Will Smith (4:12)

Odell, welcome to Acquiring Minds.

Joe Odell (4:15)

Why thank you Will Joe, we're going.

Will Smith (4:17)

To hear the painful story of your acquisition today and how you are recovering now landing on your feet. You and I have been in touch for some time and I cornered you at McGuire woods in Dallas and asked you in person and you finally relented. We thank you for doing that. These hard stories are among the most valuable. So thank you very much for saying yes. Joe, where does your story with search begin?

Joe Odell (4:45)

I grew up in a small town with a super blue collar background. I think that's kind of key here because there's the sense of me trying to just make something of myself as best I can over the years. Worked in a lot of blue collar. Grew up with my my family doing tractor services. I have memories of you know, with a shovel digging out septic tanks and stuff like that. Anyways, ended up in the military eventually and got married. When I got married I had this moment where I realized man, I want to make more money and try to be home somewhat. That would be great, having kids and everything. So my, my oldest son who's 13 now, he was just born and I told my dad, dad I want to move home and, and figure out how to make a hundred thousand dollars someday. That was my big dream back in 2012 and my dad said Joe if you do that you'll be on a whole nother tax bracket. And that's when I realized I need to stop taking financial advice from my dad. Great man, bad financial advisor. But yeah, I end up moving home. My parents double wide trailer, started going to school with my GI bill. I was enlisted in the military so didn't have my undergrad yet. Had two years already done but started night school to finish my degree working for free at a consulting company. I heard they could make good money so I did that for a few months and they felt bad, started paying me 10 bucks an hour. But by the end of that first quarter I was their top sales rep doing consulting for Bay Area tech companies. I was really an SDR at that point doing cold calling and doing a lot of cold calling over the years and worked my way up through that company. Small Boutique Group, 60 employees. Head of business development consulting. After about four years and was signing contracts with Google and Red Hat. I was so redneck at that point. I drove an F350 diesel and parked it on the Google and Google campus between a Prius and a Tesla. That was like 2015, 2016. So it was a very interesting time and period merging in traffic in the bay area and F350 is very easy. Just let me tell you. People move out of your way. Anyways.

Will Smith (7:07)

Joe, you're the, you're the.

Joe Odell (7:09)

Yeah.

Will Smith (7:09)

You're the truck in that parking lot that everyone's like, who. Whose car is this?

Joe Odell (7:14)

What is this? Yeah. Anyways, eventually sold that. Well, Joe.

Will Smith (7:19)

And so are you from California?

Joe Odell (7:21)

I am. I'm from about three hours north of the Bay Area, so it's called Reading, California. It's near the Oregon border. Very well, Beautiful area, but it's kind of the.

Will Smith (7:31)

The biggest town along the border there it is. Eureka. Reading in Eureka.

Joe Odell (7:35)

Yeah. Eureka is right on the coast and Reading is about two hours inland of there. It's kind of river valley. So it's really where the Sacramento river begins, is up there in the mountains in town called Mount Shasta. But beautiful area. And so that, that's actually, you know, I got a degree for teaching up there at Simpson University. And by the time I got my undergrad, I was already making double starting teachers pay. My wife quit working. It was like 2016, I think, and we'd had a third kid and I bought a house. I'm like, I'm not going to be a teacher. I don't think. I think, I think I'm in business. And.

Will Smith (8:12)

And how much were you making?

Joe Odell (8:13)

I was making just either right out or just under 100k. I'd hit my target of making about 100k or so. So.

Will Smith (8:19)

And you had a bought property in the Bay Area?

Joe Odell (8:22)

No, no, in Reading. So I was up in Reading. I was living in Reading and consulting down in the Bay Area.

Will Smith (8:30)

Ah, okay. Because you were living at your parents.

Joe Odell (8:33)

Yeah, as you said. And I bought a house nearby. Yep.

Will Smith (8:36)

I see. But when you showed up to the Google parking lot, that was on the occasions when you'd be.

Joe Odell (8:40)

You drive down to the bar once every other week. Yeah.

Will Smith (8:43)

Gotcha, Gotcha.

Joe Odell (8:44)

Okay. Okay, great.

Will Smith (8:45)

And did you tell your dad you made 100 grand?

Joe Odell (8:47)

I did eventually. He's very proud of me, by the way. I made it.

Will Smith (8:51)

Even though you're in a new tax bracket.

Joe Odell (8:53)

We figured it out. I walked through how tax brackets work with them. I'm not a tax guy, but I knew enough at the time. To know was bad advice. Yeah. Okay. Okay, great.

Will Smith (9:02)

All right, pick us up. 2016, 17.

Joe Odell (9:04)

Yeah. So around that time I said to my wife, I still have tears left. My GI Bill. I should get an undergrad or, sorry, a master's in business. And I had had several friends go through different programs and somebody I knew actually done the, the Berkeley program. And I mentioned my wife and she laughed because she's like, you're not getting in there. So long story short, I applied on a whim in a very short time frame, last minute, took the GMAT and passed all of it somehow with great scores. I've always been a good test taker, but great Joe. Yeah. Anyways, got in and just kind of just blown away, right away from, from the systems process. Things that I was learning. You know, I knew the go to market side of things. I learned that on the fly with a consulting group. But everything else, business finance, you, large parts of operations, hr, all of that was brand new to me. And so business school was my opportunity to really get exposed to the other parts of the business. You know, I could manage a very muted P and L at the time because it was, you know, really just consulting fees and labor that I was, I was handling at the time. So fast forward a few months into school and taking a class called New Venture Finance, had a guest speaker come in and they were a traditional searcher from about seven years prior and had bought out their investors and were owning and operating the company on its own. It was very, very successful. And I can't remember his name right now, but I can look it up and get it to you, Will, because.

Will Smith (10:32)

I knew, I'm so curious. I was going to ask, I knew it. What was the business? Do you remember that?

Joe Odell (10:38)

It was a manufact company. I remember that in Washington State. I think Trilogy was, was very connected with them, if I'm remembering right. So in the middle of that class. So I'm on Slack, this is now 2019. And I said to the group while he's talking in the middle of the, the speaker, don't, don't look bad at me for, for our field. You know, I'm sorry, but I was in middle class typing this.

Will Smith (11:01)

Yes, you weren't the only one, Joe. It's okay to multitask in a lecture.

Joe Odell (11:05)

Most people do. It was, did anyone else just find out what they want to do with the rest of their life? Like, that was literally my first take. When I heard what search, traditional search was specifically, I'm like, you've got to be Kidding me. This doesn't seem real. Growing up, blue collar growing up and just working for free to get my foot in the door in a white collar job for once to the point where I'd work so hard. And you're like, someone just write a check to have you search and look for the company to buy. This sounds crazy. How hard is this to get into? And so I started just kind of spending all of my time and energy. You know. Eventually 2020 hit. We're still in school. We're finishing school at the end of 2020 due to some delays and everything going on with COVID And by the end of that last semester of 2020, I was in a class called Opportunity Recognition. And I recognized the opportunity and I skipped that class and went and met with search fund partners in the middle of class with my partner Jess. So I ended up taking a part class which was Jess Patterson. Her and I had connected well over the the time of of school and she's a CFO by trade. So really marrying my background with, you know, sales, marketing, go to market strategy and hers with operation sales and hr, sorry, operating sales, operation finance and hr. And so really marrying those two together felt like a great fit. Had really good culture alignment and vision alignment. What we're, what we're looking for and trying to achieve. But we were very agnostic as we started going through the process of identifying an industry to search and buy from. Part of that actually made it difficult to raise capital because you'll have the different investors out there that really are looking for, hey, where are you from? I want that to be where you're going. And some that are more traditional in the sense of, hey, tell me a good story about why you can operate in this industry. And we're open to it. And so that's really the two things that you see in tandem. My background for the last several years had been in tech and everyone wanted me to stay in tech. I was trying to get out of tech though. And now that we're seeing, well, I would love to say, well, I saw AI coming, but that's not true at all. Not that that's 100% a problem at the moment, but it's becoming something you definitely have to contend with. But at the time, as a sales guy, product market fit was. Is the most irritating thing in the world because you spin up a sales team, you go to market and do strategy and then you're like, well, actually our software doesn't actually fit what the market needs. And so you have to reset and the sales team gets wiped out, marketing gets wiped out and you go back to an engineering base and slowly just try and bring revenue again. And as being consultant for that period of time, that means, you know, they maybe keep one sales guy and everyone else is gone. So the consultant consulting team is gone at that point. So I just hated, I wanted to get into a business that I could just, just help grow because that was really my, my focus and background was helping companies grow. And so I wanted to get in an industry that had that figured out already.

Will Smith (14:10)

And so you saw tech, I mean, because the idea would be that you would have bought a business even if it were a tech business that had some product market fit already and was going to have durability of revenue. But your, your, your notion was that tech in general just has this kind of inherent feature where it's, it's more off, it's, it's more dynamic, it's being disrupted more often. You can never really rest on your.

