How to Move the Needle in a $600k SDE Trades Business

Summary

Podcast Summary: Acquiring Minds – Episode: How to Move the Needle in a $600k SDE Trades Business

Podcast Information:

• Title: Acquiring Minds
• Host: Will Smith
• Episode: How to Move the Needle in a $600k SDE Trades Business
• Release Date: February 3, 2025
• YouTube: Acquiring Minds
• Episode Summary Subscription: acquiringminds.co

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Introduction

In this episode of Acquiring Minds, host Will Smith delves into the intricacies of purchasing and revitalizing a trades-based business through an insightful interview with Kirk Olson, the owner of Mike’s Fencing in Indiana. The discussion explores Kirk’s journey from real estate to acquisition entrepreneurship, the challenges he faced in acquiring a struggling fencing business, and the strategic measures he implemented to turn the business around.

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Kirk Olson’s Journey: From Real Estate to Entrepreneurship

Background and Real Estate Success

Kirk Olson shares his foundational years, highlighting his education in computer engineering and military service, which set the stage for his entry into real estate. Starting with a single duplex in Kansas, Kirk methodically expanded his portfolio, ultimately managing over 110 rental units generating approximately $100,000 in annual cash flow. This financial stability provided him the leverage to explore acquisition entrepreneurship.

Kirk Olson [01:36]: "I've always been a pretty normal person...I did an internship for GE Healthcare but found myself yearning for ownership and financial freedom."

Transitioning from Real Estate to Buying a Business

Despite his success in real estate, Kirk sought further growth and fulfillment, leading him to consider purchasing a business. Initially targeting businesses that could synergize with his real estate operations, he encountered repeated setbacks with the owners of a fencing business who were rigid and difficult to negotiate with.

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Acquisition of Mike’s Fencing: Persistence Pays Off

Initial Attempts and Setbacks

Kirk recounts his first attempt to acquire Mike’s Fencing through his real estate partner, John Murphy. The deal initially fell apart due to the sellers' insistence on unfavorable collateralization terms, mirroring previous failed attempts with other buyers.

Will Smith [00:00]: "John bought a painting business in Michigan, but before he did, he got very close on a fencing business...When the deal collapsed at the 11th hour, he was devastated."

Securing the Deal

Undeterred by the initial failures, Kirk maintained contact with the sellers and seized the opportunity when another buyer also backed out. This persistence led to Kirk successfully closing the deal, becoming the fifth buyer to take on the business.

John Murphy [21:32]: "Without any of that, I want to be sitting here at Mike's Fencing."

Kirk Olson [22:25]: "Always stay top of mind to them in case something falls through."

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Understanding Mike’s Fencing: Business Overview

Business Description and Financials

Mike’s Fencing operates as a fencing contractor with a balanced mix of residential and commercial projects. Established in 1983 and operated by the current owners since 2001, the business boasts substantial brand recognition in Northern Indiana. Financially, the company averages around $2 million in annual revenue with an SDE (Seller's Discretionary Earnings) of approximately $600,000, translating to gross margins of 25-30%.

Kirk Olson [28:25]: "I was redoing the math...we have a 60% gross margin, about 10% above what other companies are getting."

Employee Retention and Corporate Culture

Upon acquisition, Kirk retained nine employees, with only one installer departing shortly after closing. He emphasizes the importance of fostering a positive work environment, moving away from the previous owners' hostile culture by implementing regular meetings and offering incentives to boost morale and retention.

Kirk Olson [91:11]: "We need to get to that point where it could run itself with defined procedures and strong team dynamics."

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Facing and Overcoming Business Challenges

Sales Decline Post-Acquisition

Six weeks into ownership, Kirk noticed a troubling decline in sales, dropping from six weeks of bookings to just two weeks. This unexpected downturn caused significant anxiety, threatening the sustainability of the business.

Kirk Olson [64:06]: "I was freaking out, like, man, if we're doing this terrible now, we're not going to have income to make it through winter."

Market Dynamics Post-COVID

Kirk identifies a shift in the market dynamics post-COVID, where the initial surge in demand for fencing services began to stabilize, leading to more price-conscious consumers who began seeking lower-cost alternatives.

Kirk Olson [69:15]: "People are now shopping around more. Folks that could still afford us...a little too high, so they're going with lower-priced options."

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Strategic Interventions for Business Turnaround

Rebuilding Job Costing

To address inefficiencies, Kirk initiated a comprehensive overhaul of job costing, a critical component in project-based businesses. By developing detailed spreadsheets, he gained better visibility into material costs, labor efficiency, and overall profit margins. This meticulous approach allowed for more accurate bidding and improved financial control.

Kirk Olson [74:10]: "I spent most of it sitting here in my closet and looking at spreadsheets...now estimating is more rigorous."

Implementing a CRM System

Recognizing the need for streamlined operations, Kirk introduced Job Nimbus, a CRM tailored for fencing and roofing companies. This tool centralized lead tracking, improved communication, and enhanced visibility into the sales pipeline, significantly reducing the time spent managing estimates and follow-ups.

Kirk Olson [84:29]: "I have a nice dashboard which a fair amount of CRMs do...I can look at that and see we've got 10 appointments made."

Enhancing Digital Marketing

Kirk revamped the company's digital presence by optimizing Google My Business listings and initiating Google Ads campaigns. These efforts increased lead generation, resulting in a steady influx of new projects and better utilization of the sales funnel.

Kirk Olson [80:21]: "We started pumping a little bit of money into Google Ads...now we're booked into February."

Improving Operations and Culture

Beyond financial and marketing strategies, Kirk focused on enhancing the corporate culture. Initiatives included regular team meetings, incentive programs like raffles for sports events, and fostering an environment of mutual respect and support. These changes not only improved employee satisfaction but also attracted higher-quality talent.

Kirk Olson [95:07]: "I want to help folks and provide as much as I can to them because I’m fortunate for everything that I’ve done and got."

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Results and Business Turnaround

Recovery and Growth

By mid-year, Kirk's strategic interventions began to bear fruit. The implementation of job costing, CRM systems, and targeted digital marketing led to a resurgence in sales. Mike’s Fencing witnessed a turnaround from a precarious position to being fully booked months in advance, with additional leads for larger, multi-week projects.

Kirk Olson [81:51]: "We’re still booked into February...we got two and a half crews going and everything’s running smoothly."

Operational Efficiency and Increased Margins

The refined job costing and improved estimating processes not only stabilized the business but also enhanced profit margins. Better financial oversight enabled Kirk to make informed decisions, ensuring sustainable growth and operational efficiency.

Kirk Olson [79:37]: "I wouldn't say that yet, but I think it gives the estimators and myself better visibility into whether a job is worth it or not."

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Key Lessons and Takeaways

Persistence in Deal-Making

Kirk’s experience underscores the importance of persistence in acquisition entrepreneurship. Maintaining relationships and following up with sellers, even after multiple failed attempts, can eventually lead to successful acquisitions.

John Murphy [21:32]: "Never assume that the deal you're working on is a slam dunk."

Implementing Systems and Technology

Adopting technological tools like CRMs and detailed job costing spreadsheets can significantly enhance operational efficiency, provide better financial oversight, and facilitate growth.

Kirk Olson [84:33]: "Job Nimbus gives me a nice dashboard where I can see all my appointments and follow-ups without bugging the team every other day."

Focusing on Corporate Culture

Building a positive and supportive work environment not only improves employee retention but also attracts high-quality talent, fostering long-term business success.

Kirk Olson [95:07]: "If you screw up, I'll be angry, but I'm not going to tear you up in front of everyone."

Understanding Cash Flow vs. Profit

Kirk highlights the critical distinction between accounting profit and actual cash flow, emphasizing the need for meticulous cash flow management to ensure business sustainability.

Kirk Olson [100:06]: "QuickBooks may say we've profited, but if your AR is high, you don't have that money in the bank yet."

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Conclusion and Future Plans

Kirk Olson’s acquisition and turnaround of Mike’s Fencing serve as a compelling case study in acquisition entrepreneurship. By leveraging his real estate success, implementing strategic operational changes, and fostering a positive corporate culture, Kirk not only stabilized the business but also set the stage for future growth. Looking ahead, Kirk plans to focus more on commercial projects and explore opportunities to expand into additional locations, continuing his journey of building and scaling successful businesses.

Kirk Olson [87:38]: "My focus is to be more competitive on jobs that we bid with our general contractors...opening a new location is a long-term play."

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Notable Quotes

• Will Smith [00:25]: "When buying a business, he set his heart on it, fantasized about running it."
• Kirk Olson [21:32]: "Without any of that, I want to be sitting here at Mike's Fencing."
• John Murphy [21:55]: "Never take for granted that the deal you're working on is a slam dunk."
• Kirk Olson [95:07]: "I want to help folks and provide as much as I can to them because I’m fortunate for everything that I’ve done and got."
• John Murphy [73:45]: "Putting in tech, turning on digital marketing, putting in tech...it's saving you an hour."
• Kirk Olson [100:06]: "QuickBooks may say we've profited, but if your AR is high, you don't have that money in the bank yet."

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Additional Resources Mentioned

• Upcoming Webinars:
  • SBA Lending Office Hours: Hosted by Heather Anderson on February 6th.
  • Legal Office Hours: Focused on financing debt with attorneys Bill Barlo and James David Williams on February 13th.
• Self-Funded Search Conference: SM Bash: April 2-4 in Dallas. SM Bash
• System 6: Outsourced finance team for SMBs. system6.com
• Aspen HR: Human Resources support for acquisition entrepreneurs. aspenhr.com
• Oberle Risk Strategies: Insurance brokerage for searchers by Mark Sinatra. oberly-risk.com

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Contact Information:

• Kirk Olson: k olson o l s o nikekesfencing.com

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This episode provides invaluable insights into the challenges and triumphs of acquisition entrepreneurship, particularly in the trades sector. Kirk Olson’s candid recounting of his experiences offers aspiring entrepreneurs practical strategies and inspirational lessons on building and sustaining successful businesses.

Transcript

[Will Smith]

You might recall my interview with John Murphy from April. John bought a painting business in Michigan, but before he did, he got very close on a fencing business. During that failed acquisition, he succumbed to a dangerous temptation. When buying a business, he set his heart on it, fantasized about running it. When the deal collapsed at the 11th.

[John Murphy]

Hour, he was devastated.

[Will Smith]

Well, that very business is the subject of today's interview with Kirk Olson. Kirk and John are real estate partners and they were both searching for businesses to buy independent of each other, but at around the same time. Well, the sellers of that original fencing business still hadn't sold. As you'll hear, they were rigid and difficult. So John put Kirk in touch with them so that hopefully Kirk would have more luck closing the business than he had had. And Kirk did it. Took the deal dying once, but he finally got it over the finish line. He was the fifth buyer who'd taken a run at the business. Like I said, difficult sellers. He's now seven months into his ownership of Mike's Fencing and we hear many of the themes today that you yourself can expect to encounter should you buy a project based trades business cash flow, of course, learning how to cost a job and pin down gross margins, putting in tech, improving digital marketing and the anxiety that comes when sales are dropping.

[John Murphy]

And you don't know why.

