forget it. And. And then. And projects were just nothing dead. And so what I had to do was just go out and find, okay, well, what is hopping in in the middle of COVID And the answer was home furnishings was going crazy because everybody was sitting at home. Right. So. So I went to a lot of the home furnishings outlets. I mean, just think anybody who makes. Makes furniture, essentially Wayfair and all these, this type of company, and they all needed renderings of their stuff. So instead of doing renderings of rooms or buildings or things like that, now I'm doing like pieces, individual piece, you know, here's a rendering of your couch. Here's a rendering of your tv. Is rendering of this piece of, you know, this artwork or whatever and rugs and any kind of home furnishings item that you can imagine. Teeny tiny dollars per item. And they want like thousands of items made. Right. So it really changed the structure of the business quite a bit. We had a lot more people that we hired over in Bangladesh. We had gone completely remote during that time, of course, ended up getting rid of the office completely. And so that then took the business to, yes, eventually higher than it had been. You know, then you had some record breaking sales. But, but, but yeah, I was nervous for a while. For quite a while.

Podcast Host / Interviewer (27:21)

So. So the time before you figured out the new market to serve Covid starts is scary. Yeah, super scary. Did revenue kind of drop to how bad? Like at its. At its lowest. Wow.

Joe Solberg (27:35)

Yeah.

Podcast Host / Interviewer (27:36)

Were you did you have to come out of pocket to service your SBA loan.

Joe Solberg (27:40)

So the only reason why I didn't is because at the same time, you recall everything was shut down and the government said, okay, this is, you know, we're, we're shutting everything down. But at the same time, they gave forbearance. And it was, it was forbearance of everything. It was, it was not, it was not like, oh, interest will continue to accumulate. It was just forbearance. And yeah, and anybody with an SB alone will recall that, that time with happiness and glee in their hearts, you know, so, yeah, so, yeah, that saved, saved the business, honestly, that, that there was that for parents.

Podcast Host / Interviewer (28:20)

Yeah, sure. Okay, Joe. And then so you pivot the, or you go after a new market for the business, and what do you get? Revenue to, Revenue to kind of as it's at its peak. And if you're not there now, maybe, maybe it's at its peak today. But yeah, give us a picture of how, how much that business has grown.

Joe Solberg (28:44)

Sure. So that 1 is 2 million is the, is the, is the peak and, and about where we're still at. So it's not a, not a massive growth story over the, over the last few years, but maintaining that. The, the good news was you get that surge of home furnishings work, and that took us up to that level. But then after that, all of the hospitality came back, and so, you know, be fantastic if it was like, oh, and that just, you know, continued the surge. Kind of, the wave kind of crashed on the home furnishings. Not completely, but it's died down, you know, so, so almost it's sort of like, leveled out, essentially, those two things. And so, so hospitality is a great place to be in until this, like, weird black swan event, you know, But I still like it. I mean, it's, it's, it's, it's a good, it's a good place to, to be. Senior living is, is an area that's maybe a little less, you know, kind of cyclical or, or, or subject to kind of these downturns and stuff, so doing a lot of that as well in the rendering space. So. Yeah, that's been good.

Podcast Host / Interviewer (30:11)

And you ran the business as its owner operator during this time?

Joe Solberg (30:15)

Right. Right up until, like, 2023 is when I, when I hired a manager for.

Podcast Host / Interviewer (30:23)

It and tell us what that looked like. Why did you, why did you hire a manager then? And what does your involvement look like today?

Joe Solberg (30:32)

Yeah, essentially, I, I, I wanted to start looking for another acquisition. There were some things about that business that a lot that I liked, but a lot that I also learned and felt like, okay, I would maybe do this a little bit differently with a, with the new acquisition. And so I same story as first time. It was like, hey, I know that searching for something is not really a part time job if you want to get it done right. And so I'm going to need to offload money much of this work if I can. And so I hired a, a manager. She's awesome. She is kind of comes with a design background and so she really knows how to speak to the designers in that world like much better than I did and, and does a great job at, at all of the client management and all that. So amazing she is able to pull. You know, my, my involvement with the business now is about, I don't know, probably five hours a week, something like that.

Podcast Host / Interviewer (31:48)

Wow. And, and how much is it earning for you?

Joe Solberg (31:52)

Oh, we're at about, that's about, margins are fairly thin on that one. It's about 200, so.

Podcast Host / Interviewer (32:02)

200, say that again. Little under, little under 200 to you for five hours of work a week and still own, still own the business?

Joe Solberg (32:13)

Yes, yes, that one is 100% owned. Right, right.

Podcast Host / Interviewer (32:17)

Okay. So it, it's not, it didn't make you a millionaire. No, but that's a pretty great outcome. I, I would say, you know, I mean, I think most people listening want their ETA path to make them single digit millionaires. Well, preferably double digit millionaires, but I think they're there. There's a reliable path to single digit millionaire dumb. And, and maybe one day if you sell this business, that will be your story. But it's not yet.

Joe Solberg (32:43)

I hope so.

Podcast Host / Interviewer (32:43)

Still though, still though, I think that it is worth celebrating whatever 180 a year for five hours of work a.

Will Smith (32:52)

Week in a business that you still.

Podcast Host / Interviewer (32:53)

Are the full owner of. Do you feel similarly or not?

Joe Solberg (32:59)

Yeah, I absolutely do. And especially because it's allowed. You know, without that I'm, I'm never gonna buy point B for sure. So, so at this point, I mean point B is what's taking up most of my time. It's what I'm most excited about and all of that. But, but without Sunny and Ash, it's, it's never going to happen. And so yeah, I love it. I, I, I think you're absolutely right. I, I of it as a success story for sure. Enjoy the business. Eventually would like to sell it. It's probably, I don't know, 18 to 24 months away. Something like that, if we can get it there.

Podcast Host / Interviewer (33:37)

So, and Joe, how this superstar of a manager that you have so often, you know, finding that person that you can fully trust and that can really run a business for you on your behalf, it's difficult. So any. Anything you learned from finding such a great manager in this woman?

Joe Solberg (33:57)

It was interesting. She is somebody that had consulted with me on, I mentioned she's got a background in design and so she was somebody that had helped out before. A lot of times in the renting business you have somebody that'll. Many times you have people that will come and say, oh, here's, here's the entire design of the project. Here's. They give you everything, which is exactly what you need. But oftentimes, particularly with developers, you get somebody that comes and says, oh, I need a rendering and you know, so go ahead and do it, you know, and you're like, well, you got to give me some stuff, like I need references, you know, and so you have. So, so this was somebody that I said some on, on occasion we would use her with some of the developers and say, hey, if you don't have design in house, this person can design the spaces and is that okay? And usually they'd be like, yeah, please, you know, and so I would, I would use her services as part of my quote. Right. And she was just so good at that to the extent that I felt comfortable having her on client calls and like interacting 100 with the developers. And eventually it just became like, hey, I got an idea, let me float something by you. And she was like, oh my gosh, that sounds amazing. Yeah, let's do it. So, yeah, that's kind of how it developed.