Joe Odell (14:32)

Laurels with your offering one big check from a VC and some of your, your competitor passes you up. Right. And that's kind of one of the things that I just, I didn't want to deal with anymore and really wanted to focus on, on something that, you know, allowed, allowed us to have more of a zero sum game when it came to, you know, big, big dollars getting forced into the industry. At least that, that's what was the notion. At least.

Podcast Host (14:59)

The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human Resources. It lays out the key items you should be thinking about as you transition into CEO and owner of the business you bought. The link to download it is in the show notes. Aspen is a professional employer organization or peo, run by a searcher for searchers. Search fund veteran Mark Sinatra runs the company which provides HR compliance, flawless payroll, Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for.

Will Smith (15:40)

A fraction of the cost.

Podcast Host (15:42)

Go to aspenhr.com or contact Mark directly at Mark aspen hr.com.

Will Smith (15:50)

What about your blue collar background? Were you attracted to blue collar businesses? Yeah, because that is, that is an asset in eta.

Joe Odell (15:56)

Definitely. And, and that was something we looked at. The first thing we're looking at was security. I would call that a combination of IT and blue collar. You're dealing with a lot of blue collar folks, home services, some commercial, but you're, you're dealing with the security aspect. I think that market's been picked over pretty heavily though. So finding something at an ideal multiple is tough. You know, did a couple on sites, couple meetings here and there. But long story short, you know, I think a really boring business is very attractive at this point because I went with really complicated. And as we get further into my, my, my deal and complication costs you a lot of brain power and this is a whole nother risk on top of everything else. Right. So, you know, I think one of the lies that we told ourselves when we started our search, we. And just timeline wise, it was 2021, March of 2021 that we actually launched our search, finished our raise and all of that. And one of the bad takes we had was that there's a lot of money being made in complicated businesses. That was, that was a statement we had made a few times. And although that can be true, that's not always true. And what complicated businesses are just like debt. Yes, there's a moat, but there's also a ton of risk just like debt. Right. Just means you're closer to the knife's edge because you know, in technical businesses, for instance, software can be that way. Right. It's complicated business. A lot of times say a little.

Will Smith (17:31)

Bit more about your and Jess's decision to partner. Was it just, you know, better to partner than go this alone? And we have complimentary skills and we have some trust built up over our being, you know, both in the MBA program for a couple years together sort of thing.

Joe Odell (17:47)

Yeah.

Will Smith (17:48)

She was the one person to respond to your Slack message.

Joe Odell (17:50)

Yeah, she didn't respond. Everybody else thought I was crazy. But a few months later I started reaching out to all the financial background people because for me, you know, kind of going through my process, I took every finance class I could in school, but that was my first experience with finance. That was it in school. And so I knew if I was going to go traditional route, which I have a wife that's very risk averse. So I'd mentioned the self funded route and she laughed me out of the room. But when I went through the. And now she's showing herself to be very smart and wise. But the traditional route offered that idea of coaching mentorship and we definitely got that. I would say, you know, even with our story that we get into here in a bit, but we got a lot of those pieces. But that was kind of what I was looking for. And so if I was going to traditional route, I knew I needed stronger financials and me building a model, especially at that stage was non existent. So I really needed to focus on. Okay, well that means you're going to have to go after a bigger business as well and get, get Jess or somebody like her on board with this crazy plan which feel like financial people to get on, on board with this plan. Be tough especially because they're a lot of times risk averse. Right.

Will Smith (19:11)

So you, you kind of recruited her, pitched her.

Joe Odell (19:14)

Yes, I was, I was definitely the engine trying to drag someone along with me.

Will Smith (19:20)

And what, what did your pitch sound like?

Joe Odell (19:23)

Hey, had this crazy idea and I'm looking for someone to partner with and you know, she was one of three people I talked to in our class. One of the other people I talked to actually ended up searching and acquired a company, a software company, 11 Software. It's Hannah and Alex. They're classmates of ours that also paired as a part of this process which was, which was great but really just kind of hey, values alignment. And so for Jess and I, we both had a lot of alignment of we're not coming from a lot. And so taking down a, a business and being able to operate it and get the, the experience and knowledge and hopefully a good, you know, financial outcome. Like we're not gonna, if we have the opportunity to sell it for a win for the, the investors and we take home a million dollars each, we're going to be okay. Like that's a, that's a win for us. It's not a great win for everybody obviously, but if we're getting a million bucks, we know we've done something right for the investors. Right. They've made their money back and then some.

Will Smith (20:20)

So, so you saw that, you saw the experience of doing a traditional search, even if you two didn't personally have enormous windfalls, is still very worth it because this is part of your, this is going to, just going to be the first chapter in a long business career. And it seemed like a great first chapter.

Joe Odell (20:36)

No, that's great. No, it's a 100% what it was for us where we, we had that alignment. One of the worries you'd have is you see this incentive alignment that someone's like, hey, I have a huge nest egg. My family's very wealthy. I don't, I don't need to have this windfall or no, sorry, a little bit. I need to be like a home run. Right? And, and I'm like, I'm, I'm good with a double right now. I don't, I don't need to, I don't need to home run this first time. Yeah. Okay.

Will Smith (21:03)

Interesting.

Joe Odell (21:04)

Great.

Will Smith (21:05)

Joe. Okay, so I don't want to get I mean I want to get into the meat of the story sooner than later. Is there, are there elements of the search process, the mechanics of your search that you want to share or maybe raising money from investors? What or, or should we just jump right ahead to the business you found? What do you think?

Joe Odell (21:23)

I would just add that raising money can be really hard and can be really easy. So one of the pieces for us that was tough is the timing that we raised money. I think it's gotten a little bit easier now, but also trying to do it in a very short period of time after meeting people, you know, due to class. So just advise like make sure that you're planning a year ahead of time if you're looking to raise money. It's a mistake we made. We, we did it in a six month period and I think really giving a full year cycle of people get used to seeing them at the different events I think is really helpful for raising money. And if you don't do that, it's going to be painful. And ours was painful, but we were able to get there. We ended up with about 24 people on our cap table, which was tough frankly, just because of managing all the different emails and groups and the switching of the funds, you know, oh, actually we're on fund, we're going to invest at a Fund 3 now, you know, and just have to jump through that and manage it. Needed an intern just to do that. We didn't, but it just felt like it. Right. And the last thing I'll say is Jess ended up having her, her first son right after we closed in April. So we, we had our deal in March where we had raised our 800k for our initial search and she was, you know, a month from popping and so her and her husband welcomed our first son. And then I had about eight interns that already rolled up in a group and we were just going hard at getting as much deal flow as we could. We ended up find. We ended up finding this deal in that process and sat on it probably about two months while we had looked at the security deal and a few other things on the side. This deal scared us a little bit and probably should have more apparently to the point where we shouldn't have done it frankly. But we take some advice, ask some questions and felt comfortable taking next steps of just having a phone call with the company.

Will Smith (23:22)

Tell us about the company.

Joe Odell (23:24)

Yeah, so company was Pharmacy Specialists. It is a home infusion pharmacy company which does antibiotic, IVIG and cardiology meds. So it's Three different areas of injected IV based medications for home health patients. So if you think about this, in the past they didn't have the home health aspect. If you needed a drip, it would be handled at the hospital or an outpatient like live in facility. And, and you'd have to have that for however long you need the drug. If it's a severe infection that could be months and if it's cardiology based it could be years. And so IVIG is lifetime. And instead of going to facility you can get in the comfort of your home. It's about a 4 hour, 4 hour to 8 hour injection per day depending on the different situations. And so this company had a clean room both in Dallas and in Houston. And those clean rooms would take a powder most of the time to a liquid state in a vial and create a prescription. That prescription would be either shipped or hand delivered to the home where a home health nurse would administer or they would self administer depending on their capability. So that, that was really the crux of the company. We didn't have our own nurses when we first looked at the business we eventually did by the end. Um, but it was really just a manufacturing or really last, last leg type manufacturing where we're taking an existing prescription from a vial of powder to liquid and then, and then delivering it on site.

Will Smith (25:00)

And would this be considered a niche of compounding pharmacies?

Joe Odell (25:05)

Correct, it is a, it, it is a considered a compounding pharmacy. It's just not going from not doing a paste or creams or anything like that. Yeah, that's a very specific.

Will Smith (25:16)

And I recall in the pre call you mentioning you wanted to be close to healthcare, a kind of picks and shovels to healthcare and home health, but not. Or maybe in home health specifically, but not in home health directly. This is perfect.

