Evan Stewart (3:56)

Evan Stewart, welcome to Acquiring Minds.

Heather Anderson (3:59)

Thank you for having me. Appreciate it.

Evan Stewart (4:01)

Evan, you were my cohort mate in.

Will Smith (4:05)

The Acquisition Lab back in January of 22.

Evan Stewart (4:09)

You're what acquisition Labs Chelsea Wood calls a closer. You are a lab grad who did.

Will Smith (4:15)

Go on to buy a business.

Evan Stewart (4:17)

Today we're going to hear that story. Start us off.

Will Smith (4:20)

Evan, what was it that turned your.

Evan Stewart (4:22)

Attention to buying a business in the first place?

Heather Anderson (4:26)

Yeah, you know, I think when we met, that was kind of the middle of my search probably, or at least the, I'd say the end of the beginning. Right where I started to get very intentional about that. Not gonna say I was always thinking of buying a business, but I think if you went back and pulled my high school classmates, they'd probably say I was one of the most likely to do so.

Evan Stewart (4:46)

I was just always most likely to buy a business.

Heather Anderson (4:49)

Yeah, just, you know, I was always kind of current events guy. Like I always knew what was happening in the world, sports, politics, whatever. And so was just always like, involved. Right. And the zeitgeist, so to speak. But, you know, it was a weird journey leading up to that. I actually got involved in politics. When I graduated college, I was a student worker up at the governor's office. And this would have been 0708 when I was graduating, economies melting down. They offered me a job to stay on full time. And I was like, yeah, sure. You know, none of my other friends have jobs. This is good. But I had majored in economics. You know, I'd always intended to go onto the business side, but, you know, I started on that process and it just kind of, it opened my eyes that there's this whole cottage industry around political campaigns, which is really interesting. And I had no idea up until that point. So ended up traveling the country, running a few campaigns, lived in D.C. a few times. And then in 2014, I ended up at a direct mail firm in Jacksonville, Florida. They had, interestingly enough, gotten a capital injection from Redbird Capital, and they are going to start to scale beyond just direct mail. Right. So that gave me an opportunity. They tapped me to help them build out a. A staffing agency for political operatives. We called it Campaign Hunter. Initially, the majority Hunter ended up winning a couple industry awards. But that just relit that fire in me to go back more towards the business side. And I started to get more serious about it. Decided then.

Evan Stewart (6:20)

So this firm, Evan, was direct mail. And that means for the political category or any kind of direct mail.

Heather Anderson (6:29)

Yeah, usually you're looking at whenever. Whenever you have a political direct mail firm, there are some that specialize specifically in political, but this one's doing some advocacy work, some non profit work, but also some political work. Okay, so a little bit of everything, but the. The main takeaway there is it was direct mail only at that point in time.

Evan Stewart (6:47)

Right.

Heather Anderson (6:48)

Direct mail, which again, was very interesting because I had never really considered, you know, how does this mail piece get in your mailbox in the first place? But, you know, from there. So with. With the opportunities I was given while I was there to build out a couple of divisions for them, that was just, you know, something was kind of lying dormant in me, and it just sort of relit that fire to go back, you know, on the business side. So decided to go ahead and while I was working to pursue my MBA at the University of Florida, did that. That was great, Wonderful. Learned a ton of. Met a couple professors there. And one of the concepts that we covered, one of the classes was entrepreneurship through acquisition. And again, that's like one of the first times I had heard of that term. Right. I'm also one of these weird people that likes to hang out at a bookstore on occasion whenever you're traveling. Just a good way to kind of kill time between meetings. And I remember I was at a Barnes and Noble, I think this was in Tallahassee. And I'm walking through the shelves of business books and I see that the Harvard book about how to buy a small business, I think it was. And you know, next to it was buy, then build. And I was like, interesting. We just kind of COVID this in that MBA in that program.

Evan Stewart (8:01)

So this would have been up now in 2017, 2018 timeframe.

Heather Anderson (8:05)

This would have been probably closer to 2019.

Evan Stewart (8:07)

2019.

Heather Anderson (8:08)

Okay, yeah, 2019. During that time, professionally, Sean Spicer, you know, he'd been with the Trump administration. He was leaving the White House at the time, and him and a guy I had known previously were starting a firm. And both those guys had different skill sets, and they were looking for someone to come on and help build out the operations. Right. The back end, just Working with creative talent, dealing with customers, working with printers across the country. So interviewed with those guys, got the job, and we did that for a couple years. That would have been 20.

Evan Stewart (8:41)

Evan, you didn't tell me you'd worked for Spicy.

Heather Anderson (8:44)

You know, I'd say it was an interesting time. Right. He's a great guy. We're still really good friends to this day. He has a lot of things going on, you know, and so it was just. I try to give him as much space as possible and just work on building the business. Right. And helping build the business. Okay. It was kind of the setup how we did things.

Will Smith (9:07)

But so.

Evan Stewart (9:07)

So that would have been right after he left the Trump administration, correct?

Heather Anderson (9:12)

Right, yeah.

Evan Stewart (9:13)

And I can't. I can't remember the chronology there. He wasn't there for the whole administration.

Heather Anderson (9:19)

No, he was. Would have been 17 or 18. So this is probably about a year after he left. I'd say that they had started it. They were doing things before I got there. Right. I was just kind of that person brought on that's like, all right, we got, you know, this line of business set up. We need help executing it. We need process procedures. Right. To help out. Okay. But, you know, so they recruited me. But, you know, that process is very clear. You know, I'm going through the MBA program. My goal is one day be a business owner. You know, we'll see what happens here. And, you know, but I'm gonna give everything that I have to help you guys build this out. So we did that for a few years, and at the same time, I'm going through that MBA program and, you know, learning a lot through entrepreneurship, entrepreneurship through acquisition, concept. And I'm going home also during this period, I should say, I got married and we had our first child. So there's a lot of change happening in my life and a lot of different things. And I finally feel for the first time in a while, I'm starting to kind of control things, my destiny a little bit, and I have choices to make, and these are going to set the tone for the next 20 years of my life, so to speak. I was telling my wife one night, you know what? I think this whole buying a business thing makes a lot of sense for me and kind of where we're at in our process. I didn't think with. With what we had going on in life, like it made sense to do a startup. I honestly, I don't think I'm one of these 0 to 1 people anyways that can take just a concept and build Something I am much better at coming in and looking at process procedure, almost consultant, like. Right. And just kind of saying, all right, here's some opportunities where we can make a difference. And she was very supportive. She had a job at Fanatics at the time. She was one of the first couple hundred employees there initially. You know, they. They had a good base in Jacksonville, Florida at the time, and, you know, it just made sense for us. So I started that process kind of looking part time. And then I had a friend who also was interested in doing this. We had talked a little bit. It was a good friend of mine, actually. And his skill set was more on the financial side. Right. And the things that maybe aren't necessarily my strong suit. So we just decided to start looking together. And this was right before COVID I'd say, yeah, maybe Covid was kind of hitting around that time. So we start this process, Covid hits, things change dramatically, but we still continue. And, you know, we're meeting weekly. And just throughout that process, we start to kind of realize that maybe we have different priorities and different goals. Right. And we're. We're at different phases of life. He was actually getting promoted at work, and it just kind of became clear along the way that this isn't aligned. Like, it's not going to work. And, you know, shock. I might have to do this alone. Like, you know, and it just kind of is what it is, but it's also a really good friend of mine. So, you know, we had to have that conversation of, you're going someplace else than I am. I'm. I feel like I'm much more serious about this than you are. I'm just going to do this by myself. And, you know, that's that. Actually, he was relieved. Right. There's a conversation that we needed to have. He felt like he was just. He. He couldn't tell me the same thing. And he was just kind of, you know, going along with it because he didn't want to let me down. But, you know, during that process, I was kind of telling myself, you know, I'm done with the agency side. I'm done on the creative side. I don't want to deal with customers, clients anymore. I want nothing to do with anything. Direct mail, digital ads, tv, none of it. You know, so as we're looking, we're looking at, like, solar panel installation companies, spark plugs, H Vacs, you name it. Nothing to have anything to do with commercial print, let's put it that way. Well, anyways, after me and my friend split, I Joined the acquisition lab. That's where we started talking. And for me, that was really good at helping me understand exactly what it is I am looking for. Right. Like, he got very intentional about it. And I feel like I remember in our exercise, we're going through the Porter's five forces. You know, on the surface, like, man, this is very elementary, like, what are we doing? But it was good because it actually made you sit there and think, like, okay, why do you like an industry that has, like, a lot of competitors, you know, so to speak? And I really appreciated that. And I felt coming out of that, a couple. After being in there, let's say a couple weeks, couple months, I was so much more focused on exactly what it is that I was looking for.

