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- [00:00]
Will Smith
Today's episode has two segments. The first is the story of Matt Brunig building a holdco back in 2017. Matt was eager for an off ramp to his high travel 90 hour week life in the power plant industry. It was either find another job or find a business to buy. He kept an eye on Biz, Buy, Sell and funny enough actually skipped over the business he eventually bought. But when he realized that it was just over a mile from his house in St. Petersburg, Florida, he figured why not go take a look. And what he discovered was a tiny manufacturer with under $700,000 in revenue, but one with good employees and an international reputation. He bought it and has since grown organically and inorganically to over 3 million in revenue. Listen for Matt's donut story. In the second segment we bring on Kevin Peer who Matt hired in October of last year. Kevin was a searcher raising for a traditional search fund. He connected with Matt on search funder. When he saw they were both in St. Pete, one thing led to another and instead of continuing his search, Kevin went to work for Matt as a quote, part time cfo, part time, some other stuff. This would give him operational experience in a small business and allow him to stay in St. Pete which he wanted. That was about eight months ago and since then Kevin's role has evolved into something best described as searcher in residence. We unpack what this novel role entails and its benefits to both searcher and and existing owner. When I first met Matt And Kevin in St. Pete, we talked about Kevin's amorphous, as yet unnamed role and how it's emblematic of a pattern I've seen. I've received many emails, especially since we launched SmithList.com from people who say something to the effect of I've been searching but haven't found anything or I'm not yet ready to search. I'm not quite sure this path is for me. What I'd love to do is as an intermediate step, work as the GM or Chief of Staff to an existing small business owner. Do you know an owner who could use something or someone like that? Those are the emails I've gotten and what they're describing is this searcher in residence concept, a label that Kevin later came up with. See what you think. Would you like to work as an SIR at a small business? Or if you already own a business, would you hire an SIR who could work with you for a year or two on special projects or whatever it might be? I'm curious if this concept has legs, so let me know and feel free to reach out to Matt and or Kevin as well. Their linkedins are as always in the Show Notes. Also in the show notes, the one pager that Kevin prepared that we lean on in the interview and and that really explains this searcher in residence model point by point. Okay, here is Matt Brunig, owner and President of Octal Ventures and Kevin, peer searcher in residence at Octal Ventures. Offshoring is a key lever to generate value in a small business. But maybe you think offshoring is great for white collar office work, but not in the blue collar type business that you're looking to buy or already bought. Well, in tomorrow's webinar Nick Huber yes, that Nick of sweaty startup fame will correct this idea and show you how offshoring can indeed be a tremendous tool that you bring to your blue collar acquisition. Nick has built an empire in self storage and offshoring roles to the Philippines, to South Africa, to Latin America has been key to his success in that industry. The webinar with Nick is How to Offshore in a Blue Collar Business. It is tomorrow, Tuesday July 1, 2:30pm Eastern. Register at the link in today's show notes or on the Acquiring Minds homepage Acquiring Minds Co or go to Acquiring Minds Co Hiring how to Offshore in a Blue Collar Business. See you there. 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.
- [04:55]
Matt Brunig
Podcast I talk to the people who do it.
- [04:58]
Will Smith
You know that one of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper. But tech is complicated with tons of solutions out there. So choosing the right cloud platform, CRM, telephony, compliance and cybersecurity, not to mention implementing all that, is a job in itself. Acquiring Minds guest Nick Akers knows this firsthand. As a former searcher who now owns Inso Technologies, Nick has seen the tech challenges searchers face when acquiring businesses. His team at Inzo regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients, drawing from his own experience in the search phase. Enzo dates back to 1989. So this is a company that has managed the tech for hundreds of small businesses over decades. And one last thing, no long term contracts with Enzo. A big differentiator. Check out enzotechnologies.com in Z O or email Nick directly@nicknzotechnologies.com and don't forget to tell them you're a searcher.
- [06:21]
Matt Brunig
Matt Brunick, welcome to Acquiring minds.
- [06:24]
Kevin Peer
Thank you. It's great to be here.
- [06:25]
Matt Brunig
Will Matt, you bought a niche manufacturer back in 2018. It was quite a small business, but it was also one stoplight away from your home. We'll get there. We're also going to learn about the.
- [06:41]
Will Smith
Concept of searcher in residence.
- [06:43]
Matt Brunig
I'm very excited about this.
- [06:45]
Will Smith
And we'll bring on your own Sir.
- [06:48]
Matt Brunig
Kevin Peer at the back half of the interview to explore this with us. And finally, Matt, you are an LP.
- [06:56]
Will Smith
In our fund MINDS Capital. Thank you for your support in that.
- [07:00]
Matt Brunig
Been great to have you along. Let's, there's a lot to get to. Let's get to it. Matt, start us off with why you turned your attention to wanting to buy a business in the first place.
- [07:13]
Kevin Peer
Sure. I don't remember why I first wanted to buy a business. It was back in 2011, I believe that I first looked around at buying one and I don't remember what the catalyst was for purchasing a business or where I got the information. But I've known since I was young that I like to. I've wanted to run a business. I've known that I wanted to build something and I always thought that it would be something that I created. So growing up I thought that I would be a private inventor. That was really what I thought I'd want to be. That's why I went and did engineering in school. And eventually I realized that starting something up was going to be very expensive and time consuming with at best lowish rate of success. So I decided that it would make a lot more sense to purchase a business and kind of jump in midstream and then later on I could fold in creating something if time allowed.
- [08:14]
Matt Brunig
It's interesting, Matt, the an inventor. The kind of core. One of the core reasons for ETA is for people who have the entrepreneurial energy but maybe not the idea. And it sounds like you maybe weren't, didn't have, weren't lacking for an idea, but you just thought that the, the path to success would be more likely buying something that already existed, already had some product market fit, already had some revenue and pouring your creativity into, into that already existing entity and being creative within a business that already existed.
- [08:52]
Kevin Peer
Yeah, absolutely. So the initial jump was, you know, I was in mid career, I was 10 years in. I was a senior project manager for a company that rebuilt power plants. By the time I bought. Sorry, I'm Jumping ahead a few years, but I realized that I needed to maintain some income. I was looking to start a family, and it was very clear that stopping and trying to start something up was not going to keep income coming in. So buying a business at that point was extremely clear as the best opportunity.
- [09:23]
Matt Brunig
But you were not somebody who was in. In or around eta, had heard about it in school, was going down the rabbit hole. It. This was all you were. You were one of my few guests who kind of comes to the conclusion on their own that buying a business makes sense.
- [09:38]
Kevin Peer
Yeah. I wish I could remember exactly what. How it clicked in my mind and the process or the direction that it came into me from, But I know that as early as 2011, it was. It was clear that that was a good option. And then by the time I bought in 2018, jumping ahead a little, it was even more clear. So, yeah, I'd had no experience with the ETA community. I just did undergrad engineering. So I didn't go to business school or anything like that. I wouldn't have heard it there.
- [10:11]
Matt Brunig
You said a line in our pre call, Matt, that. That struck me about the two loves of your life. Share that with the audience. You've already mentioned what one of them is building. But say the line.
- [10:22]
Kevin Peer
Oh, baseball. Yeah, I loved building baseball. Yep.
- [10:25]
Matt Brunig
Yeah.
- [10:27]
Kevin Peer
So, yeah, baseball was the core of my life, I would say, up until very near the end of college. I hurt my shoulder and elbow actually partway through college, and it became clear that that was unlikely to be a career path like I had intended. And so I still love it, but, you know, it's. It's not a careers.
- [10:47]
Matt Brunig
Yeah, but building is.
- [10:50]
Kevin Peer
Building is. Yeah, absolutely. I did want to jump back to one thing you mentioned a bit earlier, where there was the concept of a lot of people that come into ETA think that they might not be the idea guys. And I've heard that before. It does not match me at all. I'm probably too much of an idea guy. It's very easy for me to want to run with a new idea a day. And a lot of the team's job here is to help kind of keep me corralled and focused on the few things we're actually able to do at a time.
- [11:23]
Matt Brunig
Great. Good. Good call out. Well, so it comes on your. Well, you come to the conclusion on your own that buying a business is. Is something that intrigues you that you'll likely want to do back in 2011. But you don't do it then why.
- [11:41]
Will Smith
Don'T you do it then?
- [11:43]
Kevin Peer
Basically, I would say I got scared. I could not determined with certainty that it was going to be successful. I did not have any encouragement from my family. They saw that I had a solid career and, you know, was quote, unquote, doing well. And so between the two of them, I just couldn't come to a point where I thought, hey, this, this is definitely a good idea and going to work. And I was right. It's not, it's never definitely going to work, but I think that I solidly underestimated the chance of it working. When you buy a good operating business, it's, it has a very high probability of success if you don't go breaking things.
- [12:29]
Matt Brunig
And what do you think changed about that fear factor between then in a few years later, when you did get serious and committed to the idea?
- [12:40]
Kevin Peer
I would say that my threshold for acceptable risk came down. So I was looking for something that was, let's call it 98 or a hundred percent. I, I could be 100 confident or 98 confident would succeed. And as time went on, I realized that if one can be that confident, they're probably already too late to whatever it is. So I try to, I move my threshold down consciously to be somewhere in the 80% confidence. Right. So some of that comes, I believe, from the military. I think that they tend to say somewhere when you have 70% of the information, it's time to move. And that, that really clicked for me when I realized that I was never going to have all the information. I was never going to be fully confident. And that's okay.
- [13:31]
Matt Brunig
It's really interesting. I feel like that's another way of talking about risk and reward. So if there is no risk, like you said, if, if you actually found something where with a 90 chance of, of 98 confidence in, in its success or 100%, then there's probably no, no juice in the, in the, in the trade.
- [13:52]
Kevin Peer
There isn't.
- [13:52]
Matt Brunig
So, so there's no risk, there's no reward. So what you look for, of course, is the sweet spot of there's always going to be some risk. But the sweet spot is a little enough risk with enough reward. And for, in your own mind, that was 80% certainty that buying a business could, could pan out.
- [14:09]
Kevin Peer
Yeah. And as we grow, it could even potentially come down just a hair as, as each individual deal becomes a little less critical to the, to the success of the hull. There's one kind of a tidbit that helps with that for me personally, and that is that in a business you have good and bad and known and unknown. Essentially you have four quadrants. Right. And it's pretty easy to get comfortable or uncomfortable with the known good and the bad. Which leaves you with the known and the unknown, good and bad. And one way that one thing that helps me think about that is it feels like you're 50, 50 at that point. Right. You don't know what's going to happen in the future. But the truth of the matter is as a business operator, you help create reality. Reality doesn't just happen to you. So you're able to split and, and make some less of that bad happen and cause more of the good to happen. So it's not really a 50, 50 unknown. I would say something more like 75 positive to 25 negative.
- [15:12]
Matt Brunig
Great point. The difference between an active investment and a passive investment. If you, if you're buying a stock, it's totally out of your hands which direction it goes. But in active business ownership, we are talking about being able to influence the future. Helping, helping the odds. Yeah.
- [15:28]
Kevin Peer
And that's a huge part of it. And I mean even today, sometimes I have to remember that we create reality here. Things are, things might feel sometimes like they're imposed on us, but the great majority of the time there's a reality to be created depending on what actions we're able to take.