Joe Odell (25:31)

Yeah. So we, we 2020 obviously was the big home health explosion due to Covid. 2021 is when we started searching. So we were hot off the tails of that and really just seeing the growth in all of the moves of Congress that happened quickly to support home health, to make it more accessible, even the Medicare world, all these areas that are pulling the trigger from health. So we're just really just saying hey, there's a huge wave that's being pushed with the aging population as well. All of this is playing in the factor of this is going to be a really strong area to invest over the next 10 years. So with that we said all right, we want home health adjacent companies. Not so much point of the spear, but something that supports the Home health piece. So that way we're not directly patient facing. This was almost that this definitely was patient facing from a pharmacy prescription standpoint, but not so much administering, at least not initially. When we looked at the company.

Will Smith (26:38)

Well, without knowing any more details, it sounds great, at least that it aligns with the thesis quite closely, if not perfectly. Tell us some metrics of the business, if you could. How big a business are we talking? Headcount, revenue, et cetera?

Joe Odell (26:52)

Yeah, about 100 employees, about 20,000. Excuse me, $20 million in top line and just over 20% EBITDA. And it had two years of 20% EBITDA, so 4 million this year that we, we acquired it the year before it did 15 million, so jumped from 15 to 20 in a year, but it had maintained 20% margins over that period. Now take note that one of those years is 2020. And so really, especially back then, teasing out Covid Lift, regardless of industry was super hard because a year after Coven, which, you know, I think we've all seen a slew of companies just do a great job of, of hiding Covid Lift. And I've heard stories of, of the difficulties of buying post Covid. And now that we're several years removed, it's a lot easier to, to figure out where this company really is because we have two or three years of actuals now to, to look at. But for us, you know, they had grown 20% prior to Covid, so why wouldn't it make sense that they'd continue to do that after? However, they weren't cutting to the chase. They were actually not growing at that speed whatsoever. And Covid was really hiding that fact really well. That's something we didn't talk about before, but I remembered because there's so many facets of my story that I've apparently forgotten over the last couple years, maybe. Convenient, right?

Will Smith (28:23)

Well, Joe, circling back to the $100,000 a year thing, right, you know, you must have just been, when you were looking at signing on the dotted line, you must have just been beside yourself that, wow, I'm about to buy a $20 million a $20 million business. Me and Jess, I mean, obviously it has ended in heartbreak, so I won't put too fine a point on this, but let's, let's hear it for the traditional search fund model that it could enable that for somebody.

Joe Odell (28:59)

Well, it's wild, you know, and I was 20, 21, so I was eight years removed from the military at that point. Very short, looking back, a very short period of time, like I Was and had no. And when I got out in 2013, I had no college degree. Right. So I went from that to having a master's in about eight years and pretty, pretty significant executive experience. So the, the path after the military as an enlisted person I think is it's hard. I found several people like me, but they're hard to find. It's usually officers club. So it's been, it's been pretty fun for, for me to see other people doing the same thing on the listed side especially. But yeah, I was, I was ecstatic. We were, we end up paying six and a half times. That's the going rate for that and that size company, you know, four, four plus million in EBITDAs. No small feat. So you know, we, we paid what would probably be a market rate. It wasn't low, it wasn't high, you know, and I think I've had someone ask me how could you pay that much? And it's like, well, the market is what the market is and industry really determines it. Right. It's. And that's based off of quality of revenue. Right. If the, Yep. They say quality of EBITDA for this type of company is very high, you're going to pay a lot more for it. And if you're trying to pay three times for that company, well, you know, be waiting a long time before anybody wants to sell that to you at that rate. And it's not going to happen probably. So that's kind of where we were at there. Yeah.

Will Smith (30:32)

Well, with, without knowing the specifics of that industry, you know, at Mines Capital. So across our portfolio, the average business is doing four. Our average investment is doing four of ebitda and the average multiple paid I think is five, one. So you guys were six, you guys were a turn and a half above that. But that's not a crazy amount. That's not, doesn't strike me as a crazy premium given that again, I don't know this industry, but certainly the quality of revenue here seems just fantastic. I mean it's, it's prescription life.

Joe Odell (31:07)

Correct.

Will Smith (31:07)

Life preserving prescriptions. Right?

Joe Odell (31:09)

Correct. Yeah. All of the drugs, either their life would be significantly diminished either in time or in quality if they didn't have it. So it was, or you know, likely death. Right. So there, there were just a lot of factors going in where this is like, hey, this isn't going away.

Will Smith (31:27)

Yeah, yeah.

Joe Odell (31:28)

And on top of that we were looking at multiples. If you get to about 5 million plus 5 to 7 million in EBITDA, you're starting to see multiples jump in the tens. So, you know, the, the arbitrage there was real where, hey, we, we just need to figure out how to keep a portion of this percentage of growth within an okay rate. The seller also the other thing that was great is the seller didn't want to just be done. The seller wanted to stay on as an operations role and really want to help on finance and in sales. And so we said, hey, like we can come in partner and come in from that approach rather than, yeah, we're going to figure out on day one how to run this company. And so that was really, you know, an enticing piece of how do we mold together as a leadership team. And so that on. Right.

Will Smith (32:18)

And did that correspond also with a nice equity role by that seller?

Joe Odell (32:23)

Small, but I wouldn't, wouldn't. It wasn't substantial, just slightly less than 10%. Yeah.

Will Smith (32:28)

Okay. Okay. To your point about multiples expanding at 5 to 7 of EBITDA and this business was sitting at 4 when you bought it. This is something I don't talk much about in acquiring minds, but on the Mind's Capital podcast, it comes up a lot, this idea of zone, zone skipping. And when multiples expand and they expand at certain thresholds because when you go from when you get into 5 million EBITDA north, that, that unlocks a whole new group of buyers, 10 million and above, 25 and above and so on. And so there's, there's a certain, I don't want to call it a hack, but a certain shortcut if you can go, if, you know, if you're at a business that's at 4 of EBITDA and you right under this threshold of 5 and you could just tip it into 5, you might get some extra multiple expansion for your efforts compared to going from just six to seven, let's say you just happen to be right at that threshold. So going from 4 to 5, there's extra, extra punch or 9 to 10 or 24 to 25 if you can.

Joe Odell (33:32)

Right. Go up there.

Will Smith (33:33)

So anyway, pretty interesting dynamic.

Joe Odell (33:36)

Right. And on the other side, thing about this company or this company that we really liked is because of the high ebitda, we could strap it with a lot of debt. And yeah, and that, you know, at the acquisition side of things looked great on the returns because just pay off the debt over three to five years and, and everyone's going to be coming, coming home with a decent amount of cash. And so even without a multiple expansion. Right. And so that, that was kind of the Other piece. So we end up know, doing three turns with traditional debt and another turn in seller debt in a seller. Excuse me. So we end up with about 16 million in debt, which, so that was.

Will Smith (34:15)

3.3X of a traditional debt. Y 1 1/2 you said of seller note. And then 2x of. Of equity.

Joe Odell (34:24)

Correct. Great. Okay. Yeah, it's right around that range. So, you know, with that, you're like, okay, the math on paying down this debt is, is very good because if we can pay this thing down and operate, you know, with some nominal growth, our outcome is going to be pretty great. Even though maybe our IRR doesn't hit 35, it hits mid-20s. Well, you know, our, our role or our carry as an operating group, it's going to end up in low millions which without, without any kind of crazy strategic growth that, that's out of this world. So it just made a lot of sense to, to, you know, maybe this is our double, this is our triple with the upside of, you know, arbitraging that, that multiple expansion band if we get into that five to $7 million range. Now we're talking about real money. And so, so all of that just seemed to be really good factors because when you, you know, all those, most searchers are optimists. I'm probably a little too optimistic, or at least was back then. I'm a lot less now. And when you look at all these factors, like, man, there's a lot of ways to be made whole here, right? And that's, that's kind of like I was looking for a company that we could do that and figure out all our different ways to be made whole. And company had three legs of the stool too, which sounded great too. But, but yeah.

Will Smith (35:47)

Can I just underline what you said there, Joe, about your return? So for the audience, remember that in a traditional search fund there, your, the carry that you earn is based on performance. So traditionally it's, you get a max of, as a single searcher, you get a max of 25%. Eight and a eight and a third. When you close the business eight and a third after four years in the business just based on tenure alone and then your final eight and a third to get to fully 25 based on hitting certain performance hurdles. You guys were a partnered search. So I think it's 30% to the pair. 10, 10, 10, 10, 10 and 10. Now the, that final, the performance tranche, that third one is pretty hard to hit. Right? I mean, it's a pretty aggressive, it's pretty aggressive growth to get that final. So when we talk about traditional search being a 25 or in the case of a partnered search, 30 split two ways. So you. We're looking at 15. Yeah, it's a pretty, it's pretty aggressive to hit that. And in your own minds you said, hey, even if we don't hit that, if we just run this thing and it just kind of carries on, but we pay down debt and maybe get, you know, 10% each, it's going to be, it's going to be a good outcome.