Podcast Host / Interviewer (35:23)

Well, to segue us into point B, which is where we're going to spend the rest of our time together. Let's hear more about what you learned from the experience of Sunny and Ash and what you, I guess, didn't like, really and what you set out to find in the next chapter of your acquisition career.

Joe Solberg (35:50)

Yeah, so the, the stuff that comes into Sunny Nash is really a hundred percent project based. It's. We have one or two clients that are a retainer and we're eternally grateful for those. But, but by and large, it's, it's all project based and I wanted to kind of turn that on its head with my next acquisition of, of something that was, you know, more recurring. Just the tale as old as time. Right. It just is more, you know, for all the reasons that everybody does, it's just stability. But when you're actually running it and sitting in it. It's not theoretical anymore. You know, you, you really feel it like, oh man, I wish I didn't get to chase so much, you know, so, so I was definitely looking for that and I wanted something in the advertising space that, that industry reason for that is just that that was my, I didn't, I don't think I mentioned it, but that was actually my undergrad at, at BYU was, I was, I was an advertising guy and had never touched it since then. But, but really like it like the space and like the space now because digital marketing is a, is an area that continues to be growth. It's, it's, you know, way out of its hockey stick growth time, but still significant growth in the industry as a whole. And so I think you have some strength there. But also it's an area where every single business needs advertising marketing of some kind. And so great place to be from a B2B standpoint. You can approach anybody anywhere and they'll be like, yeah, we need to do marketing, you know, so that's, that's a plus. I feel like what part of that.

Podcast Host / Interviewer (37:53)

Of the marketing puzzle offers recurring revenue opportunities to you? Business buyer?

Joe Solberg (37:59)

Yeah, so the creative services part specifically. So thinking of, you know, you're generating a brand or refurbishing an existing brand, or you are creating collateral for any business, or you are generating the look and feel of a website or anything design related, all of that will oftentimes, not always, but oftentimes slide into a retainer relationship. They'll know, you know, businesses will know, hey, we just need a significant chunk of this done always and forever. And so you'll say, well, you know, here's, here's the, you know, $10,000 a month, $20,000 a month, whatever it is, here's your retainer. And then typically what we'll do then is, hey, sometimes we'll be doing more work than that for you on a monthly, sometimes less. And so we just keep a balance, right? We keep a balance and then quarterly or even on some businesses yearly will true up essentially and, and send them an invoice or if they're like, hopefully this isn't the case, but if they are, you know, very frequently lower than their retainer, their usage of our services, then, you know, we adjust the retainer or in rare cases like send them, send them a chat, you know, like, hey, you, you just didn't use as much this year or whatever. And so that's, that's really kind of what that looks like and so what.

Podcast Host / Interviewer (39:42)

It is is this retainer model. So 10,000, $20,000 a month. I think you said something like that.

Joe Solberg (39:50)

Yeah.

Podcast Host / Interviewer (39:50)

And really what that is is, is just capacity that you'll give to them to in effect do projects. So it's still project based work, if not project based work revenue. So it's a bunch of mini projects. They, you know, they, they send you an email and say hey, we need a, you know, a new piece of collateral for X event we're going to. So little projects that are covered by the retainer. And really the retainer model is probably an invention of service providers to get some sort of recurring revenue relationship with customers instead of constantly doing little, little mini projects, invoices, flying back and forth sort of thing.

Joe Solberg (40:34)

Yeah.

Podcast Host / Interviewer (40:34)

And you see it of course not just it's very common in, in marketing. So I think feel like that's where we hear about it the most. But legal, legal firms, right, will do retainer retainers a bun a bunch of kind of B2B services industries will, will have a retainer based revenue model, right?

Joe Solberg (40:49)

Oh exactly, right. Yeah yeah, yeah. You mentioned law firms. They, they operate much the same way. For sure, for sure, for sure. And you know there are certainly parts and pieces of what we do that are, that are you know, non project based. I'm talking about like SEO and PPC work where there is a payment from us to another vendor on a monthly, you know we're, we're paying Google to, to, to get that right and to make sure they come up in search or we're paying meta to make sure they, they've kind of come up in socials or, or YouTube or whoever. And so there's that and there's kind of like a layer of, of of of of additional for the agency on top of kind of what you send out as well as a management fee for hey, we do your SEO and ppc so that's just a standard per month and we don't, some of these things we don't necessarily measure against the hour, stuff like that. But, but, but those are very, very productized and very specific, you know, specific price levels and all that. Whereas yeah like the majority of the work that we do is this more to your point? Project based work, you know that they just have ongoing projects that they need us working on all the time.

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Podcast Host / Interviewer (43:23)

Jump ahead for us and relieve the suspense. Is the revenue quality what you hoped it would be?

Joe Solberg (43:31)

In point B, it is. And I think the reason for that, as I was doing the due diligence on this deal, there's some things that you look at and you, you like a deal or don't like a deal. But, but weirdly it doesn't necessarily enter into what you pay for the deal. And, and by, I'll kind of tell you what I mean by that. So this, the example that I use is something that I really liked, which is saw lots of potential to get additional share of wallet in this deal. Specifically going to bring up this, this industry again that we talked about in the rendering firm, but the senior living space. So lots of activity in the senior living space right now, including acquisitions and just expansion of existing projects, stuff like that. For obvious reasons just it's demographically driven. Right. So this particular space, there's lots of, well, for each community there's an owner and an operator. Sometimes they're the same, but oftentimes they're different. And some of our clients are, you know, we have some of each, some, some owners, some operators that we, that we work with. But we were doing, we were doing like maybe one or two communities for them. So when I say you can't use. But they have many, many communities. So when I say you can't use this as a basis of what you're going to pay for the business because in the past, you know, you buy business on what, what it's done in the past. This isn't, you know, you don't want to say, oh well, the future is bright. You could, this could be infinity business, you know, whatever you. Yeah, well, I'm not going to pay for that. You know, I mean like I got to go out and get it if that's what's going to Happen.

Podcast Host / Interviewer (45:31)

But that's the value that you're going to bring. Not, not the value that the seller brought.

Joe Solberg (45:36)

Exactly. Yeah, exactly. But looking. But you do want to look at that, right? You do want to say, but is there. What is the value I can bring? So saw a lot of that. Saw where, you know, they were kind of, they were kind of testing the waters and, and having fun and dating a lot of senior living sites, but none of those sites had decided to marry them yet. You know, I mean, like, and, and in the years since acquisition, or 15 months since acquisition, sure enough, that's kind of come to fruition. All these sites are like, yeah, let's, let's go exclusive. You know, you can, you can do all of our communities. You've done a great job. We're, we're all full and, you know, we're really happy with how this has worked out. We're renting it at rents that are higher than we've ever done. So this is great. And that makes a big difference because maybe we used to do two or three of their communities and now, but their full portfolio is like 10 or 12 or more. And so it can make a big difference.

Podcast Host / Interviewer (46:38)

So to be clear with the dating metaphor, they basically had a good pipeline of business already that was already in the works.

Joe Solberg (46:48)

Yes.

Podcast Host / Interviewer (46:48)

And some percentage of that business would close under your ownership. You, you, you forecasted.