Evan Stewart (13:45)

It's funny, Evan, your. Your description of your reaction is, is one that, that Chelsea will talk about people having, which is they. They. Their focus on, like, looking inward sort of, and, and what drives you, what motivates you, what resonates with you as a business buyer. It's easy to be skeptical of that or kind of like, question, wait, why.

Will Smith (14:10)

Are we spending all this time on this?

Evan Stewart (14:12)

But it is kind of like a trust, the process thing. And you. And you realize that it's all an exercise in finding business buyer fit. That's why they spend so much time there. And, and you kind of, You. You do eventually realize just how important that is, but only after you've been kind of gone through this formal exercise that you do in the lab.

Heather Anderson (14:31)

Yeah, I'd say that buyer profile exercise, the most important one, because that's when I started to realize, like, hey, just because you hate, maybe the agency side of this doesn't mean you hate all of it. Right. And then at a conversation with a loan broker, and he just goes, you know, it's one of these things. It's so simple. Right. But he's like, hey, you know, you'll probably be able to get a lot more money if you just do something where you have some sort of experience in. And I was like, oh, that makes sense. Yeah.

Evan Stewart (15:01)

So he. He was saying that lenders are going to be willing to take more of a risk on you if you can demonstrate business buyer fit.

Heather Anderson (15:08)

Yep, there you go.

Evan Stewart (15:09)

Yeah.

Heather Anderson (15:12)

So, you know, started thinking about it more and was like, I've dealt with print operations, probably 15 to 20 of them across the country over the last, let's say, 10 years. I know some of the strengths, some of the weaknesses. I know about this industry a little bit. You know, enough to where I think I Could have a conversation about it with the lender or you know, whoever, investor, customer. I'm going to start looking there. So I just started going through old emails of just say sims or whatever companies where brokers had sent to me previously that I just totally ignored, like literally deleted immediately. They had no interest in whatsoever and came across one that was in Orlando, Florida and again at the time I'm in Jacksonville, so it's only a two hour drive down. It was called Direct one. I had never worked with them in the past and that's because they hadn't done a lot of political and let's say like fundraising, direct mail. They're mostly focused on the commercial and corporate side. So the email is probably from about 10 months ago. I just reached back out to the broker and was like, hey, you know, interested, is this still available? You know, we'd love to chat if so. And they reached back out and from there that's when it was this next phase.

Evan Stewart (16:22)

Yeah, Evan, going back to the business buyer fit process for you. So you, you went through the lab and that kind of helped crystallize your thinking a little bit. You hear from the, the loan broker that lenders are likely to give, lend you more money if you, if you buy a business in a, in an area that you've been active in before, namely printing. But what about your just sense of your own distaste for this industry? Were you just going to power through that or did you, did you realize that maybe there was an angle to this industry that you could enjoy? Because liking the business or liking the industry is, is, is also important. I mean that's kind of the X factor. Even if it, even if it makes sense practically, it's also got to make sense emotionally.

Heather Anderson (17:16)

Yeah. I think through that soul searching process I found that maybe I felt like I wasn't necessarily creating a ton of value as an individual because everything we do is like services based. Right. But on the print side this is tangible. You can feel it like it's a manufacturing environment. And that got me excited and it took a while to understand that was really the real issue. I couldn't actually see or feel what we were doing.

Evan Stewart (17:41)

You didn't, you, you reflected back and realized what you didn't like was the, the non tangibleness of kind of services work. Yes, but, but something tangible did turn you on. And commercial printing is, is nothing if not producing pieces of paper that you can touch.

Heather Anderson (17:58)

That's it. It's ink and paper.

Will Smith (18:01)

The team at Aspen HR recently published a short white paper targeted at searchers in 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 a fraction of the cost. Go to aspenhr.com or contact Mark directly@markspenhr.com.

Evan Stewart (18:53)

So what about this business? Tell us about it. Direct One.

Heather Anderson (18:56)

Direct One is a commercial print direct mail services firm. It's been around since 1998 where it started in the garage and by the time I got to it In April of 23 it was 75 employees. Two facilities that kind of are right next to each other. Based in Winter park, we have about 60,000 square feet and this year we're going to do anywhere from 110 to 130 million pieces of mail. Just kind of depends if some things we have in the pipeline hit next year. If we continue our growth, I think we're going to hit that 150 million mark. So we're on the rise.

Evan Stewart (19:31)

And that sounds like a big number, Evan. But, but, but I'm not an industry insider so give me a, give me some sort of anchoring to understand if that's big, small, medium, what we are medium.

Heather Anderson (19:42)

We are a medium sized company. Let's say you've got, you have some really big players in this space a lot up in the Midwest, just because historically it's where the industry's grown out of that. You know, some of these are going to send a billion pieces of mail. One thing I want to say we're focusing specifically on marketing mail. We're not doing transactional. Transactional meaning those statements that you get from the bank or from a utility company. We are just 100% marketing mail. So you know, it limits us a little bit from the volumes. But we're a medium sized company. Very much so. We're, we're probably direct mail specific. One of the bigger ones in definitely central Florida maybe in the state of Florida. There's a couple of big players, one in Jacksonville, a few down in Miami. But yeah, medium size.

Evan Stewart (20:26)

Okay, great. And tell us about the, the, the other numbers of the business that, that we'll all recognize. Revenue, number of employees, Ebitda, et cetera.

Heather Anderson (20:38)

Yeah. So when I bought, they're doing I think we're at $34 million in revenue, 1.8 million in EBITDA. We bought the business.

Evan Stewart (20:46)

34 million, you said? Yes, in revenue and 1.8 in EBITDA. So it's. The margins in this business are known to be thin. That's pretty thin.

Heather Anderson (20:58)

Very much so. And you know, in that 30, 34 million dollar number, that includes postage. Right. So your postage is going to be a significant amount, sometimes 50% of the cost of a project. Right. And that is pass through. You're not able to mark that up, you know, so.

Evan Stewart (21:14)

So on a 34 million dollar number, let's just call it back of the envelope. 50% of that is postage. Your real top line is more like 17. So that, that one 15. So that 1.8 million on. On 15 is. So those margins aren't as thin as they seem. It's between 10 and 15%, a little bit higher.

Heather Anderson (21:33)

But if you're operating the business, you're not necessarily getting that capital out, you know, prepayments, it's not getting out ahead of time. So a lot of times you're floating that postage. So it's very important. You have to keep that in mind. Yeah. Like your services revenues, you're looking at 15, 17 million. But that money's flowing through you. In a lot of instances, you're fronting it.

Evan Stewart (21:56)

Wow. Okay, well, we're going to return to that in a minute to understand the Mechanics here. Okay, so 34 million, which includes postage, so 15 million in Pure Services, 1.8 million in SDE, 22 facilities, 75 employees. How consistent had that revenue been? Talk to us about how you perceive the quality of revenue in the, in the business to be.

Heather Anderson (22:23)

Yeah, very, very consistent, let's say. Well, let me, let me kind of back up there. In 2019, they had merged with a competitor. This is how they ended up with two facilities. Right. 2019, they had merged with a competitor right across the street. Right down the street. Just so happened that way. So the company, it doubled in size overnight. Right. This was probably, I want to say, like mid to late 2019. And then of course, you had Covid hit in 2020. Everyone goes home. So it's a little bit chaotic from there. And then right after that, once Covid's done, you had the great paper shortage of 2021, 2022, which again affected industry margins across the board. Right. So from the merger on, they had never really had a good stable year, you know, just able to actually manage things or see and benchmark. So that kind of threw a Little bit of kink and things. And that, you know, was also an issue when we're going through diligence, considering we're basing this off 2021 and 2022 numbers.