[Will Smith]

Please enjoy this interview with Kirk Olson, owner of Mike's Fencing Announcements Upcoming Webinars this Thursday, Heather Anderson will host an SBA in Lending Office hours. Heather's a prolific SBA loan broker in a name many of you will recognize, and she's going to lay out the process of getting an SBA loan step by step, stage by stage. There are many moving pieces, many stakeholders in an SBA acquisition and Heather will show you how to fit them all together to successfully close your deal. That's this Thursday, February 6th at noon Eastern. Register at the link in today's show Notes or on the Acquiring Minds homepage. Acquiring Minds Co. Then next week Legal Office Hours, this one on legal questions related to financing debt. SBA attorneys Bill Barlo and James David Williams return to cover the main legal hiccups for both SBA and non SBA loans. That is next Thursday, February 13th at noon Eastern. Register at the link in today's show Notes or on the Acquiring Minds homepage. Acquiring Minds Co Also, SM Bash is coming back around for its fourth year and I will be 4 for 4 this year. SM Bash is the original self funded search conference and networking event uniting small business buyers, operators and investors. This year it's in Dallas April 2nd through 4th, many acquiring minds guests will be there both in attendance and on stage. Get your tickets [e-mail] welcome to acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs, and on this podcast I talk to the people who do it. Running payroll, paying your bills, closing your books, and producing financials. These are critical tasks every business owner must do or oversee. But spending time on them distracts you from the leadership in growth work you want to do. So let system 6 do it for you. Owned and led by a former Searcher, Chris Williams, System 6 is a leading outsourced finance team for hundreds of SMBs, including over 50 searcher acquired businesses. Chris, Tim and the System 6 team understand firsthand the challenges, the opportunities of jumping into a business as its new owner. So whether you own your business already or have one under LOI, talk to System 6 about how they can give you time back and improve your financial operations. Mention Acquiring Minds and they'll provide a free review of your books and financial ops, a $500 value. Check out system6.com, link in the show notes or email helloystem6.com Kirk Olson, welcome to Acquiring Minds.

[Kirk Olson]

Thanks, Will. Glad to be here.

[Will Smith]

Kirk, you were introduced to me by former guest John Murphy.

[John Murphy]

John had looked at your business and tried to buy it. He ended up buying another. We will hear why, but it is.

[Will Smith]

A fencing business in Indiana.

[John Murphy]

Let's get into it. Kirk, some background on you, please.

[Kirk Olson]

Sure. I would say I've always been a pretty normal person. So I grew up in Iowa, which is about as normal as you get in the middle of nowhere. I did grow up in a city in Iowa City. Right. But that's 100,000 people, which is big for us. You know, went to high school, computers were a big thing for me. So I went to college for computer engineering. But I also had a scholarship for army rotc. And that was kind of the plan was go in the army after college, do that for 20 years, retire, get a nice little pension, and then, you know, go do something else. And that was the plan. And then computer engineering was kind of a backup of, hey, I decided to get out. I know there's great, you know, good paying jobs there. I was good at it. It was pretty easy to me. So I was kind of the backup plan. So I went to Iowa State, graduated from there, went to the army, did all that fun stuff, you know, went to Afghanistan, came back, and then after my four years, I was kind of like, you know, I had a fiance at the time. I guess we got engaged right before I got out. But I had been dating her through the end of college, through my four years in the army, and she had already had, I think, three different jobs. And I thought, okay, if she's gonna have a career, we're gonna be moving around a lot. That's not gonna happen. There's a lot of other reasons too. But I decided to get out and found myself here in Indiana looking for a job. Earl found a job here in Indiana, rewind a little bit into college, which kind of got me on this path towards entrepreneurship. I had an internship for GE Healthcare division up in Milwaukee. And for the first month, I had nothing to do. They didn't give me anything to do. So I sat inside a cubicle all day looking outside and saying, man, it's really nice outside, but I'm stuck in here doing nothing. Getting paid, but doing nothing. And I had this thought, what.it seems like on TV, what do rich people, famous people, they can go on vacation, go all over the place whenever they want. Just seems like they can go. What is it that they do to be able to just get away? Right. They don't have necessarily jobs where they've got 15 vacation days or anything like that. So I spent a lot of time on Google and those hours doing nothing. Came to realize what all of us here really know is that they own things, whether it's businesses, investments, real estate, etc. And at that time, I kind of settled on real estate would be my thing, because it seemed simple, seemed like I could wrap my hands around it.

[John Murphy]

Kirk, I have to point out that despite your moment of awakening, being looking out the window at the, you know, the blue sky and wishing you were part of it, you are now sitting in a windowless back office. Yeah, the furthest thing from being outside.

[Kirk Olson]

Right now, you know, here in an hour, I'll be outside. So. Yep, yep. But anyway, so that's. So that's why I'm still in college, before I even, you know, got into the army, all that stuff, because that was still going to be the plan, right? The real estate thing. Like, okay, well, maybe down the road, you know, we'll go that path. Well, as I start progressing through my years in the Army, I'm thinking more and more about getting out, doing something post. So I start looking into real estate a lot more. And coincidentally, right before I got out, we bought our first duplex in Kansas. So, stationed Fort Riley, Kansas, and lived in one side, rented out the other, banked all that money, moved here to Indiana, started our careers. And I went and bought a few houses in not so nice parts of town in northern Indiana. Fast forward through the years, continued doing that rinse and repeat. I didn't do anything fancy, just lived below our means. We saved. And every couple of years we had enough for a down payment and we go buy, you know, some more units. So we bought, had that duplex. Those houses didn't really pan out. We ended up selling those, but bought a 4 unit, then an 8 unit. And then that's when John and I started partnering on real estate and purchased 14, or, excuse me, 24 units. Then I bought 10 and 16. And the whole goal, you know, now in the civilian world was going towards. What I had that epiphany for earlier was I want to be free of a job so that I can go do what I want, when I want. And that was just simply it. I didn't need to make a lot of money, just needed to support me, cover my income. And that was the goal. And a couple of years ago I actually reached that goal. Didn't take a lot of units. Think at the Most I had 110.

[John Murphy]

110 doors. And what was the value of that portfolio and what was it? Cash flowing.

[Kirk Olson]

So cash flowing. So some of them I did own with John. Around half of them, I think owned the 10. We just, you know, we're 50, 50 on everything. And it was cash flowing right around 100,000 a year. So I live fortunate to live in an area that's 80% below the, you know, cost of living for the rest of the United States. A pretty cheap area. And that's, you know, that was actually more than I needed to do that.

[John Murphy]

So a hundred thousand, your piece, even those who partner with John on. So you could. Okay, great. And of course, you know, you're also building equity every month into those properties. So there's more than just the cash flow there, of course. And. And this 110 doors, what do you think the aggregate portfolio value was?

[Kirk Olson]

I would say somewhere around 4 million or so. I think we'll put it there. And I always, I track. I use a nice little app to track stuff. I only put the purchase price in and I don't ever scale it up until we go to sell it. Yeah, so coincidentally, we just sold, you know, John and I sold 50 units here for twice what we paid for it just a couple years ago. And so I didn't boost up that value until we actually sold it, which Both of us, I think we're kind of surprised that we sold it for that amount, but yeah, we did. We just got those done in November here a couple months ago.

[John Murphy]

Oh, wow. Congratulations.

[Kirk Olson]

Yep. So, yeah, so back to that, you know, I reached that point and I was thinking, all right, well, what am I gonna do with all my time? I like fishing, like hunting, but I can't do that so much, you know, and in 30 years, am I gonna feel a sense of satisfaction of what I did? Just kind of that self serving thing. So I started looking for businesses and the next.

[John Murphy]

Wait, Kirk, what about your. What about your day job? Are you in a W2 at this point or have you quit?

[Kirk Olson]

Yep. So I still. Still working. Still working. Still had a W2. It's pretty flexible. In 2021, I switched from the job I moved to Indiana for to a new job at a defense contractor. And of course that was 2021, and they were still fully remote, at least for the program management office, which is where I worked. So it was working from home. I had a really good boss who was about ready to retire, and they really spent the first year training us and I actually had to pull work out of them sometimes. So after pulling for so long and not getting enough work, I kind of went to the. Okay, well, I'm, you know, I'm going to do what you asked me to do, but I can only ask for so much work and then I'm going to go do other things. So I'll admit, you know, some of the times of playing video games at home, so, so.

[John Murphy]

But the vision here, Kirk, was that you, having gotten your real estate portfolio to the point that it was cash flowing, 100 grand a year, which you could live, live comfortably off of in your part of the country, northern Indiana, was that you do quit your W2 and kind of retire, but you just hadn't done that yet. So when you turn your attention to buying a business, the idea is still. The idea was that you're going to quit, but then what are you going to do with that time rather than just be a fisherman forever, Fish and hunt forever?

[Kirk Olson]

Yeah, I'm not that Good.

[John Murphy]

Okay, well, 30 years of doing nothing but that you'd get good eventually. Yeah, I take your point. Wanted to stay active. Go ahead.

[Kirk Olson]

Yep. Yeah. And so, you know, that was part of it. What am I going to do with the time? But then, two, if I start living off that income now, I'm back to where I was 10 years ago, to where if I want to buy more, which I want to continue to grow. I'm now back to saving a much smaller amount. Right. I'm burning that capital that's coming in instead of just reinvesting all of it. So now I'm growing a much slower than I had been over the last couple of years because most of the growth that came and from 2020 till now when we bought the 24 units, right. So now that kind of scales back down. So it's like, all right, if I can get some sort of income to live off of, continue to reinvest this. You know, that was, that was a thought. And so we first looked to what are the businesses that I use most for my rentals, which is H vac, plumbing, electrical, you know, handyman stuff. But that's mostly done by guys that I know. Right. The guy. Um, and so I looked at a few of those, found some in the area, didn't really want to move, and they were just either too small or they had, you know, issues with them. There wasn't enough meat on the bone to make it worth my while. A lot of various things. And I would.

[Will Smith]

You wanted.

[John Murphy]

You wanted to find a business that your real estate portfolio that provided services, that your real estate portfolio used, H vac, plumbing, like you said. Because why? Because you thought you could get some synergies there, some cost savings or something, or just those were the businesses that felt most familiar to you because you, you worked with vendors like that or was there some grand strategy?

[Kirk Olson]

No, there wasn't a grand strategy other than, you know, I'm spending my, you know, my real estate portfolio. I'm spending this money to have these things taken care of. I might as well spend this money and have whatever profits the company's banking come back into my pocket, right? Yeah, that, you know, I'm going to spend it one way or another. Might as well spend it my own business versus somebody else's. Yeah. So that was. That was it. Nothing special. You know, there's a small thought too of, you know, H Vac companies, right. There's. There's somebody answering that phone. So, you know, right now, tenants need me. They have a Google voice number that goes to my phone or they email me. You know, it's coming through me or to me, I could easily switch that over to that person. And now they're handling that, at least during business hours. So that frees me up a little bit. So there's a little bit of that too.

[John Murphy]

But even though you didn't find a. You didn't find a business that would do this for you, Serve this purpose directly be used by your real estate portfolio. Do you still feel like the strategy that you had there was sound?

[Kirk Olson]

Yeah, I think so. Yeah. It definitely would have been. Would have been helpful. I mean, over the last year, spent an enormous amount of money for me, updating H Vac, you know, those types of things, because we're upgrading a lot of units and fix a lot of legacy issues that we kind of just skated by with for. For a while until they failed. Now we're being proactive about it, so definitely want to benefit.