Joe Solberg (46:55)

Yes, yes, that was the thinking is that they, they had a decent. So they had a decent known pipeline for sure of, of like, hey, here's the stuff that's already committed. But yeah, they also had, you know, you can extrapolate a little bit and say, you know, yeah, but if, if this goes well, what else, what else will happen? What else could we get? And, and the answer was like, chances are decent that you get quite a bit more, you know, and, and yeah, that's what's come to fruition.

Podcast Host / Interviewer (47:30)

Great. Going back to the question of you wanted to be in marketing, you had actually dialed in specifically where you wanted to play, hadn't you?

Joe Solberg (47:39)

I had.

Podcast Host / Interviewer (47:40)

And what, and what was that? And what was your thesis there?

Joe Solberg (47:43)

Yeah, the thesis was an agency with a specialty in branding. And that was really for kind of two main reasons. One was that everything just comes off of brand. You know, you, once you have a brand, then you need a website and then you need to promote that website, and then you need collateral to support all of the work that you're doing with clients and honest and on and on. But it all starts with brand. And so if you've Got a agency that specializes in brand or is known as being a great branding agency, then, then that's just kind of your flywheel and everything else. You know, you, you can now pitch those same clients on reproduction services. You know, printing will print all your stuff for you, we'll do all your media Planning and placement, etc. Etc. So that was one reason. The other reason was that a branding agency really makes for a good flagship business. So the reason number one was like great for organic growth, increasing share, wallet, etc. The second is it's great for the acquisition based growth. So as a, as a, as a flagship that will lend its brand or easily that others can tuck into and sit within it, it makes a lot of sense.

Podcast Host / Interviewer (49:18)

So if you're, if you're a, if you're a marketing business that does, you know, social meta ad placement in Google Ads, you're not likely to go out and buy a branding agency. Nothing's impossible. But it's, it's much more natural that a branding agency would tuck in the reverse. A branding agency would in fact tuck in a business like, like a, a PPC business 100.

Joe Solberg (49:42)

Yes, exactly.

Podcast Host / Interviewer (49:44)

But Joe, isn't the flaw of this vision that businesses only get branding work done once, maybe twice in their lifetimes, you know, and the, the second time would be a rebranding, but that, you know, most businesses are loath to do that because they have to chuck out so much of the branding brand equity they, they've built up sort of thing.

Joe Solberg (50:07)

Yeah. And what that. No, you're exactly right. And what that ends up looking like. And, and yes, there are rebrands. You know, to your, to your point, they're just so, so few and far between that that you can't build it around that. But what ends up making, making up for that. And I'll, I'll use the, well, kind of two things. One is that I'll use an example of. We have one of our clients is Dickies. The, the workwear.

Podcast Host / Interviewer (50:37)

Sure.

Joe Solberg (50:38)

Yeah. Yeah. So we ended up doing. So they have a lot of different products obviously as, as, as everybody knows. And so there's some branding associated with some new product that we had done for them. You know, they're not messing with the Dickies brand obviously, but they needed some branding for a new product. Right. But what that led. And so that was, that was one and done. To your point. I mean it's, it's like okay, the branding's done, but what that leads to is then, oh, now we want to keep you around for we've got another new product or another. So it's reoccurring revenue kind of because they're, they're digging what you've done and they're going to bring you on for all new project business or all new products that they're launching or they, you know, they need some creative work that's maybe not branding specific, but it's still creative work. Like, like we recently did for them a gigantic photo shoot that created their lookbook for their entire new season. And it's this like thick book that you can leaf through and you know, we arranged models to come to this warehouse and do fake like they work and stuff like that. You know, they actually got dirty beautiful.

Podcast Host / Interviewer (52:03)

People doing blue collar work in Dickie's pants or whatever.

Joe Solberg (52:08)

Yeah, you nailed it. Yeah, exactly, exactly. So, so but it's like gorgeous lookbook and, and, and a whole site that we built for them around that. It's really pretty. And so that's, that's the type of stuff that it leads to eventually is hey, we need, we need this other book that may not be a recreation or rebrand or a brand new brand, but it's not nonetheless work that they need done.

Podcast Host / Interviewer (52:34)

Yeah. Yeah. Okay. And, and what about in like a small business context? So Dickies is a big brand, but what about some new, you know, some small business, traditional small business. Are you, did. Were you also thinking about the, that idea that, you know, do the brand for them and that leads to other work with respect to a small business? Or were were you envisioning, envisioning corporate clients being the target market?

Joe Solberg (53:02)

Really? We are kind of trying to focus in at this point on the, on more on the corporate clients. But this, the way it works with small business is they absolutely may not need branding again for a minute. But where, where we hope they trust us is with that SEO PPC work or with, is sometimes they do want to do media placements, even fairly large media placements. You know, I'll, I'll use one of our clients is the architecture tour that happens in Chicago. If anybody's ever been to Chicago.

Podcast Host / Interviewer (53:42)

I love the architecture tour that happens in Chicago. The boat tour. Yeah, I've taken it multiple times.

Joe Solberg (53:47)

Oh, awesome. Awesome.

Podcast Host / Interviewer (53:48)

Yes. Oh, I love that. When I went to Chicago for the first time, everybody was like, okay, got it. You know, that's the thing at the top of the list. It's like, you know, visiting the Washington Monument or something. Yes. For Chicago now.

Joe Solberg (54:01)

Yeah, yeah, it really is. I mean I still, absolutely. It doesn't hurt that they're a client, but I, I, I will absolutely recommend that to anybody. And before I, you know, I've been in Chicago since 2011, so way before I bought Point B, loved it. And it's just such a fun way to see the city and you learn a lot and on and on, you know, you know, because you've experienced totally. So this like the leading tour is one of our clients. And, and they, they place a lot of media because they want to be seen in, you can probably guess in the airports, right? So, so whenever you come to Chicago in the summer, they're not going to show up in February, you know, but in the summertime you come to Chicago, you're going to see them. It's, it's Chicago's first lady and it's the Chicago Architecture Center. They partner together to create this tour. And, and those, those branded spots show up all over the airports in o' Hare and Midway. And we put them on out of home ads on billboards and stuff like that as well, or bus stops around the city, just anywhere that somebody that's coming to visit the city for the first time or whatever may be likely to see it. And so that type of stuff is the things that, hey, have we rebranded that, that architecture tour in a while? No, it's, it's, it's been a while since they got, since they got branded, but we continue to do the media for them, which is great.

Podcast Host / Interviewer (55:36)

That's great. Joe, tell us about point B now. The, the kind of, the bullet points of the business. We understand what it does, but give us the, the metrics on the business.