- [15:45]
Matt Brunig
Okay, Matt, so let's get into. So, so the, the year is now what when you get serious about this project of buying a business.
- [15:56]
Kevin Peer
So yeah, let's see, I would say it was 20, it was probably early 2017 that I got to be serious. So I was, I was pretty burnt out. I was working 90 hour weeks. I don't know if you're familiar with how power plant turnarounds work, but it's 247 with a quarter million a day liquidated damages. And when you're in the lead of that, every second counts. So really stressful. I learned a great deal doing it, but I was done. I was, I was tired, I was ready to move on. And for me, just as importantly, I was ready to start looking to settle down, have a family. And yeah, that, that all came down to either I would find another job or buy a business. I mean, I'm sure there are other options, but those were the two that I saw at that time. And buying a business was very clearly the direction I wanted to go.
- [16:53]
Matt Brunig
So you were embarking on a search to find a business and a mate at the same time?
- [17:00]
Kevin Peer
Yes. I wouldn't say I booked it as a search, but you know what? I was Pretty serious. I was, I was ready to settle down.
- [17:09]
Matt Brunig
Okay, and so what did your search, not for a mate, but for a business look like?
- [17:14]
Kevin Peer
Well, for me, it was very local. I, I lived here. I liked my house. I.
- [17:19]
Matt Brunig
Where is here?
- [17:20]
Kevin Peer
Pinellas Park, Florida. So just outside of St. Pete. I've. I enjoy planting, so I've got a lot of tropical fruit trees. I'd already planted these at my house. I didn't want to move and wait for tropical fruit trees to grow at a new place. And I really like the area. I mean, it's a beautiful place to be. I went to Biz by Sell. I think I used to maybe BizQuest back then a little bit. I talked to a few brokers, but not nearly as seriously as I would do in the future. So it was very much a see a business that could be interesting on Biz by Sell and ask to see more information and review it and see if I wanted to buy it.
- [18:01]
Matt Brunig
And so you were not, you did not quit to go search, which is probably part of the fact that you weren't being influenced by all the ETA kind of best practices or books where it's kind of. You'll hear a lot, you know.
- [18:18]
Kevin Peer
Yeah.
- [18:18]
Matt Brunig
About the idea of doing a full time search. You were watching, keeping your eye on the listing sites online, and when and if something came up that interested you, you would go after it and then quit your job.
- [18:31]
Kevin Peer
Correct. And I was a little more limited than the average person searching because power plant rebuilds tend to be, you know, out of town 9,800 hours a week, all of the spring and all of the fall. So I really only had a small window in the winter or the summer to do anything local to search. So I was a little bit more aggressive that summer because I knew I was serious and I would lose the next three months once it hit about, I think, September of that year.
- [18:59]
Will Smith
What do the following Acquiring Minds guests all have in common? Doug Johns, Morley Desai, Tim Erickson, Chirag Shah, Shane Ursam. They all went through the Acquisition Lab, the accelerator in community for people serious about buying a business. But they represent just a sliver of the Lab's success stories. The number of deals across the Lab's cohorts now stands at over 120, with over $300 million in aggregate transaction value. The Acquisition Lab was founded by Walker Deibel, author of Buy Then Build, the book that introduced so many of you to the very idea of buying a business. The lab offers a month long, intensive, almost daily Q and A sessions with.
- [19:45]
Matt Brunig
Advisors Live deal reviews with Walker Deal.
- [19:50]
Will Smith
Team introductions and an active community of serious searchers. Check out acquisitionlab.com link in the notes or email the lab's co founder Chelsea Wood.
- [20:01]
Matt Brunig
Chelsea buy then build.com and so what did you see? Did you feel like you were seeing.
- [20:10]
Will Smith
Decent options on Biz Buy sell?
- [20:12]
Kevin Peer
I would say it was not great. It was better. It's probably better then than it is today. It's getting even tighter to find decent businesses on something like a biz Buy sell. But yeah, I, I didn't have a lot of luck finding anything else interesting. So this one kind of jumped out at me after I looked at it. Not initially strangely enough.
- [20:32]
Matt Brunig
Well, right. It sat or it had been sitting. You had actually seen it in your biz by sell screening and not double clicked for a while. So how did that go?
- [20:44]
Kevin Peer
So I thought it was some mentioned sewing and marine and I thought it was a like a local canvas shop. So those tend to be one off project based business and they tend to rely on someone very knowledgeable in the business to run it. So I just skipped it. But I don't know, probably the third or fourth time I saw it I recognized something in the picture that it was very local to me and I thought well you know, it's I think a mile and a half from my house, maybe a mile and a quarter. And so I decided I'd go take a look. Just why not? It's right there.
- [21:18]
Matt Brunig
And what was the description, what was this business if it wasn't whatever you said, a local canvas shop. It was.
- [21:26]
Kevin Peer
So it ended up that this business, the first business that we bought was Sunrise Yacht Products and they are a specialized manufacturer of tension nets that go on the front of sailing catamarans and then have expanded somewhat to making the same type of product for architectural use. Like think a really large daybed built into the dock or a villa in the Maldives. So it's big with resorts.
- [21:51]
Matt Brunig
Okay.
- [21:51]
Kevin Peer
Yeah, they had a worldwide brand recognition. They shipped all over the world. They shipped to OEM boat makers in Vietnam and South Africa. And so yeah, it turned out they had a lot of positives and they had a solid niche built out.
- [22:09]
Matt Brunig
And so you go to visit the business and, and what do you find there? How big a business is it? What give us a kind of a sense of the look and feel.
- [22:17]
Kevin Peer
Yeah, it was at the time, I think about 5,000 square feet, five employees plus the owner doing, I believe it was about 670,000 revenue and about somewhere between 170 and 200 of SDE depending on the year.
- [22:37]
Matt Brunig
So that as you now know, and listeners will know, that's a pretty small business. So five employees plus owner, less than well under a million in revenue and 170 to 200 in SDE will assume you're going to tell us that you are going to buy. Use a loan to buy this business, an SBA loan which would cut that SDE in half roughly. So was this gonna. I assume if you're a key engineer at power plant reconstruction, you're probably making a really strong full salary. This was not going to replace that at least day one. Talk us through how you thought about the numbers of this opportunity.
- [23:16]
Kevin Peer
Sure. So it definitely was not going to replace my salary. If I projected it out, you know, without substantial growth, let's say it stayed steady, it would cut my salary just over in half. But the way I looked at it was one, I was ready to move out of what I was doing. I was ready to settle down. And I knew that I was going to have to take take a pay cut to make the jump unless I wanted to continue doing the same type of thing I was doing. So the way I modeled it out is I would probably take a hit for something along the lines of two years and then get back to somewhere in the range of where I was. And I was okay with that to get a base and get started. I know in our pre call I'd mentioned that I was looking to replace my salary. And that is true, but I was looking to grow well beyond that with time. The corporation that we started, the parent company was. I say we. It was me, Octal Ventures. And the reason for that is I. One, I think octopus are really cool. And two, I envisioned us getting to something like having eight businesses. So that was.
- [24:35]
Matt Brunig
When was that vision, Matt, that the Holdco vision? Was that later or was that right out of the gate?
- [24:42]
Kevin Peer
I don't think I knew it as Holdco at the time, but I knew that for it to be large enough to really be interesting and take on some interesting challenges that we had to grow. And I envisioned it by either starting or buying additional businesses at some point. I. I didn't have a very strict structure. I wasn't beholden to any investors. But I did see it going in that direction, which is why I call that Octal Ventures.
- [25:09]
Matt Brunig
Okay. Okay. All right. So it is doing 200 or less than SDE. You calculate that it's going to. Buying this business is going to mean taking home half as much income as you're taking at your W2 that'll last a couple of years hopefully. The. The plan is to grow the business such that you get back to your W2 level income and then of course keep growing it and eventually Supersede your. Your W2 income at least either in this business or with the acquisition of others. So, so your long term plan is to be earning something significantly more than you were at W2, which does not differentiate you. That is what most people are hoping. Right? Did I get that correct?
- [25:54]
Kevin Peer
That's definitely correct. I think what I didn't have is a particular idea like a number that I wanted to get to which would have been useful I think at that time to say hey, like I going to start, you know, cutting my salary down to a hundred eventually I want the SDE to be at least a million or something like that. It was very much a organic. There will be room to grow. Let's see what we can do as opposed to having a fixed path or plan in front of me which, which actually would have been useful looking back.
- [26:23]
Matt Brunig
Yeah, sure. Although I will say I liked the adventurous spirit of this. It was, it was a little bit more of like, you know, I mean maybe you didn't realize it at the time, but you were taking a lot of risk buying such a small business. There's a lot and in fact we're going to get to it. But you would now not buy such a small business. You are not on the buy small tip. I'm putting words in your mouth. Go ahead.
- [26:51]
Kevin Peer
It would not be my lead. I recommend for people to buy substantially larger if they can. So there's basically two caveats. There are two, two ways to think about it. One is that it's better. I would say what I did, given the situation was a good move. It was better to start and get to moving and then be able to swerve or adjust or grow further than to sit on my hands and wait for the perfect thing to come along, which in my case it never would have with the limited time I had to search for something. So if that's the opportunity, it's still a good opportunity. But I would recommend if you have the chance to buy something at least 500 STE, preferably 6 or 700 STE. It will make things easier for you. I ended up wearing quite a few hats and I still wear a few more than I want to.
- [27:42]
Matt Brunig
Well, and, and what listeners will, all regular listeners will know is that we can have these perfect criteria and then not ever find that perfect business. And then you start adjusting some of those criteria down and you decide what you're willing to compromise on. And usually size is one of those things. So despite the fact that we're talking. We're talking ideals here, and it. It's actually increasingly rare to find the businesses of that ideal size. You were going to say?
- [28:11]
Kevin Peer
Yeah. Oh, well, it's definitely increasingly difficult where I'm looking for them now. But what one other thought that I think was very. Would have been valuable to me at that time was that I was doing an SBA loan. So my downside with a personal guarantee is bankruptcy. Yeah, that when your downside is bankruptcy, there is buying bigger. There is no more risk. Your risk is bankruptcy, period. So as long as you have a large portion of the capability to run something larger, buy as big as you can and maximize what you can buy through the sba. Because you're either bankrupt or you're not, it's binary. And you just increase your expected value if you're buying larger.
- [28:54]
Matt Brunig
Exactly. It's asymmetric to your point. It's asymmetric. Great point, Matt. It's asymmetric in the sense that your. The downside is the same. No matter. No matter size of business that you buy, no matter what, it's bankruptcy, full stop. So why not increase the potential rewards to yourself by buying something bigger? There's no penalty to get. It's rare that you can find a trade where the rewards go up, but the risk remains the same. Yeah. And the other thing to say about, or just to emphasize here about, about this business, Matt, is how close it was to you. Now, it's hard to quantify the value of that, but it's tremendously valuable in. In fact. So how far away was it and how. What's your commute look like?
- [29:37]
Kevin Peer
I think I measured it at 1.35 miles from my house, maybe 1.4. So it was one stop light, but they built a second one since. So it's now two stop lights. Yeah, well, you guys, that was very.