Evan Stewart (23:23)

Yeah.

Heather Anderson (23:25)

So, you know, that was one thing. But overall, like, between the two companies, you had clients that had been here for 10 years. The, the first client that they started the business with actually had been here for 30 years. Right. Had never left. So you have a good, strong, stable client base. And the company itself, the two owners, you know, one had been here since the beginning. They, they had seen it all. They were in more of a, we're not really that interested in growth mode. Let's just kind of, we're happy, we're happy with where we are in life. It's a good business. We have, we, we have our 70 employees. We take care of them and their families. Employee longevity was solid. Like, there's very little turnover here. You had a lot of family members that worked here, just from the standpoint of, hey, we have an opening in the warehouse, and someone's like, oh, my cousin's looking. And just your usual small business mentality. This industry itself, it's tough, it's very competitive. And especially since the financial crisis, it's been consolidating rapidly. So you had folks that maybe 15, 20 years ago, they were competing with each other, and now they're all under the same roof. So everyone's kind of got a history as well.

Evan Stewart (24:38)

And part of that, Evan, is because it's also a contracting industry, is it not?

Heather Anderson (24:42)

Yes, very much so. It is. You're living in a haves and have nots world. Right. Probably until five years ago, private equity honestly wasn't even coming into the space just because of the risk level. But they are here now, and I mean, they're making a big impact. And so the, the consolidation is accelerating, I'd say, in its vertical integration, but we can get into that later.

Evan Stewart (25:07)

Okay, well, but just as you consider this business and thought about the industry, just want to understand your headspace at the time. So you see it, you see an industry that is not a growing industry. But, um, how did you think about that brought more broadly the industry itself, not this particular business.

Heather Anderson (25:26)

I was thinking of it this way. Okay. Is a mail piece going to cost more or less in five years? More. Right. What does that mean? Well, you're moving away from a million piece runs of everything being the exact same thing. Right. Exact static piece and trying to spam mailboxes to something a little bit more intentional. Right. So it's moving from, let's say, a commodity to more of a luxury. Right. Well, I'm coming out from an agency background. I understand some of these other tools that a lot of these printers, let's call them printers, but really they're print and mail service firms aren't going to understand. Like, they're just not. Like, this is like the equivalent of trying to get your uncle to go and buy you a Facebook ad. They don't know how to do it, but I did. So that was what I thought I could bring to the table. In addition to a solid book of business that I knew I could go out there and get with. Everything's hard. I'm not saying it was no effort, but like, it was there. Like, I. I knew I could bring that to the table. So I'm looking at this.

Evan Stewart (26:26)

So a book of business. Sorry, go ahead, Evan. No, please.

Heather Anderson (26:29)

No, I. I was looking at this as the contracting industry is actually a great opportunity because, yeah, the industry is going to contract, but there's still business there. So for every company that goes out of business, you still have like, you know, 50% of their book probably is still around. We can go out there and land that. And I know I can start to bring something to the table that fits exactly where I believe this industry is heading.

Evan Stewart (26:50)

So I was excited about it and just say a little bit more on.

Will Smith (26:54)

Where the industry is heading.

Evan Stewart (26:55)

So. So getting away from just the impersonal spam mail to more personalized. What. What is this. What. What is this development that you. This new capabilities that you think that you're uniquely positioned to offer into the business that it didn't already have?

Heather Anderson (27:13)

Yeah. So we're moving away from a million piece run where every piece is exactly the same to a million piece run where every piece is different. Right. Variable digital imaging is huge. You have inkjets coming online. So right now, like, if we had information or we had data that said your favorite color was blue and my favorite color was red, we could get the same L piece, but yours would have a blue background and mine would have a red background. It's all generated by the data. And so what that means is you can play, you can plug in alongside a digital strategy. Right. Because we're running the same type of ads on Facebook. Let's say you can do the exact same thing with direct mail. You can also tie in to a CRM or to lead generation forms on Facebook or Google or what have you. And if somebody clicks and like fills out a basic form of you know, we're interested, say it's a car ad or something we're interested in that could trigger, we call it trigger mail. A piece that rolls all the way through our system to the printer and we'll print them all at night. Right? So like these different sort of innovations are coming online, right? And they, it's, it's about, I hate to use the term omnichannel because I feel like it's very played out, but it is all integrated communications and integrated marketing. Like you're no longer just spending a million dollars on direct mail. You're saying, hey, how can our direct mail plan actually play with our entire marketing plan? How can you guys fit with what we're doing on Facebook? How can you make that better?

Evan Stewart (28:35)

Great. And you said these printers are not really commercial printers. They're. What did you say? Print. Print in mailing services. And. Yeah, and that you're, that's you as well, obviously. We heard you're spending millions of dollars on postage, so it must be.

Heather Anderson (28:51)

Yeah, so that's us. So 10 years ago, 15 years ago, you had commercial printers and then you had mailhouses. Mailhouses are specialized, right? You're doing inserting, but you're also putting the addresses on each piece of mail. And it's just a different function. You have to be able to tap into the USPS servers and you're doing all the NCOA work, all the cast, and you're running it through and you're creating like the walk list or the mailing list, and you're trying to put them in an order that is what you consider sorted so that way you can get a cheaper postage rate. Like, that's basically how we provide value. In addition to printing, we're getting a cheaper postage rate. So if you go, you personally go to the, to the post office and you're dropping off a hundred letters, you're going to pay the first class stamp cost, but if you had 10,000 letters, you would just give it to us and we'd be able to get them out for like 32 cents a piece. Right. Because we're doing all this work. So 10, 15 years ago, those were separate. Now everybody's a print and a mail services firm. Mailhouse, right? So that's the way it's going. It's consolidating and you got vertical integration. You're starting to see a lot of agencies either buy a print or mailhouse or, you know, the other way around because you're starting to want to drive your own demand and go in that direction. And then you also see a lot of these larger printers. They're buying digital ad shops. Right. Because they're trying to also play in that ecosystem.

Evan Stewart (30:08)

Evan, I recall you taking the listing, the opportunity to the lab where they have. What do they call it? The deal workshops or what is it called?

Heather Anderson (30:23)

It's like a search.

Evan Stewart (30:25)

The search forum. Thank you.

Heather Anderson (30:26)

Yes. Search form.

Evan Stewart (30:28)

The search form where members can bring live deals. They're looking at for. For primarily Walker, but anybody in the. In the call to provide their input on. I recall you telling me that you took this there and got Walker's opinion on it. Walker Dibel's opinion on it. What did he say?

Heather Anderson (30:45)

He didn't say. Didn't say not to do it. It was just more like had some really good questions. And he admitted, I think his first purchase was along was in the print industry and it was probably right around the time of the financial crisis. So I think he had some battle scars there. But sort of the same things we're talking about now, like it's a very tough industry. There's a lot of capex. You have to do a lot of fronting, you know, with your paper with. I don't think he was doing postage, but postage. So it's, it's tough. You want to make sure that what you're buying is legit and it is solid. And this is not something where their largest customer, their, you know, their at least top five customers aren't going away tomorrow. And that's why these guys are rushing to sell. So basically to be extra careful.

Evan Stewart (31:30)

And on that point on this customer list, you saw longevity, but you also, you also saw, you didn't see too much concentration. I could imagine in this world that there's customer concentration problems where one, one customer is like, you know, some undue percentage of the company's business. I don't know. I'm guessing. But this business, did it have that issue?

Heather Anderson (31:53)

It did not yet. A couple of customers that, you know, made up, let's say 30, 40% of the business itself. I'd say the top five. But after that and even today, I think 60, 50, 60% of my customers do $10,000 or less. Right. We're going to end up invoicing probably about 400 customers for it's all said and done this year. So it had a good mix. One thing though, I mean we're in Orlando. Everyone is that of a size is doing business with your theme parks, with your timeshares and, you know, hospitality industry. That's just going to happen. So, you know, it's. I wouldn't say you're heavy in one industry or another, or you are heavy in one industry or another. You're just not necessarily heavy by one company, if that makes sense.

Evan Stewart (32:37)

Yep, sure. Great. So anything more to say on your decision to pursue it or should we get into the structure of the deal?