Joe Odell (37:05)

Right. And that wasn't the strategy of buying a bigger business. Right. If we, you see dual searches all the time by really small companies and they might hit that 35% IRR, but have very nominal payback in cash when they exit. And so.

Will Smith (37:21)

Oh, because they're starting from a small base.

Joe Odell (37:23)

Correct. Yeah.

Will Smith (37:24)

And when they sell, it's still just.

Joe Odell (37:25)

Not the dollar that I was really thinking through the strategy of that of like, hey, we want to take down a bigger business because you know, if you, you're able to do that, you can arbitrage more, more debt and you can also, I don't know about arbitrage. You can, you can add on a lot more debt, AKA risk. And you can also go ahead and, and have a great outcome on the dollar side of things while, while just operating it efficiently. Right. And so that was, that was part of the theory and thought and how we end up doing a broker deal. This end up being a broker deal, by the way. But it's because the larger businesses generally are going to be brokered. It's going to be hard to find something that even if you find it proprietary, they'll bring in an advisor at some point.

Will Smith (38:08)

Yeah, yeah, yeah, exactly. And so where did you find the deal? Was it on, listed on a site or did you have a relationship with a broker?

Joe Odell (38:15)

One of the strategies I had with broker was to develop a focus on an industry and then find out who are specific brokers to that industry. So it wasn't just being randomized. And so within this industry there were two main brokers that advertised, went to each conference. So quick tip, go to the conference associations, figure out which brokers are constantly representing them. They'll even usually have them on their website. Find them, go to their website, have conversations and actually I would call brokers like that first before I even talk to sellers because you can ask them basic multiples questions, you know their jobs to answer the phone. So call them first before you even start going down the industry route and calling random owners. You can ask dumb questions to brokers that you can't ask to proprietary owners.

Will Smith (39:01)

Yeah. Yeah. Good tip.

Joe Odell (39:04)

Thank you.

Will Smith (39:05)

Okay, Joe. Well, I just want to be aware of the time, and we haven't even.

Joe Odell (39:11)

Heard about the drama.

Will Smith (39:13)

What actually happened when you got in there?

Joe Odell (39:14)

Sure.

Will Smith (39:15)

So you guys buy. Tell us to pick us up from getting in there.

Joe Odell (39:20)

Yeah. So very, very exciting. It's almost to the day that we closed. It was December, maybe 11th somewhere on there. And right now on the recording, until right around Thanksgiving, right now in 2025. So looking back, very excited. I was staying in a hotel. My family was still back in California, and I was here in the Dallas area closing on this business. And so it's funny, when it's all closed electronically like it is, you kind of like, okay, it's over, and tomorrow I'm showing up to work. I guess this is really weird, the feeling.

Will Smith (39:58)

Yeah, I bet.

Joe Odell (40:00)

So we started showing up every few days and. Or every day and. And going through the process and transferring things over. My focus was more mapping systems and processes, understanding making sure we. We understood if anything went wrong, we understood the business from every step, from, you know, when we get a referral all the way till we get it out the door and servicing the patient. And so that was really my job, just really understanding the operational flow. Jess is focused on corporate control and making sure all of that transferred control was in her hands. You know, obviously, it's a requirement from the bank, and whenever you take over company, you have to make sure you actually have control of it. So she's working on that. And within probably about two to three weeks, right at the end of the month, end of the month of December, Jess is like, we are really short on cash. And I'm like, what? What do you mean? She's like, well, things aren't coming in as fast as they used to, and we've had additional expenses that we're trying to weed through. And we'd started with just under $2 million in working capital. Looking back, not enough. Whatever you think it is, you need twice as much. We've seen it happen with a lot of companies. They're just things that pop up out of nowhere that you want to have capital to deal with. Um, but we stretch out payments. You know, the company at the time had terrible process, so they were paying immediately. Whenever a bill came in the door, they just pay it. And so we bumped everything to net 30, buying us some additional time there. Some people had problems with it, but, you know, they eventually will get in line because it's pretty standard. So we started doing that. January gets even tighter in the industry. One thing we didn't understand, being new to healthcare and we'd heard about it but never experienced it, was the recertification of insurance. Right. So insurance trips over in January resets and so any prior authorizations that you had have to be reapplied for before you can collect cash again. And so let's say we have 400 patients or so and we then January 1st hits. We now need to start calling in the insurance company and getting prior authorization or faxing or whatever for all 400 patients all over again. And every other company has the same problem, which means the call volume's insane, the request volume is insane. And so it can take a full month if not more to get all of your company prior authorizations resubmitted and approved, which means you can't bill or collect. So now it's even worse. Our cash situation. And during that time we learn about a diligence issue. I'll just leave it at that. That we ran into and it, it caused us to lose about a 20% of the revenue of the company over a three month period. A non disclosure issue. And that was devastating, frankly.

Will Smith (43:02)

20% of the revenue?

Joe Odell (43:04)

Correct. It was, it was a sales rep. Yeah. That was no longer there. Yeah.

Will Smith (43:11)

And. And meaning that sales rep had a lot of. Had relationships to the tune of 20% of revenue.

Joe Odell (43:17)

Correct.

Will Smith (43:19)

Wow.

Joe Odell (43:20)

So. And that was devastating. And that, that happened during diligence.

Will Smith (43:27)

But what do you mean during diligence?

Joe Odell (43:30)

Before we closed? Yeah.

Podcast Host (43:32)

Oh.

Joe Odell (43:33)

So like I said, it was.

Will Smith (43:34)

But you proceeded to.

Joe Odell (43:35)

Correct, we, we didn't know about it until afterwards. Oh, oh.

Will Smith (43:40)

So you were buying assuming 20 million in revenue when in fact even before you closed it was going to be really like 16.

Joe Odell (43:47)

Yeah.

Will Smith (43:50)

And was your seller still working in the business in these first few months? I mean how long did the seller stay in the business?

Joe Odell (43:58)

Through the end of the year. Because we were in crisis mode.

Podcast Host (44:04)

Through.

Will Smith (44:04)

The end of the first year. So just meaning a few weeks.

Joe Odell (44:07)

No, no, through the end of the. The 2020. First full year. Yeah, first full year.

Podcast Host (44:12)

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Will Smith (45:13)

And so all these issues are, does it, is it. How's your relationship with the seller who's working in the business?

Joe Odell (45:22)

At that point, we were just focused on all hands on deck to try to write the ship. And, you know, there, even if we wanted to start any kind of proceedings at that point for the escrow account, which is what we ultimately did, even if we wanted to start it, then it wouldn't help us at all. Right? And so we, we needed, because there's, you know, assuming it went to a court or something like that, or had to be dealt with with an arbitrator or something like that, we, we didn't have a quick cash fix. And so what we had to do is just get into the business and really understand it. We need this help to fix it because we had no idea what was going on from a cash perspective because we were not billing as much per patient as we were expecting as well. And that was the main thing causing the cash issue we had. Compounding two issues. One, that person had left. Two, there had been a change in reimbursement for one of the antibiotic drugs. It's called daptomycin, and there was a change in reimbursement. It wasn't caught at the end of the year and I kind of just went through all of our drugs and like, hey, why are we making less per administration of this drug? And we dug in, figured out that something else wasn't caught. At the end of Q4 of the year, we closed. And so we were able to make a switch. And then our profitability started building again, which was a huge win. But those two things are really tough. The other thing that we haven't gotten to yet that was tough is our projections are based off of patient count. So specifically we say, hey, one antibiotic patient on average equals X amount of dollars, about $300 to $400 or so per per dose per administration of the medication. Right. Which, so we'd look at that and say, okay, we're doing well. Well, we, we were starting to trend really high in patient count, but our, our revenue was pretty stagnant and that was really Throwing me off. And. And right before close, I was really excited because I was looking at the. That number of patient count going up. I'm like, all right, revenue will follow because it takes usually a month or so to bill. And after about three months of operating, I realized is that number, those two lines get further and further apart. I figured out that because we had a second location in Houston, the decision had been made prior to me coming on board to create duplicate accounts of patients for each location with different numbers for their patient census number. So it's not even something you can really dedupe. So ended up with a duplication of patients in this patient census, which then it's like, okay, so we have that missing too. So we have this projection of growth. It's actually not growing. It's actually slightly declining. Once I dedupe all that stuff, we have a drug that is no longer efficient. We have a sales rep that left. Right. So those three things just started for a really terrible first six months to the point where.

Will Smith (48:36)

And. And you have leveraged it.

Joe Odell (48:38)

I mean, your.

Will Smith (48:39)

Your loan on this was heavy. Was a little bit heavier than it might have otherwise been.