[John Murphy]

All right. And you. So you don't find anything in those categories because too small, too risky to what?

[Kirk Olson]

Yeah, that was. That was mainly it. Too small, too risky. And again, I was, you know, geographically constrained. I wanted to be. If it was going to support my real estate portfolio, absolutely need to be near my real estate portfolio here in northern Indiana. Yeah. And, you know, there was a couple that we found that were nearby. They still weren't great deals, but they were nearby and could have supported the portfolio. But for me to go there, if I need to go there daily, would have been, you know, hour and a half, two hours, one way. That's not something that I wanted to do because my whole goal was, I called it. I need to have a total life upgrade. Right. I didn't need to. I wasn't going to compromise on some things to get some other things, because in reality, I had this conversation with John, but had everything that I wanted that I needed. You know, this is. This is more of a thing keep me busy, keeps me going, entertained, and something that I look back on in 30 years and go, you know. Yeah, I feel. Feel like I did something really well, or at least I gave it a shot.

[John Murphy]

Totally. Kirk. I mean, what a great position to be in. The luxury, the luxury of choice, the luxury of time. You know, you have this. You have a W2, you have a hundred thousand dollars, your real estate portfolio kicking off 100 grand a year. You actually don't need to work if you don't want to. So you really are doing this to keep yourself busy, to keep yourself productive, to build something, to build further wealth, but no rush. So you can. You can be choosy. That's great.

[Kirk Olson]

Yep.

[John Murphy]

Congratulations. I'm not. Not to say that you fell into this. You built this door by door, this luxury. So good for you. Yeah.

[Kirk Olson]

Put it. Putting flooring in and all that in the beginning. All myself.

[John Murphy]

Yeah, for sure. Noted. Okay, so you expand your aperture. You're not finding a home Services business. What do you start seeing? Yeah. Or maybe tell us, jump in directly to the business that we're here to talk about.

[Kirk Olson]

Yeah, that's kind of where it went to next. This wasn't a short process even, because I didn't really change what I was looking for too much until, you know, John, I think a little after me, after I'd been looking for something, just again, off the cuff to biz by, sell stuff. I wasn't networking with brokers or anything like that, but him and I had had some discussions, and then he was like, yeah, I'm gonna go, you know, look for business too. And so he had come across this business and things fell apart. Right. Pretty much at the closing table, and it just fell apart. So he moved on. He took a little time off because he. Well, you could. You can hear that. That story on his. But yeah, we.

[John Murphy]

We talk about this in. In his interview.

[Kirk Olson]

Yeah. Yep. So he took a little time off, regrouped, and then pushed forward. But he did keep in contact with the sellers, just minimally by email. So it was about six months later, and him and I were talking, he was like, well, let me. Let me see if they're, you know, still for sale, if they've sold yet. So he sends them an email, I want to say June, late June of last year, 2023. And they reply, yep, it's still for sale. You know, we think they had gone to somebody else after him, and that fell through. So, like, okay, you know, after the 4th of July, let's get together and, you know, we'll introduce you to Kirk and we'll discuss the thing. So met with them, the two owners of the husband, wife, and their advisor, I think is what they call him, which was a friend of one of those guys that's been everywhere, done everything, seen everything, and knows everything. So he was kind of the roadblock, I think a lot on John's deal, the first go round, and I think on a lot of the other deals that fell through. So I met with them, they liked me enough to move forward. And so we started doing a little bit of question answers, due diligence type stuff. And then we got to the part of, here's the loi, here's what we see. And I think we had offered them, they were asking 2.3 million, and we were fine with that. That worked out well. That included real estate with it as well.

[Will Smith]

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 a fraction of the cost. Go to aspenhr.com or contact Mark [e-mail].

[John Murphy]

Is there a takeaway in the fact that John reached back out to them? The way John framed the story to me when he introduced us was that that's kind of a key insight. Here is following up with your past sellers and deals, even if you've lost them. What do you have? What do you think is there to learn here on that?

[Kirk Olson]

I would say without any of that, I want to be sitting here at Mike's Fencing. No, because that's not the first time that we had to reach back out to them as we go through the story because they do end up walking away from me. After, after we started going through the process in June and July, I think it was September, they ended up walking away from us again.

[John Murphy]

And so what is the takeaway to distill it? That if you ever, even if you're ever wondering about whatever happened to that deal or if you lost the deal but you still like it and it's six months later, just take the initiative, slash, don't be shy about reaching back out to those sellers. Just never assume it closed unless you really, really, really knew. No, it did.

[Kirk Olson]

Absolutely. Yep.

[John Murphy]

Okay. Okay.

[Kirk Olson]

Yep. Yeah. I mean usually, I mean if you've already been in contact with them, you have their contact info. Usually they're direct info, not necessarily just brokers too. If there is broker, which on this one there was. And again, they were using an advisor, not an actual broker. But yeah, it's just that simple. Simple email and follow up and you know, stay top of mind to them in case something falls through and maybe they, you know, realize that they were doing things wrong and they were the ones that were the at fault for it falling through and they're willing to give something up just case this wasn't the case for us. But you know, it is. It is what got us back in the door the second time after they left John. It's what got me back in the door the third time after they left me. And then. Which we'll hear about closing. Yeah. Yeah.

[John Murphy]

Great. Okay. And yeah.

[Will Smith]

And so Just, you know, to the.

[John Murphy]

Audience who regular listeners will know this, but every deal is tenuous until it's closed, no matter how good it looks. And so that could be your deal. So also, never take for granted that the deal you're working on is a. Is a slam dunk. It's, it's. It's tenuous, it's shaky until it's closed. But also, if you've lost a deal, if you've lost an acquisition to some competing buyer, that deal that you think you've lost to is also tenuous until it closes. So don't assume. Don't assume that something will close either your deal or a deal that you want that a competitor got. Always, if you. If you're still in a position to buy it, keep following up, keep working at it until it's truly closed, then it is done and you've lost it. Unless you were the buyer, which you.

[Will Smith]

Were in this case, happily.

[John Murphy]

Okay, thank you for that. And then, Kirk, the other thing is just the fact that this deal had. That John had the deal, and then they kicked out. And they had kicked out of another deal. How did you read that?

[Kirk Olson]

They're difficult. They are absolutely difficult. So at this point, with me entering, you know, kind of in the first negotiations with them, I think we were at count of maybe four deals, including John's, that had fell through. And so in my mind, I'm thinking, okay, well, what's the common denominator? The sellers. Right. And they talked about some of the past deals. I know, like John's fell apart because there was gonna be seller financing involved. Well, they wanted to have their portion that they sell or finance completely collateralized by stuff in the business, which no bank that was funding the rest of the loan is going to do. Right. So that doesn't make sense. Nobody in the world would ever do that at that bank. So I kind of knew. Yeah. That they were their own, you know, biggest obstacles. And initially I was believing that a good portion of that was their advisor. Again, he seen everything, done everything, knows everything, and so he's the one advising them and potentially giving them, you know, not quite normal advice, which got pulled out a little about in some of the conversations we had. Okay. That was my thought going in.

[John Murphy]

And so. And so there. Therefore, you were basically just preparing for that. So. So it wasn't necessary. Obviously, it didn't scare you away, but it, it sets your. Set your attitude in. In a way that was like, I'm probably gonna have to work hard with these sellers. And I mean, you had. You had this incredible inside track with John, who had gone all the way down with them down to the finish line. So he could really kind of probably handhold you in terms of how to interact with them, I imagine.

[Kirk Olson]

Yep, yep. A little bit. Okay.

[John Murphy]

Okay. Okay, great.

[Will Smith]

So.

[John Murphy]

So tell us about the business first, and then we'll get into how you structured the deal and the negotiation.

[Kirk Olson]

Sure. So companies. Mike's Fencing.

[John Murphy]

Mike's Fencing.

[Kirk Olson]

Yep. Fencing contractor. We install fences. Do. We're about a 50, 50 mix of residential and commercial. The commercial we do is generally direct to that company. Not necessarily working through general contractors for large bid jobs or anything like that. Very small amount of that. A lot of it's just directly. We have a lot of RV manufacturers around us, so we do a lot of their stuff over. Over the summer. A lot of them would call us and say, hey, we just had three, you know, trailers stolen. We need you to add a new gate here, add some fencing there or anything like that. So a lot of that type of stuff we are not. The previous owners had told me this, but they say we're not the cheapest in the market, and they're not. We're also not the most expensive either. But it has a great name. I never started doing this, and maybe some folks listening will start doing this now, but I never started doing this until I was looking into buying a fencing company. But now every time I drive down the road, I see a fence, I look to see if there's a fence sign on it and who's. Whose name is on it to see if we did it or someone else did it. And so I started doing that through the early due diligence. Well, early negotiations kind of the first time around. And I'm like, man, their signs really are everywhere. So they're on, you know, businesses, they're on houses. You know, it's. It's just. I'm looking all over. I'm like, wow, there's. There is a lot of them. I actually noticed more of them than our competitors, which there's. In this area, I'd say there's about two, maybe three other companies around our size or slightly bigger. So it is one of the.

[John Murphy]

And what is your size?

[Kirk Olson]

So we do. I average their. Their revenue because they did have a massive Covid bump through 21, 22 in the backside of 20. So I averaged out say, 2 million a year revenue. The SDE that I figured out was right around 600,000.

[John Murphy]

Great.

[Kirk Olson]

I was redoing the math too, actually. When I calculated that out. I had removed about 60 grand a year in case I had to because there's a husband, wife, they're both working in the business. She did most of the accounting stuff. So I actually removed about 60 grand from what I say that is in anticipation that I would probably have to hire somebody on to take what she was doing, which I haven't had to do. So that's actually been a little bonus.

[John Murphy]

Oh, great. So you treated that as an add back but then ultimately didn't need to. So that's almost kind of found money or lowered your multiple a smidge. Nice. Great.

[Will Smith]

And how old is the business?

[John Murphy]

You said it's great. Great brand recognition and done tons of fences in the area. So how old?

[Kirk Olson]

Yeah, so it was founded in 1983 by a guy named Mike and he. Yeah, he had sold it in 2001 to the owners that I purchased it from. So they'd operated it since 2001 up until this year. So 20, 23, 22 years.

[John Murphy]

Well, we like to see a business that has transacted already because it demonstrates that it can survive a transition. But 23 years ago is so long, it's really a different business. So maybe in this case it doesn't really, really count or mean much one way or the other. Right.

[Kirk Olson]

And how many employees came with nine employees that stayed on. So the only folks that left were just the. The two owners initially did have one installer leave over the summer, which was okay because he was, we call him, you know, the muscle. He carried the concrete and that was about it. And that's. Yeah, even when he wanted to do more. So anyway, so he left and we end up. We added two more folks to the install crews that are doing pretty, pretty awesome. So one had previous fence knowledge. We actually took them from one of our. What I considered a larger competitor until he told me how they were operating this year. And now I don't really consider much of a competitor, just a large name.

[John Murphy]

Just because inside the business it's a mess, not running well sort of thing.