- [29:48]
Matt Brunig
Valuable for me and I. As I would think it would be for. For anybody. Of course, you. You were looking to settle down, as you said, so you, you were very focused on finding something very local. So even more valuable for you. But anybody would like the. A business where in theory, you could walk to work on a nice day. I mean, that's.
- [30:07]
Kevin Peer
I never have, but I could.
- [30:10]
Matt Brunig
Spoken like a true Floridian.
- [30:12]
Kevin Peer
Yes.
- [30:13]
Will Smith
So back to the business itself.
- [30:15]
Matt Brunig
It's a manufacturer of these canvas of netting for catamarans. And then for. What did. What did you Call them bed. What did you. What was the bed?
- [30:26]
Kevin Peer
It's a tension that. So yeah, it's a like a built in daybed that goes into some resorts or to home backyard. So imagine you build a hole in your dock, an opening in your dock and you put a catamaran net in that space.
- [30:38]
Matt Brunig
Yeah.
- [30:39]
Kevin Peer
So it's, it just got a ton of benefits over other types of beds. It's breathable, it holds up a lot longer. It never gets soaked with water. So on hot days you're laying on it. It's super comfortable because you're over the cooling effect of the water.
- [30:52]
Matt Brunig
Fantastic. And so this is a. These were products that were manufactured. So a true manufacturer as opposed to what you thought it was when you first saw it on Biz by Sell, which was like a custom shop. This is something that's being. And it had a reputation, in fact an international reputation.
- [31:09]
Kevin Peer
So I would go through the sailing forums and try to see what their brand reputation was. And they were head and shoulders above anything else. They were the most expensive in the market. But they're for just a good example. Your standard net on a, let's say a million dollar catamaran from the factory is going to last maybe three years in the tropics, sometimes four. And the net, the reputation of this company was that the nets it was making as aftermarket replacements were lasting 12 years, 13 years. So it was a head and shoulders difference between everything else.
- [31:44]
Matt Brunig
Love to see a strong brand, love to see international clientele. You might say to yourself, well, this business, if it already has an outsized brand for such a little operation.
- [31:57]
Will Smith
Maybe.
- [31:58]
Matt Brunig
It has already grown into what it can possibly be. What. How did you convince yourself that there was more growth to be had in this market or for this business?
- [32:08]
Kevin Peer
So one portion of it was that the owner was on the older side. He was in his 60s and it was pretty clear he was ready to retire. And it seemed that he was running as a lifestyle business as opposed to really pushing for everything he could. An obvious sign was I believe ad spend was under $1,000 a year. So you know, he wasn't going to any trade shows, he wasn't doing any type of ad spend. It was very much we make great products and they sell themselves and when someone calls in, we will sell them their net. So I was pretty sure that by putting some effort in some ads and some marketing, maybe going to some trade shows that we could start to increase sales. I could also look at the sales revenue and I could see roughly how many catamarans were in existence in the world and see that we were in maybe at the time, I would guess 10 to 15% of the catamarans out there. And with a premium product, I was pretty sure that along with some ad spend, we could substantially increase that. There were also strong tailwinds for catamarans as a thing. They were. The catamaran market has been growing steadily for the last 15 years now. So maybe six or seven years at.
- [33:27]
Matt Brunig
The time, Matt, I feel like 10 to 15% market penetration is pretty high.
- [33:35]
Kevin Peer
Well, we are in a very small pond. There's, there's a couple other manufacturers. There's sort of one and a half in the States and then there's. At the, at the time I bought, there was really only one or two overseas of any size.
- [33:53]
Nick Huber
Okay.
- [33:54]
Kevin Peer
Or substance. Okay. And yes, 10 to 15% is for most markets probably very high penetration. But when you're in something as small as we are and there's as few competitors, I believed, and it turned out to be correct, that there was a fair bit of room to grow that.
- [34:11]
Matt Brunig
Okay. And, and what of the. Or what was there a vision to design and, and produce adjacent products into the same market? Classic playbook in, in manufacturing where you have channels, you have a market presence, you have brand. So come up with new products and, and, and sell more, but different products to the same market.
- [34:38]
Kevin Peer
Oh, that would have been a great idea. Will we. We came to that in the last about year and a half. I, I've actually still got my original business plan for the SBA on the wall and I've gone through it and our focus was going to be building out the architectural side of it. So there was very. All of the non resort architectural netting was happening purely by chance. Someone happened to think that there would be a cool idea and contact us and say, hey, could you build a net for my dock? So our initial conscious efforts were in, in terms of growth were to focus on getting the backyard doc net out there as a concept. So it ended up going through Pinterest and, and other similar things to try and spread that. But no, I, I should have absolutely spread and, and done more in adjacent catamaran space. So yeah, that, that's getting to really last summer before we get to that point.
- [35:38]
Matt Brunig
Okay. Okay, Matt. Well, can you tell us what the terms of the deal are?
- [35:44]
Will Smith
Now?
- [35:44]
Matt Brunig
We've talked about your SBA loan, but let's hear the numbers. If you could share.
- [35:49]
Kevin Peer
Yeah, it was. I believe we did. It was 470 for the business we Put on, I think it was 40 or 45,000 of working capital. I did a standard 7A loan. I say a standard 7A loan. There was a wrinkle to it. I did use the robs rollover. So I use some of my 401k to purchase the business. So my 401k owns a majority of the company and I own personally a minority.
- [36:17]
Nick Huber
Yeah.
- [36:18]
Matt Brunig
Was there any seller financing?
- [36:20]
Kevin Peer
Yes. I forget if it was 5 or 10%.
- [36:23]
Matt Brunig
Okay.
- [36:24]
Kevin Peer
There was seller note paid year two through five.
- [36:28]
Matt Brunig
Okay. So on standby for the first year and then first two years for that one, I believe.
- [36:36]
Kevin Peer
Yeah.
- [36:36]
Matt Brunig
Oh.
- [36:36]
Nick Huber
Oh.
- [36:37]
Matt Brunig
For the first.
- [36:37]
Kevin Peer
Sorry. I guess start of year three through end of year five was.
- [36:40]
Matt Brunig
Okay, great. And the $45,000 in working capital and then your deposit, your equity, 10. So.
- [36:50]
Kevin Peer
Yep.
- [36:51]
Matt Brunig
47 plus 45. So you had to bring about a hundred thousand dollars yourself.
- [36:55]
Kevin Peer
Yep.
- [36:56]
Matt Brunig
And you tapped your robs for that, correct?
- [36:59]
Kevin Peer
Yep.
- [36:59]
Matt Brunig
Okay.
- [37:00]
Kevin Peer
For a majority of that.
- [37:01]
Matt Brunig
Okay. We. We might return to the robs because now there's. It's a bit of an albatross. I'm putting words in your mouth. You'll. You'll let us know?
- [37:12]
Kevin Peer
Sure.
- [37:12]
Matt Brunig
Great. Okay. Anything more to say about the deal itself or. Pretty straightforward, I would say.
- [37:20]
Kevin Peer
Pretty straightforward, you know. Well, so a important point that I re. I, I actually ended up learning later is I ended up coming in on Monday morning for the turnover meeting and happened to go by a great local bakery and grab a dozen donuts. And about four years later, I found out that one of the key employees who today runs one of our businesses would have left that day if I hadn't brought donuts. She'd had. They'd had a really bad experience in a different job with ownership transition and the small, I guess, gesture of showing that I cared a little bit made a really big difference. And they brought that up to me years later.
- [38:05]
Matt Brunig
Isn't that. I find that actually so valuable that such a small gesture went so far. So. Yeah, great learning. And so you brought a dozen donuts to your day one speech, essentially.
- [38:20]
Kevin Peer
Yep. Yep.
- [38:21]
Matt Brunig
Huh.
- [38:22]
Kevin Peer
Led with enjoy the donuts and we're gonna chat a little bit.
- [38:25]
Matt Brunig
Okay. Well, anything more other than the donuts, which were, you know, the best 19 you ever spent for sure. The. Anything more to say about that? That moment? I mean, I mean, five people, very small head count, that's an intimate business. It's just you and half a dozen other people on your day one speech. What's that feel like?
- [38:48]
Kevin Peer
Oh, it's scary. I mean, there's no question about it. Because when you're that small, every single person is critical. And they, they were all critical. And all of them are still here today.
- [38:59]
Matt Brunig
Wow.
- [38:59]
Kevin Peer
With the exception of. There was a receptionist that retired. It's, it's, I mean, your entire financial future is on the line because I, I don't know how to make nets. I have no idea how to make nets. The owner will teach me enough, but I'm, I'm never going to replace these people. I mean, there was the amount of experience in that room and net making was actually pretty substantial. There were quite a few people with over five years, a couple with over 10, I believe, at that time. So it was scary. The main thing I wanted to do was it's pretty much the standard playbook, and that is you're coming in not to change. So even to this day, when I, my commitment to the employees is if we're making change, it should be either neutral or to their benefit. I'm never trying to make a change that is going to be negative to the employees. And I think communicating that early on is very, very important as, as long as it's true. But that is our ethos here, so it is completely true.
- [40:04]
Matt Brunig
And was your message that crisp on day one that there would be no changes?
- [40:09]
Kevin Peer
I think it was. I, I mean, I did not sleep terribly well that entire previous week trying to figure out what I was going to say. So, you know, I think we closed Friday afternoon and then it was all right, well, this is real now and I've got to figure this out. So I know I wrote and rewrote that multiple times trying to prepare for it.
- [40:27]
Matt Brunig
Yep.
- [40:28]
Kevin Peer
And that initial communication is everything.
- [40:32]
Will Smith
Looking for an SBA loan to buy a business. Then meet Pioneer Capital Advisory, your team for getting an SBA 7A loan quickly and at great terms. The team at Pioneer has closed 81 SBA loans in just the last two and a half years, with an average close time well under the industry standard. Founder Matthias Smith and General manager Valerie stash both have 10 years of SBA experience and know the process cold. There are three analysts at Pioneer who build you a lending presentation that speaks the language of the bank's underwriters and gets them to. Yes, two account managers to guide you from underwriting to close as fast and smoothly as possible. And two sales associates ready to walk you through the Pioneer Capital Advisory process. That's nine people at Pioneer. A real team to get you where you're trying to go. New owner of a business. Go to pioneerCapitalAdvisory.com or click the link in the notes.
- [41:41]
Matt Brunig
And what about this? The fact that there is so much institutional knowledge locked up in the heads of five people. You are an engineer, so you probably are more adept at learning a manufacturing business than somebody who's not an engineer. How much of that did you, how much did you anticipate actually having to.
- [42:01]
Will Smith
Learn or choosing to learn?
- [42:04]
Kevin Peer
So I was intentional in not taking on the skill set of being an industrial sewer. I did not want to learn that because I, I knew enough at that time to know that that was too much head in the sand, you know, that would have my head down too much.
- [42:21]
Matt Brunig
Yeah.
- [42:22]
Kevin Peer
So I ended up taking over the previous owner's role, which was, let's call it lead, lead, business and engineer. So everything to do with purchasing, everything to do with quote unquote, finance at that size and all customer interactions that were having to do with non standard technical type of potential problems. That was a little easier actually than I expected because, yeah, I think everybody, I think I've heard this on a bunch of your previous podcasts, but people do tend to think it's going to be a little harder to pick up the basics of the business than it is. And for us, I think it was. I think by week three, I didn't want him coming in every day and we kind of tapered back to once a week and then just by phone and. Fantastic guy. He's retired and does wish I, I wish I could share what he's doing woodwork now on his own and just an incredible, incredible skill level. He's very dedicated to quality. So he said he made a great base of building quality products for us.