Joe Solberg (55:47)

Yeah, absolutely. So the first go round I, I had a specific size that I was looking for. This time I wanted to go a little bigger and so I used, but I was familiar with the SBA model and so wanted to continue to rely on that if I could. And so I used the max SBA loan as basically kind of a limiting factor of sorts. So that happens to be 5 million for anybody that doesn't know that. And so I knew, you know, you're looking probably for something, oh, between like 5 million on the low end to maybe 7 million on the high end in terms of their sale price. And so that's what I had sent and I, and I knew I was looking for an advertising agency that, that led with brand. Again, regionally, it wasn't a factor. I, I didn't feel like I could make that a factor. But, you know, again, got lucky that the perfect target happened to be in Chicago. That's not as random as it may was, for anybody that doesn't know, like, Chicago is a gigantic agency space. There's tons of agencies in Chicago. So Chicago, New York, it was likely that you land in one of those spaces, but there's tons of great agencies everywhere, so it's always a possibility. But. But, yeah, ended up finding point B was right in that range. So it ended up being the, the deal got done. This isn't where the broker listed it, but the deal got done at about five and a half million. And I, like I said, I just, I, I maxed out the leverage. So the structure was incredibly aggressive. Had 5% down, 5% seller. Note that the SBA allows you to use that or count that as a down. And so that meets the 10% down requirement of the SBA. And, and so that's the structure we went with.

Podcast Host / Interviewer (58:12)

So 90% loan.

Joe Solberg (58:15)

It is. It's 90% leveraged. And it's a business that has been around since 1974. Business is older than I am, so not by much, but. But it's just, it's just the Rock of Gibraltar. I mean, I, I felt like it was very, very solid and so felt comfortable kind of doing that. It's a lot, but felt comfortable doing that. And it's, it's been no problem.

Podcast Host / Interviewer (58:41)

And so let's just unpack the math a little bit more. 5.5. The. So you brought 5%, came 5% out of pocket. So that's whatever. Roughly 275.

Joe Solberg (58:56)

Yeah, yeah. It ended up being 350 is what, what I brought to the deal. But, yeah, very, very close. And, and some of that, you know, flows through to a little bit of working capital and stuff like that. So. Yeah, but it was. Yeah, 350. Yep.

Podcast Host / Interviewer (59:16)

And did the bank look at the fact that you had income from Sunny and Ash?

Joe Solberg (59:21)

They sure did. Yeah. They, they wanted all of that detail. So they got historicals for Sonny and Ash, they got tax returns. All of the things that I would turn in, you know, that you would turn in for the, for the acquisition target. They also wanted that for Sonny and Ash.

Podcast Host / Interviewer (59:40)

And when you said the broker listed not five. Five was not what the broker listed it at. Is there something to be said there?

Joe Solberg (59:49)

I. I guess just, I'm, I mean, I'm not, you know, like uncovering, you know, some wild reveal or something. I think people know this, but even, even brokers that are on the up and up, I mean, they're, they're a good broker. They're well known in this space, especially they used to be called something different. I can't even remember the name. But now they're known as Go Merge. Um, and they do a whole bunch of agency. They broker a ton of agencies and so Merge. Yeah, yeah, they. They listed it at 7.1. And so it's. The Delta is pretty, pretty large. But I offered what I felt like was I wasn't lowballing. I just offer what I felt was like a reasonable, truly reasonable offer, good offer, actually. I mean, I wanted to buy a good business at a good price. And. And the owners didn't flinch at all. They. They were like, yep, that works. You know, and we moved forward with that. So, you know, just something to be aware of. People that are working with brokers, even good brokers are gonna. The numbers. I don't know. In this case, it was. It was quite high. And it may. That may be how it always looks, you know.

Podcast Host / Interviewer (61:14)

Well, I'm reminded of Johannes Hawk Guest, who has. This was now a couple of years ago, but he, in his interview unpacks his search process, which was very systematic in one key thing from Johannes's approach is he and his partner didn't even. They didn't even look at what a business was asking. Just didn't care what the asking price was. They would always look at. They would always come up with their own price, their own offer price, and send over an ioi, an indication of interest as a feeler to see if there's. If they're. If there's a deal to be had.

Joe Solberg (61:54)

Smart.

Podcast Host / Interviewer (61:55)

And. And so. And so they didn't. They just. That listing price, they didn't pay attention to it. They didn't let it anchor them, anchor their psychology. They started from their own first principles of what they thought they could value. Justifiable value was for the business, what they could pay for the business. And sent that across. And it wasn't an exercise in lowballing either. It was a recognition that, you know, the list price is just, you know, you know, who knows? I guess it was a recognition of who knows? Maybe, you know, just try it and see what the seller says. Like you did. You were fine. They were fine with your offer.

Joe Solberg (62:36)

Yeah.

Podcast Host / Interviewer (62:36)

So that's pretty interesting.

Joe Solberg (62:38)

Yeah. But that is challenging, though. Yeah. To not allow that to anchor you or not to not think that you're insulting the seller. You know, you don't want to, like, spook them or whatever. I loved the business, you know, but, yeah, ultimately you have to be like, well, realistically, this is kind of where it's going to be, you know, and.

Podcast Host / Interviewer (62:58)

Did you, did you support your offer, Joe, with any sort of rationale? You were like, you know, yeah, you really. This is what I want the, you know, this is what I think the earnings. This is what the earnings are as reported. This is the multiple that I think makes sense. You know, was there anything there or was it just. You gave them, you just gave them a number?

Joe Solberg (63:15)

Oh, no, 100%. We had a, we had a, like a, A white paper. I mean, I could dig it up in all my acquisition docs, but it laid out like, oh, here's a, here's approximately the multiple that a branding agency will sell for. Here's what a digital marketing agency will sell for. Here's what a media agency will sell for. And so this being a combination of the three, actually did a little bit of, you know, I mean, did some, did some work there to say, well, here's how much of your revenues comes from branding, here's how much comes from media, here's how much comes from reproduction work that you guys do, you know, and so really laid it out like, here's what the white paper says that are the going multiples. And they've looked at a number of, you know, quite a few acquisitions. And so obviously the overall size of the agency makes a difference in that as well. And so, yeah, we, for those reasons, here's what I think the multiple should be. Here's what you told me you're, you know, and I, I pushed on some of the, some of the add backs they had added back the entire rent. Maybe that's, that's part of it too, because they were like, you don't have to have an office. And I was like, well, well.

Podcast Host / Interviewer (64:37)

It'S not a good look for an owner to come in day one and be like, sorry, guys, no more office.

Joe Solberg (64:43)

Right, exactly, exactly. So, you know, like, you know what, there's some things that need added, you know, that I'm not going to accept as an ad back. And so, so we, you know, that means that, okay, here's the number you told me, here's the number that I kind of believe. But the multiple is not getting discount. Like the multiple. I'm just taking an industry standard accepted multiple.

Podcast Host / Interviewer (65:06)

Basically, you were looking at comps.

Joe Solberg (65:08)

Yeah, yeah, exactly. Exactly.

Podcast Host / Interviewer (65:10)

Well, that's a great rationale. That's a, that's a very robust argument that you made, which is maybe why they were like, we accept that. That's great. Um, and, and by the way, what was the headcount and what were the Numbers of the business. I don't think you told us revenue top and bottom line.