Heather Anderson (32:45)

Yeah, let's say that one thing Walker did say on the call was you should ask them what their average run rate is. And I was like, okay. And so I go back and I ask and they're like, we have no idea. We can't figure that out at all. And I was like, why not? They're like, well, we have an old ERP, right? It's from like 1992, 1994. It's not even supported anymore. We basically use it for the basic, most basic information. So for me, naturally, it's kind of the way I look at things. I wasn't scared by that. I was like, oh my goodness, what an opportunity. Right? This is a classic let's replace the fax machine. So that was one good thing I got out of that call.

Evan Stewart (33:25)

Mm, great. Okay. And so this 1.8 million ste business, how. What was the purchase price and how do you structure it?

Heather Anderson (33:36)

Yeah, so we, with that, we settled on a 4x multiple, which in all honesty was probably a little high for this industry as we discussed some of the challenges. But, you know, I just, just kind of gotten to a point where I'd looked at enough businesses and I started to view things differently. I'm not going to get into a battle over a couple hundred thousand dollars if this business is a great fit for me. Right. And I felt in my guts that this was something I could definitely do, I could add value to and we should go for it. Right. So we settled on the 4x multiple, 1.8. So it ended up being, what is that, 7.2 mil.

Evan Stewart (34:15)

And to be clear, the long term plans were getting into this new evolution, this more sophisticated marketing, integrated omnichannel style of printing. That's where the, the puck is going to be.

Heather Anderson (34:27)

Correct. And they had already started the process a little bit. The printers that we have here are, you know, big infrastructure. They are variable imaging. Like, you know, that's, that's really what our, you know, our print base is. Now a lot of our clients don't necessarily utilize it fully. And so that's another opportunity. But, you know, they had already started that process. I'm not going to sit here and pretend like, you know, I had this novel idea and concept, I'm going to go and do something that no one had ever thought of. It was more of like, hey, okay, you guys have started down this path. I see that you're right. You also don't necessarily have the will at this point in time to continue down this path. Let me take it from here and kind of add my spin to it.

Evan Stewart (35:08)

One other thing to call out was you guys were still based in Jacksonville. This business is in Orlando, not that far away, but two hours is also not that close. So how are you going to navigate that? How did you navigate that?

Heather Anderson (35:23)

Yeah. So let me say kind of day one, right, we go in and we do the. The speech on the floor transition. And I got 70 something employees, and they're all kind of looking at me like, you know, who's this guy? Right? And I ended the speech with something along the lines of, and, you know, like, we're going to grow. Um, and this is probably just me kind of making it up in my head at this point, having, you know, been here a couple years and maybe using it as fuel. But I can almost promise you, I heard a couple of, like, you know, because it's okay. Who. Who is this guy? Like, he's going to come over here and tell us, like, all these different things, like, what does he know about this company in this industry? Great. Because it's challenging. It's a very hard industry. But I remember we're driving back to Jacksonville that day, me and my wife, and we're in the car. It's like a lot of silence. And I just remember looking over at her, I'm like, what did we do? You know, it's true right now we burned the boats, but that was the first, like, real. Like, oh, wait, this is real. Like, we're not in search mode anymore. I'm not out here flying out, trying to tour facility, doing diligence, you know, doing phone calls, that sort of thing. Like, this is real. Our whole lives are our mortgage now. And, like, this has got to be a success. So, you know, early on, we had discussed the idea of. We didn't want to pull the kids out of. Out of their daycare yet. I know it sounds dumb now, but they had a good preschool. My wife had. Her job was working mostly remote, but the office was there in Jacksonville. Then it was March, right? March, April. And we didn't want to, like, uproot everything. So I was just going to go down three, four days a week and stay at an Airbnb initially, but ended up finding, like, a Long term, it was apartment rental, I think, usually for travel nurses, but, you know, securing that for a couple months. We did this for probably about two months. And we've. On a personal note, I don't want to, you know, share too much information there because my wife might get mad. But, like, we probably fought more in those two or three months than we had the entire years of our marriage. Just because I'm working down here, I'm exhausted. I. I get back, I just want to see the kids and play with the kids. She's been there kind of being single mom for a couple of days. She wants to go do something on the weekend. I'm just like, I. No energy. I just want to spend time with, you know, like basic things like that. Right? So we, we pretty quickly realized that, like, this is not going to work. Like, we, we need to, we need to get down there. So we contact a realtor, put the house on the market, start that process, we head down to Orlando, we find a place we could rent for, I think, like six months just to kind of get us through the rest of this year. And, you know, we make the move. Well, a couple months later, we finally sell the house. And I start to realize that, you know, we signed the house. All these things now that we're talking about. It's very therapeutic, by the way. But now that we're talking about it, it's. It's like, man, this is so common sense. Why don't you, why didn't you think about that? Like, you don't, like you're so busy trying, like, involved in this search and just trying to find the right thing to make it work, to set you and your family up for the future, that you're not necessarily thinking about things strategically, so to speak, that, you know, looking back now are like very common sense. So we had put a lien on the house in order to, to buy this company, start to realize that, like, yeah, we're going to sell our house, but, like, we're not going to get that money. You know, it's going to go towards paying down the loan. So we had a, we had to navigate through that. Luckily, she had had a really good year with, with her company at the time. So we're able to build up her savings enough to put a down payment on a new home when that time came in April of 2024. But, you know, for a while there, it was very, very like, what are we doing? So we uprooted our lives, we bought a business. We are fighting more than ever and now we can't even afford a house, you know, and kind of those realizations that are like very. The human side of this. Right. Like the humans.

Evan Stewart (39:24)

Sure.

Will Smith (39:24)

And Evan, say more about the lean because.

Evan Stewart (39:28)

Was that because of the second, the second loan, the million dollar loan, the Perry pursuit. Because the SBA loan wouldn't have. Okay. And so literally you sell the house and if it. And whatever equity you had in the house went right to that loan, you didn't really get any of it.

Heather Anderson (39:46)

Right? Yeah. So, you know, that's kind of the options. Right. You just pay it down. Right. And that's what we, what we decided to do. Yeah, it's. It just. It is what it is. Like, I wasn't. It's. It's hard. It's hard to say it's hard. It's just. I didn't necessarily like Rue about it too much. It's just kind of like this situation. What can we do? Let's just move forward and just keep going.

Will Smith (40:13)

Looking for an SBA loan to buy a business. Then meet Pioneer Capital Advisory, your team for getting an SBA 7A loan quickly and at great terms. The team at Pioneer has closed 81 SBA loans in just the last two and a half years, with an average close time well under the industry standard. Founder Matthias Smith and General manager Valerie stash both have 10 years of SBA experience and know the process cold. There are three analysts at Pioneer who build you a lending presentation that speaks the language of the bank's underwriters and gets them to.

Evan Stewart (40:53)

Yes.

Will Smith (40:54)

Two account managers to guide you from underwriting to close as fast and smoothly as possible. And two sales associates ready to walk you through the Pioneer Capital Advisory process. That's nine people at Pioneer. A real team to get you where you're trying to go. New owner of a business. Go to pioneerCapitalAdvisory.com or click the link in the notes.

Evan Stewart (41:22)

So you sell the house, move to Orlando, get a rental. At least for now. How. How does that go? Does that at least solve the. The bickering problem?

Heather Anderson (41:32)

It does. We had downsized the house, so, you know, we're all a lot closer. We found a great. We found a great preschool.

Evan Stewart (41:41)

Space is always a good. Is always a good prescription for fighting less. I can't.

Heather Anderson (41:44)

Yeah, I know, right?

Evan Stewart (41:45)

Yeah.

Heather Anderson (41:46)

And then we, we found a great preschool the kids loved and we started to like, actually make some friends and to. To be know, become part of our new community, which is good. It was great. But I will say this. There is no way we would have survived either the business or our marriage if we would have tried to have done this like we were. Like we had initially planned to do. Right. With like me spending half the time down there. I'm up here and.

Evan Stewart (42:12)

And so Evan, do you think that was particular to your situation or would you tell others listening with families who think they're going to try to structure something like that, that they're probably overestimating, like being able to do it.