- [43:33]
Matt Brunig
Anything to say about the first six months in your business before we turn our attention to how it's gone and, and what has happened since?
- [43:45]
Kevin Peer
Well, about somewhere about a month before I purchased the business, I ended up meeting my wife while I was, I quit my job December, I think 31st and I met her sometime playing beach volleyball sometime in, I think February and we closed in March. So we ended up just being volleyball partners for, for about six or seven months. But now we're married and just had our first kid.
- [44:07]
Matt Brunig
Congratulations, man. That's awesome. And you seem to be pretty adept at searching. Both of these searches kicked off and worked out you lined up the timing nicely. You, you know, your business is a mile and a half away. I mean it all, it all really tied up nicely.
- [44:25]
Kevin Peer
Yes, I would, I would change some things about my business search, but nothing about the marriage search.
- [44:31]
Matt Brunig
Great. At what point did you start to feel that, that this was a, in fact a very small business and buying something bigger if somebody, if a searcher could, would be like what you'd recommend, how did the small size start to make itself felt by you?
- [44:52]
Kevin Peer
Sure. So it was gradual. We grew so rapidly that. And demand was increasing substantially. So meeting demand and matching the company growth was a large part of my focus for four or five years probably. But I would say by year I bought another business. I think 18 months after a little one that we bolted on that we can go into if you want. But somewhere around year three or four, I was actively looking to find another business to buy and put an operator in place. And that's been an ongoing search. We were under LOI a couple times and they fell through. So I knew I wanted to have a part in running a substantially larger business from, let's say, year three on. I think a lot of that was because my previous background. I was very good at project management. I, I think I was very good at project management, but I didn't have really anything, any P and L management for a business. I was very. I could manage a project's cost, but P and L is a little bit different. And also I didn't really do much of the hiring and firing as a project manager. I had people that handled that for me. So I kind of had to learn a lot. I, I started feeling comfortable about myself as a business manager somewhere in that time range and believing that it could scale substantially.
- [46:21]
Matt Brunig
So it wasn't something where you felt pretty quickly like, wow, this is. I'm wearing so many hats and this thing is held together with barbed wire and string.
- [46:33]
Kevin Peer
I mean, looking back, it kind, it sort of was, but it was very much held together by the people here. Like, we, we have a fantastic team. I could not say enough about them. They, they took care of things. They have a ton of, well, passion for what they do. So they're making sure stuff is good multiple times over before it's ever an issue. For me that helped a lot. Like, absolutely. A business that size is. It could have been a lot more terrifying than it was.
- [47:04]
Matt Brunig
Yeah, yeah.
- [47:06]
Kevin Peer
The other side of that is growth came so easily that that was more of the focus and it was just, hey, let's, let's keep this train going. Let's, let's keep this snowball building.
- [47:17]
Matt Brunig
So let's turn our attention to that growth now. How was it that growth was, was coming so readily? Was it something you were doing or was it the market pulling it out of you.
- [47:27]
Kevin Peer
It was. It was both. So getting out and doing some advertising certainly helped some. Now let's see, I bought in 18. We grew, I want to say right about 20% year over year for the first five years. Which, which is about the edge of what I think we could. I mean we're doing this organically, we're not taking in any investment and I'm still wanting to take something else to pay myself. So we were on the edge of what I think was sustainable for a self funding growth. Tailwinds really kicked in with COVID That was a well and remained a wild time. But demand substantially increased starting probably two months after Covid. It really started just covet hit. So covet hit what? March something really March 2020.
- [48:16]
Matt Brunig
So that would have been two right at your two year mark.
- [48:18]
Kevin Peer
Yes.
- [48:19]
Matt Brunig
Of ownership.
- [48:20]
Kevin Peer
So we were definitely growing up until then and that was through advertisement, some advertisement having really good quality products and some of it was just getting interesting pictures out on Pinterest so people could picture this thing they didn't know existed and now say hey, oh that's a cool thing that maybe I could put in my backyard. So it was growing in that. But then Covid really kicked things to another gear and I think we had more work than we could handle for somewhere between two and three years. Post Covid.
- [48:54]
Matt Brunig
Yep. And obviously there the effect was people turning their attention to outdoor living hobbies and so very clear beneficiary of that would be catamaraning.
- [49:06]
Kevin Peer
Yeah. And in the meantime I'd mentioned that we purchased another small business and that business made pan rack baking covers. So like if you go to a supermarket and there's an aluminum pan rack, they might have bread proofing in it or cooling slightly or it might just be keeping this. This cover serves to help maintain the environment inside, but it also helps to keep out contaminants. And so a portion of that business also supplied covers that went to hospitals and that portion of the business actually covered us for the very, very slow about six weeks post Covid because the hospital business grew quickly for the covers.
- [49:47]
Matt Brunig
But Matt, just going back to pre Covid so you were able to grow the business 20% year over year by just doing some pretty straightforward marketing stuff because that, that says a lot about the potential of this business that you didn't have to do anything too non obvious or herculean to see significant growth and and in fact that it was totally in line with your prediction. Turn on a little marketing and grab market share.
- [50:16]
Kevin Peer
Yeah, I would agree with that the. I think one of the key takeaways there is to buy from someone who's on the more tired side of things. Someone who's very clearly ready to retire and maybe a little tired of the day to day. I think prior to me he was my understanding, I didn't know it at the time was he was putting in closer to 30 hours a week and even that time he I think was only active maybe 20 hours a week here. He'd do other stuff around the shop. Like I said, he was a, he was a woodworker and he'd sometimes find some projects to do. So that, that left what I believe to be a lot of low hanging fruit or demand that wasn't capitalized on. So I was more willing to take on perhaps a difficult project than he would have wanted to. He took on a few one offs and you know, I was willing to spend more time and more effort and that with the quality of product worked to create some pretty quick growth. I wish that was recreatable in all cases.
- [51:19]
Matt Brunig
Yeah, well, and, and when you put it that way, that is quite a common pattern where seller, previous owner says no to a lot of things because they're comfortable. And you as new owner come in hungry, looking to grow and say yes to everything or at least say yes to a lot more and naturally then grow. The key there of course is that there's a business that it is a business with demand. And so and kind of trying to understand that and tease that out during the search process or during the diligence process. Is there more demand there than the business is choosing to serve because the seller is comfortable would be the question figuring that out.
- [51:59]
Kevin Peer
Yeah. I would almost go to the heuristic of if you're pretty confident that you're buying from someone who's older and tired and a good person, an honest person, you could take just a rule of thumb, there's going to be opportunities there. I've. We've bought three businesses now and two were from sellers like that. And that was true. And one was from a younger, more active seller and that was not as good of a purchase.
- [52:27]
Matt Brunig
Yeah, and, and I want to double click on that in just a second, Matt. But why. So why don't we though quickly hear about these two businesses? You've told us about the one, but give us if you could, the numbers around it and so on and then we'll hear about acquisition number three.
- [52:42]
Kevin Peer
Okay. Well, you thought the first business was small. The second one was, I think it was doing just under 150,000 of revenue a year for these pan rack covers. And it was a, I want to say a 74 year old guy and a, and a seamstress making these out of, out of a, a warehouse in South Florida. And we bought the business. It was I think 70,000 SDE. But he was, you know, working daily on this. So we paid, I think it was right at, it might have been 100 even then he was working daily on.
- [53:20]
Matt Brunig
It, meaning he was working full time to generate 70,000 in SDE.
- [53:25]
Kevin Peer
Correct. Yeah. Now I've seen, I'd seen what he was doing. He was hand cutting everything. There was no tools. But yeah, it's tiny, tiny business.
- [53:33]
Matt Brunig
And also it sounds like not profitable essentially when factoring in his time.
- [53:39]
Kevin Peer
Correct. I had a bit of a side goal with it and that is that we had some seasonality in the business that we were in and there were a lot of standardized products in the business that he was in. So I was going to be able to balance out the seasonality and create what I would call buffer projects. So when we were slower, we could theoretically build more of these covers and then ship them during the busy season. Okay. So yeah, that, that's why I ended up penciling for me, because I, I had unused capacity during our slow periods that could essentially be nearly free to make these covers.
- [54:15]
Matt Brunig
Okay.
- [54:16]
Kevin Peer
Okay.
- [54:17]
Matt Brunig
And so that's $70,000 of SDE in his case, which he was living on, essentially his salary could actually be net new EBITDA for real profit for you?
- [54:28]
Kevin Peer
Correct. A decent portion, I think. When I penciled it in, I thought it was about a two year payback. So I thought we could, we could actually get profits in the range of 50 a year with a little bit of work. I, I also saw a lot of inefficiencies in how things were being done. So we added some automation and you know, cutting. The cutting and processing time got reduced by a factor of 80%, 90%.
- [54:54]
Will Smith
And the product is cover.
- [54:56]
Matt Brunig
So trays in. Imagine a, as you said, like a cart, like a steel cart with like where you put it in the trays to move them down the hall. And this covers those, whatever the contents of those trays are.
- [55:12]
Kevin Peer
Yeah, it's usually aluminum in the industry and it's some sort of a vinyl cover that usually the front maybe zips up or has Velcro, but it's going to be rectangular. It's going to be, you know, let's say two feet wide and two and a half feet deep and six feet tall. And there might be 50 very slight variations on that few inches wider, taller, smaller, et cetera. But very.
- [55:37]
Matt Brunig
It goes over the entire thing. I was envisioning it going over a tray. Okay.
- [55:41]
Kevin Peer
It goes over the entire thing, the entire rack. So now a bug can't fly up and you know land on a piece of bread or if you put it over your bread out of the oven, it doesn't cool too fast and it has a better consistency.
- [55:52]
Matt Brunig
Okay. Okay, great. Wow, what a niche.
- [55:58]
Kevin Peer
It was tiny. It was tiny.
- [56:00]
Matt Brunig
Yeah. And how'd you find that one? Through the. Through the grapevine. Also local I think.
- [56:04]
Kevin Peer
I think that was biz by sell again. That was. That was a few hours away actually. We. I went down there and packed it up with some. I think the owner found a few kids to help load everything in a U haul and I drove it back here one day and he came up and showed us how to do the stuff for two weeks, three weeks and we're off to the races.
- [56:23]
Matt Brunig
And. And the. It is whatever machine he used to. To build these.
- [56:28]
Kevin Peer
You really just sewing. So he hand cut everything. So and, and all his equipment, all the sewing machines were really old. We've got. We use all high end juki's here which is a well known Japanese made sewing machine brand. It sews faster. It's a much better machine. The automation and process of cutting was the biggest win to be had there along with just being able to fulfill what the customers wanted much faster. And that ended up helping growth happen quickly.
- [57:04]
Matt Brunig
And how did that, how did that business grow? How did it do?
- [57:08]
Kevin Peer
It went from 150 to I think it was just a hair under 600 last year. So that was what basically I think it sold November of 19. Yeah. So it's a substantial growth. I think it's going to be 25% year over year. I'd have to run the numbers. Exactly.