Joe Solberg (65:27)

Oh, no, I don't think I did. So the, the top line, it was acquired August of 2024 and it was nine. Almost nine. Exactly. Nine million exactly. It was a little higher. It was like 9.1 million as the top line. The, the bottom line was about a million. So not great in terms of margin at that, that particular year, but it was about a, about a million. And then the headcount is or was at the time of acquisition. We had I think 27 at that time. So now 24 to 25 will end 25. There was, there's some, some nice growth even just in the months after acquisition. The remainder of 24 closed in August, early August. And then 24 to 25. Now we'll close 25. We, we think we'll hit 12 million. And then the, the bottom, we have, we have spent a few dollars. So the bottom line is, is not expanding as fast, but it's about 1.25 is where we'll be this year.

Podcast Host / Interviewer (67:06)

Wow.

Joe Solberg (67:08)

Yeah. Yeah, great.

Podcast Host / Interviewer (67:11)

And that. Wait, so that's 1.25. So EBITDA has not grown along with revenue because you're reinvent, you're making investments, correct?

Joe Solberg (67:23)

Yeah, we've hired a lot of people. So our head count is, is now we, we've, now we're up to 33. So we've, we've made some significant hires, including, you know, a real media director that we desperately needed, somebody in client services that we needed. So some, some fairly major. We think we're done with the top. We, we may be just a titch top heavy at this, at this point, but we think we're done with the, those top hires and are ready to, for the additional growth, go and get kind of more entry level folks, artists, folks that can kind of help us do the work that we need to do. But we think we're in a good spot now from a leadership perspective, which is great.

Podcast Host / Interviewer (68:15)

Well, that's great, Joe. And so the business is, is what, 50 years old? Over 50 years old, yeah. And those, that, that revenue number that you bought it at, so about 9 million bucks, was it doing that pretty reliably or was that the result of recent growth?

Joe Solberg (68:32)

There was some recent growth. So that is another thing that is interesting is could the business have sold for much more than it did? I don't think so because the, the lender will take the last three years into account and use that as a proxy for like, hey, this is what's likely going forward. And there had been some significant growth, not as much as 24 to 25. You know, we're looking at like about 25% growth but, but like double digit growth for sure. They were selling it at a great time. I mean they had made the decision to sell. The, the primary owner had essentially made the decision to sell. And it was a fantastic decision. You know, they were, they were doing really well and, and had their, you know, 2, 20, 20, 23 was the highest revenue year that they had had. But like I say, it was like double digit growth, like kind of low double digit growth, you know, 10 to 12% growth the last few years. But it makes a, makes a difference, you know. Sure, sure. So, so that's kind of where they, they were at and why they sold one. They did.

Will Smith (69:50)

Well, that actually probably is the sweet.

Podcast Host / Interviewer (69:52)

Spot that we as buyers want a business that you don't want to buy. Generally, if you're going a kind of, with a kind of LBO model, leverage buyout, heavily leveraged model, you don't want to buy a growthy business, one that's growing like crazy. You probably won't be able to get it financed with an SBA loan anyway. But you want, you don't want to do that. And then you don't want a business, but you'd like to see some growth. You like, maybe you don't want a completely flat business. And of course a declining business comes with, you know, glaring risks. So you want a business that looks like it's growing healthily but not crazily. And that sounds like it's like what you got.

Joe Solberg (70:32)

Absolutely. I mean I, I could not have lined out a better target if I tried. I mean, when we, when we found, you know, it was like, holy cow, I can't believe it. I used some, some help trying to find some proprietary deals. This one ended up having been a brokered deal and, and I almost just ignored everything. You know, it was like, I, I want this one, I want to get this done. Because yeah, from so many, so many perspectives that really lined up, I thought I could get the deal done from the debt perspective. You know, I mean I had a story to tell to the bank of, of like, hey, I've run this other thing that was creative services ultimately sold to a client, B2B. This is very similar in terms of that. You know, the other thing was not an ad agency. But then I could tell that story and yeah, size wise it was just right. Tucked into that kind of max amount. I could get out of the sba. Yeah, the growth was like you said, the growth story was good. So it really was amazing. The fact that it was located in Chicago is kind of a cherry on top, you know. Yeah. As well.

Podcast Host / Interviewer (71:52)

But.

Joe Solberg (71:53)

Yeah, Good, good, good for you, Joe.

Podcast Host / Interviewer (71:55)

Well, telling the story to the lender was. Was something that you wanted to make sure that we talked about and kind of selling the story or telling the story of a transferable skills. And I think that yours is obvious. I think certainly the Sunny and Ash experience has a lot of transferability over to this. I assume the lender was like, check that box pretty, pretty readily, or was there more to say there? I. Because, you know, so often the person in your seat when talking to me has gone from white collar to buying a tow truck business, and that's a.

Joe Solberg (72:35)

Way.

Podcast Host / Interviewer (72:38)

Broader chasm to leap. So in your case, it feels like a very natural acquisition. But was there more to say there?

Joe Solberg (72:48)

You know, I mean, I think in general, they. Yeah, they just want us. They just want to see a story, you know, they just want to understand, like, this isn't completely crazy. Right. And so, yeah, that. That one that you mentioned, it becomes a lot harder to be like, no, no, this is going to be okay. You know, I'm gonna be fine. I'm gonna be okay running this. This one also had an. An aspect of it that was there were three owners of point B. The majority owner was retiring, and then there were two others. And I. The timing of this was just perfect because we kind of snuck this in before. They've changed some of the rules and stuff, but actually, no, no rule change was. Was forthcoming. I mean, we didn't know that it was like, close. But back in August 2024, you were allowed to keep an owner on as long as they retained a percentage of ownership, didn't matter how much. They didn't have to give a personal guarantee or anything like that. And so each of the other two owners retained 2% each of the company. So they got a nice little payout for themselves, but they retained a little in order that, you know, a year on, they're still a part of the business. And so that was a part of the story as well, is, hey, look, I'm not buying this to jump in and just run it 100 myself. I have some capabilities and some, you know, some things that I think I can add to the business, which we can chat about if you want. But. But the. The. The person that I'm going to install in the. As the president is actually one of the previous owners, you know, that's stuck around in the business and I think that's helpful. I mean that was, that was huge and it's been huge that he has stuck around. He's made a gigantic difference in the year since of helping the business grow like it has.

Podcast Host / Interviewer (74:58)

Well, let, let's do turn our attention to that, Joe, because that is a really interesting feature of your story. We'll probably close it out on this segment. Although I have a follow up point and question I want to make sure. But just to be clear. So there was three sellers you said, and all three of them retained a couple points of equity.

Joe Solberg (75:17)

The role that completely, completely cashed out was the majority owner. So the, the guy that the reason why the business had come up for sale was the majority owner who then was acting as the president and the creative director and all. He had wore all sorts of hats at the agency but, but he, he wanted to retire and so he, he got bought out completely. So we bought out him 100%. But the other two who were staying working in the agency retained 2% each. So you know, bought 96% of the agency rather than a hundred percent.

Podcast Host / Interviewer (75:56)

Yep, yep. And by the way, the rule change that you're talking about means that, which happened this summer of 25 means that today the owners to roll equity like that or what, what an SBA jargon is a, I think it's just called a, or was called a partial buyout, if that's what they called it.

Joe Solberg (76:20)

Right.