[Kirk Olson]

Yeah, yeah. So he left there, you know, and I'd heard this one of the employees we, we have that's been doing fence since, since the 80s, since he was out of high school, used to work for this company. The current owner's dad used to own it and he used to work directly for him. So he's told me some stories about that guy. Just, you know, not a good people person, treats people poorly. Sounds like the, the son that's running it now is the same way and they're down to. They were running, like, one crew, and that crew consisted of the owner, the owner's son, and the guy that we took from him and, like, one other guy. So when we took.

[John Murphy]

So. So it was also a smaller business than you, than you thought.

[Kirk Olson]

Yeah, yeah. But the, you know, the name. So they. I think they're probably the only fence company that's been around longer than us, or at least, you know, recognized name that's been around longer than us. I think that's 50s. So they have. They have a big name, too, which is why, you know, we get compared with them a lot. When people call, you know, for fence companies, they'll call them. They'll call us, and maybe this, you know, one of the other two competitors, unless they're looking for, you know, the guy on Facebook or whatever. And so, yeah, I considered them, not knowing what I know now when I first jumped into the business, considered them one of our, you know, main competitors. And as far as, you know, people calling them, they are, but as far as actual amount of installs and customer service, they're not. Yeah. So.

[John Murphy]

Well, maybe you can absorb them, Kirk.

[Kirk Olson]

Yeah, that's. We joked about that one day, and I said, well, what am I gonna get? I'm. Get a phone number. Yeah, yeah. Which isn't bad. It's not bad, but like, their facility, we. I've been by, and it's overgrown weeds everywhere. It looks like a. An active. I'd say junkyard, but there's not junk around it. It's just overgrown. You know, it's like a derelict lot, really.

[John Murphy]

Well, totally. So not great real estate. Not a great corporate culture there. You're already competing for business from them, so. So anybody that calls them is. Is, you know, a lot of those folks are calling you anyway, so you're not actually breaking into a new market. Same market. And if it really is so poorly run and your shop is really well run and you improve it over time even more, that'll get around, and other folks and other fencing companies will hear about it, and you may able to. You may pick off some people from them without having to buy them, which I guess is what happened with this guy. Full circle on this.

[Kirk Olson]

Yeah.

[John Murphy]

Okay.

[Kirk Olson]

Yeah, yeah. And that's. That's kind of my thought, too, in the area. Right. So I put a lot of time and effort into what can I do to make our team members lives better, their time at work more enjoyable. Right. Because in the summer when it's nice out and not scorching hot, it's nice to work outside, but right now, I mean we're looking at, we talked about it this morning. We've got a large job coming up over the next two weeks and the highs are in the teens, the lows are in the single digits. We're gonna be outside putting fence in, so that's not as enjoyable. So, you know, if you want to retain people, you got to make it worth their while to do that. So you got to pay them, provide benefits and from a place they want to come work. Right. So that's, that's a huge focus of mine. We're not there yet. Hopefully by the end of next year we're a lot closer. But I don't think that's something that I'll ever attain where I want to be. And that's good because we should always be trying to do better for our folks.

[John Murphy]

Well, I want to spend some time on that, Kirk, toward, toward the late, the end of the interview and exactly how you're doing that so other people can learn how they might do it at a similar business. Just to repeat, something that I've observed in and that I just touched on in some other guests who bought kind of blue collar tradesy businesses is that especially if they bought a business that maybe didn't have the best culture, if you as new owner come in and you really do succeed in improving the lives of your employees, that it's a small world in these industries and all the local welders or fencers or plumbers or H vac technicians kind of know each other and talk that may be overstating a little bit, but word gets out and if there's a new owner at, in this case your business at Mike's Fencing who's doing great things and the employees are all really happy, people will want hear about that through the grapevine and want to come work for you. It's something that I've seen a number of times. So there's a, there's a really happy kind of passive effect that that occurs if you're doing right by your employees and really making a change, especially if you're. The competing companies are unhappy places to work. Finally, how did you think about the quality of revenue in this business?

[Will Smith]

Kirk?

[Kirk Olson]

Yeah, so that's, that was one of the things that initially kind of when John first brought to me, I was like, yeah, fence company. I was like, I don't know, man. You know, because it's very project based. It's, you know, and it's not like roofing's project Based, too. But you tend to see a little bit more of that because one, every house has a roof. Not every house has a fence. Roofs go out. You know, they say 30 years, but sometimes it's 15, sometimes it's 20, or sometimes it just doesn't match the color of the house and they want to change it to fences. You know, once they're in, they generally are in for quite a long time, unless it's a wood fence, which, you know, then deteriorates, rots, breaks, breaks off, all those types of things. So I wasn't too jazzed about it at first. I did a lot of research watching YouTube videos on fencing, just on how to do it, too, because I've installed one fence in my life, and it didn't work out so well. It's still standing today, but, you know, barely. Yeah, I was attaching the panels from Lowe's to post with, like, little metal L brackets because my spacing was off.

[John Murphy]

Okay.

[Kirk Olson]

So I wasn't too jazzed about at first, but then, you know, as I listened to people in the industry more, and I just thought about. I looked back and said, you know what? The company's been around since 83.

[John Murphy]

Yep.

[Kirk Olson]

These owners have ran it since 2001. Obviously, there's enough work that keeps coming around to keep the company in business. You know, I looked at. I had back to 2019 and their financials, and, yeah, there was, you know, a Covid bump quite a bit. But, you know, five years is three quarters of, or, excuse me, a third almost of my SBA loan timeframe. Right. So that's a good chunk of time to say, all right. Well, yeah, it definitely worked. I put it against you all the loan payments that have to make and like. All right, here's what I would make out with if I ran it like them and had these results in these years, and that's still doing pretty dang good. So that kind of got me over that hump was it's been around. It's going to be around. There's more than one company that does fencing, so it works. Yeah, I don't. I don't have to, like, the, you know, how it is or, you know, or whatnot. But. But it does work, right. And it is steady. So it shows up in different forms every month, every week, every year, but it shows up.

[John Murphy]

Yeah. Great. Well, I hear that, Kirk, for sure. And I think one useful way to think about the term quality of revenue is how likely is a dollar that you earned last year going to reappear this year? $100,000 in sold fences last year. How you to sell $100,000 of fencing this year? And of course, that's why we like recurring revenue, because it's. You can basically see you have that visibility and you have contracts. And so it's all but certain. In your case, it's less certain. Far less certain. However, with a track record like that, you know, it starts to make its own argument for predictability that even that even though you don't know where that next hundred thousand dollars is going to come from, it sure seems like it's going to come because you've got this. You've got such longevity. So the certainty that you can feel about revenue of last year, you know, happening again this year, starts to grow that certainty.

[Kirk Olson]

Yeah. And if you look just like in our target market here, which is South Bend, Elkhar area In northern Indiana, 1, the population's still growing, so there's developments popping up. And two, you know, you go to certain parts of the country, Texas is one. Where when they build a new house, they build a new wood fence with that house. Indiana and a lot of the Midwest isn't that way. There's tons of houses that don't have a fence, have never had a fence. And, you know, possibly as time goes along, you saw a lot of it during COVID hence the COVID bump. But people start wanting to have. Have their area be their area in their backyard and not have to look at their neighbors necessarily, or not have to look at them all the time or just have some sort of divider. They get more dogs, you know, so there's a lot of things that swing it from having hardly any fences around to more people getting fences even on existing homes that have never had fences.

[John Murphy]

Yeah.

[Kirk Olson]

Yeah. So. So there's a couple of those things that, you know, made me think, okay, yeah, you know, that this is going to be okay.

[John Murphy]

Yeah, yeah. Tailwinds. Great. Okay. You were going to tell us about the structure of the deal. Please return to that.

[Kirk Olson]

Now, the first time around or the second time around? Because we haven't talked about the second time around yet.

[John Murphy]

Let's do the second time around, but to when we. To get into the weeds there. But let's hear the story of how the deal collapsed the first time around.

[Kirk Olson]

Yes. Well, it kind of has to do with the structure.

[John Murphy]

Okay, go for it.

[Kirk Olson]

So, yeah, so the structure, the first go around was, you know, we're going to buy it for the 2.3 million that they wanted. We were going to, I think, put 5% down on it. And then we're going to have them carry 15%. Right. So 5% of that would have been the equity injection for the SBA loan, and the other 10% would have been just the seller note part of it. And once again, we ran into the whole we need to be collateralized issue that John ran into, and we told him, look, it's not going to happen. No bank's going to do it. SBA is going to, you know, collateralize everything to them. So we thought we got all on the same page when we sat down with them and said, look, we talked, you know, with, with the lender and this is how it'll work out. The 10%, I think it was the 10% seller note. We can start paying you right away, and after two years, we can refinance you out of it with the bank. So you'll get all that money after two years. And after those two years, we can start paying on the other note. And once you pay on that for two years, we can refinance you out of that. So in four years, you will have absolutely all your money. And it took. It was probably an hour, hour and a half conversation. And they said, okay, yeah, they seem comfortable with it. Kind of got nods that, yep, we're in agreement. And then, I don't know, a week or so later in an email, like, nope, we're not doing that. This is what we thought. And like, okay, here we go again. You know, and I think that that's when it started going down. And like, well, you know, that's where it is. And then they, yeah, they just pulled the plug and supposedly went with somebody else and Kirk.

[John Murphy]

And so the reason they pull the plug is because they returned to this collateralized thing. And so to be clear for everybody listening, what they wanted was to collateralize their loan with the business so that if you defaulted, didn't pay, pay them, they could get. Grab the business back from you. And the reason that wouldn't work is because the SBA is going to be the senior lender. They're going to be the. So legally, they're going to be the ones to recover their loan, to recover as much of the value of the loan to you as they can before the junior lender, meaning your sellers get access to any money that may be left in a default situation. And, and so the sba, as senior lender, they'll take your business as they'll use your business, the business as collateral. And you can't have two lender lenders collateral, both collateralized on the same asset or thing. So it was a non starter. If you were going to buy this with a SBA loan, the sba, your SBA lender collateralizes the business and is the senior lender and they as junior lender your sellers would get whatever's left over and would not be able to collateralize even if you. So to be clear, even if you wanted to do it, you couldn't do it. The SBA lender wouldn't allow it, right?

[Kirk Olson]

Correct.

[Will Smith]

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[John Murphy]

That was attempt number one. Then what happens?

[Kirk Olson]

So it was a follow up, right? I mean I went off and started searching for other things. I opened up my horizons and didn't really find anything worth jumping on again. It had to be a total life upgrade like I said. So if it involved moving, need to be able to find a similar house and property which we bought ours before 2020 and now everything is, you know, twice the price. So that was going to be a big hurdle to come over. So just by the way Kirk, did.

[John Murphy]

You cry on John's shoulder when this happened? You guys cry on each other's shoulder. I mean it's unbelievable the very same.

[Kirk Olson]

Thing happened to you that again, you know keep in mind that we had the count of at least four, if not five other or total, you know, deals that they had gone through and failed. So I, I gave it a slim percentage to begin with. Yeah, yeah, maybe not slim but you know that was always in my mind. Right? Yeah and I believe it today. They had, they had their list of checkboxes and every single one need to be checked to sell and if one of them wasn't checked and they didn't get their way on something, then it wasn't going to happen.

[John Murphy]

And you think that they were also this advice this advisor was whispering in their ear and giving them back. Yeah, I think probably, yeah, I think.