Heather Anderson (42:27)

I can't necessarily speak for people's personality. I'm just one of those people that enjoys being all in. Right. Like I am not someone that goes home and turns it off. I can't compartmentalize very well. I'll go home, I'm thinking about it. I go to bed, I'm thinking about the business over the weekend, thinking about the business. We're at T ball. Thinking about the business there. For my family as well. Do my best. But like they're just little things I don't like. Just turn it off. And she's close to the same way, I think. So that helps at least for our marriage and our dynamic. Now if you are someone that can turn it off, then like maybe you can make it work. I just know for our situation, it. It was not going to work.

Evan Stewart (43:06)

Okay, great. Going back now to the groans that you heard at the back of the room on your day one speech, whether or not you actually heard them, maybe you imagine them, but that dud, even if you just imagine them, there was a sense that you were getting that this wasn't. That this wasn't a culture. Like a very lean forward culture. Right. Say more about that. What is the culture that you found?

Heather Anderson (43:31)

Culture you found is you had a successful company, mostly the same clients that they had had for years. Not a lot of new clients, an employee base with very long tenure, not a lot of turnover, generally happy. Right. Pretty content with things. You also had several that again, a consolidating contracting industry. Someone buys a company, strategic player, that sort of thing. They'll buy another competitor, they'll say they'll come in, they'll make their promises, oh, things are going to be better. And then a couple months later they're doing layoffs. So you had a few that had been through that. So a lot of skepticism, let's say. And then I wasn't what they were expecting. Right. Like I think they're expecting more along the strategic side of someone that in another company, right. That had been in the industry. And you're going to get person in there that has More gray hair than I do. And I was just different. Like, relatively young, let's say. I don't feel like I'm that young anymore, but relatively youthful. And it was probably more of like, okay, what does he mean by grow? Right? Like, does. Does he understand the dynamics of this industry? Does he know it's challenging? Does he know who we are as a company? Before. Before we did the acquisition, maybe two days before, I called up a friend of mine who. He is a managing partner at a digital advertising firm, and they had undergone a series of acquisitions over the years, and I was kind of, you know, just. Just catch up. And he was just giving me a pep talk. And one thing he said to me that I took away was, evan, everyone has to earn the right to be heard. And that really stuck with me. And that was. That was that scenario, right? They weren't just going to sit there and listen to me and follow me just because I said, hey, you know, I'm excited. I have a growth plan. It was, show me. Show me that you care about me. Show me that you care about this team, this company, everything that we've built over the last 30 years. Right? So I took that to heart. I really did in the first six months. Eight months. Shell shocked comes to mind. But I think it was more along the lines of, like, being a little bit naive, you know, Like, I thought I understood the industry, having worked kind of tangently on the agency side. But you start to realize, man, there are a lot of things that your printer told you over the years that were totally untrue, which I get. It makes sense because it's easier for them to do. Uh, so, you know, there. There's a humbling experience there of, wow. I remember one day I came home and I told my wife, it's like, you know what? I think I might be the dumbest person in that building when it comes to this industry. It's amazing. I got some of the guys that are running these presses that have been doing this for 43 years. There's nothing they haven't seen. They have awesome attitudes. And, you know, the word imposter syndrome comes to mind a lot, because these guys have been doing this for 43 years. And one of them will come up to me and be like, Mr. Evan, what do you want us to do in this scenario? And I'm like, well, one, like, you don't have to call me Mr. Evan. I appreciate it. But two, like, what do you want to do with this? Like, what would you do? You know, my.

Evan Stewart (46:40)

My yeah, My game plan is to ask you what to do. So we could go in circles here, Evan. The going back to our earlier bit about business buyer fit. So if you get in there and realize that your understanding of this industry is a lot less than you thought, that you have naivete about it, was.

Will Smith (47:01)

There actually business buyer fit.

Heather Anderson (47:05)

Man, Great question. If I thought going in, it was 90%, let's say, couple months in, I'm probably at 60%. Like, it's just going to be a lot harder than I thought. This isn't something where I'm going to come in and flip the switch and again replace the fax machine. And, you know, this is going to be work and it's going to be work on the human side, and then it's just going to be work in general. Like, he's got to roll up your sleeves and just plan on being here as many hours as you possibly can. And setting that example, when you. When you say at the time 75 employees, you got to factor in, like, that's 75 employees, but that's probably 400 mouths to feed, right? Like, whenever you spread that out amongst their family, wife, kids, whoever else is living with them, that's a lot of responsibility. And you don't necessarily understand that until you're here and you feel it and somebody's coming to you and they're saying that my AC is out, can you give me a loan, please? These are things you don't expect to be asked, right? And it's very real because I know this person's AC is out and they have a couple of kids and we're in Florida and we're heading into the summer. So the human side, totally naive about didn't. Did not even consider. And. Which sounds dumb now, of course, but, you know, you're just so focused on, well, this is 1.8 million EBITDA and I could add this to it, and here's some of the customers I could bring over instead of, well, what am I going to do when half my employees are. Not half, but like a sizable portion of our employees are related and there's a death in the family and we're going to have like seven or eight people out for a couple of days, Right. Like, these are things these don't really consider.

Evan Stewart (48:50)

And do you give the loan? Did you give the loan?

Heather Anderson (48:53)

Yeah.

Evan Stewart (48:56)

And what is the. The, like the best practice there? Is it case by case? It must be. Obviously it's case by case. You don't just give loans to any employee that asks, but you know that this is the, I mean, I, I, Alex Holly said that after his day one, after the speech, his day one speech. Like, literally one of the, one of his new employees just immediately walked up to him, asked him for a loan.

Heather Anderson (49:22)

That's funny.

Evan Stewart (49:23)

His first interaction after his day one speech. So, so this happens constantly. How do you, is it, is there any best practice to, to handling it?

Heather Anderson (49:32)

Yeah, I'd say don't advertise it, so I probably shouldn't have put it on a podcast, but.

Evan Stewart (49:36)

Yeah, yeah, yeah, yeah.

Heather Anderson (49:39)

It was a case by case basis. And, you know, I hadn't been here that long. It's probably three months, four months. And now having been here two years, I now understand it was definitely the right thing to do. And this is a standup person. But grand scheme of things, it's. At that point in time, I'm thinking stability, right? From this is a business case I made, at least to myself. I'm thinking stability. I'm here for this first year. We don't want to lose any customers and we don't want to lose any key employees. Right? And selfishly, I'm thinking, you know what, this is the right thing to do as a human. But also, there's a good business case for this of like, hey, you're looking out for your employees and you're showing them that this isn't some mean private equity play that's just going to come in and fire everyone because they're not fulfilling my growth ambitions. You know, like, I'm a human being too, right? And my family's here and they had seen my kids kind of running around the facility a little bit, and it's like, we're all in on this and we understand that you have to sacrifice a little bit by being here, you know, a little bit later on a Friday or whatever, and you do that. So I'm going to do this for you type situation. Now, if someone knew who we had just hired three months ago comes to me, he's like, hey, I need a loan. Probably a different, different conversation.

Evan Stewart (50:50)

And you don't expect to get the loan repaid, right?

Heather Anderson (50:54)

Actually, this one they are. And we spread it out over, you know, a series of pay periods, but yeah, they are.

Evan Stewart (51:02)

Anything more to say about the, this transition or the, or the first year or two? Did you stabilize the business? Did you retain all the key people?

Heather Anderson (51:12)

We did, we did. We had that first year, I would say went better than we could have imagined financially. Right? It really did. And it could have just been timing. You never know, and some of the things that I'd wanted to bring on, bring over it. So financially went better than we could have ever imagined. For me, growth wise, once I got over my little six months of like, man, I'm showing up every day, I'm providing no value, I have no idea what I'm doing. Only a matter of time before this gets found out and everyone's just going to be like, who is this guy? Once I got over that and I just started to dive in and just say, you know what? Okay, maybe I'm not the smartest person on the direct mail side here or the print side here, but there are other things I can bring to the table and other experiences that a lot of folks, a lot of my leadership team haven't seen. Then it just got a lot easier for me. Just accepted it. It's, it's. You just, just accept the situation for what it is and ask what you can do about it and how you can get better. And once you start to do that, you do.

Evan Stewart (52:13)

Can you put some numbers behind how year one performed? You said financially it did so well.