Podcast Host / Interviewer (76:21)

They would have to personally guarantee the loan for I think maybe the first two years, maybe so not forever. I think I have that right. Yeah, but you know, owners just aren't going to tolerate for a couple points of equity or even for 10 or 20% equity personally guaranteeing the loan that you are the ones, you know, with you running the ship. So it's, it's become kind of a non starter for rolled equity in SBA acquisitions which in businesses that are tradesy blue collary, where there's licensing involved and oftentimes a way of dealing with that would be that the seller has the license and stays on, rolls equity and stays on for a little bit to be the main license holder of the business has really hurt the ability for, for deals with those kinds of businesses to transact. I digress. But just for the audience's edification.

Joe Solberg (77:15)

Yeah, that's helpful.

Podcast Host / Interviewer (77:17)

So Joe, so, so.

Will Smith (77:20)

You'Re not running the business.

Podcast Host / Interviewer (77:22)

One of these previous two sellers is the president and. Yeah, and, and what is your role and kind of say More about that whole dynamic.

Joe Solberg (77:32)

Yeah, yeah, yeah, you bet. He the, the two that stayed on been both, by the way, fantastic to work with and the owner that completely cashed out. Awesome. Same deal as with Sonny. Still talk to him all the time and just, just can't say enough about what a great guy he is. But the two that I've stayed on. The vision is that I anticipated two reasons, both related to growth that I could add to the business. And I do spend most of my time in point B. So one was kind of some business development skills to the team. They had never really done direct outreach. All organic growth had been referrals, increasing share of wallet, all that kind of stuff, rather than brand new customers with no connection to point B. And that had been my past life. And so I felt like I could add some stuff there and also am I think just well positioned for obvious reasons to kind of chase strategic acquisitions. And, and I think there are opportunities there. So, so that was, that was the thesis, you know, how well of a job, you know, I just have to be critical of myself on the, on the first point of that, going out and finding new business. I would say that was, would be my biggest, I mean, I don't want to jump ahead here or anything, but that would be my biggest risk or, or kind of like, I don't, I don't know, frustration, I guess with the business so far has been. And they warned me like, hey, this is, this is going to be a challenge. You know, we've tried this before, but in this business, both a strength and a weakness is that it's so relationship driven. You know, you're, you're buying, especially at the, at the enterprise level or whatever, you're buying advertising for your brand. And so you're not going to answer an email or you're not going to be like, oh, this dude sent me an email. Super interesting. You know, I mean, it just is like, no, that's not how you're going to find somebody. You're going to, it's going to be relationship driven. You're going to use somebody that you trust or that somebody that you know trusts. And so do I think that there is the ability to go out and find brand, brand new business that has never heard of Point B before for sure. But where am I going to find that? It's probably not going to be like direct outreach type stuff. It's more going to be like conferences, podcasts. Thank you very much, Will, for having me.

Podcast Host / Interviewer (80:22)

That's why you reached out?

Joe Solberg (80:25)

No, because I, I Love it. And I've been a fan of the podcast forever, but, but, but it doesn't hurt. Um, so, so, yeah, I mean, I, I think that's something that I've learned. I don't know, hubris, pride, whatever. I had implemented these kind of direct outreach tactics in industries past, including the 3D rentery firm. Right. And it's been like, oh, shut up, guy. You know, like, I, I'm going to be fine. It's going to work just fine. And then it's like, not so much, you know, so. But we're starting to get traction, a little bit of traction on, on like these other ways of going and finding that stuff. I think it's, I still think it's essential. You know, we've, we've done really well growing with kind of senior living and some of that that has carried us along in 2025. But will that continue to be 25% growth? I don't think so. I think we need some. Just go out and find some brand new and, and so that's the idea that, that I've spent some time in this private capital markets space and so maybe I can go out and talk to, you know, search fund investors, anybody that has kind of portfolio of those companies or private equity, of course, or family offices or whatever is, hey, you've got this portfolio. There's certain times when you want to enter and exit. Are there ways that somebody that understands that process might think about your marketing spend a little bit differently than somebody that doesn't? You know, I'm probably trying to provide some value there. So that's kind of the thinking going forward.

Podcast Host / Interviewer (82:09)

Great, Joe.

Will Smith (82:09)

And, and are you reporting to the president?

Joe Solberg (82:13)

Yeah, you know, in a lot of ways. In that capacity, for sure. Yes. Right. Is that I want to be accountable and I want somebody to hold me accountable. And he's, he's done an okay job at that. I mean, he's, he's hesitant to, to like, lay it on really thick, like, what have you brought for me lately? You know, or something like that, you know, because I'm the owner, I guess. But we do, we work together really well. And he's, he's, he's, he's done a good job. I mean, he's tried to, tried to be like, okay, well, tell me how things are going, you know, that type of stuff. And it's, it's fun to work with him in that way. In other ways. A lot of the, like hiring decisions and stuff like that, we just collaborate as partners and say, what do you think about this, but I'm at the same time too, I try to not, I don't want to step on his toes because he's good at what he does. And so the last thing I want to do is try to try to muck that up. So.

Podcast Host / Interviewer (83:15)

And do you have direct reports? Do you have.

Joe Solberg (83:20)

Yeah, I do.

Podcast Host / Interviewer (83:21)

Do you have a chain of command?

Joe Solberg (83:22)

Okay, no, no, I, I do not. You know, once, once we get, once I feel like I can establish a sales process where it's like, okay, now there's consistently brand new leads coming in, then what I'll do is hire a sales team and, and go from there and, and I will likely manage that sales team. But, but yeah, I haven't, haven't done that yet. We've focused our hiring in different areas and so right now I don't, don't have any direct reports.

Podcast Host / Interviewer (84:00)

And so your, your role is to work with the president, one of the three sellers.

Joe Solberg (84:05)

Right.

Podcast Host / Interviewer (84:05)

To basically, you know, crack sales, repeatable sales, build a sales engine for this business.

Joe Solberg (84:15)

Exactly.

Podcast Host / Interviewer (84:16)

And other strategic items including hiring and so so on. You got, you guys work together on that stuff.

Joe Solberg (84:25)

Yeah, absolutely. And to be, to be clear, he's left that, that you know, build the sales engine really in my camp he likes to hear about it and wants to know updates and stuff. Stuff, but left that in my camp. And he's more than occupied with. He's probably the best client facing guy that I've ever known. He's just very, very good at that. And so he's occupied with that. Working a lot with clients. We did, I mentioned we did hire a client facing individual in the, in the business as well. She's also amazing and, and so oversees her work as well as like going on, still going on himself a pretty good chunk of client visits and, and certainly launches and things like that. And then, and then just handling, you know, management of his direct reports are like the creative director and the developer and yeah, this client team head and the strategic head. And so you know, working with all those to make sure that they're doing what they need to in their spaces.

Podcast Host / Interviewer (85:42)

And so Joe, if you weren't working on building a sales engine and some of these strategic decisions with him, with him as president, could the business be running without you? I mean, if you wanted to, could you completely kind of step to the side and only talk to him a couple hours a week sort of thing?