[Kirk Olson]

He was the one that. And now after closing and having had more conversation with him since that time frame, it may not necessarily have been just him, but, you know, somebody was putting it in their head that, well, you know, this needs to be collateralized. Because my words to them were, well, you know, if you tell me this is a great business, the tax returns show it's a very profitable and great business. So what are you worried about, you know, on me defaulting on this loan? So that, that means, you know, a couple of things happen. One, I die and I can't pay you back. And I even told myself I'd be more than happy to take out a life insurance policy for the amount I owe you and make you the beneficiaries. I can do that to help get over that collateralization hurdle. Interesting. So that, that, you know, happens. Two, I just totally destroy this place and run into the ground. Which they had reassured me over and over, hey, you know, the place pretty much runs itself. We got a great team, which, which they do. And it kind of runs itself, you know, so like, so it would take, you know, a lot of work on my part to intentionally destroy this business. So I'm like, you know, and then the others, I'm just dishonest and don't pay you. So those are really the only three things that could happen that you would not get your money back on. So, you know, and I'll take away the, you know, something's going to happen to me fear by the life insurance policy. So really the others shouldn't even be an issue. But that even. That, yeah, still, it still didn't work. Still didn't matter after the fact. That kind of helped get them into the agreement that I thought we had. But then it didn't work. So, yeah, so after that, you know, it's kind of the, the follow up. I followed up I think in October, something like in that mid, late October and said, hey, you know, just want to check, see, you know, how things are going. So, you know, they respond with, oh, things are great. You, you know, we're under contract with somebody else. We're targeting to close December 15th, I think they said. I said, okay. So I put on my calendar for December 17th to email them and see how the closing went, knowing that they've gone through five or six now and have not closed. So the odds are in favor that it would not close. And sure enough, we didn't get to that point because December 14th, they actually emailed me and said, hey, that deal fell through. And I said, wow, what is. What a surprise? And they said, we'd like to come back to you. Like, okay. So we met, I think December 22nd of last year, 2023, in person and hash things out and this go around. I said, you know, all right, we're not gonna just to get it. Get deal done, just do, you know, a whole SBA loan. No seller finance, which was the main thing that derailed it the two times that I know of. And we're just gonna ran this thing through and get it done, get it closed and move on.

[John Murphy]

Oh, wow. So, Kirk, you actually acquiesced to their not wanting even though they had come back to you?

[Kirk Olson]

Yeah. And part of that was so in the timeframe from them leaving to them coming back to me, I was searching for business more than I had been over the last two years or so, where it was kind of just casual before. Now it was like I was in the mindset of, okay, I'm done working for somebody, being an employee. I'm gonna go get a business one way or another somewhere. So I expanded my geography. We looked at other places still need to be a place that we wanted to move. It wasn't open to anywhere, but we opened that up, opened up what it could be, what the business was. So we looked at a painting company, a equipment rental company, a couple other things. But in looking at all Those, actually found two or three other fencing companies too, throughout the U.S. but looking at all of those, very few of them had the financial performance this company had. And this was also local. So this became my preferred company to acquire because of that, you know, case in point, a fence company I looked at, I think in Birmingham, Alabama, had similar revenue and about a third of the ste.

[John Murphy]

Wow.

[Kirk Olson]

And I like. Well, nope, I'm good on that.

[John Murphy]

To be clear with the audience. It was. You said 2 million in revenue and about 600 in SD. So those margins are. Wow. Well over. What is that, 20, 30 ish percent.

[Kirk Olson]

Yeah, I call around 30, 25 to 30, depending on the year.

[John Murphy]

Yeah, yeah. And it trades. Kind of a trades business. That's. Those are. Yeah, those do seem like great margins.

[Kirk Olson]

Yeah, yeah, yeah. We run, you know, now being in the industry for eight months or so. I've met other owners and, you know, a lot of the. I'll call established residential, mostly fence companies in other markets, some in Indiana. They get. They're happy to get around 50% ish. Gross margin. You know, it's just their labor, their materials on that. Whereas we're sitting at right now about 60% gross margin. So about 10% above what other companies are getting.

[John Murphy]

And so what's the secret? You're underpaying your people or charging a premium to the customer?

[Kirk Olson]

It's definitely the premium part.

[John Murphy]

Premium pricing.

[Kirk Olson]

Yeah, it's definitely premium pricing for a lot of reasons. Again, some of it's the name. Some people just come to us.

[John Murphy]

Well, let's put a pin in that because I want to get into kind of your strategy about residential versus commercial, and I think this will play there. So, so let's, let's wrap up the deal and get into your, your operation. Your operations here. So, Kirk, So. So you capitulated on their demand, but for good reason. Because you had been out there enough to recognize a good business when you, when you see it. You really wanted this business. Go ahead. So what did this structure then look like?

[Kirk Olson]

So it was just a simple SBA loan, 90% loan and 10% down on my part, closing costs, all that good stuff. And we just kind of moved forward with that. There was still a couple hiccups on the way, some terminology issues. They wanted a $25,000, what they called non refundable deposit, to which, you know, said, no, you're not getting $25,000 of my money. That you can just cancel the deal tomorrow, knowing that they, you know, tend to walk away. Right. And they could just say no tomorrow and take that away. And so There was a 6am phone call with their advisor and he was, well, no, no, it's, you know, it's. And I told him, said, look, man, like a real estate deal. I'm in real estate. Like you have a deposit. If you don't perform on the contract, then I get my deposit back. So that's not, you know, that's not non refundable. Yeah, yeah, well, but, but that's what we mean. Okay, well, it's not a non refundable thing. So he said, well, just put in there the terms, you know, that if XYZ happens, that you get your money back, and said, okay. So I, you know, put into the LOI, you know, here's this $25,000 deposit which will be returned to purchaser under certain circumstances. And you know, basically listed, hey, if they walk away for any reason or a few other things. So we got over that hurdle, but that was kind of a sticking point too. And then.

[John Murphy]

And what about your lender? The lender was fine. With them not taking a seller note. Lenders usually want to see a seller.

[Kirk Olson]

Yeah, no, so I worked with, I worked with Huntington Bank. It was really good throughout it. Yeah. And nope, they didn't, they didn't mind. I don't know if it was because there's, you know, so much excess over the loan amount or what it was, but they didn't bat an eye. You know, the first time around they gave us a commitment letter with the seller financing with the stipulations on there and how we, how and when we could pay the sellers. And then the second time around we were trying to get it done quick or quicker, if that's a thing. And you know, they turned around the commitment letter within a week or so and we had that to the sellers and off we went.

[John Murphy]

Do you want to name the actual broker that you use or the lender that you used at Huntington?

[Kirk Olson]

Yes, I used Glenn Gyro, but I. Yeah, but I don't believe he's with Huntington anymore. I think he's moved on to someone else. But he was phenomenal to work with.

[John Murphy]

What was his name?

[Kirk Olson]

Glenn Gyro. G I R O. Yeah.

[John Murphy]

Great. Okay. And there was real estate in this deal. How did that impact the loan and the structure of the deal and how, first of all, how much was the real estate worth?

[Kirk Olson]

Yeah, so the real estate, I think we had originally put it on the LOI or any of those documents between us at like 405,000 because they had it appraised previously through one of their other failed sales at 405,000. So that's how we had it on the contract. When the appraisal actually came back, it was 440,000. But we didn't switch paperwork because it really was kind of a moot point, but obviously allowed me to get a little bit longer amortization on the SBA loan. Instead of 10 years, it went to 13 years because the value of real estate being wrapped into it.

[John Murphy]

Talk about that, Kirk, because we will hear a lot or from time to time that if the real estate value in a transaction is more, is 50, is more than half. So 50, 51% and above, you can get a 25 year amortization schedule on your SBA loan. So, so very generous amortization, but I, I thought that was kind of binary. I didn't realize that there was a sliding scale there. So you're saying that because this, the real estate was, call it 20ish percent, little, maybe a little bit more of the transaction value that, that slid your amortization from the typical 10 years to 13. So it is a sliding scale. Is that something you're aware of or just in this case, or what?

[Kirk Olson]

Yeah, the way that Glenn had talked me through it on their forms that we filled out is basically they. Huntington was looking at it as almost two different loans. Right. So here's the loan for the business and the amount, and that can be done over 10 years. And then here's the loan for the real estate, and that can be done up to 25 years, whatever. And then they do what they call blending it together.

[John Murphy]

Sure.

[Kirk Olson]

It takes, you know, whatever the percentage is and the years, and somehow they came out with, you know, 13 years or something like that.

[John Murphy]

Okay, sure.

[Kirk Olson]

To be able to see us, they basically, you know, blended it all together.

[John Murphy]

That is definitely something we hear about plenty. So. So blending can. Can land you at an amortization schedule that is somewhere between 10 and 25 years. Okay, got it. Great. And then one of the other things that you'd said is you did not include accounts receivable. That accounts receivable was not. Talk to us through that. Talk us through that.

[Kirk Olson]

Yeah.

[John Murphy]

So they.

[Kirk Olson]

I think originally on John's deal, accounts receivable was included. And then after that, they realized that, you know, or they thought that during a transition, it was just going to be a pain to figure out whose dollar was their dollar and this. And, you know, in their mind, too, hey, we completed that work, so technically that's our money, even if, you know, you include that into how much you're paying for the business or whatever. So, yeah, with mine, they didn't want to do. They want to include any ar. And I was okay with that for the fact that I was getting the customer deposit. So for us, and most of the work that we do, we collect 50% of the cost of the job up front as a deposit from the customer, and then we collect the other 50% after we completed the work. So again, with the margins that we have, that 50% more than covers the actual material and labor to do that work.

[John Murphy]

Wow. So with that deposit on a project, you are already in the money actually, because your margins are.

[Kirk Olson]

Well, yeah. You're starting to pay overhead with some of that deposit, Right?

[John Murphy]

Exactly. That's amazing. The working capital. So the working capital here is. Is that common to fencing for people who might be looking at a fencing business?

[Kirk Olson]

Yeah. You know, other folks I talked to, most residential focused contractors take some sort of deposit up Front. Most are 50, some are, you know, 30 or something like that. But most of Them take some sort of deposit up front because, you know, a lot of the stuff like I don't carry. We don't carry a lot of inventory for vinyl or aluminum because there's so many different variations of it that people can order all sorts of different things and we just have inventory sitting for years in some cases. So we order what they call job lots per job. So somebody orders X amount of fence of this type of aluminum pvc, well then we go order it. So we need that in theory, money to go order it if they were to decide to cancel that job. Well, now I've spent that money on some aluminum fence that maybe nobody else ever wants out for good. Right. So they'll make sense to do that. Some commercial jobs, like some school systems that we do, we don't take 50% deposits because they don't do that or we've worked with them in enough that we don't worry about it. But yeah, residential and some of the, you know, direct to company jobs that we do, it's 50% up front gets us that material and those types of things. So, you know, going back to the transition there, you know, so I got all the customer deposits for the work that they had. So in total it was like a check for 194,000 or something like that that they gave me at closing for the customer deposits. So my mind was that all right, we're doing jobs, the jobs that are done. Day one of me being here is one where I'm going to start collecting on that second half of the 50% right for the job and say it takes them 30 days to pay me. After that we start charging late fee. So really I figured I only need to survive for about 30 days before I'm getting a regular income of that job completion money to actually start really paying the overhead, making profit and those types of things. So I wasn't too worried about it. Also, part of the loan package with Huntington was they gave me 100, didn't give, I'm paying for it, but you know, I got a $100,000 working capital as part of the loan that they made too. So that luckily with the customer deposits, figured I wouldn't need to do it. So I just put that in my loan account for the year and let that draw down out of that instead of taking money out of the operating account.