- [57:28]
Matt Brunig
Fantastic. And then business number three.
- [57:32]
Kevin Peer
Business number three. So we were in the sewing business with these two other businesses. So I've got an alert set. So show me if any businesses pop up with sewing in them. And I wanted a product something that made semi custom or semi custom products in sewing with. With some level of production. So not one offs. And we ended up getting a golf seat cover manufacturer. They were in the mideastern seaboard at the time. They'd been showing really solid growth through Covid and that's probably one of the areas I went wrong in buying. So it sold for I think it was 400. We did a pretty standard 7A loan on that, it was doing about. Sold for 400. It was doing about 700 in revenue estimated it was doing about 170 in SDE based on the seller's numbers. So it seemed like a pretty decent multiple with a growth trajectory. And I liked it. We were really busy. I probably could have due diligence a little bit better. So the issues that I think came from that. And right now it's like a big. A little better than a break even business. It's paying off its loan plus a little bit more. But it's not. I wouldn't call it a win. And lessons learned there were mainly. I should have taken a little bit more account of the COVID tailwinds because some of that so much demand, I think, shifted forward from COVID that we're on the backside of that now. So we're actually seeing a decrease in demand. Revenues dropped a little bit.
- [59:14]
Matt Brunig
Yeah.
- [59:14]
Kevin Peer
The other is, I believe the seller was doing more than I penciled in. So one, he was an extremely fast sewer. He was an extremely efficient worker. So I think he was, in a given hour, he did the work of two normal people and kind of makes sense. He's an owner with a younger guy with a fair bit of energy. So I should have just went ahead and assumed that that was the case and adjusted my offer accordingly. And if I didn't win, I didn't win.
- [59:45]
Matt Brunig
Yeah. Well, I like this concept, Matt, of. Of seller hours, like dog years. So dog years are our seven human years. And we should think about seller hours in the same way. If a seller supports working 10 hours a week in the business. First of all, there's two things there. The first is they're probably understating how many hours they're working in the business. So you have to give some margin there. But let's benefit of the doubt. Assume that the 10 hours they claim is accurate. They're actually only working 10 hours in the business. Each of those 10 hours, they're going to be twice as efficient or three times as efficient as a normal human at that. Because they built the process. They have the muscle memory. They have the. They care more than an employee will ever care. So whatever their hours are, you should, you know, multiply that times something to. To get what your replacement hours are going to need to be.
- [60:39]
Kevin Peer
Absolutely. I mean, if, if for the future, I would say a minimum of 2x for. Unless you know better for some reason.
- [60:45]
Matt Brunig
Great.
- [60:46]
Will Smith
Matt.
- [60:46]
Matt Brunig
Well, we're getting toward the end here and want to bring in Kevin and pivot to our conversation. About the searcher and residence, but still a few more things. First of all, let's just zoom out now and understand what Octal is today, what your vision for it is today. As you've basically done, you know, you've built a, a small holding company. What's, what's total revenue today of these three businesses?
- [61:11]
Kevin Peer
Last year ended at just over 3 million.
- [61:14]
Matt Brunig
Just over 3 million.
- [61:15]
Nick Huber
Right.
- [61:15]
Matt Brunig
You, you teased what the, the vision of Octal I guess is now or was then, but kind of like let's zoom out and how do you think about what you're building now in May 2025?
- [61:27]
Kevin Peer
Sure, I'm still working on it a little bit, but it's starting to take better shape. So I've known we wanted to buy bigger in some way, whether that was on the side and putting an operator in place or growing Octal itself. Since we've brought Kevin on who you're going to introduce, I believe in a minute it's made it clear what we are capable of here because he has a lot of complementary skill sets to mine. We ended up, we're doing the traction process here and I should note that implementing traction has been a substantial win. So definitely a plug for that. But, but as we do it, it's been very clear that my strengths tend more towards the visionary and Kevin is a very strong integrator. So we're trying to, we're piecing that together to see what we can grow out of this as a base with our base being essentially the, the core values in Traction and the operations and processes that we're, we're building right now.
- [62:35]
Matt Brunig
Are you thinking in terms of getting to a certain revenue number, A certain number of acquisitions, eight or anything like that or.
- [62:43]
Kevin Peer
And yeah, yeah, well, there's a built in eight as a base. So I, I imagine if we get close to that it'll sort of steer the direction. But I, I would say we haven't settled on a number. But let's say what feels natural and comfortable for us is somewhere in the range of 5x plus where we currently.
- [63:05]
Matt Brunig
Are 5 times revenue of so $15 million holding company, something like that.
- [63:13]
Kevin Peer
I would say that looks to be the next stair step on the journey.
- [63:17]
Matt Brunig
And when you contemplate other acquisitions or the, or the direction of Octal or the, the, the direction of the portfolio of Octal. Is it all sewing, manufact, sewing based manufacturing or. Not necessarily. Because it does sound like that's where all three of your businesses are currently.
- [63:33]
Kevin Peer
I think bolt ons will be. So we're Actively looking for bolt on sewing businesses. So those would be smaller businesses that tend to sell for lower multiples that we could, you know, essentially rent another unit here and, and fulfill. So let's call it a 150 to 300 SDE kind of business. We would bolt on and that would generally be a selling related company. But I'm pretty sure we're going to branch beyond that very quickly. I would anticipate sometime over the next year we'll, we'll be making that happen and.
- [64:09]
Matt Brunig
But it will be manufacturing just not necessarily sewing or not necessarily. It could be something else.
- [64:14]
Kevin Peer
Not necessarily. I was trying to write down the way we look at this. So what we really enjoy is building a team and building a process for the long term horizon. So that means that we're building something that is beneficial for our customers, for our employees and for us. And we genuinely mean that. So I think our core set of strengths is going to be implementing that and that doesn't have to be in manufacturing. That said, I am personally comfortable in it and I like it. So I would have a bit of a bias that direction. But if a good service business comes up we could absolutely get that.
- [64:56]
Will Smith
And you.
- [64:57]
Matt Brunig
But it sounds like you actually did just articulate a particular vision.
- [65:02]
Kevin Peer
Yes.
- [65:02]
Matt Brunig
At least in, at least in the long termism. Say more about that. What's that about?
- [65:08]
Kevin Peer
So who is it? Permanent equity? I think it was Brendan Shore and then a little bit of. I think Chen Mark is in that same type of vein. The long term horizon has always been much more interesting to me than the short term. So what do you like about lets you build something more genuine? I think at least for me. I mean everybody's a little different in their management style. But I want to build something where we genuinely are taking the employees growth into account as we do it. And because if we build for the employees and for the customers and for us we've got a operating base where everybody's trying to help us succeed. I don't believe that makes the most money year one or two. You know, your search funds are probably going to return slightly better results in the, in the short term. But in the long term when everybody's aligned, and that's the key word there is aligned, everybody will help everybody succeed or to a much higher level than when there's built in conflict. So we're trying to build alignment and build something that has legs of its own and makes the employees and team want it to succeed for their own personal interest.
- [66:30]
Matt Brunig
Because if, if there's a long term vision for the company. There is a long term opportunity for the employees to grow within an organization and to invest in and, and then be invested in in turn by the business.
- [66:43]
Kevin Peer
Yes. And during our quarterly meetings we talk very openly now about where we're trying to go and we have goals for the different business leads on where they are going to go and eventually that's going to be goals for everybody below the business leads as well. It's already started, we've already started that process and that sense of alignment that has been put in place partially with traction and partially just with the way the business was being built before has I think really set it up for a solid longer term success.
- [67:16]
Matt Brunig
Great, Matt. And just before we turn to the searcher and residence concept, let's hear again about Robs. So how has Rob's kind of gummed up the works a little bit? That might be, that might be too strong. But tell us please.
- [67:32]
Kevin Peer
Well, as we try to figure out the next larger jump, I just need to solve for how I could take a Rob's plan and then create a partnership. So it's really just the company structure. I'm going to have to find a Rob's lawyer expert, someone that knows this stuff and walk through it. So it's just, it makes it a little bit more difficult to move very quickly until we solve for that. And so it's a headache for me.
- [68:00]
Matt Brunig
Right now and for the audience who may or may not know exactly how Rob's works. Basically your 401k is an equity holder, a significant equity holder in the business.
- [68:13]
Kevin Peer
Correct? Correct.
- [68:14]
Matt Brunig
So, and, and so to free you totally to structure the, to, to create the future structure, you need to kind of get your 401k out of being an equity holder. And, and which probably amounts to buying your equity from, away from your 401k. So that Matt alone is the equity holder. Right.
- [68:35]
Kevin Peer
Which is doable. But it puts me in a less cash, a lower cash position.
- [68:41]
Matt Brunig
Right, right.
- [68:42]
Kevin Peer
Isn't, isn't terrific.
- [68:44]
Matt Brunig
Right. And, and of course the, the rub here is that as you've built equity value in octal, it becomes that much more expensive for you to buy your 401k out.
- [68:56]
Kevin Peer
Yes, yes. If I, if I could go back, I would have taken on a minority investor with a little bit of cash and then just bought them out and you know, made, made them solid returns because it would now free me up to more easily think about the building the business than the structural minutia that frankly I don't find very exciting.
- [69:17]
Matt Brunig
And but aside from whether or not the you know, the paperwork is interesting, which it's not but, but it does seem like strategically there's, there's a challenge here because you got to now come up with the money to buy your 401k out and so that comes out of your pocket or.
- [69:35]
Kevin Peer
Correct. I'm trying to solve for that right now.
- [69:37]
Matt Brunig
Yeah.
- [69:38]
Kevin Peer
Actually, yeah, that's on my to do for this summer is to figure out how to solve for that and it'll be probably a decent chunk of out of pocket or, or potentially we can find a way to make it work if we find a large acquisition there. There's, there's some possibilities but I, I do not know the answers right now and that's why it is something like a penny in the gears if you will.
- [69:57]
Matt Brunig
Yeah. And, and just so for the listener they need to be careful about this prospect and one and, and just very on top of the fact that after they buy their business they might look to buy out their 401k as soon as possible because the longer that goes by the more equity they build into the business the harder it becomes to buy the. Their 401k out.
- [70:20]
Kevin Peer
Yep. The more successful you are, the more expensive it gets.
- [70:23]
Matt Brunig
Yeah. Yeah. And also just to be clear, when you do or however you do buy out your robs with that cash, call it whatever it is, some hundreds of thousands of dollars that's not like that's going away, that's just now cash that's going to go into your four back for, for your own retirement. So it's not like it's somehow going away or it's not like you're paying, paying off a lender or something but it's just cash that you can't now touch until you retire.
- [70:49]
Kevin Peer
Correct. There is another way where I could sell additional shares or something along those lines to bring in a partner. But once again just it's messier stuff that I'm going to have to solve for and I'd rather I didn't have to.
- [71:02]
Matt Brunig
This has been great. Matt, anything more to say before we turn our attention to searcher and resident Cool.
- [71:07]
Kevin Peer
I think we've covered a lot of stuff. Do you want me to go through my notes?
- [71:10]
Matt Brunig
Sure. If there's, if there's something there that we didn't get, let's get to it.