Joe Solberg (86:03)

Oh yeah, yeah, yeah, A hundred percent. You know, I'd love to say, you know, point B is depending on me. It's not. No, I. Absolutely.

Podcast Host / Interviewer (86:13)

I think that that's actually, no. I. But I think that's the sign of a great acquisition. Joe. It's not. I think you should be proud of the fact that it's running without you, not you. W. You wish that it were on your shoulders. We. We don't like it being on our shoulders.

Will Smith (86:28)

Right.

Joe Solberg (86:29)

It's kind of great. Yeah. Yeah. The. The fact that I don't have to think to your point like there are, there are no direct reports. I don't have to think about, hey, is the, Is the business running okay? All of that. Don't have to worry about it. I have complete faith in, In Hamish is his name. That's. That's the. The president carries my other business partner that runs the production side of things. And they, they're phenomenal. And so it is incredible that. That, that's how it worked out, that this one. I guess I'll say that that was the other thing that was different about the two acquisitions. The first acquisition, I absolutely 100% bought myself a job. The second acquisition, I can insert myself where I'm wanted or where I feel like I can add value, but if I didn't, it's okay.

Podcast Host / Interviewer (87:27)

And that is the difference between buying small or buying larger. The difference between a 200,000sde business and a million dollar sde business. Right?

Joe Solberg (87:36)

For sure. For sure. Yeah. Yeah.

Podcast Host / Interviewer (87:41)

We have talked it. We're going to start closing up here, but I do have some. Some couple more questions I want to get to you, please. The. We had talked about your. Or you had feel very positively about your experience with Sunny and Ash. And, and you know, it was a, it was a first acquisition and a step to what you have now done. You learned a lot along the way, etc. Do you feel like, or would you recommend for the listener that they jump ahead of their Sunny and Ash experience and jump right into point B if they can get it?

Joe Solberg (88:20)

What an interesting question. I.

Podcast Host / Interviewer (88:25)

Because the conventional wisdom is buy as large as you can, right?

Joe Solberg (88:28)

Yeah. Right. Right. I would say if. If you have those kind of resources, then then yeah, why not? And if you have the story, then yeah, why not? Yeah, you should. You absolutely should. What I was lacking was the resources in the story. You know, if I had tried for the point B, number one, couldn't afford it. Number two, I don't know, maybe you can afford it. If I go. If, let's say I went and raised the money, let's say the financials, you take that off the Table. And I'm like, okay, I'm gonna raise the money. But I do have serious doubts that the bank, that the lender could have gotten comfortable with that. Even with the other owners staying on all that kind of stuff, they still, they still pressed me on that. I mean, they still wanted that story. They were like, hey, I had to write an entire business plan of, hey, why does this make sense? Why does this acquisition make sense? Why are you okay to be the person that, that owns, even if you're not deeply, deeply running it? Why are you the right person to own this business? And I just didn't have the story before Sunny and Ash or if I had tried to concoct a story, I don't know if they would have bought it. So, but, but wait, Joe, I have.

Podcast Host / Interviewer (89:50)

To press on this because again, so many of my guests are making, you know, the transferring into businesses that are so, so distant from where they're coming.

Joe Solberg (90:02)

You.

Podcast Host / Interviewer (90:02)

Let's take out Sunny and Ash.

Will Smith (90:04)

You were coming from corporate. You're a corporate guy.

Podcast Host / Interviewer (90:06)

You've, you've, you know, and I don't think it's that crazy to connect. I think there's a lot of transferability from corporate to running a branding agency. And so I'm surprised that, that you feel like you had to make such a compelling argument to your lender. Do you think it was just your.

Will Smith (90:26)

Lender who was particularly demanding?

Podcast Host / Interviewer (90:29)

Or did you experience multiple lenders who kind of gave you the same thing? Or what? You see where I'm, I'm, I'm, I'm, I'm slipping here.

Joe Solberg (90:37)

Yeah, yeah, absolutely. And that is possible, you know, that it was, that it was kind of a lender specific thing, that this was something that you're really digging into. It's. With them kind of maxing out the, you know, it's the highest loan that they do because it's the highest loan they can do. Yeah, it might have had something to do with it as well, but that's big, big purchase. Yeah, but they also want to get it done, you know, I mean, they, they want to do those deals, you.

Podcast Host / Interviewer (91:10)

Know, and it's a sturdier business. It's a bigger loan, but it's a safer, it's probably a safer business.

Joe Solberg (91:14)

And there may be some, honestly, there may be some, some just bias that I'm bringing to it because that is this, that is the story that I told, and that's the story that they accepted. You know, how there's, there's just certain things in life that you're like, boy, I'm glad I did it that way because it worked. You know, you're like, oh, I'd hate to, I'd hate to go back in time and I have to do it all over again because what if I didn't do it exactly right and it didn't work, you know, or whatever. And, and this is, maybe I'm, maybe I'm bringing some of that bias to this is like, this is the way that it works. So that's the only way it could have been done, you know, and that may or may, that may not be true. I mean it's a good point that like, hey look, I did have the corporate experience, I still had all the sales experience that I had, you know, did not necessarily have the management experience of having run that managed an agency, you know, type of a deal, but had plenty of management experience on the sales side. So it's an, it's a really interesting question. I mean I, I think for sure people, if, if you can go like, if you have those elements, a story of some kind and the financial wherewithal. Yeah, like go for it, go for something bigger, you know, why, why not?

Podcast Host / Interviewer (92:36)

Thank you for that, Joe. And so another question related to ETA broadly.

Joe Solberg (92:40)

Yeah.

Podcast Host / Interviewer (92:41)

One thing that you'll hear people say who are interested in buying accounting practices or tax businesses, mostly like accounting or you know, financial outsourcing is that they see it as a potential source of deal flow in the future. So these are usually people who are acquisition minded. They want to buy, they want to buy a number of businesses over this, over the course of their careers. Do you think that your own client base could be a source of acquisitions for you if you wanted to buy another business some point in the next five years?

Joe Solberg (93:17)

I'll tell you the area that I do think it could is that sometimes we'll use freelance and that, but that absolutely could be an acquisition pool because you know, sometimes we'll use freelance, just individuals, but sometimes we use freelance agencies and so particularly where there's some white space, you know, like hey, we don't do like this, this, this photo shoot that we just did. We've got a videographer in house and he's very good. But the photo shoot, I mean we hired, we hired all of that. We hired, you know, the, the models obviously, but the, the photographer we hired, we had, he had specific expertise in that type of photography, et cetera. And so one example, you know, are we going to go out and buy a photography studio? Not sure, but there's plenty of examples like that, that are, hey, we need some extra help on seopc or we need a little bit of extra help on some of the digital marketing stuff we're doing. Maybe there's a white space. We don't really do a whole lot of like user generated content type social stuff at all. We'll play social ads and we create social ad content but we don't really do the ugc. And so would we go out and buy a UGC company or, or, and particularly if it was one that we had had experience working with, you know. Yeah, maybe. Or buying one of these companies for their, almost just for their book of business type of, type of a deal, you know, that we've, that we've worked with. So I think in that way, yes, definitely. Because we're looking for strategics. I'm not really looking for outside the industry necessarily.