[John Murphy]

So on the accounts receivable. But they did give you all of the customer deposits.

[Kirk Olson]

Yep. Those were jobs not completed yet. In theory, they could have canceled their job and then we would need to refund their money minus any material we potentially had bought for their job that we couldn't return.

[John Murphy]

Okay. And they were fine with because some of those that deposit money that they'd collected, they had already spent on materials and stuff. So they were actually being, you know, giving you money. It didn't break down perfectly in terms of the, the, the kind of percentage job complete you were just getting money for. It was, it was in your favor.

[Kirk Olson]

Yeah, yeah. So, you know, day one, the jobs we completed, day one, I got the customer deposits for that, you know, job, even though we completed day one and we're going the next day.

[John Murphy]

Yeah, exactly, exactly. That's great. Okay. And so. And then the way your business works is that the job completes, you invoice and you get paid 30 days later. So worst case scenario, you needed to. To. Worst case scenario, you weren't going to get any checks written to you as new that you could collect as new owner of the business until day 31. Likely you'd start getting money paid sooner than that. But that was the worst case scenario. So you were basically like, how am I going to do I. Do I have a way to get through these 30 days if no revenue comes in?

[Kirk Olson]

Right.

[John Murphy]

All right, fantastic. So let's now spend the rest of our time just talking about what you've done in the business, what you've seen, you know, now that you're the owner first on.

[Will Smith]

So when did you close?

[Kirk Olson]

April 25th is when we signed all the paperwork. So the 26th was my first day.

[John Murphy]

How did day one speech go, by the way? How did people react? They must have known after five and six attempts by the sellers that they were trying to sell.

[Kirk Olson]

Yeah, most. Most of them did, you know, and that was one thing that was the scary thing for me, not being able to meet the employees right before purchase, which is normal. Understandable. I get it. Especially when you've gone through four or five of them. But yeah, most, most folks were not surprised. Most folks kind of openly knew or had been told by the owners. Right. A couple of them had shared with me since that, yeah. On this day we were told all to meet in the office and at whatever time. And then all of a sudden we got a text message saying, no, don't worry about that. Go about your day. You know, when one of the failed sales, what happened? I think that was the one where, where the guy actually just didn't show up to, to purchase it on the day of closing. He just didn't show up to it. So I was on that. That was on the. The potential buyer. But I don't, you know, the reasons could have been similar or. Or whatnot. Yeah.

[John Murphy]

Great. Okay. And so did the team react to you? Well, Anything to say about that?

[Kirk Olson]

Yeah. So there wasn't a whole lot of reactions at first. I think I said maybe four or five sentences. The rest of the time was the sellers talking and crying a little bit. And so I just let them do their thing and kind of stood there. And then after that, I think somebody asked me one question, and then again, the sellers hopped in and started talking and talking about their time and everybody else. And I was going to let them have their time. Right. Potentially, you know, the last time. Well, it was their last time as the owners. We had an agreement that they would come in and help me, that we could extend and all those things. But, you know, in theory, they were no longer the owners, so I let them have their time, and then we kind of went right out of business.

[John Murphy]

Great. You had said, Kirk, that pretty soon into the business, you got a little worried. The sales weren't coming in. Let's hear about that and how you fixed it.

[Kirk Olson]

Sure. Yeah. So, you know, day one, business looked good. You know, we were booked six weeks out or so. You know, we got to check for the customer deposits. That was a good chunk of change, you know, and things were going good. And then the month of May goes by, and, you know, I'm looking at how many estimates we sent out and how many, you know, actually got accepted. And I'm like, what's. What's going on here? Right. We went from six weeks out or so of work for both of our crews down to, like, two weeks out. And in my mind, I'm thinking, you know, this is summer. This is supposed to be where we make hay and, you know, bring in a boatload of the income so that in the winter when it's. There's less work, it's colder out, people aren't outside thinking about fences or think about installing fences or think that they can't be installed in the winter, that we've got that profit then to keep us floating by and all those things. So, yeah, so I was freaking out, like, man, if we're doing this terrible now, we're not going to have income to make it through winter, or I'm going to have to start dumping money into it. On the end, the work that we were doing, I broke down the numbers, like, all right, if our target's 2 million a year, that means, you know, over 250 working days, call it, we need to do 8,000 days, $8,000 a day in revenue. And we were hitting like, you know, we'd get. Ended up averaging out pretty close to that, but it was still under it for the average. But some days it was like, hey, you know, we got a couple repair jobs and small installs, so it totals maybe 5,000. I'm like, this isn't going to work. You know, what's going on here? And so it was like that through May, you know, you know, we kept work, but it kind of stayed within that two week. I think we got out to four weeks maybe. But there were a lot of, again, a lot of small repairs, small jobs, not installing, you know, people's whole backyard fence. And so it was. It was very worrying. There was a lot of times I woke up at 1am, 2am and could not go back to sleep trying to figure out, what are we going to do? What can I do? You know, the thought went through my mind all the time of, do I just start selling what. What real estate I have left and use that to pay off this loan so I can get out from underneath that? I was in a fortunate spot to where I could sell all my real estate and grab a couple other things and pretty much pay off the SBA loan. So I had that in the back pocket. I really didn't want to for, you know, wealth sake and just, you know, that's what I built. And I like those things. They just produce money month after month. But there was that option, and it crossed my mind for months. And, you know, I got to the point where I was telling my wife, I was like, you know, I don't care what happens. I just don't want to lose the house that we live in. That's how. Yeah, I was, I was that worried at one point because it was, you know, it was. It wasn't like previous summers. I'm talking, you know, with the folks that are here and they're like, yeah, we've never been this low in the summer. I'm like, well, that's not comforting. Yeah, you know, and so it's just a lot of. Lot of downhill stuff. I talked to as many people as I could reach out to in the industry, which wasn't a ton, but some, you know, some of our vendors, our salespeople that had been with the company for years, and they're all telling me, hey, you know, residential fence throughout the country is pretty soft. Commercials, you know, normal, ish, but residential is pretty soft. Talked to some Other folks, and they like, well, we switched website vendors to one that only does fence companies, websites. And talking with them, he said, yeah, you know, he goes, it's, it's very up and down. He goes, we've got some of our customers that are saying it's the worst year they've ever had. And some of them are saying it's the best year they've ever had. Looking back on it now, I now know that it was mostly, you know, over the past few years, people wanted a fence because they want to be away from people or whatever or had Covid money and they didn't really care too much how it cost. They got somebody to come out, gave them a quote. Everybody in the fence world was busy. So if they could get somebody to come out and give them a quote, they were signing up with them to install their fence. So people could pretty much write not necessarily everything they wanted, but just costed it, however, and they would get the work. And this year customers are more price conscious, so they shopped around a lot more. So the folks that tend to be on the lower spectrum or even the middle spectrum, we're getting a lot more work, whereas folks that are on the upper end, like we are of cost, we're getting passed up a fair amount. So then that led to and, and.

[John Murphy]

Kirk, was this just a supply and demand thing where in the immediate aftermath of COVID just like you know, so many of the trades, there was this incredible home services, I should say there was this incredible surge in demand and then. But once that had been absorbed, it kind of so, so, you know, incredible demand, so not enough supply. So everybody in these home services businesses could raise the prices. But as that demand was absorbed, then prices come back down because there's basically less demand from consumers. Is that, is that what it is? I'm kind of extrapolating or do you think this is something unique? Defense?

[Kirk Olson]

No, no, no. I, I don't think it's unique to it at all. I think that's, that's, that's right on. Except for the end. I wouldn't say that the prices necessarily come back down. Like we haven't lowered our price. It's just that folks are now shopping it around more. So more often they're going with a lower priced option as opposed to where before, like I said, you know, it didn't really matter what the price was. As long as they could afford it or had a way to get it, they were gonna, they were gonna get it. Now it's, it's, you know, the folks that could still afford us, like, yeah, but that's a little too high. So we're gonna go with this, you know, person that said they can get the material from Lowe's or whatever, and they'll do it at a quarter of the price. All right, you're not my customer. That's fine. Right? So, yes, so I agree with that. Everything except for, you know, like, we haven't lowered our prices. It's just there's other people out there that fit that price range more for some people.

[John Murphy]

Okay.

[Kirk Olson]

Yeah. And I would say, you know, and I kind of expected it a little bit. I didn't know, you know, I didn't know how emotionally taxing it was going to be on me. But look, just looking at their tax returns, right, I watched from 2019, 2020, they were hanging around 2 million for it to jump up, you know, half a million in one year, the next year. And then it slowly came down year after year back to 2023, which was again, right around 2 million, which is why I call that kind of their norm. So you could see it in the tax returns of it jumping up and then trailing off year after year. So I kind of expected it. But, yeah, I had no idea, you know, how I was going to react to it or how, you know, it looked from the inside. And it was.

[John Murphy]

How did you react to it? Kirk, you've mentioned waking up in the middle of the night. Where was your headspace at? Or you seem like a pretty cool customer. But, I mean, how tormented did you become?

[Kirk Olson]

Oh, it was awful at work. I was fine for the most part. You know, really. I mean, we talk about with my folks here, sales guys, ops guys, you know, and we'd acknowledge, yeah, we're not that far out, like, what's going on? And, you know, I looked a lot of them say, hey, tell me, what's the norm? Because I don't know what it is.

[John Murphy]

Well, what is going on, guys?

[Kirk Olson]

Yeah, please.

[John Murphy]

Yeah.

[Kirk Olson]

How it has been in the past? Is it how it has been? And. But then, yeah, at home, like, my wife took the brunt of it. I would just go home and I'm just like, all day, all night, just thinking about, like, what can I do? Did I do the right thing? That I do the wrong thing? Are we totally. You know, did I undo everything I've done for the last 10 years? You know, remember, it's supposed to be a total life upgrade, and I feel like it's a total life downgrade at the moment. And slowly but surely, I Just said, okay, this is, you know, what I'm going to look at and this is the thing I'm going to work on. So some of it was our pricing. Previous owners had a, you know, a way to cost a job. But the last day I actually had the wife in here, I had asked her, I said, well, how did you come up with, you know, I get the materials, this is the material cost, here's how much we mark it up, but here's how much you charge for labor. Like, how'd you come up with that amount? And she said, well, we used to charge less and we started charging more and still got work. So we just left it there. All right, well, that's kind of arbitrary. So then I asked the follow up question, well, how do you know if you're making money or losing money on each job? Oh, if you want to know that, you probably have to get a hold of our accountant. There's more money, you know, at the end of the month than at the beginning and more money at the end of the year than the beginning of the year. So, you know, it's okay. Like, all right, in my head I said, this is, you know, you could, you can no longer help me with what I need to do moving forward. And I intelligence. I just didn't ask him to come back in, you know, after that and kind of move forward. So that was one of the big things, was, all right, I need to figure out what our pricing should be. Are we pricing right or are we not? And we were pricing right. It was just an arbitrary way and you couldn't really link it to actual, you know, gross profit or total profit, anything like that.