Heather Anderson (52:18)

Yeah, let me see. So we are over 2 in EBITDA. I want to say 2. 2 services. Revenue we bought at 15. We hit 16 and 23. Yeah. So we increased revenue. Yeah, increased revenue and EBITDA costs were held in check. We got through the paper shortage. We were at the tail end of that. And so that definitely helped. You know, there wasn't paper prices going up every other week with planning and then. Yeah, that's financially, that's kind of about where we landed.

Evan Stewart (52:56)

Your wife got more involved than just being your support, although it sounds like she was there for the day one speech because you guys were driving back to Jacksonville together. So talk about her involvement here because it's more than the typical partner.

Heather Anderson (53:11)

Yeah. So you know, she had been part of the fanatics like growth story. She was employee. I don't even know. But there are a couple hundred employees of time when she started to where this year, you know, there are several thousand. I have no idea how big they really are. At one point during their growth, they had bought a company out of Tampa and they had moved their headquarters there. So throughout the last couple of years before we bought this business, they had been transitioning the employee base out of Jacksonville into Tampa. And so we knew it was really only a matter of time before they would make that ask of her. But you know, we went through with the business, the purchase, you know, gave the day one speech. We went through our Troubles that first, those first couple months, Fast forward to, I want to say, September of that first year. 23, she's actually here at the office, gets a phone call. Long story short, she's being let go as part of mass reorganization for us and kind of where we were at that point, there was no hesitation whatsoever. Was like almost. I don't want to say this lightly, but it was almost like a blessing in a way because she was already super stressed. It was a very demanding job that she had. We had her kids, we're in a new place, we had this business, right? And it was almost like, okay, that's a sign. This is what I'm supposed to be doing. And so immediately it was like, all right, you can definitely, with your skill set and your experience and your background and just being my support, you can add value here. How many hours a week realistically can you put in and what kind of life do you want to have? Right? Like we have our kids, young kids at the time, they are four and two. You know what, what do we want out of this? Like, how are we going to get the most reward for this? And so, you know, it's almost like that's one of the better things that happened to us during this process. I would love to actually get her opinion on it. I want to speak for. But we've gotten a lot closer because of it. In a way. Now it's all these situations that happen at work. I don't have to go home and set the table with her and like explain it. It's just, we can just pick up right where we were. It's like, did you see the same thing I did there? Or you know, and she has her own thing. Like, she's good, she does a lot of her marketing, right? And she's good at that stuff. And I think she gets a lot of value because hey, now it's not just going to a big company, right? And you're part of the org chart now. Like everything you're doing on the marketing side, that directly affects our well being as a family.

Evan Stewart (55:40)

And so how many hours a week does she work in the business? And this, in this vision of what you like what. When you asked yourselves, what do we want from this, what was the answer?

Heather Anderson (55:50)

Yeah, so the kids started going to daycare part time. They get out at 2, they get there at about 8:30. She'll do the drop off, she'll do the pickup, right? So she's able to play mom while the kids also get their socialization with the kids. So from the hours of about 9 to 1:45, she's here, she's helping, she's busy, she's always in, always involved. There's also things just being a small business owner and especially being in a new place, you got to become part of the community, you know, like you gotta, gotta join events or join groups, civic organizations, events, kids playing T ball, preschools, always doing fundraisers, those sort of things. So it frees up time for both of us to do those things and to become involved and to be visible.

Evan Stewart (56:33)

And it's, and it works well. It sounds like, it sounds like you're, it's actually, it's actually great having her in.

Heather Anderson (56:40)

It is, I'd say from my perspective, marriage wise, probably never been stronger. Yeah. And you know, understanding this does not work for everyone. I get it. Like a lot of people do not want to work with their spouse and I totally understand. But just for us and our dynamic and kind of who we are as people, it, it works really well.

Evan Stewart (56:58)

That's great. Heaven. Let's get a little into the mechanics of the business itself. So we've touched on the postage and that you have to float the cost before being paid back by your customer. So that's, that's two times your revenue every year in postage. So what does that actually look like? Like, give me an example job, like a hundred thousand dollar job. How does that break down between services and postage and how, how much do you have to front and when do you get paid? How's that look?

Heather Anderson (57:30)

Yeah, so you've got two or three different types of customers. Your bigger, larger mailers, like you know, billions of pieces a year, hundreds of million pieces a year type customers, they're going to have their own permits, their own permit, you know, on, on record, on file with the usps. So they're paying their own postage. Right. So typically you don't have to worry about them. It's the 60% of customers, 50% of customers that I mentioned are doing $10,000 or less. Typically they're going to come to you with a mailing, it'll be let's say 10,000 6 by 11s. They're going to send you a data file of, you know, list of folks that they want to hit and the creative, the art piece, you're going to get it, you're going to run it through your data processing system. We're going to, you know, tap into the usps. We're going to get the list perfectly sorted so they can get the lowest postage rate possible. Let's say in this scenario, it's 32 cents a piece. So with 10,000, what's that, $3,200 for services, for something like that to print, to mail it, to get it out, we're probably going to charge 15 cents a piece, right? So 15 or 1500 dollars, so you can do the math there. Most of that in that job itself, and that's a very common job for us, is going to be the postage. From there, you have two choices. If it's someone you never worked with before, you're going to want to get the money up front for the postage portion and then we'll bill them for the invoices. Net 30. If it's someone that you've got a history with, then typically you're going to go ahead and send it out at the same time. They're going to be, you're going to send them an invoice at the same time. They're going to be either cutting you a check and it'll get there in a couple of days or they'll ach you within probably 10 days is typically how it works. And it's not ideal, but this is. There are firms that are going to do this or there are shops that are going to do this. So if you want to win business, that's what you have to do, right?

Evan Stewart (59:21)

Well, it's not ideal, but it's also not, it's not, I mean, it's better than net 30 or God forbid, net 60, which you see in some industries. So you're floating it for a life shorter.

Heather Anderson (59:31)

Yeah, we couldn't survive and like, you know, obviously the bigger you are, like Donnelly or someone, they're probably not doing that. I don't want to speak for them, but I doubt they're. They're sending mail out for customers without it being completely paid for ahead of time. At least the postage portion.

Evan Stewart (59:47)

Yeah, yeah. Of course, in other industries with like net 30 and net 60, the amount that's been invoiced is going to, is, is not just pass through. So they're going to have to pay their, their own costs and their own employees back with that. They're going to have to front the cost of their, of their work product, but you're actually fronting the cost of your own services and work and print cost and cogs and this other, this other bit which is the postage, which is. So you're actually fronting them on the, you know, USPS's behalf. Almost correct. So, yeah, so, yeah, it's tight. So that's That's a different dynamic. The Capex requirements you touched on that being one of the, one of the weaknesses of the, of, of the, of the category of the business model overall. Or maybe Walker did say more about that.

Heather Anderson (60:43)