Joe Odell (48:43)

Yeah, yeah, definitely. You know, that mo. The models are great until they break. And it's like, oh, this is a great return anyways. It's imaginary money, though, on. On your model. So then probably around that March or so of that. That first year, things were like, still touch and go. Didn't know how it's going to play out. Obviously, I'm scared of my mind. We're having emergency board meetings or we just started out in the fire. Just exactly how you want to start your CEO stint of, like, everything's on fire. What did I do? And I'm a big emotional health type person. And I. I knew I needed to talk to my wife because I just moved our family cross country to Texas. And I'm like, the back of my head, this is literally how marriages end. Stuff like this, right? Where you make this big bet you're wrong, and the family pays for it in some way, shape or form. So sit down with my wife and I'm like, hey, I just need to say something. And, you know, you don't have to respond or whatever, but, like, are we okay? Like, I just need. Like, I said, I did need to respond, but I was like, are we okay if this all goes to, you know, if this doesn't work out? Like, are you and I okay? And she said, we'll be fine. Like, just go for it. Go fight. And so for me, it's such a blessing, like, to have that conversation. Cause I was just in the back of my mind, like, you know, this is. This is the worst case scenario right now and so enabled me to know my back was covered and I get to fight forward for the rest of the time there, right?

Will Smith (50:27)

Yeah.

Joe Odell (50:28)

And powerful. Yeah, it was. It was a huge help. So by summer, it kind of stabilized, and then by Q3, we were starting to ramp. And then Q4 of that first full year, it was the business we thought we had bought. It was back again. We were, you know, churning out a million dollars in EBITDA in Q4. So, like, the. The rebound was real. And it was just such an amazing, like, moment of time where, you know, we're getting ready for the Christmas party, I'm playing Santa, like, all the things that you, you know, the funny, goofy things of. Of running a company that you want to be a part of and, like, blessing your. Your employees and, you know, just being joyous and, like, having gone through it, you know, investors are coming out of the woodwork that are like, I remember when I thought I was going to lose my business in the first year of operating. You're like, what. Where was that story, like, six months ago? You know, apparently that's a common thing, you know, and so I'm like, oh, thank you. You know, and some. Some did tell me the story in real time, but. But at the same time, you know, there is. There's a certain amount of, like, crap. It's the fan sometimes in that first year, and, and navigating that shows a lot.

Will Smith (51:41)

Right when it was hitting the fan. How is your relationship with Jess.

Joe Odell (51:47)

Good for the most part, like, we didn't have time to, like, we're just dividing and conquering. So we didn't have time to, like, have major disagreements or anything like that. It was, hey, this is. And that was actually the beauty of having two different strengths was I didn't have a lot of input other than, like, simple advice or if I can see things clearer, just from an outsider's perspective in her realm. And same for her and mine. And so that was really helpful. And so she was focused on saving as much money as possible, and I was focused on making as much money as possible for the company.

Will Smith (52:18)

Right.

Joe Odell (52:18)

Yeah. And so even with all the difficulties you ran into, we still did over $20 million in sales that year. So we had that knockdown, and we still did 20 million because we. We were focused on dividing and conquering, and we did a good job. Yeah.

Will Smith (52:33)

And Joe, you Mentioned to me that when things got tight, I think it was in this first chapter of things being tight, you were actually in the truck doing deliveries?

Joe Odell (52:42)

Oh, yeah, no, I was. I, I've driven into Arkansas, Louisiana, East Texas and Lubbock up to Oklahoma. There was like a snowstorm that we had or ice storm. And so I was out doing that with my, my truck and you know, got that four wheel drive truck still, so. Got it. Gotta use it sometimes. There's that truck. That's right. But yeah, you know, my, I'm. We can either incur overtime by having my team drive somewhere or I can do it, you know, and.

Will Smith (53:10)

Yeah, and so, Joe, the business model was that you guys would actually deliver to your patients.

Podcast Host (53:19)

Why?

Will Smith (53:19)

That seems like something that would have been outsourced.

Joe Odell (53:21)

So FedEx did 90% of it. The other 10% was if we missed the FedEx P delivery or pickup time. And it's a lot of times shipped next day, same, you know, next morning. And so there would be drugs that potentially wouldn't make it on the truck. And so, you know, logistically we're trying to work their operations. That was a big focus, was to get to the point where we would have everything ready to go by 7pm every night. And every once in a while we'd be too late. We'd be past that time. And additionally, when we had the ice storms, FedEx wouldn't run. Or if it's a delivery in Louisiana or in. This is crazy. But Oklahoma, it's like a two hour drive for us. But because it's through a different distribution center. If Memphis was having a freeze, they'd fly it from Dallas to Memphis. Memphis is having a freeze though, so it's stuck now in Memphis for a full day. And then they'll fly it to Shreveport, which is like a three hour drive for us. So because of FedEx's delivery mechanisms, it would just create issues or the roads would be icy and so they wouldn't run. And so there's just stuff where we're deciding to take on additional risk by, by driving it. And we end up in a situation where it's like, hey, this just needs to get out the door. Yeah, yeah.

Will Smith (54:33)

Okay, Joe. So at the end of your first full year, which is basically 13 months in. Yep, things are looking good. You feel like you've saved the company. Despite three huge curveballs. You, you're back on track to do to what did you say, 20?

Joe Odell (54:49)

Yeah.

Will Smith (54:50)

Back on track at 4 million dollar EBITDA run rate, which is where you started okay, take us then into 20, 24.

Joe Odell (54:58)

Right, right. So in around December, we had heard of a change in reimbursement for the Cardiology Med, which Cardiology, although it was about a third of our revenue, was like about half of our ebitda. And so it had one major manufacturer that really drove all of our profit. They had a change in reimbursement. And the calculation on our reimbursement, we couldn't unravel for another month or so. So it wasn't until like the end of January that we really understand the damage that had been done. But bottom line is they had, it's called a AWP average wholesale price, but it works like an msrp. So they had an MSRP that they cut by like 90%. And our reimbursement is based off of the MSRP, where hospitals doesn't work that way, but it does specifically for home infusion. So just because we'll have a hospitalist listening to this, like, no, it's not true. It is true for home infusion. Okay. So with the, that drop, though, and cut, they've. Now they said they were trying to be more competitive with other producers. The problem is that directly drives our, our revenue and profit margin. And so long story short, it cut $2 million in EBITDA out of the business.

Will Smith (56:24)

Wow.

Joe Odell (56:24)

And so we had the same amount of patients. They're, they're congestive heart failure patients. We had the same amount of logistics required in house staff, like all of that to take care of these patients are equal, but our top line revenue just drops. So that's all ebitda. Right. It's a direct shot to our ebitda line. So 2 million. Poof. You know, we'd already eaten of the four, almost a million just in, you know, additional salaries, professionalization audits, like all that. So now we're down to a total million. If nothing else changed in possible EBITDA for a total 4 million. Focus. Right? And so that's when things really, really got bad. And it was really the beginning of the end at that point. Like, we, we had survived that first year and got to a place where like, hey, we can do this. But this was the one that ultimately, you know, broke, broke our back. There are several more things that we can go through that happen that were bad, like ransomware, attack on a supplier of ours that froze all of our, our payments and all kind of stuff like that. But long story short, we, we ended up lasting another 18 months after that and running on fumes. We had two different layoffs, half the company twice. Extremely painful. Shut down one of our offices. Just trying to get it down to a site like a small enough company to turn off the maximum EBITDA we can based off of our patient load, while also focusing on IVIG and specialty medication. So we're having to shift the whole new company in a different direction now, which I was heading up. So during this time we're literally running out of cash on fumes for 18 months. But we still hit $20 million in sales that year because I had spun up that new specialty IVIG focus, which is wild. And so we just kept having small and smaller EBITDA with the same amount of sales, which was painful, but definitely, definitely had some good, good growth. The problem is we couldn't service any of our debt. About 200,000,000 K a month in debt.

Will Smith (58:29)

Payments that we couldn't make $200,000 a month just to service alone. That is a big boy loan. Joe, the $2 million in EBITDA that you lost from the 90% reduction in what did you call it? The AWS AWP. So you lit, so you, it was a 4 million dollar EBITDA business and then that killed half of your EBITDA, correct?

Joe Odell (58:56)

Yeah. And like I said, another million had got killed by just, you know, professionalization costs, you know, just my salary because we didn't, you know, the seller stayed. So we had all of that being tacked on.

Will Smith (59:09)

Yeah, yeah. So as you reflect back is how much of this is, could have been uncovered by diligence.