[John Murphy]

Well, just to say, Kirk, two things. First, as kind of arbitrary as you said that, that as that feels or is, it's not uncommon, you know, as long as money end of the month in the bank account says Mr. Mrs. Small Business Owner, I must be doing something right and just carry on that way. It's not an uncommon story in her defense. But secondly, you know, as you hear that and you're like, wow, kind of what an inefficient business. But so often the case in these businesses, all of these weaknesses, all of these flaws are wonderful opportunity for you to create value. So in some ways it's good, it's good news, right?

[Kirk Olson]

Yes, absolutely.

[John Murphy]

Before we get away from the job costing piece here, so just give us a minute on what it looks like to rebuild job costing. I mean, that is maybe not even a term people know. They'll know it quick if they get into a project based business. But what it just give us a little bit more visibility into what that looked like. Because that sounds intimidating.

[Kirk Olson]

Yeah. Oh, it was. It actually that consumed my entire month of May. I spent most of it sitting here in my closet and looking at spreadsheets and stuff. And I mean, to be fair, going into, I had no idea how to do it. So I started doing what any normal person does and goes to Google how to, you know, cost a job or anything like that. And I'd come across a few ways that other folks in the finance industry, you know, do their costing and you know, to get granular a little bit, it just took, you know, I took my revenue that I based things off of the overhead expenses, you know, as I saw that they were going to be this year, based off of their last two years and kind of the adjustments I made to it and really just figure out what my total overhead percentage is of that total revenue. Because the materials were calculated in per job. Labor for the most part was calculated in per job. But I did have to figure out what is my actual hourly cost for labor. Because, yeah, I pay this person, you know, 30 bucks an hour, but then I've got employer taxes on top of that, maybe some benefits. How efficient are they? Are they actually, you know, doing it 100% efficient or are they 80% efficient? So I did have to figure that out and then it just became a percentage thing of what, what gross margin did I want to hit? Right. So I think when we figured it all up the way that I had it in the calculator, the materials and direct labor were actually going to be 52% of the cost of a job. So it would have been a 48% gross margin. Obviously they have said that we're doing better than that because there was some fluff that I put in there. I said that the guys would be 80% efficient on a job, but that's on an hourly basis. But we actually, you know, we cost a job by day, we bid it by this is how many days. So really there's not an efficiency thing. If it takes them, you know, two hours to get out in the morning versus one hour, that it might be immaterial on that actual job. They're probably still going to get it done in that day or that two days. Yeah, so that was a little bit of, you know, extra cushion that helps push us to that 60% gross margin, those things. But that's what it was. And then it became, you know, I've made a Spreadsheet for the guys to use bidding jobs that all you do is put in the material, put in how many days of labor and if it's going to be a two guy crew, a three guy crew, and then you can change, you know, the profit margin and then it will spit out, hey, here's the price that this should be bid at to get, you know, this, this gross profit on the job.

[John Murphy]

Fascinating. And so, so, so you learned all that from scratch, Googling and, and just kind of trial by fire here. And then what, what came out the other side was this very simple spreadsheet that basically your estimators would use now. Use.

[Kirk Olson]

Yep, yep.

[John Murphy]

So yeah, and they plug in three or four numbers and that's it.

[Kirk Olson]

Yep. Wow.

[Will Smith]

And, and, but I thought estimating was.

[John Murphy]

Quite a lot more art than science. I, I guess the art part is it can be going to a site and figuring out really how many, how much in the way materials do we need really, how long is this going to take?

[Kirk Olson]

Yeah, yeah. And I mean we could dig into this a lot too because it's, it's, you know, the material part is hard. I mean, because you've got to, you know, obviously we go out and we get our, you know, high tech measuring wheels and we wheel across somebody's backyard or whatever and get the total footage and break it down to how many panels, how many posts, how many gates, that stuff. So there's, there's time and work involved in that. But the art, the real art is, you know, how many days of labor is it going to take for guys? Right. Because I asked, I think June time frame or shortly after this, you know, whole discussion over, you know, how much we charge per day in labor or whatever. And I asked the simple question of, well, how much fence can we install per day? You know, is it, should this be a one day or two day job? And I just kind of got blank stares and well, the industry standard is this okay, but how much do we install per day? Yeah, well, the industry standard, okay, because that was never tracked. How much, you know, is a crew putting in? How many sections are they putting in or how many feet or however you want to measure it? Never tracked, never reported, never measured. And that's, you know, the same with a lot of businesses and same with this one too. So that's another, like you said, that was an opportunity for me. All right, cool. Well, maybe we need to get a little bit better at our estimating on a small job. So residential backyard, you know, if we're off a little Bit on, you know, how long it's going to take us to install it. That's a, that's a small percentage of that job. Right. So we may still get it, we may not. Now you go to do more commercial jobs that are larger. Say, you know, I actually looked at one two weeks ago. That's going to be around 5,000ft. If you're off that same percentage. Well, now you're talking tens or hundreds of thousands of dollars off on a bid and somebody may just look at that and laugh compared to a competitor.

[John Murphy]

That's.

[Kirk Olson]

That's more, more accurate.

[John Murphy]

Yeah, yeah, yeah. Fascinating. Okay, well, thank you for that, Kirk. That, that was great. And, and has your, it sounds like your job costing little tool has been working pretty well.

[Kirk Olson]

Yeah, it has, it has. We still got some work to do on the, you know, how many days should it be front. But we, we're at least collecting that data now and starting to look at it.

[John Murphy]

And, and your better visibility into costing and, and more rigorous estimating has that resulted in found money?

[Kirk Olson]

I wouldn't necessarily say that yet.

[John Murphy]

I shouldn't say found money, but better margins because you're.

[Kirk Olson]

Yeah, I wouldn't say that yet because I'd say we're about on par with what the previous owners did or kind of what my projections were, you know, with the, with what expenses we're going to leave when they left and which ones were going to, you know, stay or change. So I wouldn't say that yet, but I think it gives the estimators myself better visibility into, you know, is this job worth it or not?

[John Murphy]

Now, you were also looking at the online marketing, digital marketing or marketing, I should say marketing in general. What were you. What was the opportunity there?

[Kirk Olson]

Yeah, so the, again, the previous owners probably didn't do any real advertisement. They had sponsored a couple T ball or baseball teams, you know, in the past and that kind of went away. I think so. And I knew that going in, that was one of my, you know, predictions was, okay, look, if the business is doing this and doing this well, if I just add in a bit of marketing, there should be no reason why I can't grow even a small amount, you know, over, over a small amount of time and do better. Right. And so that was the thought going into that was the next thing, next big thing. Anyways, after coming up to job costing was all right, we need to get more leads coming in because if we're only hitting this percentage of closing right now, then I need to add more into that funnel to make the Total end number bigger. So we just did the Google Ads thing, which the previous owners had never even claimed their Google Maps location. So. So I had to go in and do that. There was actually two locations showing up and one of them had a bunch of five star reviews that weren't attributed to the company. So I can get those merged. But yeah, Google Ads, the local service ads to get the Google guarantee stamp, went through all that stuff and then started pumping a little bit of money into that. And it's nice when you see an email pop up that says, you know, new call from Google customer. Like, all right, somebody's calling. It's working, right?

[John Murphy]

Yeah. And with some distance from that now, how material has it been? How much of a needle mover?

[Kirk Olson]

So I think a lot. So I did quite a few things that then also redoing our website again, went with somebody that only does fence websites for a reason. And so it's changed tremendously. So where I was worried, even through July, mid July or so in August, things just started clicking and people started buying. And some of it was people that we'd quoted earlier in the summer that were now not as busy or whatever. But, you know, the leads kept rolling in, the business kept rolling in. You know, fast forward to now, right? We're at the end of December. Last year, this company had one crew running only four days a week from like November until February or March. Right now we've still got two, really two and a half crews going. We're booked into February right now. Then we still got other pretty warm leads that are some larger jobs that could take multiple weeks too. So, yeah, so now in the summer where everybody says, wow, it's never been like this in the summer on a bad note, they're all saying it's never been like this in the winter on a good note.

[John Murphy]

And so, first of all, that's great to hear that turnaround here, Kirk, but what. So is the takeaway that the summer was just weirdly bad and so you were in your panic, you started making these changes to the business.

[Will Smith]

Of course you were going to improve.

[John Murphy]

The business in these ways anyway, but maybe it kind of accelerated it or you did it with a fury that you might not have otherwise done, and now you're seeing the benefits of that, we assume.

[Kirk Olson]

Yeah, yeah. And to be honest, I wish I could really put my finger on what thing it was, because it was a weird summer, a lot of people say so I don't know if it's just back to normal, if it is those things that I've done, but all I know is a combination of them I'm thankful for.

[John Murphy]

Yeah, yeah. And, and you do, and you can quantify for example the digital marketing to the extent that that's generating leads. You can go in, you have a dashboard somewhere that shows you how many leads came in from Google sort of thing. You'd also said you implemented a CRM in July. So bringing visibility and follow up and all that good stuff to sales process. It's don't understand how people survive without CRMs. Anything to say on that process is probably pretty self explanatory maybe. Who did you choose? Is it service titan?

[Kirk Olson]

No. So I went with Job Nimbus, which is a traditional, I think they focus on roofing companies but a lot of fence companies use them as well.

[John Murphy]

Job Nimbus. Okay.

[Kirk Olson]

Yep, yep.

[John Murphy]

All right, well how'd you choose them? Just industry attraction. A lot of.

[Kirk Olson]

Yeah, a lot of that. And it's, it's, it's visual. So I'm a visual person and you know the, the whole reason for putting it in because there's something I was going to do eventually but I had to do it like right away because one, you know, sales were not doing that great. But for me to see all my, see my sales pipeline or funnel, you know, before I implemented this, I'd have to go talk to each estimator, see what folders and call sheets they had. I'd have to talk to my office manager, see which ones she had. I'd have to go out to the cabinets out here to see which ones were just added as you know, recent ones that will follow up with next week. I had to go bug three or four people and then go look in three or four different places too. So I did this because I have a nice dashboard which a fair amount of CRMs do. But again it's the industry thing and it has a very nice dashboard. So I can look at that and like I can look at it right now and see we've got 10 appointments made. So within between now and whenever we've got 10 appointments that we're gonna go out and estimate here in the next couple weeks. We've got, you know, five that are getting, that are in the process of getting written. We've got 20 that have just been submitted in the last couple days. So I can look all that here and I've got to go bug anybody and it's a quick five minute thing and I'm done with it. I move on with my day and as opposed to spending an hour and bugging four people to try to figure that out.

[John Murphy]

You know, Kirk, some of the. The themes of your story do seem. Do seem like almost cliche, which is it's been very hard. It was terrifying there for a while. So that cliche would be, this isn't easy. Don't treat this lightly. Buying a small business. Other. I don't want to keep using the word cliches. Other patterns that we see over and over here is that putting in tech, turning on digital marketing, putting in tech, in this case a CRM, you've maybe done other stuff really?

[Will Smith]

Does ma really does help.

[John Murphy]

It's not. It's. Sometimes there can be skepticism that, oh, get rid of the fax machine and put it in a CRM. Is it really that transformative? And you're saying that maybe not transformative, but it saved you. It's saving you an hour. What did you say?