Yeah. So the equipment here, let's say it lasts a long time. Especially the older mechanical presses, right. The offset presses, unfortunately those were set up to do the million piece runs right? Where you're just trying to get it as cheap as possible down to the quarter of a penny. That, that part of the industry is slowly fading away. What's on the rise is more of this, let's call it inkjet technology. Really. It can be toner based as well, but it's digital variable imaging where it's a million piece run, but every single piece can be a little bit different. As we had touched on earlier, those presses are becoming more and more and more than the norm. About three or four weeks ago, I was at the Inkjet Summit in Jacksonville to where it's like all the big players in the space, Canon, Ricoh Screen, HP or you know, they get, they get all the, the company owners of companies my shop and my size and probably a little bit bigger in one room for a couple days and they're able to like pitch us all on their services, right? And it's interesting to see just all the technological advancements that these machines are making along the way. Those presses, you're talking a million and a half to $3 million, you know, if not higher than that. So it's not a cheap investment at all. You know, in some instances could be half of what I paid for this company as a whole. So these are big decisions that you have to make. And that's just on the printing side. Then you have the finishing systems that are on down the line. Like each piece has to get, it's got to get folded, has to be tabbed shut to meet USPS specifications or glued. If it's a letter, it's got to be inserted, right? Sometimes these letters, they'll have matches. So you may get a letter that's got your name on the outside. Inside the letter says Dear Will. And then maybe there's another piece, a reply card, something along those lines that also says will, you know, will you please donate to our calls? That's considered a match. So what you don't want to happen is for you to open that letter and instead, instead of saying Dear Will, it says Dear Evan because somebody put the wrong letter in the wrong envelope. But these are hundreds of thousands of piece runs. And so it's going very fast, right? So they have camera systems that are called read and print systems that basically you're, you're, they're reading the barcodes on these pieces, like very small in the upper right corner, typically. And if something is out of line, it'll shut the machine down, right. So that's how they keep it in order. But like, that's just the technological advances and it costs money, right? Like one of those machines costs like $70,000 just for the camera system. So it's not cheap, let's put it that way. So, you know, a lot of these shop. This is also part of the consolidation and contraction in the industry. A lot of these shops invested heavily in that offset equipment, you know, a couple of years ago, and now they can't play with where the industry is really heading, you know. So that's a driver. What else? You got your trucks. We're making three or four runs to the usps, the airport every day. We have a couple of big box trucks. We have to take care. We have to, you know, keep up and running. Tons of warehouse equipment that goes with that. We have 60,000 square foot space. And then you've got the paper. We have a really good relationship with our paper vendors, so we're able to get pretty solid terms. And, you know, they're flexible to work with us at times whenever we really need them, especially heading into a busy part of the year. But you got to pay for that paper, you know, and sometimes it's, I think it's net 60 at this point, but you know, sometimes if it's special order, it's. It's net 30. And maybe you're ordering this paper for a project you anticipate coming, but it gets delayed for two or three weeks for whatever reason. So you've made that outlay on the paper and you're holding it till this.

Evan Stewart (64:12)

Project gets started and going back to like a big printer investment. Evan. So is that, I mean, a printer that costs half of what you paid for the business, Is that something that will be necessary to really grow the business? Like, how do you. Is that going to happen?

Heather Anderson (64:28)

Oh, yeah, absolutely. That's the direction we're going. We're going through that process now. That's why I was at the inkjet summit. I'm just educating myself on as much as I possibly can because it's, it's the biggest decision we're going to make as a company over the next couple years. Right. And we got to get it right. And there's other factors that go into it. Like these machines, you're talking four or five big vendors, largely, they're going to do roughly close to the same performance, a couple different things here or there. It's really more about that relationship and the service that you're going to get with them. A machine goes down, a press goes down, how quickly are they going to have a tech out if it's same day that is dramatically different than three days like it? Oh, sure, yeah.

Evan Stewart (65:13)

And so now give us a sense of kind of where you want to take the business or what the, what the vision is, if there is a vision other than just growing it and how that plays into spending a million and a half or two and a half million on a machine.

Heather Anderson (65:28)

Yeah. So the usps, you know, I know they get knocked all the time. Yeah. Not making money, privatized, that sort of thing. But ultimately they're pushing hard into the same thing that, you know, I was talking about earlier. Right. We're moving more into, in, in away from a commodity into more of a luxury, which to me means being able to play with different parts of the marketing mix. Whenever I go in now and I'm talking to someone, usually that person is say if we're at a Fortune 500 company that's a 35 to 45 year old, they understand TikTok, Facebook, Instagram, perfectly. I'm actually doing more of an education, a consultative sales job on direct mail and the benefits of it and how it can play along with their strategy. Right. So that's the way the industry is going. Smaller runs, much more personalized and getting it there faster. Right. Which means next day turns. So we're going to invest in equipment to make that happen. At the same time, we're forming partnerships with some of these, let's say, digital advertising agencies, more or less one, we're actually up for an award. This was a political award, but we did a campaign with a texting company called Rumble Up. And now whenever you send a piece of mail, let's say if I'm going to send 10,000 mail pieces out on your behalf, I can tap into the USPS system, pull the tracking information and it'll update every four hours. And so I can see within four hours if your mail piece to you in particular has been delivered. Right. Or to whoever. So what we did with that was at the end of every day, we sent a text to everyone that had their mail piece delivered saying, hey, we sent you this mail piece. Please check it out. You know, really appreciate your support. Right. So these things are becoming, that's becoming more of the norm. Right. Instead of the exception. And that's where the industry's heading and that's where we're going to lean. So it's going to be a mixture of spending the right money on the right equipment, but also educating our staff and educating our customers on the different things that we can do. Leading with direct mail. Direct mail is always going to be the center and the focal point of what we do, but also being able to play with different parts of that process. Something else, I do want to give this a plug, if you don't mind. Something else that, that we've developed in house is we call it Direct Collect. It's a pledge processing company. So we're doing a lot of fundraising. Mel. Let's say we're doing something for, you know, the red. We're not, but like for the Red Cross or something along those lines. We're sending out hundreds of thousands of solicitations. It's got a reply card in it. That reply card goes back somewhere. Typically they're going to go to a cager, sometimes go back to the organization and the organization itself is going to do all the data entry and process the checks. But typically they're going to a third party that's going to do that process for them. All the data entry. We started our own process. It actually precedes me. They started it four or five years ago for one client in particular. And over time we've invested into it and we've created a software program that has turned this from a data entry process to a data audit. In that we're, we're scanning everything that comes in. The reply forms, the checks, all that pops up on the screen. We're able to match it back to a CRM, make sure everything's in alignment. And then we're able to send the checks, deposit the checks to the owning organization within 48 hours for us. Usually on the back end of that you're going to send thank you cards or a receipt. Well, we can go full service with that. Right. Because we're a printer. So we can send out the solicitation, we can collect all the cash that comes back, process it all, and then we can continue that conversation with the customer on the thank you portion. So it's things like that, just expanding the ecosystem, being a part of the ecosystem, understanding what all the vendors are doing as well, where they're going with their R and D budgets and seeing just what makes sense for us.

Evan Stewart (69:21)

You know, Evan, as you talk about all this kind of fancy processing that the industry is increasingly embracing. It's almost like, yes, the industry's contracting, but in some ways it's moving away from. I heard you use the word commodity and that's a good thing because you don't want to be in a commoditized business because then you're just competing on price all the time and everyone's just constantly beating each other up on price. Instead. If, if the direction here is a, is value added services, then you can, you can different. There's opportunities to differentiate and charge premium prices. And that's a much, that's a much easier business to compete in than a pure. Than a just a straight commoditized business.

Heather Anderson (70:09)

Absolutely. And I think that's where a lot of our competitors kind of miss the boat, right? They, they just accept things as, let's say they are right. They, they let it come to them of, well, yeah, we are just throwing ink on paper and it's a commodity. But if you really look at the trends, it is not. It is moving very much away from a commodity into a luxury. And so what does that mean? What can you do to increase the value of that mail piece? Doesn't always have to be a 6 by 11 flat. You can get some different inks, right? Metallic inks, things that make it stand out whenever somebody's going and grabbing their mail from the mailbox. Just basic things like that. So I think you'll, you'll continue to see in this industry some contraction, but you're also going to see the ones that survive, like, really start to, to grow and to take that next step.

Evan Stewart (70:57)

Your own career here. Evan, is this it for you for the long haul?

Heather Anderson (71:03)

No, I'm just getting started. I love this.

Evan Stewart (71:07)

But I mean, but I mean, like, did you have some plan of building this up and then, and then buying something else or doing a Holdco or selling or do you think this is, are you not thinking that far ahead or, or what?

Heather Anderson (71:23)

I, I haven't got the, the actual structure down in my head just yet. I do know that I want to do this again and again and again. I don't know if that means another company in this industry. I don't know if that means something, you know, adjacent to this industry that can help. But I do know that I still probably have a good 20, 25 years left in me of just acquiring a business, integrating it into what we already have, creating more value and then, you know, looking at the next one.

Evan Stewart (71:57)

And when you, when you say with such a glimmer in your eye that you love this. And I think you specifically mean the acquisition piece of this journey. What is it that was so magical about acquiring? Because it's been a while you've been operating. Now it seems like you're also enjoying operating.