- [71:15]
Kevin Peer
Yeah. I think one thing that we found very beneficial is building out a company wide dashboard. So where everybody clocks in now we have built our own really our own erm, software but it has the metrics for the entire business sitting in front of the employees so they can see real time productivity. They can see real time forecasts for their quarterly bonuses which are based directly on their productivity per hour. And that has made a substantial impact on overall productivity and it's surprisingly actually helped morale as well because people are able to see that, hey, we out produced this week and it shows and our bonus is going to be bigger. So we give them visibility to a lot of. We give them visibility to sales. As soon as we build out the next portion of this, they're going to have visibility to volume of sales leads as well. So I want them to be able to see and be invested in start to finish of a sale process and also to see how well they're doing and be able to measure them as a team. It doesn't show it for an individual. It's all by business unit.
- [72:25]
Matt Brunig
Yeah, yeah.
- [72:27]
Kevin Peer
Super beneficial.
- [72:28]
Matt Brunig
Is that all traction? Is that sounds like a pillar of traction or.
- [72:32]
Kevin Peer
No, it is a pillar of traction. We'd already started the process so we started building out the erm, a little before we started traction. But it did play a role in how we built out the dashboard.
- [72:46]
Matt Brunig
Fantastic, Matt. Now before we bring Kevin on, tell us about what you were when you hired Kevin or when you went out to look for somebody to fill the role that Kevin ultimately did. What were, what was motivating you? What were you looking for? What were you trying to solve for?
- [73:03]
Kevin Peer
I would say initially it was not so much with intentionality. I, I was looking to invest outside of the business as we grew and I'd signed up for a search funder and so I was looking to invest in some search funds which I thought was a pretty cool model. And Kevin actually reached out to me and when I found out that he was from St. Pete, a few things clicked. One, I personally never wanted to buy a business where someone else had control of the business. That, that didn't work for me. And that's your standard search fund model where you don't really have control. And I saw he was from St. Pete and I threw out the idea sort of semi seriously at the time. But hey, if, if you want, why don't you come on board? Because I knew that I could use something in the range of a part time CFO or something along those lines. I was doing a lot at that point in time. I was very, it was a very flat structure with me on the top and I said, come on board and you know, you could work here and run your search out of here. And help me part time and I'd get to see what a fractional CFO is like and go from there. And, and to be clear, Kevin had.
- [74:23]
Matt Brunig
Been on Search Funder as a searcher. So you didn't, you found him as, as somebody who was posting or whatever about wanting to buy business.
- [74:30]
Kevin Peer
Correct? He, well, I'll let him say. But yeah, he was starting a search. He was in the process of building out a search fund and I, I signed up to, to, you know, take part in that if he did it. But I left open to him coming here and working with us and running a search, a self funded search out of our shop. Not. He'll have to chime in after that. I want to say it was two, three, four months later that he ended up getting back to me.
- [74:58]
Matt Brunig
But to be clear, Matt, you were looking for a CFO or a fractional cfo. It wasn't, it wasn't a sort of right hand man. It was specifically financial, it was duties.
- [75:14]
Kevin Peer
More specifically financial, but a little bit more than that. I, I knew that I was going to have to hire a highly skilled individual at some point to take on some of the portion of what I was doing. And I did not know exactly what that looked like, but it was pretty clear that he fit the bill for that.
- [75:35]
Matt Brunig
Great. Okay, well, let's bring them in. Kevin, welcome Kevin Pierre to the Conversation.
- [75:42]
Nick Huber
Thank you very much. Thank you for having me. Will. Matt.
- [75:46]
Matt Brunig
Well, we're gonna pick up the plot from what where matches left. Left us off here in a second, Kevin, but why don't you give us the background leading up to where you and Matt start talking on Search Funder. What? Give us some of your background please.
- [76:01]
Nick Huber
Sure, I'll try to be succinct, but I was originally from Pennsylvania, blue collar family, went to university, studied industrial engineering. From there I started my first job in St. Pete. So I worked at a giant contract manufacturing company in a leadership development program. From there did M and A integrations. So traveling around, not doing the financial aspect but looking at the systems they use, the manufacturing process and then making that acquisition on the shop floor more from the system standpoint. But wanted to do something different so decided to do an mba. I went to ESA in Barcelona. This is where I first learned about search and eta. But it was a bit too risky for me actually at the time, I don't even know. I say risky, it just didn't seem like realistic, I would say. So I did two VC internships while during business school and loved that. So I got a Little bit of exposure to investment, but wanted to actually build something. So I ended up joining another two startups afterwards, one in Slovakia and one in the uae. But didn't really enjoy it. I didn't enjoy the uae and I saw then this was about two years, a year and a half. Two years after graduating mba, I started seeing some of my prior classmates making acquisitions from traditional search and I thought, wow, this is something I really should start to actually look into. Fell in love with the idea. I read a number of different books and then decided to talk to a bunch of classmates, talk to a bunch of investors, a bunch of searchers, those that were doing fundraising, those that acquired, listened to your podcasts and then decided to give it a shot. So I first started in St. Pete, started doing some fundraising. I found Matt on search funder, reached out to him. Didn't realize that at the time that there were, you know, at least one other large name in St. Pete, but was deep in fundraising. And I had a girlfriend just, just started dating somebody in St. Pete's my family's in St. Pete's I came home over the summer, I met with Matt just to give him updates on how fundraising was going. And he had on the table this part time cfo. And I remember thinking, why am I going to try and go move to who knows where and do traditional search when I've, at the time I'd lived in seven countries outside of the US in seven years. And I then said I need to just stay in St. Pete and let me figure out how I can make this happen while still staying in the ETA space. So I convinced Matt to take me on. At the time it was four days a week, so it was going to be part time cfo, part time hybrid, some other stuff. And we started off with that.
- [79:24]
Matt Brunig
And Kevin, just to be clear, so you're fan, you're from Pennsylvania, but in the, since you had gone off to college and become an adult, your parents had moved down to St. Pete. And so that became you're basically your home base and you were dating somebody there. And so. Okay, and so you go there and you want to, so you've got a lot of reasons to, to stay there. And then that's where Matt is as well. Okay, great. So, so you guys kind of get the sense that it feels amorphous, like initially it's going to be fractional CFO stuff. But it, you, you see that there could be more there. Matt in Kevin, you see somebody who, who's entrepreneurial is going to do his own Search likes the idea of search. So he's. He's all. He's at the level. He understands, like, what you're trying to build versus, I don't know, a gm you might find on. Indeed. Nothing against such a person, but they might not.
- [80:17]
Kevin Peer
But.
- [80:17]
Matt Brunig
But Kevin shares your kind of worldview or your business view, right? Yeah.
- [80:21]
Kevin Peer
At the risk of a pun, he was a peer. But in all seriousness. Yeah. So we could. We could discuss things at the higher level, which was really refreshing. I mean, we've got fantastic people here, but sometimes you want to be able to bounce ideas and have it come back strengthened, and we could do that. And that was very natural.
- [80:46]
Matt Brunig
Yeah. Yeah. Great. And so, Kevin, in working with Matt, you've told us some of the reasons, I mean, that you wanted to stay in St. Pete. But what say more about why this opportunity, working with Matt could be the. A good next step. What did you see as the benefit to you?
- [81:00]
Nick Huber
Yeah, so Matt said it already partly in through traction, so he asked me to read the book. And of course, I read it before I started. And actually, I want to say the first weekend we were, that I was working, we were up at an event in Annapolis. We do this boat show every year. And on that weekend, after working with him just for a few days, I had already said, matt, I think you fit perfectly into this visionary role, and I fit perfectly into this integrator role. And I think over the last eight months, it's definitely panned out. But to speak to Matt's character, I mean, you've seen it already on this podcast of him truly caring about his employees, and I think that's actually something really special. He says that he has surrounded. He has a really fantastic team. And largely in part, that's because he's fostered that. So just from the people element side, it's definitely an individual that I want to work with, and then also somebody that shares the same values and is a good fit for us to move forward in that dual role of visionary and integrator.
- [82:17]
Matt Brunig
And so did you perceive it as being something you would do indefinitely, or was it a intermediate step on your original path to buy a business for yourself?
- [82:28]
Nick Huber
The original thought for both Matt and I was that I would join for about a year and I would get some more operating experience while I look for something to buy of my own. And then as this started to progress, I thought, wow, actually, why don't I consider this place as either becoming CEO? Because I knew that this was something that Matt wanted to step away from or what If I buy the business from Matt, or what if I lead some add on acquisitions? So it's. Or what if I just continue in the business and then decide to actually go buy something of my own that's local if the right opportunity presents itself? So there was quite a few different directions that it could go. And I was happy with all of those directions.
- [83:22]
Matt Brunig
Yeah.
- [83:22]
Kevin Peer
And you were?
- [83:24]
Matt Brunig
Oh, sorry, go ahead, Matt.
- [83:25]
Kevin Peer
I was going to say from my end, I was also okay with all of those. I mean, I'd initially looked to invest with Kevin, so if he ended up going and doing his own thing, I was there for it. And if he wanted to stay, well, I didn't know what to think of that. That actually ended up taking shape over time, but seeing how much he can get done made it really, really positive for him to stay and continue.
- [83:50]
Matt Brunig
And those paths you described, Kevin, the possibilities that this relationship could take, were those all understood at the outset and made transparent? Was it? Were you guys talking openly about all those eventualities?
- [84:04]
Nick Huber
Yes. So I would think about something for maybe a week or two and then I would bring it to Matt and say, Matt, what do you think about this? And he would be very forthright, forthcoming and transparent and say, I'm open to it, I like it, I don't like it. Here are my reservations. The communication was very open and transparent.
- [84:31]
Matt Brunig
And Matt, what of this thing I heard Kevin say about him maybe becoming CEO? So were you. I didn't hear that from you earlier. So what was that possibility?
- [84:44]
Kevin Peer
So that was not an initial discussion, but like I mentioned a little earlier, we just had our first baby and it was a long, a long nine months. There were some complications and I was exhausted, frankly. So when it came up during that time period, the idea of him possibly being CEO was broached and it clicks. It makes sense. I don't know if that's exactly the direction we're going to take, but he absolutely could do it and do a fantastic job of it. So I've been working pretty hard for 20ish years now since, since college. And I, I'm okay with taking a few months off at some point. Maybe I do have in my, in my next few years to take a three to six month break and Kevin could definitely help with that. So it made sense and it's absolutely something that could be happening.
- [85:35]
Matt Brunig
Well, so this is all pretext. I want to be providing the audience. The three of us actually met in person in St. Pete. I was down there for the, the partners meeting, the Mind's Capital Partners meeting. Nicholas my, my partner in Mind's Capital is based there and he got us all together and, and the three of us were talking about this and Kevin, your role, a lot of what the audience has just heard and, and as we kind of talked, we realized that this was a pattern and, and in fact it's a pattern that informs smith list, the smithless.com the site that, that I launched to help searcher owners find operators from the ETA community. So entrepreneurial operators, you know, something kind of peers like you said, Matt, that you might not be able to find in a GM off. Indeed. And so anyway, we, we realize that there's a, that there's a pattern here where you get where, where the person who bought the business wants a peer, somebody like minded and, and where better to find somebody like that than the search, the searcher ecosystem and all of the different kind of ways that that relationship could evolve and the, and the possibilities there like we've already been touching on. And so we agreed that we would talk about this on the podcast and we also agree that this thing should have a name. And Kevin, you went off and I think it was your name that you came up with and came back with Searcher and Residence, which you've already heard me use five times because I'm super enthusiastic about the, the label that you've come up with. It's such a good concept to capture this very kind of amorphous thing that could go in a lot of different directions. But I think that there's a, there's an essence there that we all understand and that needs a name. And you not only came up with this label, but you kind of codified it into, well, really a notion doc, which let's look at and we'll provide a link to this for the audience to have. But why don't you just kind of from here on out, why don't you just walk us through how you've codified this searcher in residence concept?