[Kirk Olson]

A day or a week, depending on how often I need that information. So at least. I'd say at least every other day.

[John Murphy]

Okay. Okay. So a few hours a week that these things. So these things that we hear about, these are all true in your case. These are coming to pass. Yep, yep.

[Kirk Olson]

And we did. We did have a fax number too, that I got rid of.

[John Murphy]

Okay, well, there you go.

[Kirk Olson]

Save $20 a month.

[John Murphy]

Okay. Okay, that's hilarious. So to close us out, I want to hear just a little bit about your thoughts on commercial versus residential, which is something that we just. That that theme is one that comes up in services and trades businesses a lot. And then let's hear about the people aspect of the business, the culture, whether or not it was good. So commercial versus residential, that mix. How do you think about it? Was it the right mix? Are you trying to change the mix? What can you tell us?

[Kirk Olson]

Yeah, so like I said, right now we're about 50, 50 on commercial and residential. And my preference moving forward is to focus more on commercial because they tend to be larger jobs. You weed out some of the smaller companies that can't front the money. Cause a lot of those you're not necessarily getting 50% deposits on. So you're fronting the money for the material. And it's an extended time to get paid in the end, right where it could be a year later. Luckily, a lot of jobs. Fencing is, you know, not one of the first things that goes in, maybe temporary fencing, but not the final fencing. So, you know, the lag there between installing it and getting paid is probably smaller, you know, so that's why it interests me you know, the residential again, we're not the cheapest and most people will shop with, you know, with the budget in mind. So that's okay. So my thoughts kind of my where I'm at now and what I'm working towards is this company has been in this 5050 mix ish and doing well. Right. So we've got great margins, you know, so if I can just keep kind of where we're at and those, you know, the markets we're playing in right now the same or very similar, then anything I add on top of that is, you know, bonus. Unless I, you know, have to have add overhead. Obviously that adds some expenses to doing extra things. But to the extent I can add more with minimizing the overhead that's added, then most of that just drops to the bottom line. So the focus of mine is to be able be more competitive on jobs that we bid with our general contractors. So case in point, there's one right now that came across for a whole new baseball field for a school. General contractor reach out wants us to bid on it. And from what I'm told from everybody that's worked here that at least in the time any of them have worked here, the longest one's been seven years, they've never won any of these bid jobs for various reasons. According to them it's because we're too high priced. But I think there could be other underlying things too that prevent us from getting some of those jobs. So I'm going to be focusing a bit on those because if we just say hey, you know, we never would have got these and for any job of those that we do get, that's something added on top of what this business was already doing. Yeah, right. And then if we can hone in our skills on winning those, then that can become, you know, work for a whole crew on in and of itself while the other crews continue doing what we're doing. So that's kind of one of the paths to growth that I'm working on. Probably the short term one. I have other long term plans of having more than one location. So where I kind of live is equidistant from the market that we serve now to another market in northeastern Indiana, Fort Wayne. And that one actually I can drive to quicker because I don't have to take a bunch of back roads. So once we get processes the way that I like them kind of here, then I can go start working over there as well. That's kind of more of a longer term play. Once some of this Other commercial stuff gets honed in. I start seeing our performance numbers a little bit better and kind of getting what the norms are and making decisions based off of those.

[John Murphy]

Well, Kirk, speaking of operations and also the claim by the sellers that this business kind of ran itself, what have you found on the people side of things?

[Kirk Olson]

So I've been fortunate that the team here is really good. I wouldn't say it 100% runs itself, but it could if they were, if the team was giving kind of the left and right operating bounds, like, hey, you know, this is how we operate procedure. So well, should I bid it for this, should I bid it for that? If they had kind of the, here's the guidance and you operate within that, it could definitely, definitely run itself. I mean, we had a pre planned vacation in late June. I think it was for a week out of state that me and my wife and her family went on and we went on it and you know, came back and the business was just fine. Fences got installed, you know, estimates went out. So yeah, it runs itself. Guidance is needed and wanted, but it could run itself. The problem being that, you know, when I leave or when the previous owners left, there isn't defined. This is that one person in charge, right? There's kind of two or three people and luckily for the most part, two. Two of the three people definitely get along, the other one gets along, but definitely has different opinions and so there could be conflict. There usually isn't. But yeah, we need to get to that point. And that's, that's one thing I'm looking to do too for growth of I have a great operations guy who wants to do more. He, you know, I've talked to him about opening up another location. He's like, I'd like to run one one day. I'm like, okay, well let's work towards that. But that means I got to work towards getting the business to that level where it can sustain the position you currently have, plus a brand new position which is going to be higher paid, right. So we need to figure out how we get the company to that level and perform at that level to earn that. And then, you know, opening a new location, even if it does a small amount won't have an SBA loan attached to it. So it doesn't carry that on top of it. So there's a little bit extra there. But yeah, so there's definitely been some team dynamics. There's, you know, a couple folks that have fenced since the 80s 90s, majority of the people on the crews have done it only for a couple years, but I say it all the time, whether they like it or not. But you know, installing fence isn't rocket science. It's hard work, but it's not rocket science. There's technical aspects to it, especially when you do gate operators or cantilever gates being code compliant and those things. There's definitely technical aspects to it, but you can figure it out. It's not, again, not rocket science. So yeah, so good people, they work hard. Most of them have been open to change. Again, it's kind of the legacy folks that aren't necessarily open to as much change, but I've gotten verbal acknowledgement from them that yeah, this is the way the world goes. Just going into the CRM has been hard for one of my sales guys.

[John Murphy]

To do, even for a sales guy.

[Kirk Olson]

Yeah, yeah, yeah, yeah. Another thing is when we do drawings of a location and the fence we're going to install, it's been hand drawn. I have terrible handwriting. Even when I use a ruler, my lines come out somehow crooked. So I'm like, this is okay for now, but we're going to have to change. So here over the last couple weeks we started using ArcSight, which is a CAD drawing type thing to where we can do it on there and we can actually put things in two scales. Instead of a hundred feet of fence looking this big and 500ft of fence looking this big on the same drawing, it'll actually be to scale. There's been some pushback on some of the technical stuff and some of those things, but it hasn't been show stopping, hasn't been confrontational or anything like that.

[John Murphy]

And how say more about what we touched on earlier, that you want to improve the lives of your people.

[Kirk Olson]

Yeah. So I would say that's part of again, part of why I liked blue collar businesses too is I think the US is finally coming around to it. But over the past 15, 20 years, however long it's always been, go to college, get a good job, go to college, get a good job. When in reality, you know, you could get a decent job out of college in the trades, you know, making decent money. Are you going to, you know, make the same as that guy that got the mba? No, but you're not going to carry the debt that guy had with an MBA either, you know. And that opened my eyes with my wife. She went to four year school, got a degree in supply chain and logistics, something big in the world today that most companies need. And when she graduated she was making about as much As a guy that didn't need a degree, like, well, that seems backwards.

[John Murphy]

Yeah.

[Kirk Olson]

And that was kind of. That was kind of my first, you know, realization of that. But you look, you know, electricians, plumbers, you know, even people doing contract, people that work for me, you know, they make good livings. Is it again, is it, you know, $150,000 a year? No, it's not. But again, they also potentially don't carry that debt. And I've had a chat with a couple of my installers that are really good. You know, they got hired actually while they were in high school and worked in the summer and then came back and worked afterwards. And like, while you're making money for four years, there's people going to college, going in debt for four years and then have to build out of it. Right. So, you know, I want to help folks there, and I want to provide as much as I can to them because I, you know, I'm fortunate for everything that I've done and got, and I want to return that to them as much as possible. Now, does that mean I do 100% profit share? No, but we can do little things. So touching on the culture. The culture here was not the best either. Under the previous owners, I had started doing Monday morning meetings where we go over just simple things. A lot of the first ones are talking about culture. And I asked in one of those meetings, maybe the third or fourth one, tell me what you think the culture is here at Mike Sunset. And the answer from one of the guys was, it's less hostile now than it was. Yeah. Not to say it's, you know, sort of hostile now, but, you know, that was what they're. They're getting as. Look, it was kind of a hostile place. People got yelled at, not treated necessarily the best. And I try not to do that. You know, if you screw up, yeah, I'm gonna be angry, but I'm not necessarily gonna tear you up in front of everybody else and, you know, call your names or whatever. We're gonna, you know, solve the problem, Right? We attack the problem, not the person. So that's a big portion of it too, you know, and then simple things like I just bought half season tickets to the South Bend Cubs that each month, you know, we'll put people's names in a raffle. For the games I want to go to, it was 1500 bucks, but that's 30 games that, you know, guys can potentially go to and take, you know, four tickets and they can take some, you know, themselves or spouse, a Couple kids, little things like that to just give back to people to show them that you care. Right. Because do I know everything about fence? No. And so somebody that's been doing fence for 30 years goes, man, I gotta work for this guy that doesn't know anything about fence. Like, that's kind of scary. What's he gonna do, you know? Or, you know, I'm out here when it's 12 degrees and he's, you know, somewhere else doing whatever that stinks. Well, okay, let me provide as much as I can for you because I can't always be out there. I try to be out there. I'll be out there next week when it is probably 11 degrees because it's a large job, and I want to see where we can improve efficiencies and how we perform it now. But I want to give those things and give, you know, make people want to stay. And then like you said earlier, that'll attract other folks that are good talent. And then I have, you know, the pick of the litter.

[John Murphy]

Sounds like a winning formula. Kirk, anything we didn't hit on that you wanted to make sure you said.

[Kirk Olson]

So I'll point this, this out because it took me quite a while to figure it out. Going back to, you know, my nightmares and going, man, we're not making money and whatnot. You know, looking at the bank account, looking at QuickBooks, that in a business like this, even. Even with the 50% deposit. Right. Because when you do that job, you can consider that 50% now spent, the materials gone, the labor is in theory, spent. Yeah, a little bit. Carries over for my overhead, but just call it 50%. The, you know, QuickBooks may say, hey, you know, you've profited 100,000 or 200,000, but if your AR is 100,000 or 200,000,. You don't have that money yet that's sitting somewhere else. So it's not in the bank account because it's counted as income, but it's all receivable. So until your profit is above your ar, you really don't have profit money in the bank. It took me a long time to figure that out. I'm like, well, it says we got money here, but it doesn't look like we got money here. So not that that might help folks, but if you get into the. The early beginnings of the business and you're saying, man says, I'm making money, but I don't have it. That's. That's part of the reason why.

[John Murphy]

Sounds like a cash flow, part of the learning how cash flow works.

[Kirk Olson]

Yeah. Yep.

[Will Smith]

Kirk, if people want to reach out.

[John Murphy]

How can they do that?

[Kirk Olson]

So I'm not a big social media guy. I'm I'm on there. So you can by all means do that, but probably the best way is just email me. And my work email is k olson o l s o nikekesfencing.com well, Kirk.

[John Murphy]

Congratulations on getting in this business, pivoting out of your W2, being able to leverage a real estate portfolio that you built up for 10 years to get where you are, and then pushing through transaction with some very hard sellers. You're the the one guy left standing after four or four or five others attempted it, and you were the one who did it. So congratulations on all of the above, and thanks for coming on and sharing so transparently.

[Kirk Olson]

Thanks. Will appreciate it.