Joe Odell (59:20)

I think there's two stages. Right. There's one of like this last one. There was no catching that the thing that actually killed us was not going to be something you can catch in indulgence. We, you know, happened a year later. Something that was a stroke of pin risk. What you could look into and say, hey, there's a lot of dependency on this drug specifically and just say maybe that's too much concentration risk, but it's not something kill a deal, you know, supplier risk. Right. With concentration there it it, you know, but you still have three legs of stool. So it tells you you need to take less debt. It doesn't tell you not to do the deal. And what, what that slash is really in the AWP is especially that much like you'll see stair steps down. But that much of a cut is unheard of. It's never happened before. And so it was really a rare, rare occurrence. So the thing that actually killed us, not much. The things that happen pre close there are ways to catch. And that's, I think that that hurts the, those pieces saying okay, if I could have. I know now because I know how I caught it post. But it's really not, it's not because I didn't go a layer deep. It's because I didn't go seven layers deep. Right. And so how do I really go down and, and you know, look for the smoke so I can find the fire eventually. Because realistically, you know, that's the only way I didn't buy this business was to find some of the, the mistakes or non disclosure things or something like that before we close. But even at that point like our search would have been over. And I say that because, you know, part of this deal we had to do a Marwood study which cost $250,000. And so what's that? It's a study specifically for healthcare. In our case, going over, you know, potential fraud and quality of patients futures, talking to customers. So it's a study by the Marwood Group and there's a few other out there like it that are pretty much giving you a report saying hey, is this a good investment or not? Based off of health care, specific trends and specific to this company as well and pulling all of their payer data and all that. Wow.

Will Smith (61:27)

So this is a company that specializes in these reports.

Joe Odell (61:32)

Correct.

Will Smith (61:33)

And it's a quarter million bucks one of these reports. And that had to come out of your $800,000 search fund.

Joe Odell (61:39)

Yep.

Will Smith (61:40)

Wow. And did you know about that cost in advance of looking at healthcare? I've never heard of that.

Joe Odell (61:47)

It was a discussion that had come up. Hey, if you guys are looking at this, we're going to acquire this study. And so then we, yeah, we started doing our research and finding out about it, but it was, you know, a requirement from both the debt provider and loosely from our investment group. I wouldn't say I think we probably could have done without the investment group, but the, the bank definitely was requiring it and, and the report was great. You know what's crazy is the thing that they said was the most positive is the thing that actually killed us. So the, the cardiology leg being the one that has the most possible upside is the thing that actually killed us crazy enough. But frankly, because we didn't know the industry well enough, how are we able to tease that out truly and know it? And so I think that goes back to like one of the key learnings from this is it's a super complicated industry, you know, payer relationships, you being a small fish in A big, big pond. You know, you, you have no leverage whatsoever when it comes to payers. And on top of that, you know, we don't have the experience navigating that, you know, Jess and I, I think did a great job for what we ran into. And that first year, you know, rebounding like we did was a huge win. Like I said, it was a huge sigh of relief. And then, you know, back to the, the grindstone of just getting ground down right after that. And so, so yeah, I think everything else was, it was manageable until we hit that last one. Yeah.

Will Smith (63:22)

Well, Joe, just to the pen stroke risk, as you put it is. And just more broadly, the audience should take away from this just the supplier risk. Supplier concentration. We talk, we're so fixated on customer concentration. But there are other failure points in the, you know, looking upstream and downstream and side to side in your business where the whole point of concentration is that is the kind of effect on your company per decision. So can one decision at something outside your control, a single decision, really affect your business in some way? And so in your case, you had the supplier risk, one decision by one manufacturer took off $2 million of EBITDA overnight. So just, it's not going to happen in every case for people listening. But just don't, don't focus on customer concentration to the, at the expense of all the other concentrations that might, might exist in your business. Look upstream and downstream.

Joe Odell (64:33)

Right. And with how complicated healthcare is, especially when you get into pharmacy, because now you're not just dealing with, you know, what you're getting paid or, or the diagnosis you're dealing with now selecting a medication, which there might be, you know, six different medications that can do what's needed. And so you're, you're working on with a doctor and figuring out, hey, which one of these should we actually have prescribed specific NDCs, which are national drug code, excuse me, get, you know, figuring out what actually needs to be applied in each case. And so that, that's that combination you're trying to work through. So the point is, it's even more complicated than just a standard business when it comes to having a manufacturer. You have multiple manufacturing options, right? Yeah. And so there, you know, daptomycin was an example I gave before, that was a really good antibiotic for us. But There was about 16 different manufacturers of daptomycin because it's a generic drug. Some of them are wildly profitable and some aren't. And so really keeping a pulse on what's changing what the new price is what our new reimbursement is. It's changing all the time. And so you're just playing this game constantly.

Will Smith (65:38)

Wow, that really is complex. So, Joe, wind up the story for us.

Joe Odell (65:46)

We had a deal on the table, actually, to get the bank to let some money up in front of it, which is, I think, an impressive deal that we were able to put together with the bank and the board. And the board is going to let us super, I think what they call the super note or something like that. I can't remember right now. It's been too long. But I'm gonna let million dollars sit in front of the banknote because I knew we were done if, if we couldn't get any equity in front of them, because equity behind them is dead at this point. This company's not gonna make it. And so any new equity needed to come in as a form of a debt and in front of everybody else. And so we were able to get a deal on the table for that. And part of it was going down to one searcher. So I was gonna remain as the, the CEO. Um, Jess was going to step down. Um, at that point, we had cut all the way down to about 20 something employees. It was wildly painful getting there from a hundred down to twenty.

Will Smith (66:51)

Wow.

Joe Odell (66:53)

And we were about a week away from making all the changes needed for that. And, um, we are and, and, and doing a capital call and everything else. And we're trying to pull the levers to make sure. And I'm just going through the, the model like one more time. One more time. Go through the model one more time and doing sensitivity analysis. Because, you know, one of the things that I did not appreciate the first time we did this deal was, hey, sensitivity analysis wise, we're screwed if things go bad, right? And, and really understanding the levers of that. And so the new numbers for August came in. It was beginning of September. And I said, all right, what are our new gross profit margin numbers? Right. They shift by a couple percent. And it dipped for August and it dipped to the point where it broke the model. It could have been fixable, but we've had no ability to control our margins because we can't control what's diagnosed every month. Right. And so if we have any kind of dip like that, it can break the model and eventually could come back up. But that's just a risk we have no control over. So I just sat there and I'm like, we never took another, you know, other than the first deal when we, we raised the capital, we Never did another turn of the hat, another capital call, anything like that. And so this is our second capital call now. It'd been two years, two and a half years. And I just had this pit in my stomach, like, I can't. I can't take another dime. And so I. I got the board together the next day and just said, hey, this is what I'm seeing. And I do not feel like your money's safe. I feel like if you put money into this business, you're going to lose it. And. And so we made the call to close the doors at that point, and within three days, I was out. And Jess, crazy enough because she actually had all the financial controls and we hadn't transferred everything over yet. She ended up staying another two months to help actually shut down the business and hand it over to the bank. And so that was the process that we went through. Is. Is that. And it was wildly painful. I don't think I made the wrong call whatsoever. I think we had no control over our gross margin. And to, you know, we. We had to hit X and we were fluctuating up and down. And, you know, at some point, our suppliers, because we're behind some payments, we're gonna shut the faucet off at some point. And. And that was going to be an issue. And so. So, yeah, just. It just seemed like we're putting good money after bad and decided to be done.

Will Smith (69:35)

How did your investors react?

Joe Odell (69:38)

I would say earlier that year, I'd gotten several conversations where people are like, why are you still here? Funny enough, where they're like, people would have left a long time ago, which is an interesting thing. And it actually helped take some pressure off me of like, oh, really? People would leave. Not that I was wanting to, per se. Or. Well, you know, I guess in my. In my sleepless nights, I'm like, man, this sucks. But it was more from this place of like, oh, okay. It's rare to stick this out this far. You know, obviously, two and a half years. No. No salary increase, no bonus for obvious reasons. There's nothing. Nothing there. Right. And so. And you're just taking the first salary you can when you're taking the seat, trying to, you know, going after the features, not. Not trying to get your best salary right off the bat. So. So really, that's been, you know, that was tough. Is just figuring that piece out. But I told him, hey, I. I'm. I'm an old small boat captain from the Coast Guard. You down with your ship, right? You're like, I made the call, this is the company we're going to be on, and we're going to run it until it doesn't make sense anymore. And, and it still makes sense. I think we can save it. Until we couldn't.

Will Smith (70:54)

And then they were supportive of that when it was time.

Joe Odell (70:57)

Yep. And.

Will Smith (70:58)

And so what, what did that look like? What, what does it look like you just handed the keys to the bank or something else or whatever?

Joe Odell (71:04)

Yeah, we just called the bank right after and said, hey, you know, this is the meeting we just had. We. We don't think we can, we can salvage it. And so how would you like us, you know, what would you like us to do? Because at that point, we're operating on behalf of the bank. Right. And that's one of things you don't. At least there might have been that part in business school, but I did breeze over probably the bankruptcy part. But, you know, I think one of the best things when our board members told us from the very beginning is like, hey, as soon as we think we can't make a payment, we're. We're operating on behalf of the bank. And so we got to make sure that we're partnered with them and care of their asset. And we still operate another year after that when we had that conversation with the bank. But it just helped the mindset of, like, hey, making sure that we're, we're all in alignment here and, you know, being a teammate with the bank rather than, you know, not, not that we don't think we can get our equity out. It's just that, hey, we're, we're in this gray area that we, we need to let them know right away. Right.