- [87:49]
Nick Huber
Sure. Yeah. So this is something that Matt and I fell into, I would say pretty naturally. And as we were seeing it pan out, we thought this is really a model that could actually be quite beneficial to the broader ETA community. So I view it as a way, a different way to pursue eta. So it's, it's taking in somebody who is interested in doing a search for one to two years to get operational experience, but then to have a number of different outcomes, all of which beneficial that it could take. So one is they do what they normally would have expected anyway. They just then have better operating experience. So they go off and buy their own business. They work in the embedded small business for one to two years, and then they offer the president, the business owner of that company that they were working with, an investment opportunity to invest in them as they go buy something of their own. That's one option. Another option is they step in as CEO and they allow the previous CEO to go pursue other things. So if it's a CEO that just wants a break, or if the CEO wants to pursue new ventures, new products, or just take a different role perhaps in the company, this then offers that. That's the second option. The third option is that they buy out the owner. So this could be an owner that says, I want to retire in the next few years, which I think there are a lot of these out there right now. But they want to make sure that their legacy is preserved, that their employees are taken care of. They don't want a transactional traditional searcher to come to them with a spreadsheet and say, hey, I want to buy your business. I don't know anything about it. They feel more comfortable selling to somebody that they've actually worked with for the last one to two years.
- [89:57]
Kevin Peer
By the way, on that point.
- [89:59]
Matt Brunig
Yeah, please, Matt. And then I also want to go ahead.
- [90:03]
Kevin Peer
What I would say is that there's a lot of validity to that. Was point three, right, Kevin?
- [90:07]
Matt Brunig
Yeah.
- [90:09]
Kevin Peer
One of the most important things before I would believe that Kevin could be the CEO here or purchase is to see how well he respects and is respected by the people here. And seeing that makes it so much easier to envision it being a healthy transition should that ever happen.
- [90:28]
Matt Brunig
And what I was going to say is that one, if, if you're hearing that, you might think that seems like the least likely path of all of these, that you're going to bring in a searcher in residence and that they maybe buy the business from you.
- [90:40]
Will Smith
But in fact, on Smith List, I've.
- [90:42]
Matt Brunig
Seen multiple instances where an owner, a searcher owner is looking for a GM ish type role or a director of, you know, the, the ops person. And they'll say, and this person might, if it works out, maybe we sell the business to this person. So it, so it's, it's not at all crazy. In fact, it's, it's a pattern that's already emerged. So just want to share the market evidence that this, this could be, this could really be a viable path.
- [91:11]
Nick Huber
Yeah, I think for business owners that money isn't the number one thing and they care about their legacy and the future of their employees. This is something that's quite valid. And in theory, I mean we haven't proven it out, but in theory it could lead to better terms with banks as well. I mean if, if the bank understands, hey this person's been working in this company for the last one to two years in a key management role, then that should very well be true. Option four would be lead on or to lead add on acquisitions to scale into old co. So that's something that could be relevant in our business here. Or the last one, which is also very relevant is realizing that SMB ownership isn't the right fit prior to actually diving deep into it, taking in millions of investor capital or debt. This is very, very possible. I don't know the metrics, but certainly this has to be happening. And this is basically a way to get your feet wet prior to taking on this massive commitment.
- [92:19]
Matt Brunig
Well, and, and that one. So I try to share the negative aspects of eta, the horror stories, the fetal position moments on Acquired Minds. And I've happily gotten a lot of guests to come and share those stories to their credit. But one thing I have not yet had somebody come and say is I just didn't like small business. And we know that, that, that is a reaction because small business has a very distinct character, especially if you're coming from corporate land. So, so, so that, that, that is one of the probably biggest risks of all in search that gets no attention, including on this podcast. And that that buyer searcher just doesn't like what they've gotten themselves into, doesn't like small business. Such so valuable to learn in advance.
- [93:10]
Kevin Peer
It's a different beast, buying, running a small business. You're essentially, you have a bunch of different shaped pieces and you have to make them all fit somehow to the benefit of those pieces, the employees and the company. Whereas where you find. I think Kevin's worked in probably larger corporations than I have. I was very field based, but I get the impression it's very much more. You say you all have to be this cube and fit exactly where I tell you to. And that's a very, very different concept on how you manage a team. Yeah, Kevin, am I the right ballpark on that?
- [93:47]
Nick Huber
Yeah, yeah, I would say so.
- [93:51]
Matt Brunig
Great. We'll keep walking us through this document here, Kevin.
- [93:55]
Nick Huber
Sure. So during the one to two years, the searcher in residence or the sir or the sir, I suppose we can say however we want. I mean we're making up the term can be either full time, part time if they are Part time. They can potentially run the search in parallel and they need to their own search.
- [94:17]
Matt Brunig
They could run their own search in parallel.
- [94:18]
Nick Huber
They could run their own search in parallel. And some potential roles could be Director of Growth. That's what I started as we called it, Director of Growth and Improvements. And I was basically running special projects and trying to increase revenue, decrease costs, make things just better in general. Get to stuff that Matt hasn't been able to get to in years. Now that you know there's another individual that has the ability to put attention towards stuff like that.
- [94:49]
Kevin Peer
If I could jump in on that point, hugely beneficial. I had a list of things I've wanted to do for a long time. Just been limited by myself but. And Kevin's been able to, I don't know, 3x the speed at which we get through what I would call special projects or improvements made a massive difference in improving those things.
- [95:06]
Matt Brunig
Yeah, I love that. Sure.
- [95:08]
Nick Huber
Or general manager, vice President, head of sales, cfo, sales Marketing advisor. I will say that if they become a role that is quite critical to day to day operations, then part of their role then needs to also be either making themselves redundant or finding their replacement. I mean this is something that is crucial if they were to then step out. Right. They can't leave the business in need of a critical role. If they go and find a business that, that they want to acquire.
- [95:44]
Matt Brunig
Well and that. And that just deserves underlining that this is a one to two year role. So whatever, whatever happens on the other side of that. Indeed, even if you became the CEO of this business, you would still be then elevating into CEO and whatever you left in your wake would need to be filled. So. So this is a transient medium term one to two years, but a transient thing. It's not a perpetual thing. And that also goes to just the special projects thing, Matt, that you were saying Because I find this in my own business with special projects it's hard because you, you can't hire a permanent person to do a special project because a special project is by nature a project, a short term thing. And so you just kind of naturally take it upon yourself but you're too busy to ever do it. So special project remains undone. I guess. One question. This. What's that Matt?
- [96:39]
Kevin Peer
They pile up on you and, and you know, you might be able to pick off one one a year that you can do as when, when you're in my role wearing a bunch of hats running the company. And yeah it's. We're, we're going to see the benefit probably in six to 12 months of the things that we've undertaken, but it's going to happen.
- [96:56]
Matt Brunig
Great.
- [96:57]
Nick Huber
I do think that this model is better suited for searchers that want to stay local and I would almost underline that twice of if you want to stay local and you're thinking traditional search isn't something for me, I think this is a very good alternative because it helps you build relationships in the community. And if you want to buy something and stay local, then building relationships in the community is number one thing to do. And I've definitely seen that for myself over the last eight months. I moved back in September, started in October. So it improves the odds of a successful acquisition, I would say, and as well the long term operational success of the company that you're working in as well because you get to leverage those relationships.
- [97:51]
Matt Brunig
Yeah. Fantastic.
- [97:54]
Nick Huber
I view this really as a win win for both sides. So for the business owner that again cares about their employees and their legacy, it's a smooth, thoughtful exit or at the very least an investment opportunity with somebody that they actually know and.
- [98:12]
Matt Brunig
Sorry, a smooth, thoughtful exit if they sell the business to the search and residents.
- [98:17]
Nick Huber
Yeah. So I guess it could be more than what I've written. It's a smooth, thoughtful exit. If they sell the business, it's a smooth, thoughtful, thoughtful change of position. If they move out of their CEO role, it could be an investment opportunity. There are win win there. There are win scenarios in all of these except for I guess suppose number five. But even in number five, the where they realize that the owner ownership isn't the right fit. Even in this scenario they would have hired somebody to take on projects and to bring value. Value for at least a short period of time.
- [98:56]
Matt Brunig
Yeah.
- [98:57]
Nick Huber
And for the s searcher in residence it's then the hands on experience, credibility and a path to ownership.
- [99:04]
Matt Brunig
Yeah.
- [99:05]
Nick Huber
And again I said this earlier, but why this model I think matters now even more than a few years ago is because obviously everyone knows in ETA that the baby boomers are retiring in.
- [99:20]
Matt Brunig
Record numbers and Kevin. So wait, to be clear, actually I was thinking about the searcher in residence as the. The owner, Matt being a former searcher or an eta, a product of the ETA community. But in fact it doesn't necessarily have to be that. It could be just a boomer owner who, who brings on a searcher in residence.
- [99:46]
Kevin Peer
This is absolutely. It would be. Oh, if I could, it would be super beneficial for them too. This was clearer for me because I see the value in ETA and I mean since I bought, I'VE had two or three friends now buy businesses. I've got another family member about to and I've encouraged people here in the company to, if they feel that if it's a fit for them to go buy their own business and I'll invest in them. So I came from the point where that was something I was trying to support already so it was clear. But some, some boomers like if, imagine you've got a, let's call it a 62 year old guy, the seller of this business but made you, let's call it a $5 million or $10 million business if they'd have brought Kevin in for a year or two before they sold the business would end up selling for a lot more than they ever spent.
- [100:34]
Matt Brunig
Yeah, yeah, great point.
- [100:37]
Nick Huber
Yeah, well, I think I was emphasizing the business owners that are looking to retire but absolutely it's definitely applicable to those that did a search and want to grow, say they're at, I don't know, year four of operating the business and they wanted to sell as soon as possible or they saw growth opportunities in the next one to two years and they bring in a searcher in residence to help them make that growth but then sell to the searcher in residence. I mean this is also a possibility. Yeah, the only, the only caveat there, and I can talk about this later in the trade offs is that when committing to selling to your searcher in residence then you potentially don't get, you don't bring the deal to market market so you are limiting the amount of offers that you would potentially see. And this could then mean a lower financial exit.
- [101:42]
Kevin Peer
I would argue that could be in every sale there's gray area because the seller doesn't know what to believe of the buyer and the buyer doesn't know what to believe of the seller. And when you've been embedded like that, that gray area starts to erase. So some of the downside is eroded away simply by it being a more trusted transaction.