Podcast Host / Interviewer (95:19)

Okay, okay. So, so marketing agencies are great for the acquisition minded entrepreneur because you can kind of vertically integrate. There's a lot of opportunities to, to, to vertically integrate. And, and there's so many different types of vendors that are involved in maybe a single marketing project that you could imagine tucking a lot of those in. But the so, so noted. But the idea that your client base is going to be the source of you buying businesses and I, you know, I'm just floating it, I'm not, I'm definitely, it feels like the answer is a pretty easy no.

Joe Solberg (95:56)

Well, but, but it just, but other people may have a completely different thesis than me too. You know, if like, if you're, if you're saying hey, I want my purpose in looking at acquisitions now is different than when I acquired point B, like now it's really looking for tuck ins. Whereas so if you were somebody that was like no, I'm not, I'm not looking for, I mean if it, if it happens to be in this space, fine. But if not, I'm totally okay with that. So if they're kind of industry agnostic or just have some other criteria that they're looking for, then that, then my answer completely changes then I think yes, absolutely. Because I do think we know or can get a sense and we do have those close relationships with each client.

Podcast Host / Interviewer (96:43)

Right.

Joe Solberg (96:44)

And can absolutely get a sense of like hey, I see the writing on the wall, I see what you're trying to do here. You know, even if they don't tell us explicitly, it becomes pretty obvious when they're making certain changes like you're trying to get ready for something, you know, or whatever. So yeah. Yeah.

Podcast Host / Interviewer (97:00)

Okay. Last thing I Is, is more of an observation than a question.

Will Smith (97:06)

So one of the things that I.

Podcast Host / Interviewer (97:07)

So like about ETA is that I feel like in, even in entrepreneurship broadly you can start a business and reach the ceiling of that business and then feel stuck. And I think a lot of small business owners and entrepreneurs experience that and so they're stuck in a, in a business that's maybe just not, it's pretty small. They just don't see ways to grow it. And unless they can find somebody to buy that business from them, that's kind of it. So they either just carry on doing that or they fold it.

Will Smith (97:44)

But if you're acquisition minded and so.

Podcast Host / Interviewer (97:46)

So of course I'm talking about Sunny and Ash now you're somebody who went, entered that business as an acquirer. So you're acquire acquisition minded. You have the skill set and you know the track record of doing it. If you hit a ceiling in a business that you own, you say to.

Will Smith (98:05)

Yourself, well let me figure out a.

Podcast Host / Interviewer (98:07)

Way to put in a manager and have this business continue to run. I don't have to sell it or shut it down or continue to run it.

Will Smith (98:15)

There's a fourth option.

Podcast Host / Interviewer (98:17)

Continue to run it myself as owner operator. There's a fourth option which is put, you know, put it, put it, find somebody who can run this business for me and then go look for another business to acquire.

Will Smith (98:29)

And I, I just think, and, and.

Podcast Host / Interviewer (98:30)

For, for everybody listening that's pro or at least regular listeners, that's probably now.

Will Smith (98:36)

Obvious, but it is, I don't think.

Podcast Host / Interviewer (98:38)

It'S obvious at all to the average small business owner, the average entrepreneur. I think they, they often feel that they're stuck in their businesses, nobody's going to buy it, they can't shut it down and they don't have the idea that they would just go buy a business is not on their radar because they're zero to one types. They're not ETA types.

Joe Solberg (99:00)

Right.

Will Smith (99:00)

And so you're just a perfect example of this.

Podcast Host / Interviewer (99:02)

You, you, Sunny and Ash kind of, you know, it's kind of maxed out what you thought you could do with it.

Joe Solberg (99:10)

Right.

Podcast Host / Interviewer (99:10)

And you parlayed that into your next bigger acquisition. I, I think it's, it's something I love about ETA that I, I think zero to one entrepreneurs, it's, for many of them it's not even on their radar. So yeah, react to that.

Joe Solberg (99:24)

I love that because I, I will say that, I mean that's kind of an insight that I, I don't, I don't know that I had even realized about myself, but, but, but kind of expanding that to the greater small business owner community. I just love that because, yeah, we, you know, you, you think, oh, this, this is, this world is experiencing so much growth. You know, this ETA world is, is from where it's been when I did the first acquisition back in 2019 to what it is now. You know, you go to the conferences and everything much bigger and more. So many more people in. Interested in that. But that is a key demographic that is, does not either doesn't know about it or is not like dialed into it is current business owners and why not? Why not?

Podcast Host / Interviewer (100:16)

Exactly. Absolutely.

Joe Solberg (100:17)

They could go out and just buy another business. You know, there's so many factors that, that, yeah, it's kind of stuck. You know, you're sort of bored. You don't have the energy for it anymore. You know, why not put somebody in there that has like new higher energy that can go after it and then also like you can go get something else that's, that's maybe gonna be something that you can lend your expertise to. So I mean, I love that. I had never thought about that before. It's amazing. That's cool.

Podcast Host / Interviewer (100:48)

Yeah, good. Well, you're, you're exhibit A here, Joe.

Joe Solberg (100:51)

So sweet.

Podcast Host / Interviewer (100:53)

Yeah, well, good stuff, sir. Anything we didn't hit that you wanted.

Joe Solberg (100:57)

To, you know, I mean, just the, we dug into it a little bit, but just that idea of, of really trying to reach out to where I'm headed or where I, where I think the opportunity lies for me to make a difference in this business is to reach out to the kind of those with a portfolio of companies like I mentioned and see if there's, you know, they want one. Or we could, we could use our senior living model, jump in on one or two of their businesses and do a good job and then, hey, you're doing a great job. Why don't you handle all of our portfolio companies or whatever? So, you know, so should people reach.

Podcast Host / Interviewer (101:40)

Out to you on LinkedIn if they're.

Joe Solberg (101:42)

Interested in conversation, email, LinkedIn, whatever.

Podcast Host / Interviewer (101:46)

And what's the URL of Point b?

Joe Solberg (101:48)

Point B communications.com great.

Podcast Host / Interviewer (101:53)

Point B of Chicago, Joe Solberg will have your. We'll have both your LinkedIn and point B's URL in the show notes for anybody who wants to reach out, learn more.

Joe Solberg (102:04)

Yeah, perfect. Thanks so much, Will. This has been an incredible opportunity, you know, longtime fan, so thanks a lot. It's kind of surreal in a way to do this. So thank you.

Podcast Host / Interviewer (102:16)

Well, you earned it with two, not one, two acquisitions. So well earned. Thank you sir. Hope you enjoyed that interview.

Will Smith (102:24)

Don't forget to subscribe to the official Acquiring Minds newsletter. We send an email for every episode with an introduction to the interview, a link to the video version on YouTube, and soon key takeaways, numbers and more essentials from the interview. For those of you who don't have time to listen or watch it, subscribe at Acquiringminds Co. You'll also find all.

Podcast Host / Interviewer (102:49)

Our webinars there on the website, but both those we have coming up and recordings of past webinars.

Will Smith (102:55)

At this point There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business.

Podcast Host / Interviewer (103:04)

Acquiringminds Co.