Will Smith (72:00)

And, and so what did that mean, operating? So, so there was some, of course, documents signed to officially hand ownership over to the bank. And then the bank becomes your boss and employer. And are you reporting to somebody at.

Joe Odell (72:14)

The bank for a year back then? Sorry, I think we're so back then, that's when we notified the bank, hey, we, we think we'll be in default, so we need to have this conversation. Right. There was nothing signed back then. It wasn't. Then we, we had. So they end up giving us more time and we had a lot of renegotiated terms of the bank until they said, hey, you need to put equity in. Which was up in that year and a half period where, you know, the week that we closed, frankly, where we got that deal on the table. And that's when we said, hey, we don't think we can save this. So we're up. What do you guys want to do with this? So that, that's that timeline.

Will Smith (72:52)

And then what? And then, then what did you do?

Joe Odell (72:57)

Like I said, I, I was out with them three days and Jess took over really just working with them and winding down. We even gave him a plan like here's what we would do and specifically built the plan around how do we take care of patients? Because that's our employees. Those are two responsibilities, especially being a healthcare company. You know, DNO is great except for if you mess up with a patient, DNO doesn't matter. They can reach right through it and come get you personally. So you're sorry.

Will Smith (73:28)

Dn. No, sorry.

Joe Odell (73:29)

Liability insurance for officers. So the point is, is that you, even though you have an entity that, that separates you, a lot of times you personally are, can be held liable for patient mistakes. And so what we had to do is make sure we had a clear plan articulated to the bank for them to take over.

Will Smith (73:51)

And then they weren't going to try to fix the company. That's not their business. They already told you that it was going to need more equity put in to save the company. So they, they just started liquidating it.

Joe Odell (74:02)

But yeah, they, they should have kept operating it. It was a profitable company. Like that's, that's the thing that looking back, a mistake is they, it was a profitable company still and had very asset light like 3,400k in assets and then 12 million dollar note. They could have kept it operating for a year and then sold it to somebody at a discount and made more money but the bank wasn't interested in that. Apparently.

Will Smith (74:32)

This also is the, a point where if you had been a self funded searcher, it would have become unbearably difficult.

Joe Odell (74:40)

Right.

Will Smith (74:40)

You didn't have a personal guarantee because you don't in traditional search land and you're working with traditional conventional debt. Did you ever reflect on that point?

Joe Odell (74:54)

It definitely, yeah, yes, definitely reflected on that. And like, wow, like I still get to keep my house. That's amazing. The second piece is, you know, people ask me, do you feel, how do you feel about the equity you did lose? And I'm like, well, I had three different friends that were in the deal. One of them lost a million dollars.

Will Smith (75:14)

Yeah.

Joe Odell (75:16)

And do I personally feel like I owe them, like emotionally? Yes, like emotionally I feel the loss of that deeply. I know rationally I owe them nothing. But it's, it's still painful. Happy to report that the person that lost a million bucks is still a very close Friend of mine, but definitely was awkward for a bit.

Will Smith (75:47)

Yeah. And so how did you and you, Joe and Jess take it? What was the kind of emotional aftermath?

Joe Odell (75:57)

I would say our. Probably our last six months. We were. We were just fried. I think our adrenals were shot. We were. We were just completely pretty wore out for the two and a half year. Just slugfest. Her and I still got along really well, but I remember one time where I'm like, hey, like, we both need to get counselors because I think we need to, like, have someone else to talk to about this stuff because, like, we're dragging each other down. So we had moments like that where it's like we're just. We're just talking about all this stuff and we're so aware of how bad things are getting. It's like, I. I need. Like, we need to start talking to probably a counselor separately for. Just. From the standpoint of getting. Getting our. Our crap out so we're not just dumping it on each other. There was nothing between the two of us that was ever negative or whatever. Just I'm dealing with my own negative emotions. And then we'd share them with the other person. It's like, that's not helpful. It's like, now you're dragging me down with you. I need you to be strong when I'm weak, you know? And so we kept finding moments like that, but for the most part, I can tell you, like, it was a great pick. She has been awesome. Was awesome. You know, her and I are still friends. You know, we're still business partners, actually, which is great. And, you know, we're. I have to say, operating, which we're. We're doing a business right now, but operating that in a place of strength rather than getting drugged through the mud, is a whole different ball game. It's a lot of fun and a lot less stress.

Will Smith (77:34)

Joe, about the business itself, so. So what are your. What are your thoughts on the business itself? Was it a solid business that somebody who knew the industry better could have acquired? Or was it all. Was it always a house of cards? What. What about the quality of the business that you bought?

Joe Odell (77:54)

I think. I think there's a key mistake that a lot of people make and we made, which is good industry, therefore good business. And if it's. If you find problems, you can fix it to be in line with what the industry is. Um, and I. I think that we made that mistake thinking that because the industry has tailwinds, it's growing, you know, 9% CAGR. And other people are making money that we can figure that out too. The problem is, is that all the niches underneath there. And you know what we turned, we found out that we were highly exposed to cardiology. No one else had that percentage of their revenue coming from cardiology. And so we got hit abnormally hard by the change. Where other people were able to drop a whole line of their business and move on or vice versa. Use it as a loss leader even, right, to gain new relationships. We were just already in a place where we're hamstrung because of the debt load that we had. So I think that's a huge difference. The, you know, should we have done that deal? Like it's easy to say no now. You know, I think the big lesson for us is it, you know, I don't think we're wrong that there's money being made in complicated industries. I just think we probably need a lot more experience in that complicated industry. Do I think someone could have saved this specific company? I don't think so. I think, I think the bank could have. I think if it didn't have debt, it would have survived. Right? It was a profitable company technically, so it was a survivable company. It just couldn't survive the debt load it had.

Will Smith (79:34)

What other learnings, Joe, from your nightmare here?

Joe Odell (79:39)

I'm a lot stronger than I thought I was, I guess. You know, I think it's one of those things that you don't want to learn, but when you do, you look back and you know, I think my wife and I are stronger. My dad, my kids still like me. So like being a dad, that, that's pretty great. But I think really trying to find that balance and maintaining those relationships through the insanity of this is probably my biggest win. You know, I think I made sure that my kids baseball practices were like 7pm every night. So that way I could work like six to six every day and, and do 12 hours and then still be able to be a baseball practice with my boys at seven o'. Clock. Like stuff like that I wouldn't trade for the world. Like that's, yeah, that to me is like, okay, I know I can have it burning on both ends and still show up. So that was big for me.

Will Smith (80:41)

Well, in your point, which we've now talked, touched on a couple of times, so maybe we don't need to say anything more. But about complexity and industry experience, you see that differently. So if there's complexity, it's probably, it's probably the more complexity, the more industry experience is necessary which as I say that is like stating the obvious, I guess.

Joe Odell (81:01)

Yeah. But I don't think it said like that though. Right. So like, yes, you're stating the obvious. But I think like for me it wasn't. There was a disconnect and I think for people still out there, you know, I had someone ask me recently like, well, how do you feel about turnarounds? I'm like, well, every company's a turnaround. Like, especially if you're in search. Like you just don't know it yet in the level of turnout. Don't go out looking for them, they'll find you. You know, these turnarounds are coming for you. So yeah, it's. Yeah. And I have relevant turnaround experience. I don't have the great outcome, but I turned around the company a few times. Right. Over a few years and negotiate with the bank and equity and you know, all that process. So it's, it's a muscle you wish you didn't have to learn. But um, but it's a good muscle nonetheless. You know, I think the interesting stuff that came out of it, you know, for me personally, I, I was able to, to land consulting gigs right away. So my, my board members noticed obviously that we, we was able to always build sales back up every year. And so they had portfolio companies they'd love for me to go talk with and see if I can help on the sales side and do some consulting and figure out how to work on growth. And so that was a huge thing for me. And within two weeks I'd replaced my CEO salary after everything had ended. And so that was a huge one.

Will Smith (82:23)

You had replaced your ces.

Joe Odell (82:25)

Correct. And good timing because Christmas is coming up and I don't want to be a Scrooge. So we're, you know, my kids were happy that I had money coming in. So. Yeah. And that, that carried us through. Beginning of the next year, Jess was able to.

Will Smith (82:40)

Which is now this year, 2025.