Heather Anderson (72:13)

Yeah, I think because it's hard, you know, it's, it's nothing. You know, it's. For me, I, I enjoyed the challenge. Right. I was a very competitive person growing up. I just, you know, very unathletic. What can you say? So this is almost like, like the sport, right? It's a way for me to kind of prove something. Chip on the shoulder, so to speak. But it's, I'm, I've always been interested in like the consulting side of things. Right. And looking at like, hey, so why does a business work that way? Like, what is the point? Going through the search process, that was probably what I enjoyed the most, was diving into the different industries and understanding like, okay, here's how it really works. Here's how they make money. Here are the big players there and here's where the opportunity is and kind of building that case. And then now I get to live that out. Right? Like, I get to literally test my thesis of, okay, I think this industry's heading this way. I put pretty much my entire life on the line to test that thesis. And right now we're in a good place. You know, knock on wood. I'm never going to say, like, it's done, but we're in a good place today. And I love it. Like, I love it now. If it would have been the other way around, I don't know if we would be having the same conversation. I probably wouldn't even be doing a podcast. I'd probably be crying somewhere. But, you know, so far it's been good.

Evan Stewart (73:35)

Well, on that point, Evan, let's, let's round out our conversation with, with specifics on how it's been good. Two, two, two sub questions there.

Will Smith (73:45)

The.

Evan Stewart (73:46)

I want to hear the numbers of where you are most recently, if you'll share those. But first, the culture. So going back to the sigh at the back of the room when you said, let's grow guys on day one. How has, how has it played out? Have you gotten everybody excited about your vision? What, what's, what's that look like?

Heather Anderson (74:06)

Yeah, I mean, probably impossible to get everybody, but we, we got some key buy in and it happened pretty early on. Just different things we were doing for the employees. Something as simple as buying pizzas, you know, a couple Fridays Just things like that. And just sort of. We started sending out a newsletter, and so we just started to. To try to establish that, like, hey, we are like you. Like, this is still a family business. It is still a family environment. You are more than welcome to bring up your kids, your brother, you know, whoever, to let them see, like, where you work, what you do. Because we're proud of it, right? So we got over that hurdle, I think, pretty early on. And then there never was a mass firing, right? I didn't come in one day and say, hey, you know, you're not meeting what we want. We just kind of let it play out a little bit. And some of the folks that didn't want to be a part of this, and I would say, like, you could count it on one hand. And Today we have 84 employees throwing that out there. So you can count on one hand the ones that didn't really want to be a part of this or where we were going, Basically, they opted out themselves, right? It kind of shook out themselves. And the ones that did, you know, they're. They're excited. So when we took over, you're again, you're talking about really, it was two businesses. And then Covid hits, right? Because they had done the merger in 2019. So he had a very flat organization structure. Whenever you set in one of the former owner's office, like, people were coming into him all the time for, like, hey, we need some window cleaner. Do you know where it's at to, hey, can you help me quote this $500,000 project? And I remember sitting there like, I cannot get down in the weeds. I can't do this. Like that. That. That drains me two months. So what we've started to do over the last year is to build an actual org structure with a level of junior management. And so what that's done is give people an opportunity. Now not only do they know who they report to or who to hold accountable, right? But now they see, like, oh, wait, there's more for me. I can climb this ladder. And, like, this is the actual track to go. So they're excited about it, right? I've told them we're going to be investing in more equipment, right? We're not just taking all this money and paying out as much debt as we possibly can, or, you know, putting it in our pockets, going on a vacation to Maui, even though I'd love to, we're going to be investing back into the company because, like, we're committed to this right now. None of them have any idea about what my cap stack is. So, you know, I'm a little nervous about them hearing this. But, you know, I think, like, they would probably appreciate that, that we're not just like, totally focused on ourselves. Like, we're focused on this company and growing. And at the end of the day, whenever I go to bed, what I'm thinking about is those 84 mouths to feed, plus all their family. Like, that's what honestly drives me. And it makes it easy to wake up in the morning and come in here because I know it's not really about myself and what I'm doing. And I think, I hope that has translated right and I hope everyone has seen that and they're now excited. Like, a couple weeks ago, someone came up to me with an idea that you would have never expected. Just like, hey, I had this idea. Client was asking me for something. But like, isn't this something we could do across organization for all our clients? I think we could. That sounds great. Let's do it.

Evan Stewart (77:25)

Let's try it out. That's great evidence of a cultural shift there, Evan. Congratulations. And then lastly on the numbers. So we started at. What was it, 15 million, 1.8 in SDE. You told us what, where you'd gotten to in the. At the end of the first year. Where are you today?

Heather Anderson (77:46)

Yeah, so at the end of last year, 24, we did. I want to say it's 18.7 million in services revenue, 42 million total top line revenue. And we're over 3, probably about 3.2 in EBITDA. So it's a really good year we have with this business. Like, there is a ton of operational leverage. So fixed costs are the fixed costs. And so anything you can do over a certain number each month, it's going to really impact the bottom line. And that's just how we've started to focus on things. And it's interesting too, because you have just certain clients, they have busy seasons, right. So in a way, we only have a certain amount of equipment and certain amount of capacity. So we need to kind of. We have to be strategic about the clients that we're going after. Because if we're already heavy in the you the last thing you want to do is add another heavy client in the fall. It's just going to impact Service.

Evan Stewart (78:40)

Well, at 3.2 million in of EBITDA, you are approaching having doubled the business in terms of its. Of what it generates. Obviously that 1.8 number from before was. There was no debt service there. So it's not like You're. That's true.

Heather Anderson (78:56)

But.

Evan Stewart (78:57)

But that's. But the profitability, you've almost doubled. So that's. That's really a lot to have accomplished in, what, three years?

Heather Anderson (79:06)

Two. We're at two years and two months.

Evan Stewart (79:09)

Oh. Last year was 3.2 million. Wow.

Will Smith (79:11)

So in 2 million.

Evan Stewart (79:12)

So. So you almost doubled it in. In two years in a really notoriously difficult industry.

Heather Anderson (79:18)

Yeah, we. I mean, it's cheating a little bit because it is an election cycle, and election cycles produce a ton of direct mail. But I will say this. I want to give it all away. We are up over last year's Q1, or we finished up about 20%. So we're. We're keeping that trajectory and we'll see. I don't expect the fall to be near. I don't expect the fall to be as successful as it was last year. But as long as we can kind of keep that trajectory and still keep positive growth this year, you know, that'll be a big accomplishment for us.

Evan Stewart (79:52)

Anything we didn't get to, Evan, that you wanted to make sure to share?

Heather Anderson (79:56)

Yeah. I will say for any searchers out there, that is kind of wobbling thinking. You know, should I do it? Should I not do it? 100 do it. If you feel in your gut that this is what you need to do, do it. Don't get caught up on multiples and EBITDA kind of variation. Go down there. Meet with the owners. Meet as many people on the team as you possibly can within reason. Don't give it all away. Tour the facilities, understand it, feel it. And if you feel like it's right for you, then make it happen. Don't get caught up with, well, they want a couple hundred thousand dollars more than what I want. Who cares? If you can bring the value to the company, do it right. You got to find the right business for you. Be persistent. I'd say, you know, in a way, be deliberate. I almost want to use the term ruthless in a way, but it sounds too mean. But if you're talking to someone, let's say a business owner, you know, it's just not going to work. Quit wasting their time. Don't cut it off, move on. You only have so much time, right, to do these things. So be deliberate about your actions and then always focus on the big picture. Remember your why Whenever I go home, see the kids. Luckily they're young right now, so it's always fun. But whenever I go home and see them, like, to me, it's all at the end of a hard day. It's like, okay, this is why I did that, because I want to give them a better life and I want them to see me as an example of, hey, if you work hard, you follow your dreams, you take calculated risk, which in my opinion is what America is really all about, then you can be successful.

Evan Stewart (81:28)

Beautiful Note to end on Evan Stewart, I'll include your LinkedIn in the show notes as well as a link to direct one, but plug the URL directone inc.com. easy enough. Super, Evan. Really fun interview. And also because it's kind of a full circle for both of us. There we were learning about Porter's five forces three odd years ago and here you are sitting in, sitting in a business that you've almost doubled in. Or that. Yeah, that you've almost doubled in. In two years. Two or so years.

Heather Anderson (82:07)

Here I am. Here you are. You're like a celebrity on the circuit now.

Evan Stewart (82:12)

All right, Evan, thank you.

Heather Anderson (82:13)

All right, thanks. Have a good one.

Will Smith (82:15)

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