- [102:03]
Matt Brunig
Yeah, yeah, that's a interesting point. You know Matt, you brought up Chenmark earlier and I'm also reminded of their, I think it's generalist Vice president GVP program but essentially Chenmark building a Holdco, buying new businesses all the time are always trying to build out their bench of talent to have operators and people come in to run these businesses that they're acquiring. People like you, people like searchers. And so they're all, they're often at the ETA conferences talking about Chenmark precisely to bring in talent into the Chenmark family. I say this only to say that there's a parallel here for them. They're. They're kind of. They've kind of institutionalized this search and resonance thing and they're definitely trying to bring the. What we're calling searcher and residences into the Chenmark family to keep them and have them run businesses. Chenmark businesses. But still it's kind of a, it's a, it's a similar. It's a similar feel similar.
- [103:06]
Kevin Peer
It's just more, maybe more flexible. And yeah, I'm okay with any of these outcomes really.
- [103:12]
Nick Huber
Yeah, I think that is absolutely correct what Matt said on flexibility. I think Chenmark has a fantastic thing going on. I think that their model is mostly the second outcome here. I think the, the GV exactly. Move into the CEO role. I don't know exactly get any sort of ownership opportunities. I'm not entirely sure.
- [103:37]
Matt Brunig
Yeah, well, they, there's a company ownership. Company wide ownership and equity grants at Chenmark. So they, they get ownership that way. But no, they are not looking to then buy and become owner of a, of a, of a Chenmark acquired business. So you're. So you're right. Theirs is a, is a bench to be. Is a. Is a pathway to become a CEO within the Chenmark family, which is just one of the outcomes here. But I feel like the in. In Chenmark for, for somebody said, oh, I just want to work at Chenmark for a couple years and then quit and go do my search. They would. That would probably disqualify that candidate. They don't want somebody like that. Whereas the Si sir concept is that everybody's fine with that and understands that that's a possible outcome.
- [104:20]
Kevin Peer
Funny enough, one of Chen Mark's. Chen Mark bought one of our customers or two I think two of them in the last year.
- [104:25]
Matt Brunig
Oh really?
- [104:26]
Kevin Peer
Yeah.
- [104:26]
Matt Brunig
Oh, the. I know they bought some boat businesses but they're like touring the, the boat tours. In fact, I featured one three years ago. Not. It can't have been one of those because there's nothing catamaran about it.
- [104:40]
Kevin Peer
Okay. I don't think I've heard them that it was actually in a different space. I just thought it was pretty funny when we saw this. Oh we saw a new owner and checked into it. Oh, that's Chen Mark. I don't know that but I sort of know them.
- [104:51]
Matt Brunig
Yeah. I don't know what that acquisition would have been. All right, so trade offs. So this all sounds great in theory, but I'll just, I'll just spoil a spoiler. One of These is somebody like you, Kevin. The reason why you're hard to find is because you come expensive. And so how is that addressed here? Maybe, maybe you're. I mean. Well, I won't put words in your mouth.
- [105:18]
Nick Huber
Sure. That is definitely a trade off. My current compensation is below the average of a post MBA grad. That being said, I wouldn't say it's too far off of what I would be paying myself in a traditional search. So you might be able to consider it as an investment by taking this smaller compensation for a short period of time to then go into this position where if I mean any of these outcomes then significantly should increase the salary as well as the large exit potential.
- [106:00]
Matt Brunig
Great. So you're willing to take a below market salary, not terribly below market. Understanding that it's, it's an investment of a couple years which will result in getting that back and then Matt, you're able to access your this peer talent for at a rate that you wouldn't otherwise be able to access. Because it is this in this kind of searcher, searcher and residence model.
- [106:27]
Kevin Peer
Partially that and partially it allowed essentially a trial hire of a very high quality individual to see what that type of individual could do in the business. And yeah, I'm super happy with how it's going.
- [106:43]
Matt Brunig
Great. Other trade offs, Kevin?
- [106:47]
Nick Huber
Yeah, I've listed quite a few because I wanted to be try. I wanted to be as transparent as I could be. But it's maybe the number one that I see here for the searcher in residence is that there's a large relationship risk. So you could go one to two years, everything's going great, you're having fantastic growth. The expectation is that maybe you're going to buy out the owner and then something happens in the relationship, you have an argument and then the whole year and a half is down the drain. So this is definitely a risk. You need to manage the relationship well because if it does break down it can derail the opportunity entirely.
- [107:35]
Matt Brunig
Sure, sure. Okay, fair enough. Others, you want to just bang through, bang through these trade offs for us?
- [107:41]
Nick Huber
Sure, yeah. So compensation we talked about could be below market. There is no guarantee of ownership or equity after one to two years. The time spent embedded can reduce your exposure to other deals. So if you really are looking to buy something then this could distract from that.
- [108:05]
Matt Brunig
Yeah.
- [108:06]
Nick Huber
The path to ownership could then also take longer than traditional ETA timelines. The business, business success. So you spend time growing the company. The this could reduce the owner's urgency to sell. Right. If you double the company in two years, and it's going really well. Then maybe the owner says, wow, this is great. Why do I actually want to sell at this time? And then that leads into the changing of. The potential changing of the business owner's minds as well. That's another risk. There is one that I haven't really experienced too much. But your role could sit awkwardly between both being an employee and the owner. And this could then create tension, and you could then, of course, spend years driving growth only to misalign on terms and watch the deal actually go to market, spending a lot of your effort and then seeing it disappear. So all of this was for the searcher in residence, for the business owner. I can have Matt chime in for.
- [109:16]
Matt Brunig
Any of these before we get to those. Just to. Just to be clear, I think that there's kind of the search and residence concept where search and residence is a potential buyer of the business, and then searcher and residents where they're not gonna. They're not likely to buy the business. And, and I, I think that that's important to highlight because many of your. Your risks that you highlighted here, Kevin, were related to that. If it was like if the search and residence was possibly gonna. Possibly gonna buy that business. But if it's more of all of the other reasons to do it, the getting exposure to SMB embed, you know, embedding themselves in the local community built, you know, building their chops, developing a relationship with the owner who then might invest in them for their. For their search later. All of that. All of those other great benefits still are still there, correct?
- [110:14]
Nick Huber
Yeah, yeah, that's right.
- [110:16]
Matt Brunig
So I just. I guess what I'm trying to say is I don't want the listeners to feel too much like this. It's only a searcher in residence if it's an interview to be the future buyer of that business. Not necessarily at all.
- [110:30]
Nick Huber
Right. And maybe.
- [110:32]
Matt Brunig
Or was that a big part of it?
- [110:33]
Nick Huber
I think you're totally right, Will. And something to emphasize here is that, that this is a model with multiple different outcomes. And it's. It's really expected to be dynamic. And the searcher in residence and the business owner should go into this relationship understanding that it can go into a number of different directions and they could be happy with multiple of those directions.
- [111:01]
Kevin Peer
Transparency is critical for that.
- [111:04]
Matt Brunig
Yeah, yeah.
- [111:04]
Kevin Peer
On both sides.
- [111:06]
Matt Brunig
Yeah. Yeah. Excellent point. Because. Because we're. Despite the fact that, you know, we've codified this into this notion, doc, it's actually, this is meant to be this pretty flexible, multiple paths thing. It's not meant to be overly prescribed here. So. Thank you. Okay, we're, we're, let's start wrapping up here. Just the last little pieces. What, what are the trade offs to the, the business owner in the search and residence concept?
- [111:33]
Kevin Peer
I'll take that one early on. There's a, you know, you have a short term window of one to two years and the first one to two months could be spent really getting acquainted with the business on the, on the searcher's part. If you're looking for a rapid, if you're looking to sell to the searcher, it could take a year or two. It's going to be a slower process than, well, actually thinking about that out loud, it's probably going to take you at least a year if you go to market. So it's probably not that big a difference realistically. Maybe slightly slower. Letting go of control, that's a thing I'm working on every day. It's been made a lot easier and it's an exercise that I needed to go through at some point in time. But letting go of control as the owner to the searcher and residence is, it can be different. For an owner that's done everything, the culture fit is critical, much more important than really probably anything else because without a culture fit, nothing is going to work. I think there's three more here, let's say.
- [112:41]
Matt Brunig
Yeah.
- [112:41]
Kevin Peer
So, you know, there's, there's the potential that this, the searcher in residence doesn't want to, if you're wanting to sell them, doesn't want to buy your business, which actually isn't that bad as long as they help out and do some special projects along the way. And there's absolutely the thing where you could miss out on selling to let's say the market with potentially a bit higher multiple. That one doesn't talk to me very much because I've, I'm not in this purely financially and I really find value in what we do and who I sell to is going to be very important. And then, then the whole fit with the employees is something, it's a personality thing that has to be navigated very deftly. So it requires some emotional intelligence by both people involved.
- [113:32]
Matt Brunig
And by the way, how do you position this person to the employees? I guess it depends on what the, what their primary role is. You just kind of give them the title of what they're, where they'll primarily be spending time. So fractional cfo, for example, that works.
- [113:48]
Kevin Peer
I mean the title that. Kevin, what was the title we gave you again, Kevin, Director, Director of Growth and Improvements. So that's a great one because everything he does is a special project and everything fits under it. Right. So he has touch points in every part of the business from there.
- [114:03]
Matt Brunig
Yeah, fascinating guys. I love it. I, I think this concept has legs, as you know. I'm very excited about it. I'm very excited about this term that you've come up with. Search and Residence. It's perfect. Of course, it's for those who don't know, it's based on the entrepreneur in residence concept popular in tech land that I guess usually happens at VC firms. Right. A V. A VC will have an entrepreneur, an E. Yeah. So anything more to add to the story, Matt or Kevin, your role in the story or the search and resonance or have we, have we gotten to everything? We're well over time.
- [114:36]
Kevin Peer
So yeah, I, I think we've hit quite a bit.
- [114:39]
Matt Brunig
This has been fantastic, guys. Matt, thank you for so much transparency on Octal and the businesses you bought under it. Kevin, thank you for putting work into this document and really putting your, your thoughts to paper and this kind of like this squishy concept and, and, and kind of codifying it and of course the name. Is there anything that you guys are looking for or want to request from the audience or otherwise?
- [115:08]
Kevin Peer
Sure. So first, if people want to reach out to me and talk about what it's like to buy a small business, I'm glad to help. They can reach me on LinkedIn. For us as Octal, we're actively looking for deals in the Tampa Bay region and then in the wider market in, you know, bolt on selling companies from around the country that we could move here.
- [115:30]
Matt Brunig
Kevin, LinkedIn, best, best place to reach you.
- [115:32]
Nick Huber
Yeah, LinkedIn is a good place to reach me. If anyone wants to talk on my experience in the searcher and residence, I'm happy to chat. It's not something that is perfect, it's something that we just tried to put legs to because we thought that it might be valuable to the broader ETA space.
- [115:52]
Matt Brunig
I agree. Thank you for doing it. Matt Brunig. Kevin Pierre. Thank you gentlemen for coming on Acquiring Minds.
- [115:58]
Kevin Peer
Thanks will really appreciate it.
- [116:00]
Will Smith
Hope you enjoyed that interview. Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode with an introduction to the interview, a link to the video version on YouTube and soon, key takeaways, numbers and more essentials from the interview. For those of you who don't have time to listen or watch watching, subscribe at Acquiring Minds. Co you'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars.
- [116:33]
Matt Brunig
At this point There are over 30.
- [116:35]
Will Smith
Webinar recordings, a wealth of information on all the technical nitty gritty of buying a business, acquiring minds Co.