Joe Odell (82:41)

Yeah. And Jess, because she had about a two month off boarding with the bank she's able to land a job with as a CFO of Girl Scouts here in dfw Dallas Fort Worth area. And so that was great. And she's still there now. You know, one of the things that was tough that we've heard over the last year or so is there's been mixed feedback on how everything went down and we've even heard like some investors are terrible that were on our forward potentially or whatever else. And I just have to say, like to clear the air and A few things. Next coast partners Anthony Walker and their crew are amazing. I've heard that they tried to remove us or something like that. Not true at all. Biggest advocate for us, you know, to. To have us last to two and a half years and not be replaced is incredible. 1. Regardless of how we were doing. Like, it's just, you know, that's. That's a long period of time to let people be in the seat when things aren't going right and a lot of questions in the air. And so he was great. So.

Will Smith (83:40)

So you're. You're saying that you've heard rumors come back to you about your own deal that your investors didn't do right by you, and you. You want to make it clear that the Next coast crew absolutely did do right by you for whatever negative rumor.

Joe Odell (83:54)

Rumors are circulating then Todd, Tracy, search on partners as well. So, you know, it's great. Great crew. Been. Been really happy with the partnership there and relationships, so just wanted to make sure that that was clear. However, there's been rumors. Right. And another one is that, that Jess didn't do a very good job. And so she actually had a job on the table from a search fund group. Sorry, search fund acquired group back in earlier this year and was going to go be a CFO or something along those lines with them. And it got pulled after the. Someone on the board saw it. We don't know who, but someone on the board saw her name on it and said, hey, the way that search fund went down, they weren't somebody that was on our board, though. It was somebody from the board of the company that was acquiring. They decided to resend her offer after she already put a notice and everything. So she had an offer in hand and got pulled. And that. That was painful. She's fine. But as a friend, as a coworker, as someone that went through the fire with her, and if they talked to Todd or. Or Anthony, I don't think that would have happened. Um, and so that. That really sucks to see that happen.

Will Smith (85:04)

Yeah.

Joe Odell (85:05)

Yep.

Will Smith (85:06)

Well, glad to. Glad to hear you clear the air here, Joe. Yeah, we're starting to wrap up here, but I want to hear what you're up to now and next. And then first just. I get the sense that you don't ref. That this actually hasn't changed your view of search and ETA overall. Or am I wrong?

Joe Odell (85:28)

Yes and no. Right. I. I'm still a big fan of search. I think I would. Nothing's ever off the table for me, but having the experience I have, I'M a little more strict on my requirements. Sure. You know, I did the consulting gig through beginning of this year and things started slowing down a little bit in, in March and I met some local people that was looking for some help and one of them had offered to meet with me and kind of just pick my brain on what to do with their company. They had a small plumbing company and so I met with them and we kind of hit it off. And after about two hours, he's like, would you just put an offer in to buy my business? And I'm like, no, you don't want me to do that. Why is that? I said, I will offend you with my offer. I'm a bad buyer for you, not the right fit. He's like, well, you want to offend me and, and I think you're the perfect fit. I'm like, well, I'm not a plumber, so that's rough. So I'm. I said, if you really want me to, I'll put an offer. So I went ahead and look at his financials and gave him a offer for half a turn of his SDE.

Will Smith (86:38)

What was the SDE?

Joe Odell (86:40)

A little over 100k. Nothing too big.

Will Smith (86:43)

Okay.

Joe Odell (86:43)

Okay. And put it into a seller note with 10k down. And he took it. He said, you're the right buyer for me. Like, I'm what?

Will Smith (86:53)

And what was the revenue on this business?

Joe Odell (86:54)

Half a million. Wow.

Will Smith (86:57)

So you bought a half a million dollar plumbing business for around 50. For 50. 50 grand with $10,000 down?

Joe Odell (87:03)

Yeah. The rest on a seller note and no personal guarantee on the seller note.

Will Smith (87:07)

And now that's a tiny, fragile business.

Joe Odell (87:10)

Right.

Will Smith (87:11)

But no personal guarantee and.

Joe Odell (87:12)

Right.

Will Smith (87:14)

And the seller understood who you were and in fact, it's going well. So tell us how it's. It's gone.

Joe Odell (87:19)

Yeah, it was. The company was in decline, so even though it did a half a million the year before, when I had taken over, it had had several months of decline. And part of that was due to the seller had a heart attack in the previous year and just had taken the eye off the ball. Right. And I knew that walking in. That's why the deal was so cheap, frankly. And I took, you know, I'm like, hey, if there's just time risk, like, I'll take that, that's fine. So did that. And we have since tripled the revenue within about eight months of owning the business. And you know, we're all the money's pretty much rolling right back into it for tools and trucks. And we know I have an office that we're opening up at the end of the month. You know, I'm, I'm trying not to take any money from it. Taking a couple grand a month or so just to help bolster my expenses on top of consulting. And for the most part, other than rolling out new softwares and answering questions from time to time on pricing or scheduling, the company runs itself. The, the owner had a really good foreman who I've taken over and bonded with and become really good friends with. And, and we've, we've really done a great job of enabling him to be successful.

Will Smith (88:33)

So you've tripled revenue to what. So what is revenue now?

Joe Odell (88:37)

Our, it's really a, a go forward basis. Right. So go forward basis for a little over should be a million and a half next year. So.

Podcast Host (88:47)

Wow.

Will Smith (88:48)

And, but you continue consulting so you're not giving your full time efforts to this. And, and, and why not? This feels like, this feels like, I mean it's, it's growing like without much involvement by you. So it's just got natural momentum. Imagine if you gave it your full time, you own the whole thing. It's a, it's a, it's an easier business to understand to, to the theme of this episode. In fact, you, you, you know, you're at home in a blue collar business. It is a blue collar business.

Joe Odell (89:21)

Right.

Will Smith (89:21)

It's already been de. Risked because you're, you're now in it. I'm just, it just feels like all the indicators are, are green and now I guess it's not, it's not throwing off enough cash to pay you. That's this, that's the answer to that question, right?

Joe Odell (89:34)

It is, it is. Yeah. And like, and I'm trying to, it is throwing off enough cash to, to.

Will Smith (89:40)

Pay you a living salary.

Joe Odell (89:42)

I mean, right at this point. No, it's not paying off. Yeah. Thrown off enough cash because all the money's going back into it. Right. Like I wanted to stop growing. Yeah. I could pay myself, I could stop getting trucks, you know, because it is higher capital expenditure type business. Right. With, you know, I was thinking about it today and I was driving, I'm like, all right, one truck, $50,000. So every, every new person I want to bring on can bring in, you know, 500k to $1 million in revenue, which is great, but that's going to take a while before they're ready to do that. And are they a good fit? You know, I had to let go of somebody just this last week. I've already Backfilled, which is great, but he's not going to be ready to be on the road by himself for at least six months. So like there's all of that, that's just constantly, you're negotiating. And so if I can survive without taking money out and the business can run itself, that's the best of both worlds. Because if it never really needs me full time in it, then I'm in a really good situation. Right?

Will Smith (90:33)

Yeah, well, for sure, for sure. Unless of course, giving it your full attention could then grow faster. I mean it's sort of a time, you know, an attention allocation question.

Joe Odell (90:44)

I don't think it would grow much faster and frankly the faster it grows, the more, the more difficult it is to go to cash flow it. Right. So you actually have to have a staggered growth to allow the cash flow to support its continued growth. And I think I said to you in the pre call, I own too much of this to take out debt on it right now. Right? To take out debt. Yeah. We could jump and grow, but now we add a layer of complexity called risk in the form of debt. And instead the pathway to me being where I want to be in six months versus trying to shorten that, like it's not worth trying to shorten that to add debt to it. I'm better off just continuing to, to make ends meet on my own. And, and you know, and I'm not throwing out the idea of not taking money at some point, but if I own, own it and I don't need the money, my ability to negotiate, you know, a better position for myself is much higher that point. Right, Totally.

Will Smith (91:43)

And so then in the meantime, it's going to be consulting gigs that continue to pay the bills.

Joe Odell (91:49)

Yep. Yeah. I've got an interesting one I'm doing right now through the end of the year for an engineering group locally. They're, they're doing really well and have sold more than they can deliver. So I'm helping them with operation CRM Build out, making sure their projects are being tracked and just mapping everything out in there in our CRM. So really soup to nuts type stuff. And they've been really, really good and intentional about their growth, but they have never hired someone before because they started this up as a husband, wife team and like what do we do next? And so help them figure out that piece. Great.

Will Smith (92:21)

Well, Joe Dell, thank you on behalf of all the listeners and the ETA community broadly for sharing your.

Joe Odell (92:30)

Horror story.

Will Smith (92:31)

These stories are, are always the most valued by the audience because it's easy to get distracted by all the big numbers and happy stories. But these are the. These are the ones that tell what the risk looks like if it doesn't work out. So thank you.

Joe Odell (92:45)

You're welcome. Thanks, Will.

Will Smith (92:47)

Hope you enjoyed that interview.

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